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PROTECTION OF LOCAL GOVERNMENT REVENUES
Legislative Constitutional Amendment.

THE QUESTION

Should the California Constitution be amended to reduce the Legislature’s authority over major local government revenue sources, including property taxes, sales taxes and vehicle license fees (VLF), and to require that local programs and services mandated by the state be suspended if state funding is not provided?

THE SITUATION

California cities, counties, and special districts provide services and programs paid for with property tax, local sales tax, and the vehicle license fee (VLF). The Legislature, however, has authority over these taxes.

The State Constitution requires California to reimburse local governments, schools, and community college districts when the state “mandates” new programs or higher service levels. Nevertheless, for several years the state has not provided reimbursements for many mandated costs.

THE PROPOSAL

If Proposition 1A passes, the state could not:

• Reduce local sales tax rates or alter the method of allocation
• Shift property taxes from local governments to schools or community colleges
• Decrease VLF revenues without providing replacement funding
• Enforce unreimbursed mandates.

This measure was placed on the ballot by the Legislature as part of the 2004-05 budget package. For fiscal years 2004-06, property tax revenues due to cities, counties, special districts and redevelopment agencies will be lowered by $2.6 billion. Those funds will be shifted to schools and community colleges, lowering state costs for the next two years.

Starting in 2008-09, in an emergency, by a vote of two-thirds of both houses of the Legislature and the approval of the Governor, property tax could be shifted to schools, but it must be repaid, with interest, within three years. The state could also approve voluntary exchanges of sales and property tax revenues among local governments within a county. These transfers of taxes and funds would not need voter approval.

If both Propositions 1A and 65 are approved, the provisions of the measure receiving the most votes will go into effect.

FISCAL EFFECT

Local governments would have greater and more stable revenues, resulting in increased spending on local programs or decreased local fees or taxes. The measure’s effect on state .nances would be the opposite.

WHAT A YES OR NO VOTE MEANS

A YES vote means the California Constitution would be amended to restrict the State Legislature’s authority over major local government revenue sources and to require that local programs and services mandated by the state be suspended if state funding is not provided.

A NO vote means the California Constitution would not be amended.

SUPPORTERS SAY

Proposition 1A

• Would end state raids on local revenue and provide stability and predictability for future funding of local services
• Would provide the Legislature with flexibility to deal with future state fiscal crises.

OPPONENTS SAY

Proposition 1A

• Would lock into the Constitution a flawed system of funding local governments.
• Would give local politicians a spending guarantee with no fiscal accountability or oversight.

For More Information:

Supporters: Yes on 1A Californians to Protect Local Taxpayers and Public Safety, (800) 827-9086, www.yesonprop1A.com

Opponents: Carole Migden, Chair, State Board of Equalization, (415) 557-3000

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