Epilogue
No Satisfaction?

[I]f we hadn't had Prop. 13, I shudder to think what would have happened to our state. . . . "
James K. Lee (chairman, Citizens for Property Tax Relief)^[1]

Indeed, for James K. Lee and those who were lucky enough to own homes in California in 1978, property tax bills became merely a nuisance instead of a dreaded nightmare. No more would tax bills double every year. Instead, tax rates immediately fell from 2.5 to 1.2 percent and assessed valuation reverted back to 1975 levels, resulting in a tax decrease of $750 for the owner of a $50,000 home. Among the Proposition 13 generation of homeowners, fears that runaway real estate prices would make tax bills unpredictable and unpayable gave way to the calm certainty that assessments could only increase by 2 percent a year, so long as homeowners held on to their houses.

And hold on they did, especially the elderly and low-income homeowners who could not afford to buy a more expensive home. In 1988, ten years after Prop. 13, some two million homes (44 percent of owner-ccupied dwellings) were still assessed at 1975 levels plus two percent a year. The truck driver who had bought a house in 1975 for $50,000 had a tax bill of around $600 in 1988. Unfortunately, Proposition 13 did not give the same treatment to the newcomer who bought an identical house across the street, paying a $200,000 purchase price and taxes each year of $2,000 (1 percent of the sale price). In the beach community of Ocean Park in Santa Monica, even faster inflation produced greater disparities. The young movie studio executive who bought a cottage in 1988 was paying seventeen

times the tax hill of the owner of a similar house purchased in 1978. It is no wonder that the Prop. 13 assessment system brought disapproval from 70 percent of those polled.^[2]

The effects of Proposition 13 were not confined to property owners and their tax bills. Beginning in 1991, each year California politicians had to deal with multi-billion-dollar gaps in the state budget. For two months in the 1992–93 fiscal year the state issued IOUs instead of checks as the governor and the state legislature quarreled over which programs to cut. The fiscal crisis was mainly caused by the severe and persistent California recession, which led tax revenues to plunge. But Proposition 13 was also responsible for creating a system that multiplied the effects of the fiscal crisis.

Because of Proposition 13, cities, counties, and schools have had years of tight budgets, hiring freezes, deferred maintenance, and canceled infrastructure projects. By the early 1990s, basic community needs were going unmet as the California recession shrank local tax revenues. Just at this time, the state government faced its own budget crisis and took billions of dollars in property tax revenues back from the cities and counties, which led to the harsh consequences detailed below.

Catch a Falling Star

After one year of Prop. 13, property tax collections in California fell from over $11 billion to $5 billion. By fiscal year 1986, California property tax revenues as a proportion of personal income had fallen 30 percent (compared to a 12 percent drop in the United States). In fiscal year 1988, property taxpayers paid a total of $13 billion. But if measured in constant 1978 dollars, collections were about $6 billion, significantly below the peak before Prop. 13 and a staggering $16 billion less than what property taxes would have been if there had been no Proposition 13.^[3]

Senate Bill 154 allocated the property tax revenues collected to local authorities according to how much revenue each jurisdiction had collected in the past three years. In the fateful first year after Prop. 13, cities lost $625 million in property tax revenues, down 58 percent; counties lost $1.8 billion, or 57 percent; and schools lost $2.3 billion, down 52 percent.^[4] The state provided a multi-billion-dollar "bailout": to cities they gave $221 million in block grants; to counties, $424 million in block grants and a $1.1 billion state assumption of Medicaid and other costs; and to local schools, a new $2.2 billion state assumption of costs, bringing total state aid to education to $5.6 billion. Assembly Bill 8, passed the following year, modified the allocation formulas by shifting property tax revenues to counties and cities and away from the schools. (The funds the schools lost

were replaced by other state revenues—revenues which would no longer be available by 1991, as explained below.) But the new law ended the block grants to localities, leading to another fall in per capita revenues for cities, counties, and schools.

