Storming the Prop. 13 battlements

Proposition 13 faces one of its most serious challenges on the ballot this fall, in the form of Proposition 88.

Enacted by California voters in 1978, Prop. 13 limited property taxes to 1 percent of the purchase price, with a maximum increase of 2 percent per year for inflation. Changes to Prop. 13 could only be made by state or local voters.

Since then, local voters sometimes have increased property taxes to fund schools, usually through higher percentage taxes on a property's value, but sometimes through a parcel tax -- a tax of a specified amount on each parcel.

Prop. 88 is a statewide parcel tax -- the first such statewide tax in California since 1910. Every parcel in the state, no matter what size, would pay $50 to fund statewide education programs, amounting to $450 million to $500 million a year. A car dealer or Costco would pay $50, the same as for a family home or small business.

Proponents contend that schools need the money, which is to be divvied up among programs this way: $175 million for K-12 class size reduction, $100 million for instructional materials, $100 million for school safety, $85 million for facility grants and $10 million for
data systems.

There are number of problems with this initiative:

- First, it takes what traditionally has been a local tax -- the parcel tax -- and starts using it for state purposes; thus more power flows to the state and away from the local area, where decisions, especially for education, are best made. The state already has enough sources of revenue, especially income, capital-gains and most of sales taxes, and simply should not be given any more.

- Second, citizens can levy a local parcel tax -- or raise general property taxes overall -- on their own for their school districts through a local initiative process.

- Third, it's not clear exactly how the program money would be divvied up among schools. The Legislative Analyst's summary of the bill found that most of the money would be sent to schools "using a new per student formula to be created by the Legislature." For the data system money, "the measure does not specify how or to whom funding would be allocated."

Especially considering how computer funds have been misallocated in California in the past -- such as the $95 million state computer contract with Oracle that a 2002 audit discovered cost $41 million too much -- strict accounting should be demanded on any data system spending.

- Fourth, this money would be filtered through the state bureaucracy. What if one's local district is OK on school safety and data systems, but needs more for school books? Too bad. Prop. 88 says school safety and a data system are statewide needs.

For example, the Legislative Analyst says Prop. 88 "requires school districts to collect and report the data needed to create and maintain the system." But if a district already has decent data acquisition, the money would be wasted.

- Fifth, Gov. Arnold Schwarzenegger agreed earlier this year with the state teachers' unions to restore all funding demanded by Proposition 98; the money had been reduced a year ago because of budget problems. For fiscal year 2006-07, which began July 1, per-studentfunding from all sources -- federal, state and local -- for K-12 is $11,264, up $516 from the previous year. That's a lot of money, more than what some private schools charge.

- Sixth, taxes already are too high in California. The top income tax rate is 10.3 percent, highest in the country. The sales tax of 7.25 percent also is the highest of any state (with local taxes adding even more, such as 50 cents in Orange County). The only break Californians get is on property taxes, which in 2004 were 29th highest in collections per capita among the 50 states.

- Finally, this breach in the bulwarks of Prop. 13, although small, could be widened in the future should Prop. 88 pass. As has been seen with other taxes, such as those on cigarettes, the victory of one tax leads to attempts, sometimes victorious, to impose more of the same type of tax. If Prop. 88 wins, it would encourage copycat assaults on property in the form of new parcel taxes.

Soon, the state could be back in the same dreary days of 1978, with retirees on fixed incomes losing their homes because they couldn't pay the taxes, before Prop. 13 was enacted. Been there, done that.

We recommend a No vote on Proposition 88.

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