The Peculiar State of Taxes, Education, & Housing in California

Or What Hath Prop 13 Wrought?

Illustration from the Bold Italic, Artwork by Nicole Album

Ask your young friends, new neighbors or co-workers what Prop 13-passed back in 1978- is and how it affects them. A good percentage of folks will say-what’s that? Few can explain what Prop 13, a state constitutional amendment, does much less its long term effects.

Close the Commercial Loophole and Fund Local Needs

We now have an opportunity to reverse the most disastrous effects of Prop 13. It’s estimated that the state loses up to $11 billion a year on the commercial loophole because the original proposition allows some big businesses to keep their taxes artificially low. The answer is to support the ballot measure that turns that around. It’s called Schools and Communities First. But first let’s briefly explain Prop 13 and some of its effects.

Very simply put, it permanently reduced all property taxes, residential and commercial, mom’n pop and corporate to an initial 1% of its assessed value which will then only increase by 2% per year. Assessed value is added based on that small increase and quickly loses any correlation with appraised value, that is what you could sell your property for. So–my house, purchased in 92 (on the downward slope of one of our cyclical booms for $206k is now assessed at a little over $300k which might get you a one room condo somewhere in Oakland–if no bidding war occurs. It’s valued at about 4 times that now. Naturally, I’m leaving only feet first.

This constitutional amendment also moved municipal taxing decisions to the state except for local initiatives (designed to close the gap for local needs) which must garner a supermajority (67%) voters’ approval. There is a sneakier way to increase money to the general fund. Initiatives can pass at 50% plus one (our original democratic measure of support) by not making the expenditure of funds more than a suggested goal-like our soda tax-in order to require the normal majority but this process can lead to voter confusion and anger.

For instance, Measure AA for Early Childhood Ed in Oakland did not gain the 67% super majority but a judicial decision may reverse that so that a simple majority decision is all that is needed. In that case the measure would have won. Another irony of Prop 13 is that many who normally argue against the rule of the minority, will also oppose that change if it affirms this particular proposition-we seem to have gotten used to a perverse version of democracy which infects even the most progressive mind.

California’s Master Plan for Higher Ed

When I moved to California, the Master Plan for Higher Ed, was still in full force. In fact it’s why I moved to California (altho the Mamas and Papas song, “California Dreami…on such a winter’s day” definitely helped ease me out of my Pennsylvania funk too)

Once I attained resident status my student fees dropped to $33 a semester at SF State which was good because my parents had no extra college money lying around for me to use. Housing costs were quite low then and a part time job was enought to keep me in bisquick and tuna (I didn’t say I lived well.)

Yes, California was able to attract the budding Boomer generation from all over the country including a large number of Vietnam War vets who also had the GI Bill to cover room and board. We were an ungrateful, rebellious cadre of the huge generation known as the Baby Boom and many of us are still active change agents.

Free college and university were not the only hallmarks of the once Golden State (no that wasn’t an NBA team then & anyway, who?) Our school system was considered the best in the country, real public schools, not charterized, privatized education.

That was one of the reasons our state became the cradle of revolutionary tech in addition to demands for ethnic studies, programs for poor children and children of color, and the Black Panthers, inventors of the free breakfast program among other necessary services (not to mention the rare period when white conservatives argued for gun control.)

But the Golden State began to turn against itself and its own success shortly after I arrived in 66. Ronald Reagan as governor not only mused, “if takes a bloodbath…” in response to worldwide student protest, particulary those at my school, then called San Francisco State, he cut the funding so that we had to stand in the back of the classroom or beg the profs for a space in order to get into a required class, and many had to stay in school an additional year or so to graduate. (Personally, I didn’t graduate then anyway due to suspension during the school strike of 68/69.)

It was a massive reversal and betrayal of the state’s promise to its youth based on 1) his belief that government shouldn’t provide any type of enrichment or assistance to its unrich and 2) his visceral hatred of our rebellious, demanding generation. [Please take note of the similar references to today’s Millennials and Gen Z]

By 2013, despite state charter amendments like Prop 98 which legislated a basic level of education spending, we were ranked as 50th in state spending with school segregation by class and race predominant throughout our cities and suburbs.

graphs on education and poverty in Cali

Before we go on, read this short and easy to digest summary of how Prop13 and subsequent amendments to the state constitution like 1988’s Prop 98 have affected our educational system.

Okay, so now you have some idea why our schools are always screaming for more funding-because they effing need it!

