The Conversation: How Prop. 13 led us to the mess we're in
Published: Sunday, Mar. 13, 2011 - 2:00 am | Page 1E
Gov. Jerry Brown's budget proposals to realign local services and redevelopment are a great public service. Not because they represent deep change – they don't – but because they expose the broad and bipartisan consensus against any meaningful overhaul of California's broken governing system.
The broad opposition to Brown's redevelopment and realignment arguments illustrates the extent to which our state has acclimated itself to the afterworld of Proposition 13, even though it robs us of our ability to govern ourselves democratically and condemns our children to a shabbier life.
This opposition also shows the extent to which Californians of all stripes have been turned from citizens into rent seekers, using money and the political process to claim their piece of the pie and make someone else foot the bill.
In the process, we have turned our governing system and culture into a "Through the Looking Glass" world in which our most engaged citizens spend their days fighting for what they say they are against.
On the left, protectors of equal opportunity and the poor fight changes to a system that starves education and programs designed to give the neediest and their children a chance at a better life. On the right, opponents of big government defend a centralized system that produces irresponsible and wasteful spending and empowers public employee unions.
The ironies produced by this operating system are as thick as the milkshakes at Palo Alto's Peninsula Creamery. But these ironies, unlike those milkshakes, are transparent. By looking through them, we can see how only bold change might give us a more sensible, rational and democratic government.
A first irony: Proposition 13, the same 1978 measure that signaled voter revolt against big government, gave state government even broader control over California communities.
By slashing local property tax revenues, putting up higher barriers for local passage of taxes and bonds, and giving the Legislature the authority to divvy up remaining property tax dollars, Prop. 13 was the Great Centralizer.
After Prop. 13, the state took over the primary duty for funding schools, which were left with little local tax revenue of their own, and it relieved counties of paying a share of some health and welfare programs. Where once there had been largely separate and relatively well-defined pots of revenue – one labeled "local," the other "state" – there was now a single hydraulic money system, as vast as the state's waterworks, with the Legislature controlling the sluices and pumps.
That system begat the second irony: While California's problems are often portrayed as the result of partisanship and uncompromising ideologues, this centralized system came to be defended by a fierce consensus that spans party and ideology.
For the past 30 years, the right and the left have built their own structures onto the Prop. 13 system, carving out particular spending mandates and tax protections for favored interests.
Liberals have never mounted a full-scale challenge to the system because centralization – with the state taking a greater role in funding and regulating schools and health and welfare programs – represented a liberal dream of equalization come true (even though, in practice, state control has been more about leveling down than raising up). Conservatives came to accept big government in Sacramento because they hated taxes more.
Issues once settled at city hall fill the state agenda. Take the example of infrastructure. Because of Prop. 13, local governments could no longer sell general obligation bonds, repaid through the property tax, to build the public infrastructure – everything from roads to firehouses – needed to sustain growth. To the dismay of builders, local officials turned, as an alternative, to kludges like impact fees on developers to pay for those things. That brought the developers and builders and their political allies scurrying to Sacramento for infrastructure solutions that didn't land on their shoulders, such as restoring to school and community college districts the power to issue general obligation bonds to build and remodel schools.
Redevelopment agencies grew for similar reasons, as politicians – and their developer backers – sought to grab land and property tax growth to finance big projects. Many of the billions in property tax siphoned to redevelopment would otherwise have gone to schools. The state government, under Sacramento lobbying, ended up making up the difference.
There is no real opposition in Sacramento to this way of governance. The beneficiaries of the system include virtually everyone who shapes communication with the California public about how state government works: lobbyists; strategic consultants; public relations experts; fundraisers and party planners; the reporters and pundits. These players take different sides in contests over who gets what from government. But they are all on the same side when it comes to preserving the centralized system that supplies the lucrative work of fighting these never-ending battles.
This consensus undergirds a third irony: The tax limitations in Prop. 13 fuel the power not only of business and anti-tax groups – but also their chief opponents, the public employee unions.
This may be the least understood irony of the Prop. 13 system. By separating the responsibility for taxing and spending at the local level and by centralizing power in the state Capitol, Prop. 13 opened the way for public employees – teachers, police, firefighters, prison guards, city managers – to increase their influence, both in local government and in Sacramento. They have used that power to raise their compensation to levels unequaled in the rest of the country.
The effects of Prop. 13 have been felt most strongly in local politics. Before the Jarvis-Gann measure, local agencies and their boards had dual duties.
They decided how much to spend on public services, and they set the property tax rate needed to supply that money. And because they had the power to tax, they attracted a lot of attention, not just from people interested in the quality of the services, but also from property owners, both business and homeowners, who paid the taxes to support those services.
Prop. 13 and successor measures (Proposition 62 in 1986 and Proposition 218 in 1996) took taxing authority away from local elected officials, leaving them with the reduced responsibility of spending dollars whose amount was set in Sacramento or by the voters. Without the power to tax, local governments were less of an immediate threat to local pocketbooks. It was no longer necessary for business and taxpayer groups to watch them so carefully.
And so leaders of business groups began a retreat from local service, which left the field in local politics to those whose primary interest in local government is as a source of income or subsidy – including developers, contractors and, especially, public employees.
Operating with little scrutiny from their own residents or from the atrophying commercial news media, local governments dominated by their employees made pay and pension commitments they could not keep.
And here's a final irony: Nearly every proposal to realign local-state responsibilities, with the exception of Brown's redevelopment plan, leaves the central pillars of this system in place.
Real realignment requires a total unwinding of this system – and a return to the pre-Prop. 13 rule that local governments should themselves decide on the taxes for the programs they fund.
Ask yourself: Would county boards grant lavish retirement benefits to public workers if they had to raise the tax rate to pay for them – and then defend it to voters? Would city councils approve lavish redevelopment subsidies if they had to justify the tax increase to pay for them?