For cities in the decade after Proposition 13, property taxes accounted for a smaller share of revenues as city government increasingly relied on fees for services. In counties, too, property taxes shrank as a percentage of revenues, but state aid accounted for a greater share of county budgets. The most dramatic changes in funding occurred in schools. Property taxes comprised over half of school budgets in the year before Prop. 13. By 1986, property taxes amounted to only 22 percent of school spending. Seventy percent came from state funds.^[5]

By 1989, state and local spending in California had fallen from $1,817 to $1,722 (constant dollars) per capita, or from 21.7 to 17.3 percent of personal income. City and county spending (excluding enterprise activities, such as publicly owned utilities) was still below pre-Prop. 13 levels. One warning of what was to come was a hollow scraping sound in 1989 as officials in Butte County dug into their treasury and found nothing. The state legislature had to provide the almost bankrupt county $2.8 million in emergency aid—a trivial amount, compared to what would be required two years later.^[6]

Teachers and Librarians Mad as Hell

Another warning was the chatter from room after room of overcrowded public school classrooms. In 1988 California had the most students per classroom (twenty-seven, including elementary grades) of any state in the nation. Although California had once boasted one of the best-funded school systems in all the states, a decade after Proposition 13 per pupil spending in California ranked forty-eighth out of the fifty states. Funding for K-12 education fell after the passage of Prop. 13, from $3,547 per pupil (adjusted for inflation) to $3,258 in fiscal year 1983, a decline of around 8 percent. (Per pupil constant dollar spending then increased somewhat until fiscal year 1989.) One letter to the Los Angeles Times voiced typical frustrations: "[T]he elementary school near me hasn't been reroofed since it was built 34 years ago. . . . All the drinking fountains, except one, are so corroded you can't drink from them. . . . The copy machine was bought by donations, because the district never had enough money in the budget. . . . I know we need a lot more money for teachers. We need funds to hire more teachers. . . . The school population is growing faster than classroom space."^[7]

Now it was the turn of parents, PTAs, and teachers to be mad as hell. If a ballot initiative could cut taxes and restrict spending, the ballot could also compel authorities to spend more money. If Social Security recipients could have their benefits indexed to increase with inflation, why couldn't school spending also be indexed? If aging homeowners could have their tax reductions guaranteed by the California constitution, then why not amend the constitution to insure increased school funding? The California Teachers' Association, with the support of State Superintendent of Public Instruction Bill Honig, drew up ballot Proposition 98, which required the state to spend on public schools and community colleges no less than either 39 percent of its general funds or, if higher, the amount spent the previous year plus increases for higher enrollments and inflation. Another provision countered the Gann Amendment (Proposition 4 in 1979), which had mandated refunds to taxpayers if government revenues exceeded a ceiling. Proposition 98 required some of the excess to be given to the schools.

With these bold provisions, Proposition 98 captured the mood of the electorate, which was supportive of increased spending on education. Furthermore, the Prop. 98 campaign received $4.5 million from the California Teachers' Association. The Yes on 98 forces outspent the opposition, including the big-business-funded California Taxpayers' Association, by a 26 to 1 ratio. Although a solid majority backed Proposition 98 at first, after the governor and other Republican politicians criticized the measure, it fell in the polls. On election day, November 1988, Prop. 98 barely won, by a margin of only 135,000 votes statewide. But no matter, compulsory spending Prop. 98 was enshrined in the California constitution, along with the compulsory cutting Proposition 13. Eventually one of the two would have to give way.^[8]

I Was Formerly With . . .

The hopes that Proposition 98 would revitalize education in California soon collided with the reality of the worst economic recession that California had experienced in sixty years. In the mid-1980s, California's largest economic sector, defense contractors and military bases, began to shrink as a proportion of the state's economy. Jobs in manufacturing durables declined. The last warning was the sucking sound of real jobs going down the drain; between December 1990 and January 1994 California non-farm employment fell by 1.2 million jobs. As real income per capita also declined, state revenues began to fall far short of the sunny expectations of a bygone era of growth. The first year after Proposition 98 (fiscal year 1989–90), per pupil, constant-dollar school spending held steady, but the year after it began to decline (around 3 percent in fiscal year 1990–91.)^[9]

