Correction: Due to a reporter error, an earlier version of this article mistakenly reported that Assemblywoman Catharine Baker supports the extension of Prop. 30 taxes. Baker does not, in fact, support the proposed extensions. 

Steve Glazer – bald, bespectacled and mild-mannered – doesn’t look like a revolutionary. But the politically moderate Democratic state senator from Orinda hopes to be in the vanguard of a centrist coalition in Sacramento that challenges the Legislature’s entrenched partisan divide and loosens labor unions’ grip on power.

“[When] I ran, a big part of it was to break down the power that exists in Sacramento,” said Glazer at a town hall meeting in San Ramon on Nov. 30. “There is no center anymore. It’s a polarized place, from the left and from the right. It’s unhealthy, it’s very unhealthy.”

“Everybody is afraid to try to occupy that center because you lose,” Glazer continued. “So, part of the reason that I got into this was to try to break it down, and say, ‘Look, I run, I lose, it’s OK.’ But it’s an unhealthy process.”

Glazer’s candidacy in a May special election sent alarm bells to Sacramento’s biggest power player, organized labor, which spent more than $2.7 million attempting to elect union-friendly Assemblywoman Susan Bonilla.

In that campaign a union front group played a dirty trick in an attempt to siphon votes from Glazer. Posing as an Asian-American business group, they sent mailers touting another Republican candidate, Michaela Hertle, but failed to mention she had dropped out of the race too late to have her name removed from the ballot.

“Maverick” status

Glazer touted his political maverick status to the standing-room-only crowd in the Amador Rancho Center, site of the recent town hall meeting.

“In my first week in office – the pro tem in the Senate [Kevin de León] is the top guy – I voted against four of his bills in my first week,” he said. “People said to me, ‘Steve, the Chamber of Commerce supported them.’ In the first week I voted against two of their top priorities on the floor of the Senate.”

He added, prompting laughter, “I can’t find anybody that’s really that happy with me.”

A question about why things don’t seem to get done in Sacramento prompted Glazer to elaborate on his view of Sacramento’s polarized, unhealthy atmosphere:

“Some of it is intractable and difficult to solve,” he said. “It’s because these interest groups are so powerful. When you have a choice to be made as an elected leader between what you might think is better for your community or the powers in Sacramento, what does that really mean?

 

“It means campaign contributions. It means the organizers that come into communities, they don’t live there, and influence the decisions that are made in that local community. It affects independent expenditure campaigns.”

For two months last spring those IE groups flooded mailboxes daily with mailers featuring Glazer’s face. Half praised him as a fiscal conservative and maverick willing to buck the special interests in Sacramento. The other half denounced him as a tool of business interests, including tobacco companies.

Score Card

Several legislative report cards affirm that Glazer is one of the most fiscally conservative, pro-business Democratic legislators in Sacramento.

The Howard Jarvis Taxpayers Association gave him a “D,” which sounds bad, except that every other Senate Democrat but one (Sen. Richard Roth, D-Riverside) received an ‘F.’ Glazer voted with the HJTA 57.6 percent of 16 bills.

The California Taxpayers Association scored Glazer as voting with taxpayers only 50 percent of the time on targeted legislation. But that still made him the third most taxpayer friendly Democrat in the Senate.

Glazer did better on business legislation, according to the California Chamber of Commerce. He voted with business interests on 11 of 13 bills, which is the highest score among Senate Democrats. Most Democrats voted the Chamber’s way only three or four times on those bills.

After casting more than 1,300 votes in his six months in office, Glazer said one of things he’s most proud of is his 100 percent voting score from the California League of Cities. It was based on votes on 15 bills mostly dealing with local control but also with marijuana, economic development and affordable housing.

Local Control

As part of his crusade for more local control, Glazer is cosponsoring Senate Bill 799. It would raise a state-imposed cap on local school districts’ reserve funds. The union-backed cap was designed to free up school district funds for increased employee compensation, according to the Contra Costa Times.

“The whole school district cap issue happened because all the power was in Sacramento,” said Glazer. “Think about it. It’s not just about we here engaged locally concerned about your local control, your local choices.”

