Haunted By The Spirit of ’13
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By Peter Schrag
The estimable Joel Fox, former head of the Howard Jarvis Taxpayers Association and now president of the anti-tax Small Business Action Committee, used to complain vehemently about the tendency of some on the left to blame all of California’s ills on Proposition 13.
Fox, who’s as thoughtful as he is conservative, was – is – partly right. California had plenty of problems even before June 6, 1978. It’s had lots since that didn’t have the remotest connection with Howard Jarvis’ famous stink bomb.
But last week’s budget wrestle in Sacramento was another reminder of how much of our mess was set off by the initiative and the orgy of other ballot measures and related legislative fixes that came in its wake.
The biggest example, bigger even than the Proposition 13 property tax cap, is the requirement that the legislature cannot pass any tax increase without a two-thirds vote – effectively a grant of veto power to any minority party or group, now almost always Republicans, that can muster one third of the votes, plus one, in either house.
But there are lots of others. Because Jarvis and his sometime partner Paul Gann couldn’t figure out a way to divvy up the shrunken property tax among the various jurisdictions that got a piece of it, they handed the job to the legislature – an entity enjoying less trust among voters than the locals.
And because the legislature and governor – then, as now, Jerry Brown – decided to bail out schools and local governments, rather than letting voters immediately feel the consequences of their decision, we now have the muddled accountability of a system in which the state generates the largest share of public revenues while the locals spend it.
This year and last, Jerry Brown has been pushing hard to restore more education control to the locals. But it was Brown – and of course Jarvis and Gann – who moved so much of it to Sacramento in the first place.
Again, we shouldn’t blame all that on Proposition 13 and the state’s response to it. Part at least reflects a periodic swing: local control, followed by local failure – real or perceived – followed by state mandates to fix it.
Given local political dynamics, over the local run influential parents and voters will almost inevitably drive a disproportionate share of local resources to their own neighborhoods and children. The children of the poor, of immigrants, of racial minorities, will get the short spoon. No matter how the next budget finally turns out, it’ll be the poor and their kids who will suffer the lion’s share of the cuts.
But it was Proposition 13 that, in capping local property taxes, substantially attenuated the interest of local business people and other civic-minded fiscal moderates in responsible management of schools and other local jurisdictions. That left the door to local boards wide open to the public employee unions – teachers, cops, firefighters – who became the chief sources of money and candidates in so many local elections.
And because Proposition 13 started three decades of declines in school revenues relative to other states, more and more jurisdictions, instead of putting more money into current compensation, put it into pensions and over-generous retiree health benefits – in effect deferred the cost to the next generation. That bill is now coming due.
Last week’s budget battles, like most in the past decade, were over shares of a shrinking pie, essentially a battle over which Peter will pay which Paul. Schools vs. child care; suburban schools vs. schools with many poor children and English learners over Brown’s weighted school funding formula. In Los Angeles, the school district worked out a “compromise” between losers and losers – no teacher layoffs in return for fewer school days and a pay cut.
But the biggest impacts of Proposition 13 are subtler and rarely noticed, yet no less powerful.
One is the shift from a communitarian ethic to a market ethic. It’s the expectation that students and parents will pay the lion’s share of university tuition, not the state; that new homebuyers will pay for the new neighborhood school, not the community as a whole. They are now seen as the chief beneficiaries, not society as a whole.
The other is the dramatic public embrace of the initiative process as a prime instrument of public policy and the severe restrictions on legislative discretion that comes with it.
As we were reminded again last week, despite the debates and lobbying in Sacramento, much of the budget was fixed years ago: by inflexible prison sentencing laws, by voter-enacted school spending formulas, by ballot measures denying the legislature the power to take back the money with which it first bailed out cities and counties a generation ago.
Again and again we’ve passed measures to lock in one or another spending item, denying government the discretion to make decisions that most other democratic governments take for granted. Every year Sacramento struggles with those limits. Can anyone say that the state is better for it?
Back in 1979, Paul Gann labeled Proposition 4, his spending limit imitative, “the Spirit of 13.” This is the spirit of 13.