The following fiscal year, 1991–92, when the recession hit with full force, the state faced a projected budget gap of over $14 billion. Polls indicated that 83 percent favored increased taxes on alcohol and 78 percent wanted higher income taxes for the wealthy. Despite the fiscal crisis, almost three-quarters of the public, including 66 percent of Republicans, felt it was not necessary to suspend the provisions of Proposition 98: 57 percent felt very strongly about continuing to implement Prop. 98 and 52 percent favored higher taxes to fund the schools. The newly-elected Republican governor, Pete Wilson, was forced to compromise with the Democratic legislature. Taxes were raised by $7.6 billion, programs cut by $3.1 billion. Despite the strong public support for Proposition 98, its funding guarantees were effectively reduced by $1.2 billion. Throughout the 1991–92 budget year, revenues fell further behind expectations, producing a deficit of $3 billion. For the next fiscal year (1992–93), the deficit was at least that large; the shortfall would total almost $11 billion if state programs received funding increases to match rising prices and caseloads.^[10]

Lose, Lose—Lost

The federal government routinely operates without a budget for a new fiscal year, coasting on continuing resolutions that allow the functions of government to continue as politicians debate and filibuster. Congress has come perilously close to failing to approve a timely increase in the national debt ceiling, which would make the federal government unable to pay its bills. In 1992, the California governor and legislature went eyeball to eyeball on the state budget—only no one blinked, for two months. From July 1 to September 3 California functioned without a state budget and without authority to spend money. Governor Wilson opposed borrowing money to pay expenses for the new fiscal year. The nation's wealthiest state, with an economy larger than all but seven entire countries, issued IOUs instead of checks to its employees, to counties for welfare payments, to taxpayers owed refunds, and to contractors for supplies and services provided during the previous fiscal year. Banks cashed these IOUs, these interest-bearing "registered warrants," but only until July 31. Suppliers and contractors in the new fiscal year didn't even receive IOUs. Also suspended without IOUs was funding for health clinics for low-income mothers, nutrition programs, in-home care for the elderly, and centers for the disabled. Governor Wilson insisted that Medicaid payments to doctors and hospitals stop until the budget was passed. Not wanting to give the appearance of leaving the state in a crisis to score political points, Wilson decided against traveling to the national Republican Convention. "We will not repeat the sins of Washington in Sacramento," thundered the image of Pete

Wilson in his television address to the convention. Wilson stayed in California to keep the pressure on for the budget he wanted out of the Democrat-controlled legislature.^[11]

For what? At issue was Proposition 98 and the funding level for public education—not only for 1992–93, but also for every year thereafter. Under the Proposition 98 guarantee, public schools were entitled to receive what they got the previous year, $23.4 billion, plus more for increased enrollments and higher personal income per capita. Paying this bill and providing other state agencies with increases for inflation and caseloads would have left the state with an $11 billion deficit. Raising new taxes, given the restrictions of Proposition 13, would have taken a two-thirds vote of the state legislature. Although a bipartisan coalition had increased taxes by $7.6 billion the previous year, this time Wilson faced increased pressure from conservative, anti-tax Republicans; the big-business-oriented California Taxpayers' Association was pushing for no tax increases. By July 1, 1992, the governor and the legislative leaders had agreed that there would be no new taxes. This meant that just about everything in the budget had to be cut.^[12]

Governor Wilson thought he had found the way to effectively set aside the funding guarantees of Proposition 98 without the politically risky step of a formal suspension by an urgency vote in the legislature. He would argue that in the previous fiscal year (1991–92), because of overly optimistic budget estimates, the state had paid the schools $1 billion too much. The trick was not to reinvent government, but merely to redefine what government had done just last year. Wilson proposed that this $1 billion be retroactively reconceptualized as a loan, a loan that schools would have to repay in 1992–93, producing the first billion-dollar budget cut. But there was more. Under the terms of Proposition 98, what schools get each year is what they got the previous year plus a little bonus. Redefining $1 billion in state aid out of existence in '91–92 meant $1 billion less for '92–93, a second billion-dollar reduction from what was originally planned for 1992–93. Furthermore, in fiscal year 1993–94, and every succeeding year, the Proposition 98 guarantee for schools would be $2 billion less than what it otherwise might have been. The California Assembly rejected Wilson's proposal the night of June 30, 1992, and the next morning the new fiscal year began without a budget.^[13]

