Don't you hate it when, after spending all year diligently earning property tax revenues, the General Assembly swoops in and borrows some of them to make up for a deficit in its annual budget? The proponents of Proposition 22 sure do. And they're out to stop it.
Like 2001: A Space Odyssey, Prop. 22 is long and complicated. On one side, you've got the support of the California Professional Firefighters. On the other side, you've got the support of the California Fire Chiefs Association. Teachers are pitted against librarians, nurses against the police. It's a veritable Civil War out there.
Some Background
About half of the state's budget woes can be traced to Proposition 13, passed by (what else?) initiative in 1978. Prop. 13 required a two-thirds majority of the legislature to agree on increases in either ad valorem property taxes, or any other state income tax.
California is one of only 13 states that require this "supermajority" in order to increase taxes.
Prop. 13 was passed with the help of the late Howard Jarvis, an anti-tax activist. Jarvis got Prop. 13 passed by spinning it to landlords as a way for them to save on property taxes. He simultaneously spun it to tenants as a way for them to prevent their rents from increasing. The logical leap here was that landlords would pass property tax increases on to their tenants, and it was in tenants' interest to vote for Prop. 13, as well. This was before the advent of rent control laws in California. That year, California property tax revenue - which went to local governments - declined by 57%.
After its passage, it was revealed that Prop. 13 did not cause rents to decrease; rather than pass property tax savings on to tenants, landlords were pocketing the savings. This led to modern rent-control ordinances.
The effect of Prop. 13 was to decrease revenue to both state and local governments.
The other half of California's budget problems relate to the requirement that a two-thirds majority of the legislature is required to pass a budget. California is one of only three states with this requirement. It is the only state that requires a two-thirds majority both to pass a budget and to raise taxes. The combined effect of these two measures is to render California unable to finance itself.
This provision of the constitution was added to the California Constitution in 1966 as part of Prop. 1A, which drastically overhauled the state constitution and made many modifications to the operation of the state government. Prior to 1966, California's was a "part-time" legislature, meeting only every odd-numbered year for general subjects and in even-numbered years for budget-related subjects. Prop. 1A required the legislature to meet every year, during which it would consider all subjects.
The California Legislature is required to pass a budget by June 15 of every year. For the last twenty years, it is failed to do so, owing largely to the two-thirds majority requirement. A minority of legislators can bring the government to a halt.
So that's where we are. The instant proposition deals with the first issue; that is, tax revenues. (But don't worry; the second issue will be dealt with in Prop. 25!)
What does this Prop. 22 do, anyway?
A couple of things. Currently, the Legislature can borrow money from local tax revenues to make up deficits in the budget. California, along with 48 other states, requires that the budget be balanced every year, so the money has to come from somewhere.
Prop. 22 would prevent the legislature from borrowing local tax revenues for any reason.
Prop. 22 also inserts a provision into the state constitution to prevent community redevelopment agencies from paying property taxes on any property owned by the agency (except for taxes paid pursuant to statutes requiring taxes for local school districts) and prevents the state legislature from reallocating any revenue raised by community redevelopment agencies for any purposes not specified in the Health & Safety Code.
Revenues from the state vehicle fuel tax will now be deposited into a trust fund called the Highway Users Tax Account, which will pay for highway construction and maintenance. The legislature is forbidden from borrowing money from this account.
The legislature is also forbidden from borrowing revenue from the Public Transportation Account, which is now established as a trust fund to be used only for public transportation purposes.
The only way to reallocate funds from either the Highway Users Tax Account or the Public Transportation Account to other transportation jurisdictions is: (1) for the California Transportation Commission to hold at least four public hearings on the issue; (2) published a report on the issue; and (3) have the legislature pass a statute by a two-thirds majority modifying the reallocations.
What's the harm in all this?
For one, the protections given to redevelopment agencies is alarming. Community redevelopment agencies work to revitalize blighted areas, and they are often successful in attracting new business to the area. But the property allocated to the agency would be tax-free. As California Professional Firefighters President Lou Paulson notes in the the San Francisco Chronicle:
Statewide, 12 percent of all property tax dollars are diverted into these agencies - $6 billion is earmarked for developers and can't go to schools, police, fire services or the poor.Counties (which by and large oppose Prop. 22) have lost millions to redevelopment. Los Angeles County alone has seen $45 million drained away, not available for cash-strapped vital services. Prop. 22 would lock these cash grabs into the state Constitution.
This is what Prop. 22 opponents mean when they declare, "If Proposition 22 passes our schools stand to lose over $1 billion immediately and an additional $400 million every year." That statement by itself sounds shrill. Why couldn't Lou have put his Chronicle statement in the voter guide?
The big harm from Prop. 22 comes in that it effectively requires the state to cut funding for lots of things, since passing tax increases is pretty much impossible. Prop. 22's proponents, in capital letters, declare, that Prop. 22 "will STOP RAIDS of LOCAL GOVERNMENT and TRANSPORTATION FUNDS." EMPHASIS IN ORIGINAL! I've always been of the opinion that, the more caps there are in an argument, the poorer the argument is.
Prop. 22 will further hinder the state's ability to fund itself, a problem that has been forty years in the making. Lots of business interests want to finish the state off by making it nearly impossible to provide funding for anything, turning California into a Libertarian paradise. I'm sure Ayn Rand would be proud. Vote no on Prop. 22.
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Cathy Wilson
Richard Erlich
Kerry Lauerman
Joan Walsh
Salon.com
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