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LOCAL GOVERNMENT FUNDS AND REVENUES.
STATE MANDATES.
Initiative Constitutional Amendment

THE QUESTION

Should the California Constitution be amended to require a vote of the people before the Legislature can make changes affecting local government’s revenues from property taxes, sales taxes and the vehicle license fee (VLF)?

THE SITUATION

California’s more than 5000 local governments (cities, counties, special districts, and redevelopment agencies) fund programs and services with money from local taxes, fees, and user charges, state and federal aid and other sources. The State Constitution and existing statutes allow the Legislature to take over funds from three major taxes: property tax, sales tax and the VLF. In addition, the state has not reimbursed local governments for mandated programs although it is required to do so by the state constitution.

THE PROPOSAL

This measure amends the state constitution to reduce the state’s authority over local government, school, and community college programs. Voters would have to approve any:

• Shift in property taxes from local governments to schools and community colleges;
• Change in how sales taxes are distributed among cities and counties;
• Exchange of city sales taxes for increased property taxes;
• Revised formulas used to distribute property taxes among local governments.

Proposition 65 also would suspend any law enacted after November 1, 2003 that would have required voter approval under the terms of this measure. Suspended laws would take effect only if approved at the next statewide election.

In addition, if the state does not provide timely reimbursement for a mandate’s costs, local agencies could choose not to comply with that mandate.

FISCAL EFFECT

Since Proposition 65 would reduce state authority over local .nances, local revenues would be higher and more stable. The effect on state finances would be the opposite of its effect on local finances. This reduction would affect state spending and/or taxes. The total fiscal effect could be in the billions of dollars annually.

WHAT A YES OR NO VOTE MEANS

A YES vote means that the California Constitution would be amended to require voter approval for any shift in the property tax, sales tax, or vehicle license fees away from local governments. Local governments could choose not to comply with unreimbursed state mandates.

A NO vote would leave the situation as it is.

SUPPORTERS SAY

• Proposition 65 would stop the state from balancing their budget on the backs of local governments.
• Proposition 65 would not raise taxes or increase funding for local governments.

OPPONENTS SAY

• Proposition 65 would rob the state of budgeting flexibility.
• Proposition 65 has been supplanted by Proposition 1A, which is supported by the governor, the Legislature and earlier proponents of Proposition 65.

For more information:

Supporters: No supporters listed on the ballot pamphlet

Opponents: Californians to Protect Local Taxpayers and Public Safety, (800) 827-9086. www.protectlocalservices.com

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