He continued, “They, excuse my language, they – how do I use better language? [audience laughter] – they stepped on every school district in the state. Every legislator made the choice to step on every school district in their district to create an artificial cap because of that power, that grip that exists in Sacramento on school policy. It’s very unhealthy, but it’s a great example.”

Several attempts to remove the cap failed this year, but six Democratic senators who voted for the reserve fund cap have signed onto Glazer’s bill.

Bipartisan Cooperation

In an example of the bipartisan cooperation Glazer is hoping to increase in Sacramento, the town hall was co-hosted by Republican Assemblywoman Catharine Baker. She recently celebrated her first anniversary in office after fighting a similarly expensive, divisive election campaign against a union-backed Democrat.

She received 51.6 percent of the votes in a district with 32 percent registered Republicans, and is the only Republican state lawmaker in the Bay Area.

Baker is more fiscally conservative than Glazer. She received a “B” from Jarvis and a 100 percent score from CalTax.

No one in the Assembly, including all of the Democrats, scored higher than Baker’s 86 percent on the League of Cities report card. She received the same score as Glazer from the Chamber.

All of that commonality, including overlapping districts, has engendered a mutual respect society with each legislator praising the other at the town hall and urging a new way of doing things in Sacramento. In Glazer’s words:

“It’s the center we are trying to build and occupy. Both of us here, we see the value of bipartnership, in partnering, in building that center so it will be more reflective of what we are here to represent.”

 

“We wish every place was like San Ramon, but it’s not. But we are trying to break it down. We are creating a cluster here that’s very unusual in the state. A Democrat supporting a Republican, a Republican supporting a Democrat.

 

“So we are creating a cluster here of independently minded representatives that is unique in California. It’s part of the excitement of what we do. We are trying to recruit to find more members like that who want to join our centrist party.”

Baker is moving a companion measure to lift the school district reserve cap, Assembly Bill 1048, through the Assembly.

That potential 3 percent sales tax levied by cities and counties is in addition to the statewide 7.5 percent sales tax, which could result in a combined 10.5 percent tax in some areas of the state. Tax hikes require majority voter approval for general purpose levies and two-thirds approval for special purposes.

The average state and local combined sales tax in California is 8.5 percent, according to a recent report by the Legislative Analyst’s Office. The lowest rate of 7.5 percent predominates in rural counties, while the highest rates are in urban areas. Residents in eight cities in the Bay Area and Los Angeles County are currently paying a 10 percent sales tax because their counties have received exemptions from the 2 percent cap.

“AB464 is about local control and flexibility,” said the bill’s author Assemblyman Kevin Mullin, D-San Mateo, on the Assembly floor May 14. “It gives local voters the ability to raise revenue to fund important public services, including transportation, public safety and libraries. This bill is crucial, because if just one city in a county reaches the [2 percent] cap, then the entire county is precluded from having voters raise any additional taxes, hindering key transportation projects or attempts to enhance public safety.

“As a result, a flurry of legislation has been signed into law creating individual cap exceptions across the state. AB464 reduces the need for this one-off legislation by lifting the cap statewide. Please join me in granting voters the ability to raise sufficient revenue to fund public services locally in California.”

There was no debate on the bill, which passed along party lines 45-31. It’s supported by California’s counties and their transportation commissions along with government employee unions.

The California Taxpayers Association issued an opposition “floor alert” on the bill that was signed by numerous business and local taxpayer organizations. It states that “California already has the highest sales and use tax rate in the country,” and provides three arguments against raising the cap:

• Increases the cost of doing business. Businesses face a significant sales and use tax burden in California, and business purchases account for roughly 40 percent of all sales and use tax collected by state and local governments. California is one of the few states that requires businesses to pay sales and use tax on manufacturing and R&D equipment bought and used in the state, making California a very expensive state to operate in, particularly when the sales tax rate is 10 percent in some California cities.
• The sales and use tax is a regressive tax that impacts California’s most vulnerable residents, making it more difficult for them to budget and purchase everyday necessities. California’s economy is improving, resulting in improved revenue collections this year. Now is the wrong time to ask taxpayers, especially those that can least afford it, to spend more of their income to pay taxes.
• Raises the sales tax rate to 11 percent in some areas. [T]he Los Angeles Metropolitan Transit Authority imposes a 0.5 percent tax in excess of current limitations for all of Los Angeles County. This bill would authorize this district to increase its rate to 11 percent. This level of taxation is excessive, and exacerbates the problems described above.

