Cal-Tax Ballot Brief


October
1996



Summaries of November 5, 1996 Ballot Propositions


Click here to see Cal-Tax's positions on these measures.

Proposition 204

Safe, Clean, Reliable Water Supply Act.

Legislative Statute (SB 900, Jim Costa and David Kelley)

Major Provisions:

Background:

As of June 1996, all but $79 million of $2 billion authorized by previous water bond acts had been committed. Additionally, the CALFED Bay-Delta Program, a joint state and federal effort to restore ecological health and improve water management, calls for funding of $4 billion to $8 billion over the next 20 to 40 years. Flood control, which the state had funded in the past from the general fund but has been unable to fund recently, requires a state infusion of $158 million. Specified water development and clean water projects would be funded by this measure, and also by a new revolving loan program.

Fiscal Impact:

According to the Legislative Analyst, the general fund cost of Proposition 204 would be up to $1.8 billion ($995 million principal, $776 million interest). The average payment over 25 years would be up to $71 million per year.

As of July 1, 1996, state general fund bond debt totaled $20.2 billion ($14.3 billion in G.O. bonds and $5.9 billion in lease payment bonds). Unsold were $9 billion in authorized bonds awaiting project approvals. Debt payments for 1996-97 should total about $2.4 billion, increasing to $2.9 billion in 1999-00 as authorized bonds are sold. This represents a debt ratio increase (debt payments as a percentage of the state general fund) to 5.3% in 1998-99, and declining thereafter. The debt ratio in 1990-91 was less than 3%.

If all three bond measures on the November ballot were approved, the Legislative Analyst projects the bond debt payments would remain at $2.9 billion for two more years, through 2001-02. General fund bond debt would total $21.3 billion, and the debt ratio would remain at 5.3% an additional year through 1999-2000 and decline thereafter. Voter approval at subsequent elections and authorization of additional lease-payment bonds would increase those figures.

Support Arguments:

Support arguments signed by: Senator Jim Costa, chair, Senate Agriculture and Water Resources Committee; Stephen Hall, Association of California Water Agencies; Gerald H. Meral, Planning and Conservation League; Thomas S. Maddock, California Chamber of Commerce Water Committee; David N. Kennedy, California Department of Water Resources, and Sunne Wright McPeak, Bay Area Economic Forum.

Opposition Arguments:

Opposition arguments signed by: Gail Lightfoot, Libertarian Party of California; Jon Petersen, Libertarian Party of California; Dennis Schlumpf, Tahoe City Public Utility District, and Ted Brown, insurance adjuster/investigator.


Proposition 205

Youthful and Adult Offender Local Facilities Bond Act of 1996.

Legislative Statute (AB 3116, Jim Brulte)

Major Provisions:

Background:

Almost all juvenile halls to house the more than 50,000 juvenile offenders in the state report overcrowding. Since 1988, voters have approved $100 million in G.O. bonds for juvenile facilities. These bonds are fully committed. According to a 1995 assessment, $350 million is needed to upgrade and develop new juvenile facilities.

There were more than 1.1 million adults booked in California jails in 1995. Because of overcrowding, many inmates serve only a fraction of their sentence. In 1995, more than 21,000 persons per month were released early from jails because space was lacking to house them. The Board of Corrections has identified a need for an additional 30,000 beds by the year 2000.

Since 1981, $1.6 billion in G.O. bonds has been raised to expand and improve county jail facilities; all funds are committed.

Fiscal Impact:

According to the Legislative Analyst, the general fund cost of Proposition 205 would be up to $1.25 billion ($700 million principal, $550 million interest). The average payment over 25 years would be up to $50 million per year. The Analyst also notes that counties would incur unknown increased costs, in the millions of dollars per year, to operate the facilities built with these bond funds.

Support Arguments:

Support arguments signed by: Assem-blymembers Jim Brulte and Paula Boland; Senator Bill Lockyer; Harriet C. Salarno, founder of Justice for Murder Victims, and Orange County Sheriff Brad Gates.

Opposition Arguments:

Opposition arguments signed by: Gail Lightfoot, Libertarian Party of California; Jon Petersen, Libertarian Party of California; Douglas F. Webb, criminal defense attorney; Ronald Payne, National Guard military police, and Ted Brown, insurance adjuster/investigator.