The legislature eventually accepted Wilson's cuts, but only after he scaled back his unpopular proposals to cut special education programs by 20 percent and to make 110,000 four-year-olds wait a year before beginning kindergarten in the fall. (The faces of disappointed children shown in the television ads against Wilson were politically devastating.) Wilson also had to agree to give the schools the same per pupil spending for 1992–93 as the year before, financed by a $730 million loan to the schools, which

again would be taken out of the budgets for future years. In the end, school spending did not keep up with inflation, contrary to the intent of Proposition 98.^[14]

But the spirit of 98 lived on. In a poll taken two weeks after the 1992–93 budget was signed, two-thirds of respondents were angry about the budget cuts; 45 percent anticipated being personally hurt by the cutbacks. Sixty-six percent thought that education should receive the highest priority in state spending; far behind in second place was health care with 22 percent. Despite the $7.8 billion tax increase the previous year, 48 percent were willing to pay higher taxes to restore educational funding. The percentage who felt that taxes were too high had fallen from 58 percent after the 1991 tax increases to 43 percent. At the end of 1992, 48 percent thought that the state should rank among the top states in per pupil expenditures (California ranked 36th). Seventy-seven percent thought California should spend at least the additional $750 per pupil needed to bring California up to the national average.^[15]

Compared to elementary and secondary schools, other institutions were cut more drastically in 1992. State funds for the nine University of California campuses fell 11 percent and fees were raised by 24 percent, to over $3,000 a year. Five thousand positions were cut from the university system. Fees at the California state colleges rose to around $1,500 a year, with 1,500 fewer classes and 7,000 fewer positions systemwide. $44 million was cut from the budget for college financial aid. While spending on criminal corrections fell only 0.1 percent from the previous fiscal year, Aid to Families with Dependent Children was cut 5.8 percent.^[16]

The 1992–93 budget also cut the post-Proposition 13 bailout, reducing the funds that the state had provided to compensate counties, cities, and special districts for lower property tax revenues after Proposition 13. When the California treasury had run a surplus, the state had given money from its general fund to the schools and reallocated property tax revenues from the schools to cities and counties. (With the passage of Assembly Bill 8 in 1978, the schools' share of property taxes had fallen from 47 to 37 percent; the counties' share increased from 27 to 33 percent; the cities' share from 13 to 18 percent.) This flow from the state to schools to localities was reversed in the 1992–93 budget; the new reality was localities to schools to the state. Cities and counties gave $1.3 billion in property tax revenues to the schools; schools took less from the California general fund so that the state could balance its budget. A Ventura County supervisor complained, "We are seeing for the first time the true effects of the implementation of Prop. 13."^[17]

In 1992, employment in county, city, and other local government units in California declined by 19,000. County government in Los Angeles averted a $588 million deficit by cutting 1,900 jobs. By the end of 1992 cities in

California had 7,300 fewer employees on the payroll than they had two years earlier. One hundred city jobs, a third of the total workforce, were lost in Oakland. The town of La Canada-Flintridge, the Los Angeles suburb of 20,000 that had voted so strongly for Proposition 13, was down to one police car per shift. The Pasadena city library planned to reduce headquarters service hours by 50 percent and to close all eight branches. Angry citizens packed city council meetings. One asserted, "When the taxpayers of California passed Proposition 13, they didn't vote to close libraries. . . . They voted to stop the out-of-control spending, bloated bureaucracy, and corruption in Sacramento. We were cheated. We're mad as hell and we're doing something about it!" Citizens initiated a ballot proposition that would guarantee library funding from the city's general fund and would tax households $20 per year. The measure gained the two-thirds vote of approval required by Proposition 13. But more typical was the Los Angeles County library system, which lost $10.2 million of its $70 million budget in 1992. Head Librarian Sandra Reuben responded, "How many libraries do we have? Now, that's a tricky question. . . . This morning we had 92; effective Monday we'll have 83."^[18]

