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Connell Proposal Aims to Relieve Local Dependence on Sales Tax
By Steven A. Capps, Bee Capitol Bureau (Published Aug. 20, 1999)

State Controller Kathleen Connell on Thursday proposed restructuring California's local government finance system, encouraging better local land use policies by reducing local officials' reliance on sales tax revenues.

"Local governments cannot continue to operate effectively without a dedicated source of stable and sufficient revenue independent of state control and intervention," she said in releasing the report at a Capitol news conference.

Under the proposal, local sales tax revenues would no longer be distributed through a point-of-sale system but on a per capita basis, meaning population would matter more to "cash-starved municipalities" than development of sales tax-producing enterprises like auto malls or large retailers, she said.

The plan also would require the state to return most property tax revenues to counties. Property tax revenues were diverted as part of a 1992 budget-balancing arrangement, and have been only partially restored since.

While some counties would receive less sales tax revenue under the proposal, any loss would be more than offset by the increase in local property tax revenues, Connell said.

"This is a formula that works for every county in California," she said.

Connell said local governments would receive an extra $450 million a year under the new system. Sacramento County's share would be about $15.3 million a year under the arrangement, according to a staff analysis.

The proposal also would require the state to begin paying for programs it requires at the local level and audit such programs annually to assure efficiency and effectiveness.

Connell's plan would need both legislative action and passage of a constitutional amendment by voters. The controller said she hoped to begin meeting with legislative leaders and members of the governor's staff next week "to get their support and feedback."

The report was the result of a six-month study undertaken by a 21-member task force formed by Connell and comprising elected officials, builders, labor representatives, developers and academics.

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