Proposition 206

Veterans' Bond Act of 1996.

Legislative Statute (SB 852, Don Rogers)

Major Provisions:

Provides a general obligation bond issue of $400 million to fund home and farm loans for veterans.

Background:

The money from veterans' bond sales is used by the Department of Veterans Affairs to purchase farms, homes, and mobilehomes which are then resold to California veterans. Veterans' payments to the department are sufficient to cover all costs; there is no direct cost to taxpayers.

Since 1921, voters have approved about $7.5 billion of G.O. bond sales. As of July 1996, only $250 million remained of these funds. The Department of Veterans Affairs advises that funds from Proposition 206 would enable at least 2,000 additional veterans to receive loans.

Fiscal Impact:

According to the Legislative Analyst, the cost of Proposition 206 would be $700 million ($400 million principal, $300 million interest). Average payment for both would be $28 million per year for 25 years. The Cal-Vet program has been totally supported by the participating veterans, with no direct cost to taxpayers.

Support Arguments:

Support arguments signed by: Senator Don Rogers, Assemblymember Jim Morrissey, and Lieutenant Governor Gray Davis.

Opposition Arguments:

Opposition arguments signed by: Jon Petersen, Libertarian Party of California; Joseph B. Miller, retired Air Force officer; Ted Brown, insurance adjuster/investigator, and Willard Michlin, real estate broker.


Proposition 207

Attorneys. Fees. Right to Negotiate. Frivolous Lawsuits.

Initiative Statute

Sponsor: Consumer Attorneys of California

Major Provisions:

Background:

Current law places few limitations on fees attorneys can charge clients. Notwithstanding, there have been repeated efforts to limit attorney fees. This measure would pre-empt future efforts to impose fee limits by requiring a vote of the electorate. A two-thirds vote of the Legislature could make changes if they further the purpose of the initiative.

Fiscal Impact:

According to the Legislative Analyst, the net fiscal impact of Proposition 207 is unknown, but probably insignificant. There could be fewer lawsuits filed due to the sanctions for filing frivolous lawsuits, but there could also be increased courtroom use for appeals filed by sanctioned attorneys.

Support Arguments:

Support arguments signed by: Mary E. Alexander, Consumer Attorneys of California.

Opposition Arguments:

Opposition arguments signed by: John Sullivan, Association for California Tort Reform; Martyn B. Hopper, National Federation of Independent Business/California; Assemblymember Bill Morrow, chair of the Assembly Judiciary Committee, and Sara F. Cheaure, Citizens Against Lawsuit Abuse.


Proposition 208

Campaign Contributions and Spending Limits. Restricts Lobbyists.

Initiative Statute

Sponsor: Californians for Political Reform

Major Provisions:

Background:

Federal law places limits on campaign contributions for individuals and groups. California, generally, has no similar restrictions, although some localities have imposed limits.

Similarly, state law places no restrictions on candidate spending from personal sources, including personal loans, nor does it restrict campaign expenditures from campaign committees.

Past efforts to impose limits on contributions and/or spending (Propositions 68 and 73) have been nullified by the courts.

Fiscal Impact:

The Legislative Analyst estimates an annual cost of $4 million to administer and enforce Proposition 208 and additional but insignificant state and local election costs.

Support Arguments:

Support arguments signed by: Tony Miller, Californians for Political Reform; Fran Packard, League of Women Voters; Jean Carpenter and Robert Holub, American Association of Retired Persons, and Ruth Holton, California Common Cause.

Opposition Arguments:

Opposition arguments signed by: Ed Maschke, California Public Interest Research Group; Yvonne Vasquez, Association of Community Organizations for Reform Now; Amy Schur, Association of Community Organizations for Reform Now; Fernando Igrejas, Californians Against Political Corruption; The Reverend Dr. Carol Edwards, and Richard Solomon, professor of law and legal ethics.


Proposition 209

Prohibition Against Discrimination or Preferential Treatment by State and Other Public Entities.

Initiative Constitutional Amendment

Sponsor: California Civil Rights Initiative committee

Major Provisions:

Background:

Current law provides for targeting or "affirmative action" to increase opportunities for various groups, including women and racial and ethnic minority groups. These preferences or set-asides, which rose out of the civil rights movement, were deemed remedies for past discrimination. More recently, there has been a backlash over quotas and reverse discrimination. Proposition 209 would disallow preferential treatment based on race, sex, color, ethnicity, or national origin.

