Fiscal crisis puts Prop. 13 up for discussion

Joe Garofoli, Chronicle Staff Writer

Monday, June 29, 2009

(06-28) 20:41 PDT -- About this time every year, as the Legislature and governor wrestle over how to pass the state budget, somewhere, somebody blames Sacramento's stalemate - and the state of the California's mediocre schools and crumbling roads - on Proposition 13.

The wail usually echoes unanswered for a simple reason: Thirty-one years after California voters overwhelmingly passed the law that fixed the rate of property tax increases and required a two-thirds majority of the Legislature to raise taxes and approve state budgets, polls show that Prop. 13 is as popular as ever.

But this year, with California and the nation in the throes of the worst economic crisis in decades, some provisions of the 1978 measure - which curbed revenue for key state programs, particularly public education - may be open for discussion.

No changes just yet; just discussion.

One major challenge: There is no roadmap for changing Prop. 13. While the measure inspired a popular revolt against property taxes in the years after it was enacted, no other state has the same mix of property tax limits and the two-thirds majority required to pass budgets and increase taxes.

Although voters in Massachusetts and Oregon approved laws inspired by Prop 13, those measures don't face the same hurdles.

Debate next month

"No other state has exactly the same combination as California. And the problem is that they're all connected," said Nick Johnson, director of the State Fiscal Project for the Center on Budget and Policy Priorities in Washington, D.C. "You have to start untying some of these knots."

Californians will have the chance to debate Prop. 13 beginning next month, when the California Tax Commission is expected to issue a report on the state's tax system that participants say will include some game-changing proposals.

Later this summer, the nonpartisan California Forward, which includes former Republican Secretary of State Bruce McPherson and former Democratic Assembly Speaker Robert Hertzberg, will issue recommendations on how local communities can have more power in the budget process.

In addition, the Bay Area Council, a business advocacy group, wants to ask voters in November 2010 to call a state constitutional convention to address the state's problems.

This week, members of the group's RepairCalifornia.org coalition, which represents two dozen organizations that want a convention, will decide how - or if - they want to make Prop. 13's provisions part of the convention.

Open to discussion

There is no question that the political environment is more tuned to at least discussing Prop. 13 than it has in the past, said Bay Area Council spokesman John Grubb.

"The state is so completely broken," Grubb said. "Everybody is looking for answers. Some point to Proposition 13. And some point to other things."

In the next couple of weeks, California's Legislature will form a joint committee to examine reforms to state government and Prop. 13 could be among them. "I think that it should," said Assembly Speaker Karen Bass, D-Baldwin Vista (Los Angeles County). "I really think that we need to put a lot of things on the table."

Terri Sexton, a professor of economics at Cal State Sacramento and an expert on the measure, said "the only time you have a chance at some kind of reform is in the middle of a crisis."

While Sexton and a few other analysts think the state's current crisis may provide a brief window of discussion, some of them wonder if there is the political will to do more than pay lip service to the stream of suggestions for fixing the state's financial mess.

"I don't know that there is," said Fred Silva, senior fiscal policy adviser for California Forward. "That's the challenge."

Reviewed before

Silva's been there before. In the wake of California's recession in the early 1990s, he helped craft a report detailing suggestions for repairing the state's fiscal house. The problem was that the report came out in 1996 - just as the dot-com boom was beginning. "Nobody wanted to listen then," he said.

Some political leaders think they may now.

"Local governments and school districts have very little authority over the revenue side of their budgets," said state Senate President Pro Tem Darrell Steinberg, D-Sacramento. "The state of course has the ability to raise revenue, albeit with two-thirds requirement, but much of what we do is pass the money that we raise down to schools and to counties and some to cities. And the various levels of government are entangled in ways that do not allow the people to have any confidence that somebody is accountable and responsible."

Prop 13's proponents have been hearing that for three decades.

"People are looking for scapegoats and politicians don't want to accept blame themselves," said Kris Vosburgh, executive director of the Howard Jarvis Taxpayers Association, named in honor of the anti-tax crusader who wrote the measure with Paul Gann. "So they're saying, 'Oh, it's Proposition 13's fault.' "

Tax cap 'makes no sense'

It won't be easy for advocates of change to modify Prop. 13.

In August 2003, shortly after being named an adviser to then-candidate Arnold Schwarzenegger, billionaire Warren Buffett said California's cap on property taxes "makes no sense." Schwarzenegger's camp backed away from Buffett's comments immediately, while supporters of Prop. 13 called Buffett "out of touch."

Schwarzenegger said at the time: "I told Warren that if he mentions Prop. 13 one more time, he'll have to do 500 sit-ups."

Bass thinks the public needs to be better informed about what Prop. 13 does. "I would love to have that discussion," she said. "But what I have found in my experience is that it is so radioactive that the minute you start the discussion you can't talk about anything else."

While the public remains solid in its support for the tax law, it is not as well-informed about how the state budget is put together, said Mark DiCamillo, director of the poll, which has regularly surveyed Californians' attitudes toward Prop. 13.

Highly symbolic moves to reduce state spending, such as cutting state commissions, draw wide public support but put only a dent in the multibillion-dollar budget deficit. Meanwhile, there is little support for cutting the bulk of the budget - spending for education, law enforcement and health and social services for low-income Californians.

But the time is now for something to be done, DiCamillo said.

"This is dark," he said. "It is like watching a slow train wreck coming. I have never seen it this bad before."