County Should Get Fair Share of Taxes : State, Local Officials Must Not Relax Fight for Equity

One Orange County legislator commented recently that legislators from other parts of California “are getting sick of hearing” that Orange and several other counties in the state are not getting their fair share of tax dollars. But better they should tire of it than that they should be allowed to forget it. Orange County lawmakers need to keep the pressure on the Legislature to move the system toward equity. That’s no easy task in view of the state’s serious budget problems, but recent experience has shown that being “squeaky wheels” can net results.

Last summer, for example, Orange and other so-called “under-equity” counties won changes in state-mandated mental health services programs that, over five years, will net them an additional $205 million--$13 million of which will come to Orange County. More important, that money will increase the base used to determine how much these counties will get in the future. Ironically, the increase came not despite but because of the 1991-92 state budget crisis. Providing the catalyst was a massive realignment in how state-mandated health and social services programs are financed.

But that hard-fought adjustment is a drop in the bucket compared to what Orange County would get if it were to receive tax allocations more in line with what would be fair. One measure of this is that Orange County, with 8.5% of the state’s population, generates about 10% of the sales, income and corporate taxes collected in California. Yet only about 6% flows back to the county. This is because of one of many formulas set in place after passage of Proposition 13 in 1978. Many other counties, including San Diego, are in the same boat.

Also adopted after Proposition 13 were formulas used to distribute local property taxes to schools, special districts and cities, as well as to county general funds. All of this revenue stays within their respective counties. But while most counties receive about a third, Orange County receives only 18 cents of every dollar--the lowest of any county in the state. Orange County school districts, on the other hand, get nearly half of this county’s property tax dollar; schools average about 36 cents in other counties. The county’s allocation to special districts and cities are closer to the state averages.

Just bringing Orange County government up to the statewide average of roughly a third of the dollar would net the county $225 million more a year. But it would be at the expense of area schools, special districts and cities. That’s not likely to happen.

As a political reality, none of the under-equity counties expects major changes in the way other state money is distributed. That’s because finances in California today are a zero-sum game: One county gains only by depriving another. Even counties with bigger shares, such as Los Angeles and San Francisco, are far short of what they need.

But just as the state budget crisis provided an opportunity for an adjustment, there may be other developments that could give under-equity counties an opening to plead for fairness. For example, the property-assessment mechanism of Proposition 13 has been legally challenged, and the U.S. Supreme Court has accepted the case for review. If overturned, that would precipitate a major overhaul of the tax system. Under-equity counties must be positioned to defend their interests if such a thing were to happen.

One way or the other, Orange County legislators and county staff must prepare now and keep the issue alive if there is ever to be equity. Otherwise, the opportunity, should it come, will be lost.