Fiscal Impact:

According to the Legislative Analyst, the elimination of affirmative action programs would result in savings to state and local government. These savings would occur for two reasons: government agencies would no longer have the expense of administering affirmative action programs, and secondly, the prices paid on some government contracts would decrease. Savings are estimated to total tens of millions of dollars each year.

Additionally, school spending for voluntary desegregation programs, tutoring and outreach, could be lower by some $75 million. However, because of Proposition 98 guarantees, total spending would remain the same, i.e., the $75 million would be expended for other school purposes.

In the state university systems, spending for similar tutoring, financial aid and outreach programs would no longer be required, resulting in a savings of $50 million. As this funding is not protected by the Proposition 98 guarantee, overall higher education spending could be lower.

Support Arguments:

Support arguments signed by: Governor Pete Wilson; Ward Connerly and Pamela A. Lewis, both of the California Civil Rights Initiative; California Attorney General Dan Lungren; Senator Quentin Kopp, and Gail L. Heriot, professor of law.

Opposition Arguments:

Opposition arguments signed by: Prema Mathai-Davis, YWCA of the USA; Karen Manelis, California American Association of University Women; Wade Henderson, Leadership Conference on Civil Rights; Fran Packard, League of Women Voters of California; Rosa Parks, civil rights leader, and Maxine Blackwell, Congress of California Seniors.


Proposition 210

Minimum Wage Increase.

Initiative Statute

Sponsor: Liveable Wage Coalition

Major Provisions:

Background:

Minimum wage standards were first enacted in California in 1916, and at the federal level in 1938. At present, state and federal laws are similar. Where differences occur, employers usually must conform to the law providing higher wages and broader coverage.

Thirty-nine states, including California, require a minimum wage equal to the federal minimum of $4.25 per hour. Eleven states require higher wages, ranging from $4.27 to $5.25 per hour.

At the federal level, an increased minimum wage has just been enacted - to $4.75 per hour this year and $5.15 per hour next year. California's minimum wage will automatically rise to the new federal level effective October 1, 1996.

Approximately two million (out of 13 million) California wage earners are paid less than $5.75 an hour. About one-fourth of all minimum wage earners are teenagers. Industries paying minimum wages include restaurants and fast food franchises, nursing facilities and child care.

The last change in California's minimum wage occurred in 1988, when it was raised to $4.25 per hour from $3.35.

Fiscal Impact:

According to the Legislative Analyst, there would be an unknown net impact on state and local government revenues, depending on the effect of the measure on employment, income, and taxable sales in California. State and local governments costs would increase by approximately $300 million due to the higher cost of providing public services. Net annual savings in state health and welfare programs, potentially in the low tens of millions of dollars, could result due to more wage earners collecting income above AFDC and Medi-Cal thresholds.

Note: Adoption of a higher federal minimum wage causes the specific effect of this measure to be reduced by about half. Costs would remain the same, but half would be attributable to the federal minimum wage and half to the higher state minimum wage.

Support Arguments:

Support arguments signed by: Rev. Kathryn Cooper-Ledesma, California Council of Churches; Dr. Regene Mitchell, Consumer Federation of California; Howard Owens, Congress of California Seniors; Kenneth Arrow, Nobel Laureate in economics; Cliff Waldeck, California Small Business Owners Alliance, and Senator Hilda Solis, chair, California Legislature Women's Caucus.

Opposition Arguments:

Passage of Proposition 210 will put people out of work.

Opposition arguments signed by: Sheldon Grossman, owner, Bixby Knolls Car Wash, Long Beach; Connie Trimble, owner, Barron's Family Restaurant, Burbank; William H. Merwin, owner, Hunn & Merwin & Merwin Farm, Yolo County; Milton Friedman, Nobel Laureate in economics; William R. Allen, former president, Western Economic Association, and Michael Darby, former undersecretary for economic affairs, U. S. Department of Commerce.


Proposition 211

Attorney-Client Fee Arrangements. Securities Fraud.

Initiative Statute

Sponsor: Citizens for Retirement Protection and Security

Major Provisions:

Background:

Lawsuits alleging securities fraud have become a major problem for high technology companies, costing them billions of dollars in legal costs and countless hours of wasted management time. Last year, they helped forge a bi-partisan coalition strong enough to override a Clinton veto and enact important reforms to this area of federal law.

