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Dan Walters: The fight for tax dollars gets more fierce as they grow more scarce

By Dan Walters -- Bee Staff Writer

Sacramento Bee

February 3, 2002

When Jerry Brown became California's gubernatorial philosopher-prince 27 years ago, he declared that the state had entered an "era of limits," although he was characteristically vague as to what he meant by the slogan.

Seemingly, Brown was saying that after decades of human and economic growth the state had reached a plateau and did not need to continue building highways, dams, power plants and other public works, nor continue to expand government services.

As it turned out, the factual underpinning for Brown's "era of limits" dictum was utterly incorrect. Within a few years of his becoming governor, population growth had begun to expand again and the economy boomed. Nevertheless, Brown's policies remained intact, in part because Proposition 13 and successor measures severely limited the supply of tax and bond dollars, and in part because of the ceaseless ideological conflict over the environmental impacts of public works.

Not surprisingly, a huge squeeze has developed between the demand and supply sides of the public ledgers, with traffic, schoolchildren, water and other factors on the former side outpacing the latter side. Proposition 13 and other tax limits have, meanwhile, created a similar squeeze in operational funds at both state and local levels, thus sparking a ceaseless scramble for tax dollars.

One of the interest groups to first perceive the new reality was the union-led "Education Coalition." It scored a big win by persuading voters in 1988 to guarantee a share of state revenues for education and has since both protected Proposition 98 and, through the adroit application of political power, enhanced it. A decade ago, for example, the governor and the Legislature grabbed billions of dollars in local government property taxes to avoid cutting state money to schools. Other interests want to emulate Proposition 98's protections, with city governments now planning a big ballot measure push for their version, in a belated reaction to the property tax shift of a decade ago.

The politics of rationing were very evident last year when the state faced an energy crisis and the prospect of prolonged power blackouts. Suddenly, the Capitol's many interest groups began pitching for exemptions from blackouts on various pretexts and lists of who would and would not be cut off began to emerge.

Other, less dramatic, examples abound, such as the various efforts at encouraging car-pooling on the state's freeways, schemes to redistribute and/or market water rights, or the ever-changing standards governing college admissions. What dictates the distribution of scarce public services: need, ability to pay, some arbitrary designation of virtue or some other criterion?

Two rationing situations arose in the Capitol this year: a $12 billion-plus state budget deficit and a scheme to reallocate local sales taxes in the six-county Sacramento region.

The budget crisis is almost a textbook example since its resolution will hinge on imposing the financial burden, in some degree, on three groups: those who have stakes in state spending, those who pay taxes or future generations that would have to pay for borrowing to cover deficits.

The controversial regional sales tax measure, a form of which went through the Assembly last week, is another form of rationing. Proposition 13 put a big dent in local government finances 24 years ago and that loss was magnified when the state, as mentioned earlier, shifted another $4 billion a year in property taxes away from local governments to paper over a big hole in the state budget.

Cities that have fostered retail development replaced property tax losses with local sales taxes, and in the Sacramento area it has meant prosperity in the suburbs but a relative paucity of money in the city of Sacramento. Sacramento's city and county governments are pushing the sales-tax legislation that would, over the years, shift more of the regional tax pie into their treasuries and leave the suburbs with less. It's being billed as "smart growth," but it's truly the use of political muscle to win a rationing game. And it's doubly ironic that the Legislature that put the squeeze on local governments with a property tax shift now purports to solve it with a regional sales-tax shift.

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Speaker's Commission on State/Local Government Finance
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