Proposition 22: Local revenue protection
October 27, 2010 by California Forward
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NOTE: California Forward’s work on governance reform may be affected by several of these measures, although we have not taken a position on them – with one exception. CA Fwd opposes Prop 27. Prop 27 would reverse the landmark redistricting reform plan that was enacted by voters in 2008 as Prop 11. California Forward endorsed Prop 11 and has been deeply involved -- with many other groups -- in supporting successful implementation of the reform since enactment. The opportunity to serve California through the new redistricting commission inspired tens of thousands of highly qualified Californians to apply for the job, which we applaud. We look forward to the new, independent commission taking control of state redistricting in 2011.
In times of fiscal crisis, state leaders consider three main ways to balance the budget: spending cuts, tax increases, or seeking other sources of money to fund state priorities. Often, lawmakers borrow from Wall Street or local coffers to help fund programs at established levels. This can leave cities and counties short-changed.
Proposition 22 was placed on the ballot in response to the state’s habit of turning to local municipalities to help balance its budget. The intent of Prop 22 is to prevent the state from using money generated at the local level - which currently funds transportation, redevelopment, or local government projects and services - for its own purposes (e.g., education, corrections, or health and human services). If approved by voters, Prop 22 would constitutionally protect that money.
The measure would prohibit the state from borrowing or redirecting state fuel taxes, or using those taxes to make payments on long-term debt issued by the state, including debt issued for transportation projects. It also would apply similar restrictions to revenues generated by the redevelopment property tax and vehicle license fee.
There was a time when local money was only used for local services. After the passage of Proposition 13 in 1978, the state took greater control over the collection and distribution of local property taxes and assumed a greater role in the administration of local programs. Now, there is sentiment from some quarters that this setup needs to be reversed or modified.
Proponents of Prop 22 argue that the measure would restore local control by protecting local funds. Opponents say passage of Prop 22 would result in less money for education and that it prioritizes local developers over statewide fiscal emergencies.
The line between state and local services is not always clear, and many services, including K-12 education, are funded with a combination of state and local money. In Aug. 2010, California Forward wrote about the convoluted relationship between the state and local governments and the difficulties sorting out specific sources of funding.
While it is difficult to know what the fiscal impact of Prop 22 will be, policy experts and the state legislative analyst estimate that it will impose a burden on the state budget of about $1 billion or more each year. However, the measure would provide local governments with a similar amount of money, on a more stable basis, to fund transportation and local government projects.
While California Forward’s sister organization, the California Forward Action Fund, proposed the Community Funding Protection and Accountability Act last year, California Forward remains neutral on Prop 22.