The initiative - often called the Lerach initiative after its author and chief sponsor, Bill Lerach, a securities lawyer - would make California state law much more plaintiff-friendly in securities cases. It would be more favorable, in fact, than the pre-reform federal securities law. Supporters include high-profile lawyers, like Lerach, who specialize in filing securities cases, as well as several senior citizens groups and union organizations.

Fearing an outbreak of abusive securities lawsuits in California state courts, a broad coalition has formed to oppose this initiative, including the California Chamber of Commerce, the Association for California Tort Reform, senior groups, high technology and financial services companies and small business associations. Both major party candidates for President oppose Proposition 211.

Fiscal Impact:

If passed, the initiative would shift securities cases historically brought in federal court into what would become a much more plaintiff-friendly California state court system. Since California would be the only state in the nation to circumvent the federal securities reforms, lawyers from around the country would have an incentive to file securities cases in California state courts.

The increased costs of more securities cases burdening California state courts is undetermined. However, the initiative would bring many more of these major, complex securities cases to the California judicial system, adding significant administrative costs and demands for new judges.

Support Arguments:

Support arguments signed by: Lois Wellington, Congress of California Seniors; Kenneth E. Wilson, Retired Public Employees Association of California; Ramona E. Jacobs, victim of Charles Keating's Lincoln Savings & Loan fraud; John R. Quatman, senior prosecutor, fraud division, and James Kenneth Hahn, Los Angeles city attorney.

Opposition Arguments:

Opposition arguments signed by: Larry McCarthy, California Taxpayers' Association; Martyn B. Hopper, National Federation of Independent Business/California; Kirk West, California Chamber of Commerce; Gordon Jones, The Seniors Coalition; Mary George, Hispanic Women's Council, and Steven J. Tedesco, San Jose Metropolitan Chamber of Commerce.


Proposition 212

Campaign Contributions and Spending Limits. Repeals Gift and Honoria Limits. Restricts Lobbyists.

Initiative Statute

Sponsor: California Public Interest Research Group (CALPIRG)

Major Provisions:

Background:

Federal law places limits on campaign contributions for individuals and groups. California, generally, has no similar restrictions, although some localities have imposed limits. Similarly, current state law places no restrictions on candidate spending from personal sources, including personal loans, nor does it restrict campaign expenditures from campaign committees.

Efforts to impose limits on contributions and/or spending (Propositions 68 and 73) have been blocked by the courts.

Proposition 112 restricts or bans gifts, honoraria and travel payments to state elected officials.

Fiscal Impact:

Elimination of tax deductions for lobbying expenses would generate about $6 million annually in state revenues. The Legislative Analyst projects administrative costs of up to $4 million per year and additional, but insignificant, state and local election costs.

Support Arguments:

Support arguments signed by: Wendy Wendlandt and Ed Maschke of CALPIRG; Don Vial, former state Fair Political Practices commissioner; Bob Benson, professor of law; former Governor Jerry Brown, and Daniel A. Terry, California Professional Firefighters

Opposition Arguments:

Opposition arguments signed by: Jacqueline Antee, American Association of Retired Persons; Fran Packard, League of Women Voters; Michael Gunn, California Campaign Finance Reform Task Force of United We Stand America, and Tony Miller, Californians for Political Reform.


Proposition 213

Limitation on Recovery to Felons, Uninsured Motorists, Drunk Drivers.

Initiative Statute

Sponsor: Insurance Commissioner Chuck Quackenbush

Major Provisions:

Background:

Currently, a person who is injured while breaking the law may recover losses resulting from the injury. One school district had to pay more than $1 million to a burglar who fell through a skylight on the roof of the building he was attempting to enter illegally.

Fiscal Impact:

According to the Legislative Analyst, the state could experience less than $5 million-a-year revenue loss due to a reduction in taxable insurance premiums. This would be the outcome if the restrictions on uninsured motorists and drunk drivers resulted in lower cost for auto insurance. The denial of the right to recover losses in Proposition 213 could result in reduced annual court-related costs to state and local governments and fewer lawsuits filed against state and local governments with resulting unknown savings.

