Historical Perspective of Proposition 13 - Essay Example

Proposition 13 Historical Perspective In 1978 California passed Proposition 13 with nearly 2/3 of the voters electing to change the way California calculates and collects property tax. Escalating property tax in California had become a sore point with the voters, and Prop 13 stabilized tax rates and put a limit of a 2% increase on yearly reevaluation. Proposition 13 also mandated that a two-thirds majority of the legislature would be needed to raise local tax rates and also required a 2/3 vote of the people to approve any rate hikes. The state of California immediately lost 57% of its property tax revenue amounting to $6 billion dollars (Fox). Proposition 13 was the result of a taxpayer revolt against escalating and uncertain tax rates. Viewed as one of the first signs of the coming Reagan Revolution, the radical conservative approach rippled across the country as key provisions of the act were enacted in several other states (Menrow). The most immediate and severe impact of Prop 13 was felt by the school districts that lost over half their revenue creating a crisis in many of California's public schools. In response, California passed a number of bills that eased the pressure on school systems. Overall, tax revenues going to schools decreased between 9% and 15%, with the wealthier districts losing the higher amount ("The Special Challenge"). Prop 13 resulted in the school systems in California moving from local community control to control by the state. It further gave property owners the ability to calculate and plan for their tax rate, enabling low income and fixed income households to maintain possession of their property and avoiding losing their homes due to unaffordable taxes. Provisions The focus of Prop 13 was to give the taxpayer a known and predictable property tax rate. It set a maximum tax rate at 1% and limited valuation increases to 2% per year. Upon selling a property, it would then be revalued at the market value. The 1% limit imposed by Prop 13 was about 1/3 of the rate prior to its passage. Prop 13 further limited local taxation by requiring a 2/3 majority in the legislature and 2/3 public vote to increases local taxes. These actions put the responsibility for funding the public school system on the state and in doing so, the state took control of the schools and away from local communities. Recent amendments have lowered the threshold for voter approval to 55%, which has allowed local governments to raise additional funding when necessary. Impact of Proposition 13 The impact of the loss of revenue was most clearly felt by local school districts. Schools, faced with fewer dollars, were forced to delay improvements and in some cases resulted in the cutting of programs. However, the long-term result has not led to the bankruptcy of California's schools. Bolstered by "bailout bills" that benefited education, the schools continued to operate under state control at or near the previous level of funding. In 2001-2002 California teachers were ranked at the top of the pay scale compared to other states (Bell). Faced with the loss of revenue, many cities increased fees on everything from traffic violations, to home inspections, and service taxes on hotels and restaurants (Wood). Along with innovative taxation, changes in Prop 13 over the years have made it easier for local communities to raise money for schools by reducing the 2/3 voter approval to 55%. Critics have pointed to the lower test scores in California schools since the inception of Prop 13 and linked them to the reduced funding. Per pupil spending has been reduced and is currently about $650 below the national per pupil average. The falling test scores are due to several reasons and lower funding may be just one facet of the problem. Immigration, state educational policies, and an activist teachers union may have more impact on test scores than reduced funding. Relations between the state and local governments have been strained as local government officials, in need of funding, have become beholden to the state and have been put in the awkward position of pleading for money. This has opened the door to state influence on local spending, and has resulted in officials more willing to spend money on profitable projects than ventures that cost money. This has brought about an increase in malls and retail outlets at the expense of improving infrastructure. Local officials run the risk of reaching politically cozy compromises that are not in the best interest of their people. The impact on California taxpayers has been to reduce run away tax rates and stabilized the valuation process. Taxpayers have been able to keep their homes which they may have risked losing under the previous taxation system. It also provided them with a guagable, predictable rate that has allowed them to plan for the modest increases allowed under Prop 13. It also allowed this money to reenter the economy and helped to spur rapid growth in the state's economic surge in the years following Proposition 13. In the first 10 years following the enactment of Proposition 13, incomes in Californians grew 50 percent faster than in the rest of the nation while jobs grew at twice the national pace (Moore). Rather than financially crippling the state revenue stream, Prop 13 resulted in a budget that grew 75% above inflation in the first 15 years following its passage (Moore). Implications of Prop 13 The passing of Proposition 13 became a model for taxpayers to actively show their concern with government spending and demonstrated that activists can affect the way the government collects and distributes taxes. The curbing of the popular vote required to collect local taxes, from 2/3 to 55%, continues to enable communities to generate the revenue needed for improvements and expansion. It has not led to the demise of public education that was predicted by the opponents of Prop 13. In fact during the 1980s, the years right after the passing of Prop 13, California's rate of taxation rose from 11% to 12% as a share of Californian income (Moore). Schools such as Ft. Bragg have implemented methods to structure long term financing for new buildings and necessary expansion. By a 65% voter approval, they recently approved a $22.5 million 40 year bond approval for renovation of all its schools (Bell). However, the changing of school control from local to the state level may have not been in the best interests of California students. Though Prop 13 put some initial strain on local districts, the long-term effect has resulted in adequate funding. Teachers are paid above the national average and class size is limited. However, the inability of local school districts and schools to make decisions at a local level may be an obstacle to new ideas and innovative cost saving programs. California is a widely diverse population with many differing demographics. These diverse groups might be better served on a local level. Proposition 13 was a good move as the voters became more engaged in making political decisions and having their voice heard. The subsequent amendments gave Prop 13 more flexibility and have assured that California schools can continue to grow and show improvement. If offered for a vote, I would support the action. I would also place a safety net that would guarantee minimum funding for schools that was at or above the national average. In addition, I would place a provision in the bill that would give local governments greater access to tax dollars without putting them in a beggarly position. Without Prop 13, many Californians risked losing their homes during the escalating real estate boom in California. Prop 13 has helped to stabilize neighborhoods and offered some security to homeowners faced with unaffordable property taxes. Prop 13 was a fair and reasonable law that protected the taxpayers. It did not bring about the demise of the school system or bring bankruptcy to the state. In fact, its conservative approach demanded more judicious spending habits by government officials and fueled a healthy growth cycle in California's economy. Works Cited Bell, Tom. "Fort Bragg Schools Feel Sting of Proposition 13." 16 May 2004. Portland Press Herald. 13 May 2006 . Fox, Joel. "Proposition 13: a Look Back." Howard Jarvis Taxpayers Association. 13 May 2006 . Moore, Stephen. Proposition 13 Then, Now and Forever. CATO Institute. Washington, DC: CATO Institute, 1998. 13 May 2006 . "The Special Challenge of Proposition 13." The Menrow Report. PBS. 13 May 2006 . Wood, Daniel B. "Dealing with the Unintended Consequences of Proposition 13." Speaker's Commission on State/Local Government Finance. 14 Apr. 1999. Christian Science Monitor. 13 May 2006 . Read More