Give It Back, Sacramento : State should start returning property taxes to city and counties

When he first ran for governor in 1990, Pete Wilson promised to be a friend of local government. As a former mayor of San Diego, he was intimately familiar with the problems of city and county government and was an advocate of local control. He promised to put an end to Sacramento’s penchant for saddling cities and counties with new programs without funding.

But today, Wilson is more often than not the proponent of Sacramento control over how local governments--even school districts--can spend their state funds. This occurs at a time when mayors and county supervisors are struggling to meet growing demands with their tax base in a straitjacket.

To make matters worse, Wilson is carrying forward a multibillion-dollar raid on the treasuries of California’s counties, cities and special districts in order to balance his 1997-98 state budget. The governor appears to be giving only token consideration, at best, to his promise of last fall to consider comprehensive reform of local government finance this year.

During the harsh recession of 1992-94, Wilson and the Legislature grabbed $3.6 billion in property tax revenues--the historical keystone of local government finance--and used the money to meet the state’s obligation to public schools. State taxes were raised too, but many of those increases were designed to be temporary, until business rebounded. Most notably, the 10% and 11% personal income tax rates on the wealthiest Californians were allowed to expire last year.

With state revenues reviving, the Legislature decided it was time to begin paying back local governments for some of their involuntary contributions. Democrats and Republicans joined last fall, without a dissenting vote, to pass a modest proposal to cap the state’s take of the property tax at the 1996-97 level. Local governments were to be allowed to keep any growth of property taxes above that amount.

The bill that was to accomplish this, sponsored by Assemblyman Fred Aguiar (R-Chino), also provided that the state would begin returning the base amount to the counties, cities and special districts in installments, the amount to be negotiated each year.

Wilson--the self-proclaimed friend of local government--vetoed the bill. The governor said he recognized the sacrifices made by the cities and counties but that the complexities of local government finance should not be dealt with in such piecemeal fashion. “A comprehensive approach should be considered next year as a part of the budget process,” Wilson wrote.

There is no such provision in the new budget, however, beyond items such as the long-proposed state takeover of the costs of trial courts. The governor claims counties could save money under his welfare reform plan, but the potential fiscal pitfalls there are yawning chasms. Wilson would divert hundreds of millions in welfare savings to other state programs.

The overall problem of local government finance is complex and profound. But the matter of the state takeover of the property tax is simple. Sacramento took it. Now Sacramento should start giving some back. That can and should be done this year under new legislation sponsored by Aguiar and others.