Support Arguments:

Support arguments signed by: Linda Oxenreider, Mothers Against Drunk Driving; Chuck Quackenbush, insurance commissioner; D.O. "Spike" Helmick, California Highway Patrol commissioner; Ronald E. Lowenberg, California Police Chiefs' Association; Jan Miller, Doris Tate Crime Victims Bureau, and Steven H. Craig, Peace Officers Research Association of California.

Opposition Arguments:

Opposition arguments signed by: Harvey Rosenfield, Proposition 103 Enforcement Project; Ken McEldowney, Consumer Action; Ina Delong, United Policyholders, and Roy Ulrich, campaign finance reform advocate.


Proposition 214

Health Care Businesses. Regulation. Consumer Protection.

Initiative Statute

Sponsor: Service Employees International Union and Neighbor to Neighbor

Major Provisions:

Background:

As indicated in the summary on the California Nurses Association (CNA) initiative proposal (Proposition 216), this measure is nearly identical to the other proposal. Three key differences are that Proposition 214 does not contain the direct taxation provisions of the CNA measure, it does not create the Consumer Association, and it explicitly repeals the doctrine of "at will" employment for health care workers.

Fiscal Impact:

The Legislative Analyst and Director of the Department of Finance estimate the following fiscal impact on state and local government:

According to research done by the opponents of Proposition 214, the measure could have the following impacts on private sector costs:

Support Arguments:

Support arguments signed by: Mary Tucker, American Association of Retired Persons; Lois Salisbury, Children Now; Laura Remson Mitchell, National Multiple Sclerosis Society, California Chapters; Robyn Wagner Holtz, The Susan G. Komen Breast Cancer Foundation; W.E. (Gene) Giberson, Alzheimers Association, California Council; Jonathan Shestack, Cure Autism Now.

Opposition Arguments:

Opposition arguments signed by: Sister Carol Padilla, Daughter of Charity; Dr. Richard Gordinier; Kirk West, California Chamber of Commerce; Gordon Jones, The Seniors Coalition; Mary Dee Hacker, Childrens Hospital, Los Angeles.


Proposition 215

Medical Use of Marijuana.

Initiative Statute.

Sponsor: Californians for Medical Rights

Major Provisions:

Background:

A number of other states have decriminalized marijuana for medical treatment of various diseases, including cancer and AIDS. In California, the City of San Francisco has fostered the sale of marijuana for the same purposes. Past legislation that would make the substance available for medical use has been unsuccessful.

Fiscal Impact:

According to the Legislative Analyst, Proposition 215 would probably have no significant fiscal impact on state and local governments.

Support Arguments:

Support arguments signed by: Richard J. Cohen, M.D., California-Pacific Medical Center; Ivan Silverberg, M.D.; Anna T. Boyce, registered nurse; Terence Hallinan, San Francisco district attorney; Assemblymember John Vasconcellos; James Canter, cancer survivor.

Opposition Arguments:

Opposition arguments signed by: James P. Fox, California District Attorneys Association; Michael J. Meyers, Brotman Medical Center; Sharon Rose, Californians for Drug-Free Youth, Inc.; Brad Gates, California State Sheriffs' Association; Eric A. Voth, The International Drug Strategy Institute; Glenn Levant, D.A.R.E. America.


Proposition 216

Health Care. Regulation. Consumer Protection.

Initiative Statute

Sponsor: California Nurses Association (CNA) and Harvey Rosenfield, head of the Foundation for Taxpayer and Consumer Rights

Major Provisions:

Background:

Proposition 216 is similar to Proposition 214 sponsored by the Service Employees International Union (SEIU). CNA is the labor organization that represents many registered nurses in the state, while SEIU represents other classes of health care workers. For the past several years, CNA and SEIU have collaborated on strategies to publicly criticize health care providers and managed care organizations while advocating for provisions to increase health care staffing and give providers more control over coverage decisions. In 1994, CNA played a leading role in the qualification of Proposition 186, the "single payer" initiative that was rejected by a decisive 73% "no" vote. The 1996 measure contains a number of provisions that were advanced in Proposition 186, such as staffing requirements and regulatory oversight by a health care consumer board. Many provisions of the CNA and SEIU measures are nearly identical. Both groups were collaborating on a single measure to advance to the 1996 ballot, but could not reach agreement on some key provisions, particularly the tax provisions of the CNA measure.