The immediate beneficiaries of AB464 are Alameda, Contra Costa, Los Angeles and San Mateo counties, which have all reached the 2 percent limit, as well as Marin, San Diego and Sonoma counties, which are near the 2 percent limit, according to the Assembly’s legislative analysis.

California’s sales tax brought in $48 billion in 2013–14. About half of it goes to the state government’s general fund, making it the second largest general fund source after the income tax, which accounts for two-thirds. One percent of the sales tax goes to cities’ and counties’ general funds; the rest is aimed at specific programs such as public safety and transportation.

The statewide sales tax rate began at 2.5 percent in 1933. Although the tax rate has tripled since then and its revenue has increased at a 7.3 percent annual rate, the sales tax has actually decreased as a share of total state revenue. “In the 1950s, the sales tax accounted for the majority of General Fund revenue, while the personal income tax contributed less than one-fifth,” the LAO report said. “Since then, personal income tax revenue has grown rapidly due to growth in real incomes, the state’s progressive rate structure and increased capital gains.”

In 1969, cities and counties were granted the authorization to pass their own sales tax increases, mostly benefiting transportation improvements.

Although not nearly as volatile a revenue source as the income tax, revenue from the sales tax can vary significantly depending on the state of the economy. In 1974-75 sales tax revenue increased 22 percent, but in 2008-09 it declined 10 percent. Overall, however, adjusting for increased rate changes, inflation and population, sales tax revenue has remained roughly constant per capita since 1970–71, according to the LAO.

AB464 will next be considered by the Senate Rules Committee.

By Dave Roberts

California Democrats are seeking to weaken the protection for business property in Proposition 13, the 1978 tax limitation measure passed by voters. If the Democrats are successful, it could result in an annual $10 billion business tax hike, and over five years a loss of nearly 400,000 jobs and a $72 billion hit to California’s economy, according to one study.

AB 188, by Assemblyman Tom Ammiano, D-San Francisco, requires that commercial properties be reassessed whenever there’s a 100 percent change in ownership of those properties.

Currently, business partners who purchase a property can avoid reassessment as long as none of the partners owns more than 50 percent of the property. Democrats consider that a loophole — and a potential cash cow for the state treasury if the loophole is closed.

Democratic resolution

One of the resolutions passed at last weekend’s state Democratic Convention in Sacramento pledges to revise Prop. 13:

“Whereas, Proposition 13, passed in 1978, is unfair in that it allows commercial property owners to avoid paying their fair share and has shifted the tax burden to residential property and away from business, including everyday homeowners and working families; and

“Whereas, the state of California continues to face chronic budget crises in large part because Proposition 13 has forced the state to rely on more volatile revenue sources than the property tax, like income taxes and sales taxes paid by working families that move in tandem with economic cycles, causing deficits and requiring cuts to vital services that grow our economy and thereby worsening economic downturns;

“Whereas, regularly reassessing non‐residential property would, according to an analysis of data provided by the California Board of Equalization, generate at least $6 billion in additional revenue for California, and shift the tax burden from homeowners, renters, and working families to corporations and commercial landholders;

“Therefore be it resolved, that the California Democratic Party supports commercial property tax reform that will require commercial properties to be reassessed regularly while maintaining residential property owners’ protections under Prop 13 ….”

Ammiano echoed those themes as he introduced his bill to the Assembly Committee On Revenue And Taxation on Monday.

“While teachers and police are being laid off and children are being denied access to critical medical care and struggling families are being forced to bear a larger tax burden, it is appropriate that we close loopholes such as this which benefit major corporations at the expense of both small businesses and the average Californian taxpayer,” he said.

Ammiano was backed by Lenny Goldberg, executive director of the liberal California Tax Reform Association. He said E&J Gallo used the loophole to avoid a property reassessment when it bought the Louis Martini winery in St. Helena in 2002.