Because Prop. 13 required a two-thirds majority to pass all local specialpurpose taxes, funding even the police department was difficult. Voters in the City of Los Angeles gave proposals to tax and hire more police only around 40 percent support in 1981 and 1985. The number of L.A.P.D. personnel fell from 8,300 in 1990 to 7,800 in 1992, giving Los Angeles the lowest ratio of police to population among the six largest cities in the United States. In the entire city of Los Angeles, only about 280 police officers at a time were typically on patrol; 300 calls per day to the 911 emergency number received a busy signal or were put on hold.^[19] A penny saved, a life lost.

Richard Close, who had led the Sherman Oaks Homeowners Association when it campaigned for Proposition 13, supported another police tax proposition on the November 1992 ballot. It won a 63 percent majority, in part due to the disturbances following the first Rodney King trial, but it still fell short of the necessary two-thirds approval. One San Fernando Valley political consultant sounded like the Valley secessionists and tax protesters of decades ago: "The Valley experience is that somehow we always get screwed when it comes to money being passed out" (see chapter 7). Suspicious that the downtown would benefit while their neighborhoods would not, Valley residents gave the measure only bare majority votes. On the far side of the Valley, Granada Hills voted the measure down. The sites of the 1992 civil disturbances, minority South-Central Los Angeles and the adjacent Westside communities, gave over 70 percent support. Two years later, the score was evened on the issue of bonds to repair the Northridge

earthquake damage. The San Fernando Valley voted strongly in favor of the bonds, while the rest of California voted against. I got mine, you scat.^[20]

For the next budget year, 1993–1994, politicians faced a projected shortfall of $8.6 billion. The schools again had their guaranteed funding reduced and were held to the same per pupil expenditure as the year before. From counties, cities, and other local units, state officials took back $2.6 billion in property tax revenues (in addition to the $1.3 billion from the previous year), allocating the funds to public schools. The only consolation was a statewide ballot proposition, which passed in November 1993, to continue giving half a cent of the sales tax to local government. Now county supervisors were mad as hell; fifty California counties voted to refuse to send property tax revenues to the state. Los Angeles County lost $299 million and immediately laid off five hundred workers. Orange County had already trimmed two thousand positions over the past three years; the City of Irvine closed its city hall on alternate Fridays and cut seventy-one jobs.

In the 1970s the South Bay communities of Torrance, Redondo Beach, Hermosa Beach, and Manhattan Beach had spearheaded the move to form an independent county. Now the state was forcing them into financial independence by withdrawing property tax revenues, leading to scores of lost positions. In the conservative community of Glendale, the home of the 1966 tax strike, by spring 1994 a hiring freeze left city government with the lowest ratio of employees to residents in fifteen years. Nevertheless, according to a frustrated Glendale city council representative, "people want more and more services with less and less money. Residents expect the same service levels they had five years ago, whether it's trimming palm trees or resurfacing streets."^[21]

General Assistance payments to individuals without children were cut to $212 per month, not even enough to pay for a single-occupancy room at a skid-row hotel. Many were forced to join the 60,000 homeless in Los Angeles County. The number receiving General Assistance in Los Angeles County alone had climbed from 49,000 in 1990, to 80,000 in 1992, to 105,000 at the end of 1993. These recipients could not have been attracted by the amount of the benefit (it had fallen from to $212 from $341 in 1992). Many were on the rolls because all other benefits had run out during the recession. Meanwhile, Los Angeles County threatened to lay off thousands of social workers and cut the pay of county employees by 8.25 percent. The Reverend Jesse Jackson joined the protests against the budget cuts: "We need more teachers, and more schools, and more social services. . . . If Rosa Parks can stand up in the seat of the Confederacy, cannot Local 660 stand up in Los Angeles? If Martin Luther King, Jr. can go to Memphis and lose his life for a garbage worker's job, cannot you stand up for your own job in California?"^[22]

