The New Tax Revolution ... Again

By Al Beltrami

Editor's Note: Mr. Beltrami wrote this commentary in reaction to the guest commentary by Dan Wall, a deputy director of the California State Association of Counties (CSAC), that was published in the March 1997 issue of Cal-Tax Digest. In his article, entitled "The New Tax Revolution," Mr. Wall said Proposition 218, the "right-to-vote-on-taxes" initiative, may prove to be the most revolutionary act in the state's history. He said it jeopardizes up to $300 million in county revenue, shifts decision-making powers to Sacramento and poses a direct threat to county supervisors' ability to balance their budgets and serve their constituents.

I was struck by how familiar some of the rhetoric was, because I had been "guilty" of some of the same strongly and honestly felt concerns nearly 20 years ago. Instead of Proposition 218, my comments related to Proposition 13 in 1978 while I was the Mendocino County administrative officer.

When the Jarvis-Gann initiative, known as Proposition 13, proposed to limit property tax increases, many of us in local government believed it to be "the most revolutionary act in the history of California," as Mr. Wall described Proposition 218, which statewide voters approved in November 1996.

We were wrong then, and Mr. Wall is wrong now.

First, while the initiative process is flawed and needs modification, it still is the most creative method for direct popular involvement in the public process. Proposition 13 was passed when property taxes were escalating, especially for seniors on fixed incomes, and the Legislature and then-Governor Jerry Brown were sitting on a multi-billion-dollar state surplus. People waited for the Legislative process to solve the problem. And, guess what? It didn't. What a surprise.

Now we have Proposition 218 dealing with the same concepts. Since local governments are limited on property tax increases, they have creatively turned to fees, assessments and other taxes. These extractions have been the fastest growing local government revenues in recent years, because they are available.

Some of us were warning some years ago that such a shift to other revenue sources, without consulting with voters, would bring a popular reaction. We were correct, as Proposition 218 proves.

Now, after almost 40 years in public service, I find myself as a consultant, basically representing a new business organization called the Mendocino County Employers Council. Obviously, my perspective has changed with my new experience. After all, where we stand depends on where we sit. But what I have seen in 1996 and 1997 is that local voters in the North Coast region, at least, have supported by more than two-thirds votes all of the special district and other tax proposals required by Proposition 218. What this tells me is that when local governments have a good and logical case for revenue enhancement, and tell their story well, the citizen and taxpayer responds well.

It appears to me that some local government officials are protesting too much. They need to be taxpayer friendly. I know how hard that is for those who see themselves as the last resort for the poor, the mentally ill, county prisoners, public health recipients, county hospitals, etc. But let me tell you, the world out there is much bigger than those select constituencies.

One area of public relations concern for local government is the ongoing "chicken little" approach of some local leaders to blame "mandates" for all their fiscal woes. This argument loses credibility when systems are in place to answer any real unfunded mandate. I recommend you inform your members that the time has come to put the mandate shibboleth sword back in the scabbard.

Finally, I recommend that counties face the unpopular but real issue of Proposition 98. As long as the schools have carved out their automatic share of all state general fund revenue increases, by popular initiative, then counties, along with city and special district allies, will have to live with that reality or make a change.

Proposition 218 is a convenient straw man to battle, but let me tell you from the front lines, your enemies are not the voters or local business; they reside in Sacramento and in other established state priorities. From one who has "been there, done that," let me wish local government well in dealing with the tough decisions to be made.

And, I just looked outside. The sky is not falling.