Font ResizeAMONG THE MANY things that make balancing the California budget so difficult is the complex and changing allotment of property and sales taxes among local governments, school districts and the state.
Most of the property tax money raised locally goes to the state, which in turn sends it on to school districts. Unfortunately, there has been a lack of consistency in just how much property tax money cities, counties and local redevelopment agencies can keep for themselves.
In the early 1990s, when the state faced substantial deficits under the Pete Wilson administration, the Legislature and governor agreed to a plan to shift local property tax revenues to school districts so the state could cut back its financial support of schools.
It was called the Educational Revenue Augmentation Fund, or ERAF, which was a fancy name for a raid on local government revenues. The result was a balanced budget and adequate school funding, but at considerable cost to city and county governments.
Four years ago, under Gov. Arnold Schwarzenegger, another source of local funding was cut, when he reduced the vehicle license tax by two-thirds. To compensate local governments for the loss, property taxes were shifted back from schools to local governments and the state made up the difference to keep school districts afloat.
In another tax shift, a portion of sales taxes was taken from local governments to guarantee
The latest round of property tax roulette is a part of Schwarzenegger's latest plan to balance the state budget. This time the state wants to take $228 million from local redevelopment agencies and shift it over to schools for each of the next three years.
Redevelopment agencies declare certain areas to be blighted. Then they seize land, often using eminent domain, and hand out taxpayer subsidies to develop the land. Property values generally rise significantly, and the additional property tax revenues are retained by the agency.
However, any property tax loss to schools must be made up by the state. In effect, the state ends up subsidizing the redevelopment agencies at least in part. That is why the governor wants to shift some of the redevelopment money over to schools to help the state dig out of a $15.2 billion deficit.
There is justification for the redevelopment property tax shift, especially if school budgets are not to be slashed.
Certainly, there must be a better way to allocate different sources of tax money in a way that adequately funds the state, local governments, redevelopment agencies and schools in a more stable manner.
Perhaps if local governments were allowed to retain all of the property tax money, with a certain proportion allotted to local school districts, and the state were to keep all of the sales tax money, a more transparent and predictable means of paying for governments services would result.
It is doubtful that many California voters understand how their property and sales taxes are spent. Even worse, local governments are not able to make long-range fiscal plans because of the ever-shifting allotment of property and sales taxes.
With a $15.2 billion budget deficit to solve, major tax reform is not on anyone's agenda this year in Sacramento. But it should be once this budget is passed.
California taxpayers and local government officials deserve a more stable, sensible allocation of property and sales tax revenues.
