Voter Guide 2004: Propositions aim to protect local revenues from state raids Voter Guide 2004: Propositions aim to protect local revenues from state raids (October 13, 2004)

By Andrea Gemmet
Almanac Staff Writer

The basic idea behind both Propositions 1A and 65 is to limit state politicians from raiding local revenues every time there's a budget shortfall.

Of course, to truly understand all of the implications of these two ballot measures, you'd have to understand the convoluted fashion in which California cities, counties and special districts earn money and how Sacramento has, over the years, taken control over much of that money, redirecting it, skimming from it and putting conditions on its use.

Trying to unravel it can lead to long conversations about the implications of Prop. 13, various state budget crisis over the years and unfunded mandates from state politicians, in which local governments pay for new programs instituted by Sacramento.

And then there's the torturous history of the two propositions themselves -- orphaned Prop. 65, abandoned by the very people who drafted it in favor of Prop. 1A, a compromise measure that gives the state two more years to tap into local funds before restricting Sacramento lawmakers from doing it again.

In a nutshell, Prop. 1A would restrict the state's authority to dip into local sales tax revenues and allows for limited, short-term "redirecting" of property tax revenues, which would have to be repaid within five years.

It wouldn't go into effect until after the fiscal year ending June 30, 2006, allowing the state to get through its current budget crisis with help from local revenue sources. It also prevents unfunded mandates, forcing the state to pay for programs it imposes on local jurisdictions.

Prop. 65 has stronger protections for local dollars, requiring voter approval before state politicians could tap into local tax revenues and going into effect immediately. It was drafted by representatives from the League of California Cities, the California Special Districts Association, and the California State Association of Counties.

In exchange for abandoning Prop. 65, local officials were promised that Prop. 1A would have the backing of California's popular governor, Arnold Schwarzenegger.

Prop. 1A's backers are numerous, and they argue that, in the past 12 years, the state has taken more than $40 billion from cities, counties and special districts. Continued raids on local revenues could result in cutbacks to firefighters, police officers and other essential services or in higher local taxes and fees, they say.

The argument against Prop. 1A is that it entrenches a flawed system of financing that should be reformed. A Sacramento Bee editorial against both propositions argues that while the goal is laudable, it locks in destructive financial incentives that have left the state with too many strip malls and not enough housing, because cities are increasingly dependent on sales tax revenues.

Since sales tax goes to cities where people shop, not to where they live, the editorial says, "this is why cities love to build power centers and auto malls and why they frequently lose money if they build housing. This largely explain the state's chronic housing shortage and its retail glut."

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