Fiscal Impact:

The Legislative Analyst and Director of the Department of Finance estimate the following fiscal impact on state and local government:

According to research done by the opponents of Proposition 216, estimates on the impact on health insurance premiums range from an increase of 10 - 15% to an increase of 30% or more. The increase in staffing costs is estimated at up to $345 million per year. Preliminary estimates of workers' compensation impact is a 10% increase in costs ($700 million).

Support Arguments:

Support arguments signed by: Ralph Nader, consumer advocate; Dr. Helen Rodriguez-Trias, American Public Health Association; Kit Costello, California Nurses Association; Harvey Rosenfeld, Foundation for Taxpayer and Consumer Rights; Dr. Sheldon Margen, University of California Wellness Newsletter; Linda Ross, California Committee of Small Business Owners.

Opposition Arguments:

Opposition arguments signed by: Sister Krista Ramirez, Sisters of Mercy; Dr. William Weil, Cedars Sinai Health Associates; Sally Pipes, Pacific Research Institute of Public Policy; Sister Carol Padilla, Daughter of Charity; Gordon Jones, The Seniors Coalition.


Proposition 217

(For a more complete analysis of Proposition 217, see the September 15, 1996 Cal-Tax Ballot Brief)

Top Income Tax Brackets. Reinstatement. Revenues to Local Agencies.

Initiative Statute

Sponsor: California Tax Reform Association

Major Provisions:

Background:

At 9.3%, California's top personal income marginal tax rate bracket is among the highest in the nation.

In 1991, as part of a budget-balancing compromise between Governor Pete Wilson and the Legislature, the 10% and 11% brackets were temporarily added. They were in effect through 1995, when they automatically expired. In the past two-year session of the Legislature, efforts to make the higher brackets permanent were unsuccessful. Also defeated was Governor Wilson's proposal to phase the rates back down to 9.3% - a 15% reduction - over three years, along with the same reduction in all other rates.

Lenny Goldberg, executive director of the California Tax Reform Association, authored Proposition 217 to retroactively and permanently impose the 10% and 11% rates. It is his second major tax-hike initiative in four years. Voters in 1992 soundly rejected his Proposition 167, a $5-billion increase in taxes on businesses.

California's current six-bracket structure is designed to tax people with more income at higher rates because of their greater ability to pay. Each additional increment of income is subject to a higher tax rate, and these increments are called brackets.

Under California's extremely progressive system, the top 10% of income earners pay 67% of the income tax and the top 1% pay 31% of the total tax.

Fiscal Impact:

Taxpayers: The Legislative Analyst estimates that this proposition would increase taxes approximately $700 million annually. This estimate is based on a static estimate that assumes no changes in taxpayer behavior to minimize the additional taxes the proposition would impose.

Schools: The Legislative Analyst estimates that approximately one-half of the increased revenue generated by the higher tax rates would go to schools. There are no provisions providing how the money is to be spent.

It is likely that not all school districts would receive new revenue under this proposition. There are about 50 "basic aid" school districts, that do not receive more than a constitutional fixed amount of state revenue due to a Supreme Court decision (in the Serrano case) requiring the state to equalize the spending of school districts.

Cities, Counties and Special Districts: These local agencies would receive any remaining new tax revenues, allocated based on the property tax shift formula.

Support Arguments:

Support arguments signed by: Fran Packard, League of Women Voters; Mary Bergan, California Federation of Teachers; Daniel Terry, California Professional Firefighters; Steven Craig, Peace Officers Research Association of California; Carol Ruley, California State Parent Teacher Association; Lenny Goldberg, California Tax Reform Association.

Opposition Arguments:

Opposition arguments signed by: Larry McCarthy, California Taxpayers Association; Ruth Lunquist, small business owner; Martyn Hopper, National Federation of Independent Business; Kevin Wright Carney, school board member, Antelope Valley Union High School District; John Neal, California Chamber of Commerce Small Business Committee; Lake Forest Mayor Richard Dixon.


Proposition 218

Voter Approval for Local Government Taxes. Limitations on Fees, Assessments, and Charges.

Initiative Constitutional Amendment

Sponsor: Howard Jarvis Taxpayers Association, Paul Gann's Citizens Committee, and Alliance of California Taxpayers and Involved Voters

Major Provisions:

Background:

The measure seeks to address two main concerns: reinforcing voter approval requirements for local taxes and controlling the growth of surrogates for property taxes.