Other After Effects of Prop 13

I didn’t really need to write this blog because so many folks have already summarized the inequities of this “tax payer revolt” that if you just read the articles I’m linking you to, you will get the picture but I’ll throw in a few more of my own personal but hightly researched opinions [and my little following will not think I’m slacking.]

Check this out,

There’s really no end to housing horror stories but just in case you don’t believe it, read this from Azucena Rasilla, formerly of the East Bay Express- . It’s seems to be accepted policy that we are now an unlivable state from which the young, talented and creative-and those with families-must flee and that ultimately our housing crisis along with our public transit (and other infrastructure) crisis will torch what the climate crisis could not.

The only alternatives so far still fail to acknowledge the effects of gentrification and lack of protections for all those who can’t or don’t want to buy into the excess luxury-housing-syndrome. (Versions of SB50 start at that point, then crablike attempt to work their way back to something that includes these folks.)

It’s ironic that the generation that came here for $33 a semester classes and rents at about the same amount (for a time I rented a room with friends in a flat on Haight Street in the Fillmore for 30 bucks a month), the generation that had the wherewithall to live on the remains of the post war boom, that protested everything (at least I did, proud to say) now protests any change-including renter protections and denser development.

California Legislative Analyst’s Office released a delightfully graphical report that shows how Prop 13 has shaped life in California over the past 40 years, helping to enrich one generation in homeownership and impoverish the next in overpriced rental housing.

But there are ofther effects. Our local governments learned that building retail had the advantage of bringing in sales taxes-which were not as petrified as property taxes-to fund their community needs against diminishing state monies. Building housing requires funding more services but the state controls the doling out of property taxes regardless of local needs. We’ve made some fixes to the worst of the Jarvis-Gann tortured tax laws, but the basic formula still hamstrings local and state government.

There’s more. Studies show that when Prop 13 was passed commercial owners and homeowners contributed about equal shares of property tax and now residential owners pay 72% and non-residential businesses pay only 28% (because homes are bought and sold more frequently than businesses and are therefore reassessed more often). No surprise, corporations went for Prop 13 in a big way, spending lots shilling for it.

For instance, we understand that when our Oakland-based Longs Drugs was bought out by corporte giant CVS, they kept the Longs name and any property they now own is still taxed at the lowest rate. Of course, many new tech companies are taxed at the current rate so there are inequities for corps too.

So now voters are offered an ever larger menu of taxing initiatives and I will say that the generation that owned property when Prop 13 passed are the voters most likely to support these initiatives since they pay the least in property taxes (but at the same time they understand the need.) In California there’s not even a pretence of equal treatment when some of my neighbors pay so much less than I do while the young families now moving in pay two, three times that plus grotesquely huge mortgages.

Take and Break from Tax Talk and Listen

California has come to depend on income taxes and that is likely another result of this inequity. We’re fine with taxing income, it’s much less regressive than the other popular way of procuring funding for our needs-sales taxes which have also gone up and those fun utility taxes you find on your phone bill. But it makes it difficult to provide for ongoing programs because it is more volatile than property taxes, once again, leaving our basic needs in the hole.

Are you getting the picture yet that Prop 13 has stymied our ability to offer upcoming generations quality education, affordable housing, good public transit and other programs that could reduce our horrendous poverty rate and return us to a golden state of affairs.

But what about seniors (like me!) who say we couldn’t afford the increases in property taxes if we were to make the system equitable again. Well, first off we dispute that assertion, quite a few seniors could afford to pay more. The proof is that they are generally the ones who vote to support new initiatives. However, the new initiative will not affect homeowners taxes since homeowners still pay the largest share of these taxes.

And since once you become a homeowner, your property taxes though initially high, begin to stabilize; it seems unlikely that voters would consider changes to that part of the Proposition. But, all of us-homeowners, renters and even business people-can see the need to close the commercial loophole, not to mention the unfairness of corporations paying an ever shrinking share of state taxes.

The Schools and Communities First Initiative Only Affects Commercial Properties

The California Schools and Local Communities Funding Act, set for the November 2020 ballot changes the rate at which commecial properties are assessed with generous carve-outs for small business. To reiterate it, “will restore over $11 billion per year to California’s schools, community colleges, health clinics, and other vital local services.

Please come out and support this initiative. It’s fair to business and will ultimately increase the productivity of our state while providing opportunities for generations to come.

PS. Okay, I hope you can read this whole tome. WordPress is warning me the sentences are too long and vocabulary too difficult but some stuff needs a bit of splainin. Please hit the “like” button if this works for you or leave a comment if you disagree with my research or conclusions.

Gotta love those baby blue tuxes and this great song

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