“The Napa County assessor came out and said to the Assessors Association, ‘Shouldn’t we deal with this problem?’” Goldberg said. “And that’s what this bill does.”

Great Recession

Also supporting AB 188 was Christie Bouma, representing California Professional Firefighters. Many fire district budgets were hit hard by property tax reductions during the Great Recession.

“We protect homes and businesses,” she said. “In grandma’s home, she can’t sell her bathroom to someone and the living room to someone else and her family room to someone else, and avoid 100 percent change of ownership, but must instead suffer the assessment. I would suggest that since many fire protection agencies in the state and fire districts are almost 100 percent funded by property tax, they are getting choked off by these sorts of [commercial property] transactions. It’s a very small change that will allow them to not only protect these business properties that need to remain viable in their communities, but also grandma’s house.”

Exactly how much revenue would be raised by more frequent reassessments of commercial properties remains to be seen. It could be far less than the $6 billion annually that Democrats are salivating for. The Board of Equalization estimates that the annual property tax revenue increase associated with the new “change of ownership” rule would be $77 million per year, according to the bill’s analysis for the committee hearing.

“However, BOE acknowledged that estimating the revenue increase with any degree of certainty is difficult,” the analysis states. “Additionally, it does not know the number of such transactions that would be covered under this new definition in California.”

Study: significant, detrimental impact on economy

A Pepperdine University study released a year ago is closer to the Democrats’ estimate, predicting that a split-roll tax system that treats business properties differently from residential properties could bring in an extra $4-10 billion, with a best guess at $6 billion. If that occurs, it would be another devastating blow to California’s struggling economy, the study concludes:

“Increasing the taxes of businesses by $6 billion would result in lost economic output and decreased employment. The cost to the California economy of this property tax increase would total $71.8 billion dollars of lost output and 396,345 lost jobs over the first five years of a split roll property tax regime. These losses would be even greater in succeeding years.

“The introduction of a split roll property tax valuation system would result in increased instability for local government finances, as they would become more directly susceptible to the value gyrations of the real estate market. For example, in 2008‐09 when California property values faced the traumatic decline in the wake of the sub‐prime crisis and the market collapse (industrial and commercial values fell 6.5 percent), property taxes collected from these same properties actually rose 5.0 percent.

“A split roll property tax valuation system would also further undermine the attractiveness of the business climate in California. Because small businesses typically lease properties where the cost of property taxes is passed through to the lessee, this research concludes that the employment losses described above would be disproportionately concentrated in small businesses, and especially those owned by women and minorities.

“Overall, this study finds that a split roll property tax regime would have a significant and detrimental impact on the state’s economy, especially at a time when the California economy is struggling.”

Gina Rodriguez, representing the California Taxpayers Association, expanded on those points to the committee.

“The bill represents an erosion to the Prop. 13 protections that voters approved for all Californians almost 35 years ago,” she said. “This is inconsistent with the philosophy of Prop. 13, which is taxpayers’ collective response to dramatic increases in property taxes and which passed with 65 percent of voter.

“Beside capping the property tax rate, limiting the annual assessment increase and establishing vote thresholds, Prop. 13 also converted the property tax base from a market value system to an acquisition value system. With the acquisition value system, Prop. 13 removed much of the fluctuation of property tax revenue, creating a more stable revenue source for local government.

“Prop. 13 has been successful at what it promised to do. It prevented people from being taxed out of their homes and their businesses. And for the first time it gave all taxpayers a measure of certainty over their property tax.”

Response to Democratic arguments

Rodriguez responded to the Democrats’ arguments that Prop. 13 has hurt government revenues and shifted the tax burden from businesses to homeowners.

“Under Prop. 13, property taxes have been the most reliable tax in California, growing steadily year after year,” she said. “In fact, property taxes have exceeded growth in inflation and population combined. From 1979 to 2012, the average annual growth of assessed value for locally assessed businesses has outpaced the growth of homeowner-occupied properties 7.5 to 7.2 percent.”