In 1986, voters approved Proposition 62 by a 58% margin. Proposition 62 required majority voter approval of local general taxes and two-thirds voter approval of local special taxes. The special tax provision was not controversial, because it largely restated current constitutional law enacted in Proposition 13. The general tax provision, however, underwent considerable legal scrutiny.

At the time this initiative was drafted, Proposition 62's general tax vote requirement was considered invalid, because appeals courts had labeled it unconstitutional. Since then, the state Supreme Court has reinstated Proposition 62's vote requirement on general taxes (Santa Clara County Local Transportation Authority v. Guardino), but many believe it does not apply to charter cities, since Proposition 62 was only a statute, not a constitutional amendment. This measure would apply to charter cities, because it is a constitutional amendment.

Since Proposition 13 was passed in 1978, local governments have increasingly turned to surrogate financing mechanisms to extract revenue from property. Benefit assessments, also called special assessments, are the most prominent property-related surrogate.

Assessments are not considered by the courts to be taxes. They are treated more like fees, since they are assumed to relate closely to benefit received from a specific government project or service. Because they are not considered taxes, local governments have been able to increase assessments without voter approval. The resulting growth in assessment revenues has been tremendous. Although growth has been high, assessments are still a small portion of local government budgets.

Benefit assessments are applied on a per-parcel basis, but the amounts levied can vary by many factors except for the value of the property. Although not allowed to be based on property value, many potential factors approach an ad valorem basis in practice. For example, assessments can vary by lot size, type of property use, square footage of buildings on the property, size of lot frontage to a street, proximity of the property to a project funded by the revenues, etc.

In theory, the amount of the assessment must bear some relationship to the amount of benefit a property owner receives from the funded project or service. However, in 1991, the state Supreme Court significantly loosened that requirement by declaring that "indirect" benefits are assessable, and a local government's determination of benefit will usually be assumed correct, unless very unusual circumstances exist, such as fraud on the part of the jurisdiction (Knox v. Orland). That decision has led to an increase in the use of benefit assessments as local governments have assessed more owners for projects that only indirectly or theoretically benefit them.

Because assessments can vary by so many factors, some have called the use of benefit assessments a "de facto split roll." Often business property is assessed a much greater amount than residential property. For example, a proposed assessment in the City of Sacramento which would have funded police services was to charge $25 per parcel for single-family homes and up to $2,000 per parcel for retail stores or warehouses. Many times these assessment proportions do not seem related to benefit as much as they are related to political expediency and revenue-raising capacity.

Fiscal Impact:

The Legislative Analyst's Office has estimated these impacts:

State Government: Potential costs of tens of millions annually to pay assessments on state or school property that is in local assessment districts.

Local Government: Revenue losses potentially exceeding $100 million annually, due to restrictions on local taxes, fees and assessments. If voters do not ratify existing taxes that must be placed on ballots, additional existing revenue could be reduced. Future revenue growth is likely to be lower by requiring voter approval. Local costs could increase several millions of dollars to review existing taxes and assessments and place them on ballots.

Following are Cal-Tax comments on fiscal impact:

Taxpayers: Potential tax savings exceeding $100 million annually, because voters may repeal some existing taxes or defeat future tax and assessment proposals. Some individual business and residential taxpayers would experience significant savings because the measure would require more stringent determination of benefit before assessments may be levied. This could lead to more equitable assessments when taxpayers do not derive much benefit from a specific project.

Support Arguments:

Support arguments signed by: Joel Fox, Howard Jarvis Taxpayers Association; Jim Conran, Consumers First; Richard Gann, Paul Gann's Citizens Committee; Carol Ross Evans, California Taxpayers' Association; Felicia Elkinson, Council of Sacramento Senior Organizations; Lee Phelps, Alliance of California Taxpayers and Involved Voters.

Opposition Arguments:

Opposition arguments signed by: Fran Packard, League of Women Voters of California; Chief Ron Lowenberg, California Police Chiefs' Association; Chief Jeff Bowman, California Fire Chiefs' Association; Howard Owens, Congress of California Seniors; Lois Tinson, California Teachers Association; Ron Snider, California Association of Highway Patrolmen.


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