5 years later: weighing the impact of California's Prop. 13
In 1963, a scrappy populist named Howard Jarvis wrote a ballot proposition to cut California property taxes. For nearly 15 years, most Californians neither knew nor cared.
But by 1978, the public was ready to be stirred. The price of a house was soaring like a loose kite, and the property tax went with it. State government was growing faster than the economy. Many Californians were very unhappy.
In short order, Howard Jarvis became a household name. The Jarvis-Gann initiative became Proposition 13 on the state ballot. (Cosponsor Paul Gann was also a longtime tax fighter.) And on June 6, five years ago, California voters approved the measure by 2 to 1, bringing on a tax revolt that has shaken state and local governments across the United States.
''It is successful, without being completely successful,'' says Mr. Jarvis on the fifth anniversary of his initiative. It succeeded in cutting taxes, he explains, but it has failed entirely to cut the cost of government.
''For the first time in 25 years, public officials are forced to look at their budgets,'' he says.
Proposition 13 had a bracing effect on governments all over the country. ''The big message was the warning-across-the-bow effect on other states to slow spending,'' says John Shannon of the Advisory Commission on Intergovernmental Relations in Washington.
State governments were outpacing their own economies, hiring more people, funding more programs. ''They needed some kind of a shake-up,'' Mr. Shannon asserts.
The result? Since 1978, 18 states have followed California at least part way in legislating some kind of cap on their own spending. Thirty others have simply slowed their spending down, according to Shannon, ''for fear of getting a (Proposition) 13 wrapped around their necks.''
In California, post-Proposition 13 budgets certainly look different. In 1978, the state treasury carried a $5 billion surplus. This year it faces a deficit that may reach $2.5 billion. Much of the past surplus went to local governments struggling to cope with the newly imposed tax cap. Under Proposition 13, annual property taxes are limited to 1 percent of the 1975 assessments. Any increase has to be approved by two-thirds of the Legislature, which isn't likely, given the continued popularity of the tax-capping measure. As property is sold and reassessed, however, the tax can go up.
In 1978, public schools drew half their budget money from local property taxes. Now 80 percent comes from the state, and California ranks last among states in education spending per student.
Oakland, which was already in fiscal trouble in 1978, now has crews repairing streets on a 200-year cycle. The city has shed a third of its employees, and it has made moves to economize that range from turning off a thousand street lights to closing its planning and budget office.
On the other hand, the proposition has reportedly saved the average California homeowner $1,000 a year.
And according to economist Alvin Rabushka of Stanford University's Hoover Institution, it improved the state's business climate enough to stave off the current recession for a year after it descended on the rest of the country.
Dollar-squeezed Oakland is also a city that used its fiscal dilemma for some healthy, if painful, soul-searching. Every city service in the budget was reexamined and ranked by importance. Cutbacks started at the bottom of the list. This, at least, is the kind of back-to-basics government voters seemed to call for in Prop. 13.
''We did find that cities overall became more efficient,'' says Anthony Pascal, senior economist at Rand Corporation, of his recent study of 10 cities in states that have limited property taxes. Efficiency came by sticking to basics.
Police department cutbacks, for example, usually mean less detective work and longer response times to emergency calls, but the trimmed department tends to spend its dollars more efficiently.
By most accounts, the tax revolt is now over. A National League of Cities poll found that 30 percent of the 90 cities it surveyed raised property taxes in 1982. And a full 70 percent had either new or increased user fees. Further, in the past 21/2 years, 31 states have raised gasoline and fuel taxes, 19 raised their general sales tax, 18 raised alcohol taxes, 14 raised cigarette taxes, and 11 raised personal income taxes.
But the new taxes are chiefly for maintaining established government programs , says advisory commission member Shannon, ''not for expanding as in the go-go days.''
The property tax is still a sensitive issue with the public, according to David O. Sears, a University of California professor of political science and psychology and co-author of a book on the tax revolt. To pay the property tax usually means writing a check for a lump sum. Most taxes are more unobtrusive, Dr. Sears explains. And it's not geared to income or consumption, just to real estate inflation, so people feel more helpless about it.
Sums up Sears: ''What Prop. 13 did was to take the uncertainty out of it.''