One of the few bright spots in California’s sluggish economy has been the revival of the high-tech industry. But Kelly Hitt, representing Tech America, said that could be in jeopardy if AB 188 passes.

“The technology industry was born in California and we want to stay in California,” she said. “Our industry faces extreme competition and rapid technological advancements that result in compressed research cycles and product lives. In today’s fiscal climate, technology companies must compare their operational costs with other locations globally. Companies take several things into consideration when choosing where to expand. And Proposition 13 is one of the few certainties technology companies in California have when doing so. The technology industry is a bright spot in California’s economy. And we need to start playing offense to keep these companies and jobs here.”

AB 188 was sent to the committee’s suspense file, and will likely be voted on in May.

By Dave Roberts

If you decide not to pay your taxes, you could face stiff penalties, seizure of your property and jail time. But when California’s government is the tax deadbeat, state officials thumb their noses at the tax man.

The California Department of Fish and Wildlife owes more than $22 million to 36 counties, having failed to make its annual payments for more than 10 years for use of county property. Year after year county officials bill and plead for payment, and year after year they get snubbed.

“If the state was a private taxpayer, several pieces of state property would have been seized and sold a long time ago for failure to pay property taxes,” said the California Taxpayers Association in its April 5 newsletter.

The association reported that a representative of the Rural County Representatives of California spoke at the April 3 meeting of Assembly Budget Subcommittee 3, asking the state to pay what it owes for the use of county properties acquired for wildlife preservation.

The DFW owns or administers 722 properties statewide, totaling 1,147,055 acres, according to the DFW Budget Fact Book. That includes 110 wildlife areas, 130 ecological reserves, 268 undesignated lands, 154 public access areas, 20 fish hatcheries and 40 miscellaneous lands.

On March 15 the RCRC and the California State Association of Counties wrote to the Assembly and Senate budget committees seeking the monies owed under the category of Payment In Lieu of Taxes to counties.

Decades of nonpayment

The letter reads:

“[T]he law specifies that when income is derived directly from real property acquired and operated by the State as wildlife management areas, the Department of Fish and Wildlife shall pay annually to the county in which the property is located an amount equal to the county taxes levied upon the property at the time title was transferred to the State. These PILT payments are intended to offset adverse impacts to county property tax revenues that result when the State acquires private property for wildlife management areas.

“[T]his very serious problem goes back in time over two decades to 1990-1991. From 1990 to 2002 some counties received their full PILT payment, while others received partial or no payment of monies owed, accounting for a past due total of $8,838,509. In total, the Department is in arrears $22,755,965 through the 2011-2012 fiscal year.

“RCRC and CSAC again respectfully urges your support for payment of these past due monies owed to counties in the 2013-2014 Budget Year. Additionally, we request the addition in the 2013-2014 State Budget of a specific line item for this purpose to help ensure future payments are made in a timely manner.”

In a press release, RCRC adds that including the PILT payments to the counties as a line item in the budget “is consistent with the principles outlined by the Governor in his [2013] State of the State address that the State needs to pay down debt with the new revenues created by Proposition 30.”

In that Jan. 24 address, Brown declared that it “would be folly … to not pay down our wall of debt. That is how we plunged into a decade of deficits.” After recounting the Biblical story of the lean cows that ate the fat cows, he said, “Let us follow the wisdom of Joseph, pay down our debts and store up reserves against the leaner times that will surely come.”

But since taking office two years ago, Brown has continued the state’s stiffing of the counties. And nearly three months after his State of the State pledge, nothing has changed.

State pleads poverty

DFW spokesman Mike Taugher said that his department hasn’t responded to the counties’ letter, but it intends to do so.

“The reason we haven’t paid PILT in recent years is because our funding to make those payments was specifically cut from our budget beginning in 2002,” he said. “We cannot make payments for items that were specifically removed from our budget.”

But the California Fish and Wildlife Code, which DFW pledges to administer and enforce, does not allow DFW to skip out on its payments to counties if it has money in its budget. “Payments provided by this section shall be from funds available to the department,” states code 1504(c).

