No Prop 13, No Problem

Thursday, May 28, 2009 | It is ironic that many outspoken critics of the state’s “proposed” raids on local property taxes are coming from staunch backers of Proposition 13, the property-tax limitation initiative passed in 1978. If we didn’t have Proposition 13, we would have no state raids.

Until 1978, local governments set their own property tax rates, and were constitutionally entitled to keep all of the money. Prop 13 instead capped the overall tax burden at 1 percent of a property’s value. The problem, however, was how to distribute the much-reduced property tax pie among all of the local governments that depended on this revenue? The solution built into Prop 13 was the following: “The one percent (1%) tax to be collected by the counties and apportioned ACCORDING TO LAW (emphasis added) to the districts within the counties.”

In other words, authors of Prop 13 wanted to avoid the tough decision of how to divide the money, instead passing the buck to state lawmakers in the Legislature. As we now know, allowing state law to apportion the money would not mean that it would be apportioned only to local governments. (Technically, the state “raids” local governments by setting aside more of their property taxes for local schools, thus reducing how much the state has to dole out of its General Fund for education.)

Those who think important government reforms should be made through direct initiatives should take warning from the unintended consequences of Prop 13.