This article is from Cal-Tax Digest, published
by the California Taxpayers' Association.
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Nineteen ninety-nine was the year that state government finally got serious about dealing with some of the flaws in the state and local government finance system. After years of complaints from local government officials and fiscal policy advocates, the Legislature and other officials began the difficult process of looking for viable fiscal reforms. This year, we will learn whether that process has been successful.

My contribution to this effort was forming the Speaker's Commission on State and Local Government Finance, a blue ribbon panel of 34 members. I asked it to take a realistic look at fiscal issues and recommend realistic measures to address the problems many acknowledged were becoming serious. The commission spent last year dissecting the issues from various angles and issued a comprehensive, thoughtful report in March 2000. It outlines incremental, but important, steps that the state could take to increase fairness and certainty for local governments while increasing accountability and, thus, improving the public's understanding of and faith in its government. It also weighs in on complex planning and growth issues that are related to fiscal reform.

The commission's key recommendations include swapping half of locally collected sales tax revenues for property tax revenues that have, since the 1978 passage of Proposition 13, been controlled by the state. This would re-connect property taxes with the local jurisdictions and, hopefully, motivate those jurisdictions to make governance decisions that enhance the value of those taxes without changing the limits imposed by Proposition 13. A primary aim here is to "de-fiscalize" land use decision-making and allow jurisdictions to choose between retail, housing, office and industrial project proposals independent of the prejudice imposed by the need to maximize sales taxes.

The commission also proposes to formalize the Legislature-approved "backfill" of monies lost to local government in the phase-down of the vehicle license fee, and to continue the repayment of the ERAF (Educational Revenues Augmentation Fund) on an annualized basis. These are recommendations that would directly benefit almost every local jurisdiction in California.

The commission also proposes several measures to increase accountability and "transparency." One would require the establishment of performance measures (akin to annual business plans) that would allow the public to see how efficiently an agency or jurisdiction is meeting its stated goals. Others would make it easier for the public to understand how its tax dollars are being spent.

The commission's report has been referred to a conference committee on fiscal reform that I have created along with Senate President Pro Tem John Burton. (As of this writing, the final membership of the committee was not settled.) We expect the committee to look not only at the commission's recommendations (AB 1396) but also those of the state Controller's SMART Task Force and several major pieces of legislation relating to fiscal reform matters.

The conference committee is an appropriate venue for the next phase of this crucial debate. Local governments have told us that they do not see our current system remaining viable for more than another decade or so before various jurisdictions, and the well-being of their constituents, are placed at jeopardy. Since those constituents also are the constituents of the Legislature, we are paying attention. And with more than half the Assembly members and an increasing number of senators now being alumni of local government, the commitment to act is growing.