The Prop. 13 Gorilla

State Fiscal Mess Stirs First Murmurs of Debate About Amending Property Tax Prop

Thursday, July 9, 2009

By Jerry Roberts (Contact)

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Howard Jarvis, the acid-tongued author of Proposition 13, surfaced in Sacramento one year to the day after voters overwhelmingly passed his historic tax cut measure, to warn Capitol politicians against messing with his initiative.

On June 6, 1979, Jarvis was holding forth on the Capitol steps when a group of mothers, in town to lobby for more money for preschools, interrupted him: “What about the schools?” a woman from Azusa hollered. “They’re ending programs to help.”

Capitol Letters

With characteristic tact, Jarvis bellowed right back: “That would be your problem, not mine,” he said. “It’s absolutely not so. Prop. 13 didn’t have any effect on the schools at all.”

In the 30 years that have followed, California politicians of every stripe have been loath to challenge the stubborn certainty of the late Mr. Jarvis, or the persistent popularity of his legacy, long perceived as the political third rail (or the 800-pound gorilla, Big Enchilada, or elephant in the room, depending on your choice of cliché) of state politics.

With the state’s current fiscal meltdown as a backdrop, however, serious debate about amending Prop. 13 for the first time is beginning to emerge across the state. Amid widespread cuts in public education and social programs, increasing attention is being focused on how Prop. 13’s consequences, unintended and otherwise, have shaped the dysfunctional structure of state and local government. At the same time, the growing perception that California has become ungovernable is fueling a good-government reform movement that is raising questions of how much Prop. 13 and its fallout have contributed to the state’s systemic problems.

“If your goal is to make California governable again by restoring fiscal sanity and political accountability, there’s no way to avoid Prop. 13,” Mark Paul, senior scholar and deputy director of the California program at the nonpartisan New America Foundation, wrote recently. “The 1978 Jarvis-Gann measure is not just a property tax limitation. It’s the hack that rewrote California’s operating system in ways that make it unworkable and unloved across the political spectrum.”

At one level, Prop. 13 is deceptively simple. In the late 1970s, steadily and rapidly escalating tax rates threatened homeowners across the state, especially older ones living on fixed incomes, with the loss of their houses; the initiative rolled back rates to 1975 levels, capped tax bills at one percent of assessed value, and limited annual increases to 2 percent. For property owners, it was clear, easy to understand, and delivered instant tax relief along with future certainty.

Beyond its salutary effects for taxpayers who owned residential property, however, Prop. 13 included other features that have helped to warp rational governance by wrapping political leaders in double-bind knots of political and fiscal restrictions. It is these features that increasingly draw the ire of reformers:

• Although focused on property taxes, Prop. 13 imposed a two-thirds vote requirement for raising most other taxes in jurisdictions as well, meaning that even revenue measures for local services backed by large majorities of city or county voters are defeated routinely.

• Then-Gov. Jerry Brown and the Legislature reacted to Prop. 13’s approval by passing legislation that effectively took away control of remaining property taxes — and thus governance of schools and many local services — from city councils, boards of supervisors, and special districts and put authority in the hands of Sacramento. This established a crazy quilt of government finance in California with a decline in local control and overall accountability.

• The measure provided the same level of tax relief to corporations that owned commercial property as it did for individual homeowners. Throughout time, this has resulted in some areas in a substantial shift in the property tax burden, with business bearing less of the load and homeowners more.

The relative taxes paid by commercial and residential property owners are the focus of the most intriguing push for Prop. 13 changes: San Francisco Assessor Phil Ting recently launched a statewide effort to put in place a “split roll” assessment system that would use different rules for taxing commercial and residential property, in an effort to shift the balance once again. The proposed change would increase revenue for local government by about $7.5 billion a year.

“Tough times offer the best opportunity for change,” Ting wrote in a statement on his Web site closetheloophole.com. “California cannot continue to mortgage the future to protect corporate tax loopholes for commercial properties. The longer we wait to reform a property tax system that is bankrupting our state, the further we will fall behind.”

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A commentary today in the LA Times points out that property tax revenue has increased by 800% since the passage of Prop. 13. Other general fund revenue has only increased by 500% since 1978. We've really reached the limit of how much further Californians can be taxed.

JERRY WHY DO YOU REFUSE TO EVEN THE DISCUSS THE ROLE OF MASS ILLEGAL AND LEGAL IMMIGRATION IN CALIFORNIA'S BUDGET CRISIS? WHY DO YOU REFUSE TO CONSIDER THAT LEFTIST TAXATION, MULTICULTURALIST EDUCATION AND ENVIRONMENTAL POLICIES ARE CHASING BUSINESSES AND HIGHLY-EDUCATED PEOPLE OUT OF THE STATE?