And there is plenty of money available to the department — more than $366 million has been allocated in the DFW operations support budget for FY 2013-14. More than $45 million is spent on administration alone. But not a penny is being made available to abide by code 1504(a) which requires the DFW to annually reimburse the counties for property used by the state for wildlife management.

Lawsuit filed

That discrepancy was noted by Glenn County when it filed a lawsuit against the state in Sacramento Superior Court in January 2010. The complaint states that, prior to FY 2002-03, the DFW (then known as the Department of Fish and Game) had been making its annual in-lieu fee payments. But since then the payments have stopped.

The annual tax owed to Glenn County is a little over $58,000. But with the 10 percent penalty and interest, the 10 years of unpaid taxes totaled $1,066,192 through FY 2011-12. The state’s tab has increased to about $1.2 million today.

The lawsuit says the state has:

“taken the same position in each fiscal year commencing with 2002/2003 to the present that notwithstanding the plain mandatory language set forth in Fish and Game Code section 1504(a), the lack of appropriated funds in the budget of the Department of Fish and Game as a result of budgetary decisions made during tough economic times precludes the payment of ‘in lieu fees’ to the County of Glenn as required by the afore-mentioned code section.” 

But, rather than simply paying what it owes, the state has spent the past three years tying up the legal system. After first trying to get the suit dismissed, much of last year was consumed by the state’s attempt to get a summary judgment in its favor, avoiding a trial.

Its two arguments are: 1) in 2002 the state cut DFW funding for payment to the counties, so the department no longer has to make those payments; and 2) Glenn County failed to file claims for nonpayment with the state Victim Compensation and Government Claims Board.

However, that board’s focus is on individual complaints, not tax payment disputes between governmental agencies. It typically resolves claims against the state by people who are considering suing, usually because a state agency or employee is responsible for a death, physical injury or property damage.

Catch 22

Glenn County attorney Huston Carlyle’s sarcasm was palpable in his response to the state’s motion for summary judgment:

“[It’s] an attempt to create the legal equivalent of a classic Catch-22 situation. Let me see if I understand this correctly: The Governor does not propose and/or the Legislature does not appropriate funds to pay a statutory obligation under Fish and Game Code section 1504 by the state to Glenn County going on 10+ fiscal years.

“Nonetheless, Defendants would have Glenn County submit a claim to the Board, which will then (presumably) recommend to the Legislature that it now appropriate funds that it has refused to do for a decade. Of course, a bill will be introduced to do just that and of course it will pass the Legislature and of course the Governor, who supported the 10-year ‘non-appropriation,’ is now going to sign the bill containing the funding? Good luck waiting for that scenario to materialize.”

Carlyle argued that the state’s request for summary judgment should be denied because it does not meet the legal standard “that the party moving for summary judgment bears the burden of persuasion that there is no [genuine] triable issue of material fact and that it is entitled to judgment as a matter of law.”

Judge David Brown sided with the county, denying the state’s motion for summary judgment “because the State has failed to produce admissible evidence demonstrating the absence of a triable issue of material fact…. Evidence that the Legislature did not appropriate funds to the Department is not evidence that the Legislature did not appropriate funds to settle claims. This is a critical difference.”

If Glenn County prevails in its lawsuit, it could open up the floodgates for other counties to sue, perhaps in a class action suit. In the meantime, RCRC is asking county representatives to contact their state representatives. How they phrase it is up to them, but they might ask the legislators to follow the wisdom of Joseph and pay down the state’s debts before the Department of Fish and Wildlife has to step in to stop the lean cows from eating the fat cows.

By Wayne Lusvardi

The California Taxpayer’s Association spotted a provision in Proposition 31 whose importance no one has noticed until now. It appears to prohibit making any cuts or increases to the state budget of $25 million or more.  In other words, it appears to freeze 99.999 percent of the state budget at its current funding level.

This sounds like the reincarnation of Proposition 13, the 1978 initiative that froze property taxes at the 1975 level until properties were re-sold.  But CalTax opposes Prop. 31 because it could be gamed and turned into Frankenstein monster on Nov. 6 — right after Halloween.

