California's Fiscal Crisis: The Legacy of Proposition 13

[FourScore]

California's Fiscal Crisis: The Legacy of Proposition 13
By Kevin O'Leary / Los Angeles Saturday, Jun. 27, 2009

The financial crisis in California grew worse this week as State Controller John Chiang warned that if legislators and Governor Arnold Schwarzenegger fail to come up with a budget-balancing package, he would begin paying California's bills with IOUs on July 2. The last time the state did this was during the Great Depression.

What has brought California to such a perilous state? How did its government become so wildly dysfunctional? One obvious cause is the deep recession that has caused tax revenues to plunge for all states. But California's woes have a set of deeper reasons: direct democracy run amok, timid governors, partisan gridlock and a flawed constitution all contribute to budget chaos and people in pain. And at the root of California's misery lies Proposition 13, the antitax measure that ignited the Reagan Revolution and the conservative era. In Washington, the Reagan-Bush era is over. But in California, the conservative legacy lives on. (Read TIME's report: Can the U.S. Afford to Let California Fail?)

Before Prop 13, in the 1950s and '60s, California was a liberal showcase. Governors Earl Warren and Pat Brown responded to the population growth of the postwar boom with a massive program of public infrastructure - the nation's finest public college system, the freeway system and the state aqueduct that carries water from the well-watered north to the parched south. When Ronald Reagan was governor he actually raised taxes. Then Proposition 13 shot the tires out of Pat Brown's liberal state. Liberal legislative leaders such as Willie Brown and John Burton jerry-rigged repairs and kept the damaged vehicle running for 30 years. Now Republican Arnold Schwarzenegger says there is no choice but to complete the demolition by slashing essential services. (TIME's Joel Stein weighs in on California's state of insanity)

Proposition 13 was the brainchild of the late Howard Jarvis. The antitax crusader was a policy genius not unlike Franklin D. Roosevelt. Both shared an affinity for designing deep structural change that, once embedded in the political system, is nearly impossible to alter without a massive change of heart by voters. Social Security is the lasting legacy of the New Deal era because F.D.R. understood that workers who contribute payroll-tax deductions from their paychecks would not want politicians tinkering with their retirement dollars. Conservatives have mounted assaults on Social Security through the years but to no avail.

Jarvis created a similarly impregnable institution. When he rode the wave of anger over skyrocketing property-tax assessments to pass Proposition 13 in 1978, he included a two-thirds vote requirement for the passage of any new taxes in California - an insurmountable obstacle built on populist allergy to any kind of new levy. Beholden to a tax-averse electorate, the state's liberals and moderates have attempted to live with Proposition 13 while continuing to provide the state services Californians expect - freeways, higher education, locking up felons, assisting needy families and, very importantly, essential funding to local government and school districts that vanished after the antitax measure passed...

http://www.time.com/time/nation/article/0,8599,1904938,00.html?xid=rss-fullnation-yahoo

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1. yay! another california thread! but california... you know what you have to do...

its not rocket science.

y'all (especially the rich of you) have to give up more to support your state.

simple, right?

so do it.

[Cleita]

5. Okay, a lot of the rich who own property in California and do business here

are from foreign countries or out of state. I personally don't think they spend enough here to get the free ride they are getting on property taxes and other luxury items they should be taxed on. Do you know there is no sales tax on services? All the rich people who are hiring pool guys, landscape architects, lawyers, accountants. limousines and the myriad of services rich people use, but most of us don't, are not paying a tax on it like the ordinary shopper does at Wal-Mart. Hey legislators, look into this?

[Cleita]

2. California really needs to void Proposition 13. Other laws can be passed that

protect old people and the working poor from losing their homes because of the inflation of property values.

[roamer65]

3. Michigan has solved these problems usually with a mix of spending cuts and tax hikes.

We've plugged the budget holes that way for the last eight years. This year will be no different I am betting.

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4. "Michigan has solved these problems" really?

have you?

[roamer65]

6. We've balanced the budget for eight years under Jennifer Granholm.

She's a great governor and made the state run on 39% less revenue than her repig predecessor. I remember being at our state Dem convention about 3-4 years back and talking with my state senator. I told her, "Do what you know you have to do...raise the income tax." She nodded with agreement.

Are there changes we can make? Yes. We need to open up the state constitution and get rid of the flat income tax. We need to go to a progressive income tax.

[blue_onyx]

11. A progressive income tax could solve MI current budget shortfall

I wish it had been on the 2008 ballot.

I agree that Granholm has done a great job dealing with the mess she was handed.

[TahitiNut]

7. Proposition 13 is OK for owner-occupied primary residential property

It's a nightmare for all other kinds of real estate. Commercial real estate, for example, just doesn't change ownership as often, so the market valuation trigger leaves many commercial properties undertaxed enormously. Thus, huge amounts of commercial property rests in the hands of landlords, not tenant businesses.

[roamer65]

8. This part of Prop 13 has to be one of the dumbest things about it.

"When he rode the wave of anger over skyrocketing property-tax assessments to pass Proposition 13 in 1978, he included a two-thirds vote requirement for the passage of any new taxes in California - an insurmountable obstacle built on populist allergy to any kind of new levy."

This part of the prop should be repealed ASAP. It gives minority parties in the state legislature the same level of power as the majority party on taxation issues. Dumb.

[pnorman]

9. K & R!

And everybody here, study this very carefully, if you want to know what happened to the once great state of California!
(NO!, It was NOT the "illegals"!)

pnorman

[Bandit]

10. This was passed in the late seventies, during the nineties California Prospered.

California didn't enter their huge nosedive until the 2000's and we all know who was running the show then..While the idea that it takes two thirds to raise state revenues seems quite absurd to me and should be done away with, the idea of capping the millage rates for Property Tax seems no different than establishing a Usury Law for Lending institutes.

[Cleita]

12. I beg to disagree. The mobs of homeless that started appearing in the

streets in the early eighties and nineties were not prospering or even living a humane life. We had very little homelessness, even among the poor, prior to Prop. 13. Just because the rich were getting richer didn't mean the underclasses and the working classes were doing any better. I started noticing that I was working longer hours and getting paid less than inflation in those days, yet my expenses were increasing by double digits, especially rent.