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revisionist (anonymous profile)
July 9, 2009 at 7:08 a.m. (Suggest removal)

Raise the tax on second home owners.....real estate prices need to drop....limit the commissions on sales to brokers to 2%, give the state 3%, just remember that the real estate industry is an equity partner in your home, forever....the whole industry is out of control.

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lordleadbetter (anonymous profile)
July 9, 2009 at 10:02 a.m. (Suggest removal)

Even if prop. 13 is modified or repealed, politicians will squander away the money and come back looking for more. There need to be radical changes in the system. The way things are going, the poor and unfortunate are coming to California to suck off the government teet and the shrewd and wise are getting out before it all boils over. Overpopulation and a wave of illegal immigrants and their legal offspring who don´t assimilate, educate and respect others simply clog the jails, courts, emergency rooms, etc. These people are not welcome back in their own countries and learn to work the system here. Couple that with the average American´s laziness and complacency and it is doubtful that things will change soon. California needs more educated, respectful people with the means to support themselves (they can come from other states or any other country). Right now there seems to be an influx of the opposite with politicians pandering to them for votes while bankrupting the state with pork and bribes for votes.

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El_Informador (anonymous profile)
July 9, 2009 at 11:53 a.m. (Suggest removal)

"• Although focused on property taxes, Prop. 13 imposed a two-thirds vote requirement for raising most other taxes in jurisdictions as well, meaning that even revenue measures for local services backed by large majorities of city or county voters are defeated routinely."

If such measures truly were backed by such a "large majority" they'd have no problem passing a new tax then. 2/3 isn't exactly an unreachable figure. Statements like the one above are completely biased and irresponsible. The fact is that many, many new taxes, bonds, whathaveyou have been passed since the passage of Prop 13. Sure, not all of them - why? Because people are sick of having new taxes/bonds/etc passed for every whim bureaucracy can think up. This isn't because of Prop 13, it is because of fiscally irresponsible Government.
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"• Then-Gov. Jerry Brown and the Legislature reacted to Prop. 13’s approval by passing legislation that effectively took away control of remaining property taxes — and thus governance of schools and many local services — from city councils, boards of supervisors, and special districts and put authority in the hands of Sacramento. This established a crazy quilt of government finance in California with a decline in local control and overall accountability."

Well, there ya go... THAT is the whole problem right there. Not Prop 13, but what Brown did in response to it. FIX THAT.

Think about this... anything that somehow gets hijacked into the General Fund of CA never seems to get back to where it was mandated to be. Prime Example: The Lottery. Remember when we voted for that? Why did we approve it, anyone remember? Oh yeah... it was going to ADD money to the CA Education system - remember now?

What happened? Sacramento simply took that revenue, all of it, and added it to the General Fund. Then, instead of supplementing the Education Budget... what did they do? They did not supplement it at all, they basically replaced the original funding with the Lotto dollars. So it just turned into a windfall for Sacramento and added nothing "extra" for the schools.
That's not what I voted for. Not by a long shot.
Which also might explain why there are so many School Bonds that come up for vote in the elections. And yes, plenty of those do get passed, so don't tell me the "2/3rds majority is not fair to the large majority" rubbish, ok?

Be jealous of the retired people that have owned their homes in CA for decades if you must... But also realize that if you ever do get industrious enough to actually own your own property, without Prop 13 you, too, might be forced to sell it upon your retirement because of the ridiculous taxes you won't be able to pay.

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cartoonz (anonymous profile)
July 10, 2009 at 1 a.m. (Suggest removal)

"The relative taxes paid by commercial and residential property owners are the focus of the most intriguing push for Prop. 13 changes: San Francisco Assessor Phil Ting recently launched a statewide effort to put in place a “split roll” assessment system that would use different rules for taxing commercial and residential property, in an effort to shift the balance once again."

What's "intriguing" is that a split roll initiative -- Prop. 8 -- was on the ballot along with Prop. 13 in 1978, but Prop. 13 included a "poison pill" clause that invalidated Prop. 8 if Prop. 13 won.

As for "unintentional" consequences, there was nothing unintentional about it; 2/3 of the property tax benefit from Prop. 13 immediately went to large commercial property owners, who heavily bankrolled it. Jarvis was a rather despicable and corrupt individual who lied to Californians in order to get his boss's initiative passed: http://en.wikipedia.org/wiki/Howard_Jarv...