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Peter Schrag, whose exclusive weekly column appears every Monday in the California Progress Report, is the former editorial page editor and columnist of the Sacramento Bee. He is the author of Paradise Lost: California’s Experience, America’s Future and California: America’s High Stakes Experiment. His newest book, Not Fit for Our Society: Nativism, Eugenics, Immigration is now on sale. View his archived columns here.
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No one's arguing, nor opposing (and much has already been given up by unions/workers), common sense reforms to some of the needed pension reforms. But, if we're going to continue to ask middle class public employees to give back more, than its only right to ALSO address the state's revenue crisis and the bevy of tax loopholes that allow those with the most (which is more and more of the wealth/prosperity) to pay their fair share too.
Prop 13 doesn't need to be scrapped entirely - just improved and reformed, so average homeowners continue to benefit from its protections, but big commercial real estate contributes more, just as we must scrap the insane 2/3 vote of the Legislature to raise revenues, so we can store democratic rule to the state.
As the recent study by the California Tax Reform Association and the Goldman School of Public Policy at U.C. Berkeley noted (http://www.californiaprogressreport.com/site/how-tax-california%E2%80%99...), "you don’t have to change a word of Proposition 13 to declare by statute that a 51% turnover in publicly-held stock constitutes a change of ownership. For example, tech giant Intel owns prime Silicon Valley land which is taxed at 2-5 cents/square foot in an area where land goes for $1/square foot. Closing this loophole would bring in $2 billion annually which would be divided between local government and public schools."
This is just one of MANY ways in which we could fairly (eliminate elective single sales tax loophole, institute an oil severance tax, force out-of-state companies to calculate their tax liability based on the percentage of sales here, and others)increase investments in our state's crumbling schools, infrastructure, and safety net (which is of particular importance to the growing numbers of children living in poverty)...instead of always balancing the budget on the backs of the middle class and poor.
Thanks Peter for shedding more light on this issue!
Peter Fine article. I think you might give the implemenation of Serrano the honor of the move of power to the State. SB 90 (Regan/Moretti) esentially eliminated all local control and it was never proposed to be reinstated until 1977 with the passage of AB 75. Then Proposition 13 came and restored the flawed logic of Serrano Implemetation. best John
This article presumes thet education and all other goverment progams need more money. Performance studies are never made.Liberals always want to add more money (and raise taxes) to programs without any regard to need or use of money; conservatives are closer to the truth: they presume that all progams waste money and cuts must be made (except for wars).The author is correct that the voting public have added to the problem; e.g,. Prop 98 giving education almost half of the budget. It probably only needs 50% of the 50%. One of the good initiatives is Prop 13. Neither the state nor local officials spends money any better than the other. "Local control" is a myth, unless you are going to do as they used to in Switzerland or ancient Greece:--all the men (sorry, women!!) of the town would gather in the public square and vote on each and every law. Both local and state are controlled completely by the unions. Get rid of public unions and the whole budget problem is solved.
UC Berkeley Chancellor Birgeneau and Provost Breslauer's ‘charge Californians more’ tuition policy skyrocketed fees by an average 14% per year from 2006 to 2011-12 academic years. Additional funds is NOT the problem at Cal.
Additional funding should sunset. The economic downturn is devastating California. Simply asking taxpayers for more money to fund inept Cal leadership, old expensive higher education models and support burdensome faculty, chancellor salaries/benefits is not the answer.
So many errors, so little time.
What is this about deferred compensation? California has the highest paid teachers in the nation.
And then there is the old "local control" canard. Prop. 13 did not deny schools local taxing authority, it was the California Supreme Court with its 1971 ruling in Sarrano v. Priest. Not longer would the property tax be the basis for school funding, the state would be required to step in a equalize spending per pupil, which, by the way, is 30% higher, after adjusting for inflation, than it was prior to Prop. 13.