The key tax provision of Prop. 31 is Section 4.  In effect it would prohibit the Legislature from passing any bill that reduces or increases taxes by $25 million or more — unless the same bill provides for a tax increase or spending cut from some other program.  CalTax says that the $25 million threshold is so low that it would apply to any meaningful tax reduction or tax incentive.  It also would apply to any tax increase of $25 million or more.

Prop. 31

Under Prop. 31, a revenue reduction would apply to any “tax, fee, penalty reduction, or elimination of any type of incentive, tax exemption or tax deduction,” says CalTax.  But CalTax has the following concerns about Prop. 31:

* Any change to an existing job creating tax incentive would be affected.

* It could be gamed by bad budget estimates that may kill its touted tax limitations.

* Past budget reform proposals have only included budget increases, not revenue reductions.

* Prop. 31 has to be taken as a package of reforms with the bad as well as any good.

* Prop. 31 says it is about greater budget transparency.  But CalTax is concerned that the Department of Finance, state tax agencies, and the Legislative Analyst’s Office would exercise sleight of hand behind the scenes to create an appearance of new tax revenues or budget cuts where none really exist.

A crucial concern is that the $25 million limit on budget increases or decreases can be gamed in several ways.

One way it can be manipulated is by creating many $24.9 million expenditures.  Another way could be by using projected revenues for increasing spending, thus running up more deficits.

Expenditure bills could also be padded.  By inflating the budget of a program or project the governor then could use the veto power granted him under Prop. 31 to create the appearance he cut its budget in half.

The $25 million circuit breaker funding clause in Prop. 31 will only work with a responsible Legislature that does not use budget gimmicks.  Limiting spending is not likely to happen with a tax-and-spend California Legislature, or with the local “Strategic Action Plan Committees” created under Proposition 31.

No Limits on Big Ticket Funding Items

Another big difficulty with Prop. 31 is that it apparently does not put any limits on using bond financing or voter initiatives for state or local programs and projects.  As even the liberal Los Angeles Times wrote:

“But Proposition 31 simply fails to deal with the big-ticket items: bond measures, which add new annual payment obligations, and voter initiatives, which routinely impose new costs without identifying new revenue. Lawmakers thus would have a new incentive to rely ever more often on bonds and the ballot box — to the state’s fiscal detriment.” 

A recent example is the city of Pasadena, which is considering using $3 million in state water bond funds under Proposition 84 to re-landscape a flood control basin, expanding recreation facilities and open space, and installing a public bathroom as well as some upgrades to water works facilities. This is a local parks project funded by statewide taxpayers.

Water treatment

The city of Maywood is also planning on using statewide water bond revenues to finance a new water treatment plant under the guise of cleaning toxins from groundwater.  Statewide taxpayers would end up paying for local public works projects wearing the mask of an environmental project.

Under the mechanism of bonds, the financing of local parks, open space acquisition, public recreation, and local water and sewer projects are being regionalized.  The “user pays” principle is being abrogated and the financing of projects and programs is becoming socialized.

Under Prop. 31, this regionalization of public financing would be expanded. The stated purpose of Prop. 31 in its own wording is:

“To improve results, public agencies need a clear and shared understanding of public purpose. With this measure, the people declare that the purpose of state and local governments is to promote a prosperous economy, a quality environmental and community equity.  These purposes are advanced by achieving at least the following goals: increasing employment, improving education, decreasing poverty, decreasing crime, and improving health.”

In other words, Prop. 31 would be used to transfer funds from a large state or county taxpayer base for local prisons, public schools, and health and welfare programs. What regionalization — or socialization — does is create the image that everything that politicians can promise can be had for nearly free, or for a pittance of taxes.   It would do this by spreading the financing base over a wider tax base than city governments.  But the reality is that taxes would then become out of control.

A major concern about Prop. 31 is its silent “tax sharing” component.  It provides for the creation of regional government committees that would transfer taxes from suburbs to big cities and big-city school districts that are broke.

Prop. 31 is the opposite of Prop. 13.  It is a Frankenstein monster wearing the tax fighter mask of Howard Jarvis or the Jerry Brown mask of a monk.  Prop. 31 is an after-Halloween trick, not a treat.