In the jargon of computer programmers, the Prop. 13 operating system is an endless loop. We are all living in the crash.
The broad opposition to Brown's redevelopment and realignment arguments illustrates the extent to which our state has acclimated itself to the afterworld of Proposition 13, even though it robs us of our ability to govern ourselves democratically and condemns our children to a shabbier life.
This opposition also shows the extent to which Californians of all stripes have been turned from citizens into rent seekers, using money and the political process to claim their piece of the pie and make someone else foot the bill.
In the process, we have turned our governing system and culture into a "Through the Looking Glass" world in which our most engaged citizens spend their days fighting for what they say they are against.
On the left, protectors of equal opportunity and the poor fight changes to a system that starves education and programs designed to give the neediest and their children a chance at a better life. On the right, opponents of big government defend a centralized system that produces irresponsible and wasteful spending and empowers public employee unions.
The ironies produced by this operating system are as thick as the milkshakes at Palo Alto's Peninsula Creamery. But these ironies, unlike those milkshakes, are transparent. By looking through them, we can see how only bold change might give us a more sensible, rational and democratic government.
A first irony: Proposition 13, the same 1978 measure that signaled voter revolt against big government, gave state government even broader control over California communities.
By slashing local property tax revenues, putting up higher barriers for local passage of taxes and bonds, and giving the Legislature the authority to divvy up remaining property tax dollars, Prop. 13 was the Great Centralizer.
After Prop. 13, the state took over the primary duty for funding schools, which were left with little local tax revenue of their own, and it relieved counties of paying a share of some health and welfare programs. Where once there had been largely separate and relatively well-defined pots of revenue – one labeled "local," the other "state" – there was now a single hydraulic money system, as vast as the state's waterworks, with the Legislature controlling the sluices and pumps.
That system begat the second irony: While California's problems are often portrayed as the result of partisanship and uncompromising ideologues, this centralized system came to be defended by a fierce consensus that spans party and ideology.
For the past 30 years, the right and the left have built their own structures onto the Prop. 13 system, carving out particular spending mandates and tax protections for favored interests.
Liberals have never mounted a full-scale challenge to the system because centralization – with the state taking a greater role in funding and regulating schools and health and welfare programs – represented a liberal dream of equalization come true (even though, in practice, state control has been more about leveling down than raising up). Conservatives came to accept big government in Sacramento because they hated taxes more.
Issues once settled at city hall fill the state agenda. Take the example of infrastructure. Because of Prop. 13, local governments could no longer sell general obligation bonds, repaid through the property tax, to build the public infrastructure – everything from roads to firehouses – needed to sustain growth. To the dismay of builders, local officials turned, as an alternative, to kludges like impact fees on developers to pay for those things. That brought the developers and builders and their political allies scurrying to Sacramento for infrastructure solutions that didn't land on their shoulders, such as restoring to school and community college districts the power to issue general obligation bonds to build and remodel schools.
Redevelopment agencies grew for similar reasons, as politicians – and their developer backers – sought to grab land and property tax growth to finance big projects. Many of the billions in property tax siphoned to redevelopment would otherwise have gone to schools. The state government, under Sacramento lobbying, ended up making up the difference.
There is no real opposition in Sacramento to this way of governance. The beneficiaries of the system include virtually everyone who shapes communication with the California public about how state government works: lobbyists; strategic consultants; public relations experts; fundraisers and party planners; the reporters and pundits. These players take different sides in contests over who gets what from government. But they are all on the same side when it comes to preserving the centralized system that supplies the lucrative work of fighting these never-ending battles.
This consensus undergirds a third irony: The tax limitations in Prop. 13 fuel the power not only of business and anti-tax groups – but also their chief opponents, the public employee unions.
This may be the least understood irony of the Prop. 13 system. By separating the responsibility for taxing and spending at the local level and by centralizing power in the state Capitol, Prop. 13 opened the way for public employees – teachers, police, firefighters, prison guards, city managers – to increase their influence, both in local government and in Sacramento. They have used that power to raise their compensation to levels unequaled in the rest of the country.
The effects of Prop. 13 have been felt most strongly in local politics. Before the Jarvis-Gann measure, local agencies and their boards had dual duties.
They decided how much to spend on public services, and they set the property tax rate needed to supply that money. And because they had the power to tax, they attracted a lot of attention, not just from people interested in the quality of the services, but also from property owners, both business and homeowners, who paid the taxes to support those services.
Prop. 13 and successor measures (Proposition 62 in 1986 and Proposition 218 in 1996) took taxing authority away from local elected officials, leaving them with the reduced responsibility of spending dollars whose amount was set in Sacramento or by the voters. Without the power to tax, local governments were less of an immediate threat to local pocketbooks. It was no longer necessary for business and taxpayer groups to watch them so carefully.
And so leaders of business groups began a retreat from local service, which left the field in local politics to those whose primary interest in local government is as a source of income or subsidy – including developers, contractors and, especially, public employees.
Operating with little scrutiny from their own residents or from the atrophying commercial news media, local governments dominated by their employees made pay and pension commitments they could not keep.
And here's a final irony: Nearly every proposal to realign local-state responsibilities, with the exception of Brown's redevelopment plan, leaves the central pillars of this system in place.
Real realignment requires a total unwinding of this system – and a return to the pre-Prop. 13 rule that local governments should themselves decide on the taxes for the programs they fund.
Ask yourself: Would county boards grant lavish retirement benefits to public workers if they had to raise the tax rate to pay for them – and then defend it to voters? Would city councils approve lavish redevelopment subsidies if they had to justify the tax increase to pay for them?
In the jargon of computer programmers, the Prop. 13 operating system is an endless loop. We are all living in the crash.
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