Should reality on the ground influence your analysis? Would it matter to your calculations of school expenditures that California's school population is 50% larger now than when Prop 13 was passed? Would it matter that the population now is much more diverse, ethnically and linguistically? Would it matter that mandated educational requirements to meet individual needs have greatly increased? Would it matter that there have to be more schools for this much larger and more diverse student population? Would it matter that these students need books and desks and specialized help that were not required when Prop 13 passed? Would it matter to your critique that computers and science labs and tech support are as essential now as books and rulers and slide rules were then? Would it matter that more is required of schools and students now for college admission and thus more and better books and educational resources to meet those requirements have to be on hand? Would it matter that everything, including land for schools, costs more now than when Prop 13 passed? Would it matter that everyone with a professional degree earns much more now, even after the great recession? Would it matter that women are no longer restricted to the segmented labor market that was still common in the late 70s that kept teacher salaries low? Women have options now for careers in law, science, medicine, business, so schools have to be able to compete to some extent in order to attract sufficient numbers of teachers. Why would we expect teachers to accept less than they are worth, even if most do get a great deal of personal satisfaction from teaching? Is it just a flight of fancy that you'd think a bit more deeply about current conditions when framing your analysis?
Prop 13 was was a noble attempt to rein in spending, but it did not do enough. It was supposed to cut fat from government,but not one ounce of fat was cut...some low-level public workers lost ther jobs, but the end-of-of-the world that was predicted: closed libraries, fire houses, etc., never occurred. Government is more fat than ever. Prop 13 must be kept but commercial property should be included.
The NEA's comprehensive annual reports show that California teachers have the fifth highest average compensation in the nation ... AND ... the largest class sizes. As a result, cost per pupil for instruction is in the bottom half for the nation.
Prop 13 has managed to strengthen unions and teacher pay packages, while education spending per pupil, in one of the highest cost-of-living states in the nation, is in the lowest quartile.
Meanwhile, Serrano, while forcing the State to raise spending in the poorest districts, did NOT strip schools of local taxing authority. (Talk about so many errors, so little time! Take a little to do the research.) Take one look at the large disparities just prior to Prop 13 and you'll see that.
Thanks for covering many of the Prop 13 fiscal implementation issues -- you've only missed one major ($7B) one and a related $1B one.
The State's repurposing (under Schwarzenegger) of local property taxes to cover the now-permanent "Vehicle License Fee" reduction has had the effect of refilling county and city coffers at great cost to, especially, schools.
In the early 90's, Deukmajian's attempt to claw back some of the excess apportionment that the Legislature handed to cities and counties under the AB8 in 1979 created "ERAF" -- named the Educational Revenue Augmentation Fund. This fund clawed back property tax share to schools, thus reducing the State's burden. It also opened the door to cities and counties making the claim that the State has "taken" property tax although, in fact, it never left a single county.
Schwarzenegger climbed onto the bandwagon and repurposed those funds for his 2004-5 Economic Recovery Bonds and to make permanent the popular VLF "cut" -- without actually making any service cuts to match. (This has become a standard part of the fiscal tax-cut magic Republicans in particular seem to adore.) Instead of spending cuts, there were "deferrals" of funds owed to the schools from one fiscal year to the next. Wealthier school districts were not affected if they were locally funded (so-called 'basic aid' districts). Districts that still got the majority of their funding from local property taxes were only slightly impacted. But poorer districts, that had already seen their property tax revenue gouged by Redevelopment Agencies, have found themselves having to go out and borrow to cover the shortfall. And, of course, to pay interest and debt service fees.
Finally, in the largest of all counties, Los Angeles, only a quarter of all property taxes were allocated to schools, versus 45%+ in most counties. This has meant that LA schools were disproportionately backfilled by the State -- that is everyone else's income and corporate taxes. ERAF attempted to rectify this -- pulling money out of LA County (which had grabbed a massive 50%+ of the local property tax dollar) to rebalance their local school funding. But the VLF "swap," of state funding promises in return for hard local tax dollars, has zeroed that out in LA, the most car-intensive of all California areas. So we, the rest of the State, are back to paying for LA's schools, while the local cities and County are back in the fiscal catbird seat.