CalTax Commentary: Why Are Voters Facing 234 Local Tax Measures With Government Revenue at Record High?

ballot box feature

Dustin WeatherbyBy CalTax Policy and Communications Associate Dustin Weatherby

This column was published this week by the Los Angeles Daily News, Orange County Register and Riverside Press-Enterprise.

When Californians go to the polls in March, they will narrow the field of presidential candidates, decide a $15 billion school bond and face hundreds of local tax measures.

There are 234 local tax and bond measures on the March ballot, a 169 percent increase compared to the 2016 presidential primary election.

In the June 2016 election, voters were presented with 87 local tax and bond measures, and approved 67.

The influx of local tax proposals comes during a time of impressive economic growth in California.

Since the beginning of the economic recovery in 2009, the state’s general fund budget has grown from $89.5 billion to $149.7 billion. It would increase to $153 billion under the budget proposed this month by Governor Gavin Newsom. During the same period, California built up $21 billion in state reserves.

The economic expansion has benefited local jurisdictions as well, as increased property values translate to increased property tax revenue for local governments. Sales of homes and businesses, combined with a 2 percent inflation increase and reassessments for new construction, resulted in a 6 percent increase in property tax levies in 2019 – continuing several years of similar revenue increases for this major source of local government revenue.

When he unveiled the annual property tax update for the largest county in the state, Los Angeles County Assessor Jeff Prang reported “record growth and new all-time highs in real estate and business property values across the county.”

Even after voters in 2010 approved Proposition 26 to strengthen the definition of a tax (to keep elected officials from getting around vote requirements simply by labeling taxes as “fees”), local taxes and fees increased by $47 billion (36.9 percent), according to data compiled by the California Tax Foundation. Since 2005, California voters have approved 72 percent of the 3,453 local tax and bond measures placed before them.

With increased tax revenue and growth, and so many tax hikes already approved, why are local jurisdictions placing hundreds of new tax measures on the ballot?

A report by the League of California Cities gives one reason: city pension costs will increase more than 50 percent by the fiscal year 2024-25, to what the group describes as “unsustainable levels.”

“Often, revenue growth from the improved economy has been absorbed by pension costs,” the cities’ report says.

Rising pension costs will require cities to nearly double the percentage of general fund dollars they pay to the California Public Employees’ Retirement System. By 2024-25, more than a quarter of California cities are projected to spend more than 18 percent of their general fund budgets on pensions.

Looking ahead, local governments will have to prioritize spending, control pension costs and improve efficiency. With many Californians already living paycheck-to-paycheck due to the high cost of living, there is no guarantee that taxpayers will authorize hundreds of additional taxes every year, especially when revenue is growing significantly under the taxes we already pay.