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The Real Impact of Proposition 13

Ask any local government veteran in California what has most hurt their cause and the answer will very likely be Prop 13. Since 1978, the infamous taxpayer revolt and its aftermath has been blamed for every public service woe in the book: closed libraries, lack of police protection, dying street trees, indeed faith in government itself. Yet a growing body of research suggests that per-capita spending by cities in California has not changed from that of pre-Prop 13 years. And nearly all observers of municipal finance agree that spending for police and fire services far surpasses that of the early 1970s. How can this be possible, since cities' primary source of general fund expenditures - property taxes - was severely limited in the complete restructuring that the initiative implemented? For answers, we checked in with Michael Coleman, A policy analyst for the League of California Cities. His data confirms that property tax dropped precipitously. Indeed, inflation-adjusted per capita revenues from property taxes have dropped from $150 in 1978 to about $75 in 1995. But the drop was mostly an instant free-fall: the worst year was actually 1979, right after the revenue pie was re-sliced. In that year, property taxes dropped to only $50 of per capita revenue. Since then, the numbers have ebbed and flowed along with assessed valuations, actually growing to about $105 in 1992. In planning lore, Prop 13 has forced cities to grovel for sales tax revenues, accounting for much hand-ringing about the zero-sum gain of fiscally-based land use decisions. But truth be told, revenues from sales tax are actually lower than in pre-Prop 13 years. In 1978, about $125 of cities' revenue per capita came from sales tax, on average. But in 1995, this figure had declined to only $100. Taxes aside, the total revenue picture hasn't really changed in all of this time. While 1978 was a peak year for per capita revenue for the state's cities ($750 dollars), overall revenues have essentially remained stable. For example, 1975 totals were approximately $630 per capita, as were they in 1994. Special taxes, utility user taxes, and transportation sales taxes pumped the revenue pie back up. So how come libraries are closed and tree wells are paved over? In part, because new police cars and rapidly growing administrative salaries consume a much greater portion of the municipal expenditures, to the detriment of not so fortunate services. According to the Coleman's research, police and fire spending are up an inflation-adjusted 50% since 1976. Meanwhile, parks, libraries, and long-range planning are down. Parks is the most dramatic victim - down 24% since 1976. It's a fair bet that a larger proportion of overall expenditures go to white collar salaries at city hall. In an annual review of public employee salaries conducted by the Vacaville Reporter, Karen Nolan noted that Vacaville's public works director collects a base salary that is 47% higher than 20 years ago - after adjustments for inflation. The city's police chief is an adjusted 24% higher than in 1997. And this is a pattern that is mirrored throughout California. When faced with such data, why is it that Prop 13 stirs such acrimony amongst dedicated public servants? Fred Silva, research director for the San Francisco-based non-profit Public Policy Institute has theory. "There is no city-wideness to fiscal policy anymore," he surmises. The post-Prop. 13 fiscal system offends the public servant's sense of propriety, and complicates the mission to provide for the broader public interest. It's a loss of city wide-ness. But whose public and whose interest? Silva points out that "Prop 13, along with the Coastal Act, were exactly the types of policies that reformist governor Hiram Johnson had in mind when he invented the initiative process in 1910." Prop 13 would have happened with or without Howard Jarvis, because it was a fundamental reaction to a legislative/statehouse impasse in resolving a widely understood problems in the annual property assessment system. So when it comes to local government financing, maybe the question should not so much be "how much?" but "how?" In this 20th anniversary of the passage of Prop 13, let us take comfort in the fact that the blood is still in the turnip. But at the same time, let us pay greater attention to how we slice it.
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