Hard hit were public libraries, which could not raise special taxes easily because Proposition 13 required a two-thirds supermajority. Nor could libraries charge fees for their services, as other agencies were doing, without violating their principles and their mandate to provide the public with free access to knowledge. The Orange County library system implemented a 75 percent cut in acquisitions and a 40 percent reduction in service hours, losing 75 staff members in the process. County supervisors threatened to close 43 branch libraries and bookmobiles in Los Angeles; a last-minute emergency appropriation kept them open two days a week. Benjamin Franklin, the penny-saving prophet of private frugality, was also the founder of the Free Library of Philadelphia and would not have understood how a free people could have turned themselves into public misers.^[23]

Grow, Baby, Grow

The California recession produced the state budget crises of 1992 and 1993, during which politicians took property tax revenues from counties and cities. This created budget gaps for counties, cities, and special districts, which had already been receiving lower property tax revenues for the decade and a half since passage of Prop. 13.

While the recession was making local budget crises and the effects of Proposition 13 worse, so too Prop. 13 and local budget crises were exacerbating the recession. To begin with, under Proposition 13 taxes fall more heavily on new purchasers of housing and on new business owners rather than on long established owners, thereby providing a heavy disincentive to construct new housing, purchase a more expensive home, or open a new business—exactly the opposite of policies needed to bring California out of recession. A newly purchased house is assessed at its current market price, whereas a dwelling held by the same owner since 1978 is assessed at its value when it was acquired (as far back as 1975), plus a 2 percent increase per year. Given the real-estate inflation in California, the longtime homeowner pays taxes on an assessment much less than current value, and has an incentive to stay put and not contribute to new housing starts. Similarly, Proposition 13 gives a tax break to established businesses rather than to the new enterprises that might stimulate economic growth. The property of a new company is assessed at current market value, whereas business property held by the same owner is assessed at earlier, lower values. Even if shares of stock in a company are sold to new owners, the company is not considered to have undergone a change in ownership (which would trigger reassessment at the current, higher value) unless one owner obtains a majority of the shares, a relatively infrequent occurrence. Proposition 13 thus provides longtime owners of business property and

apartments with assessments much lower than current market values. If business property were assessed each year at full market value, existing firms would still have the benefit of the low 1 percent tax rate, and the state would gain $5 billion in tax revenues that could be used to encourage new ventures.^[24]

Furthermore, Proposition 13 has contributed to the recession forcing localities to encourage businesses with high-volume sales rather than manufacturing enterprises that would boost GNP and high-wage employment. In the city of Monrovia, for example, officials squeezed by inadequate property tax revenues sought to attract a Wal-Mart rather than a Kodak manufacturing facility. After Prop. 13, the Wal-Mart was the better deal for the city. Fewer city expenditures would be needed for start-up infrastructures. More revenues would come in—one-eighth of the sales tax revenue at the Wal-Mart—eclipsing the 6 percent of property tax revenues the city would keep from the Kodak plant. However, for the economy and the community, the Kodak plant would have been the better deal with its $20 hour jobs, versus Wal-Mart's part-time jobs paying less than $10 hour.^[25]

In their frenzy to take sales tax revenues from each other, communities have subsidized mall after new shopping mall. Many have been built on prime agricultural land, thereby exacerbating suburban sprawl; many more have failed to attract sufficient customers.

Prop. 13 and the fiscal crisis have also limited spending for infrastructures such as highways, transit systems, airports, water and sewer facilities, and schools, which would have helped to stimulate the economy. Prop. 13 moved wealth from the public to the private sector, allowing a wealthy homeowner to save tens of thousands of dollars and long-established businesses hundreds of millions of dollars in taxes. Prop. 13, compounded by the California fiscal crisis, made future revenues, which are needed to pay off bonds, uncertain and threatened infrastructure operations and maintenance budgets. As a result, local government units reduced issuance of bonds and other methods used to finance capital improvements. Furthermore, some localities trying to attract businesses rather than residents were unable to spend on infrastructure for economic development because the Gann initiative (proposition 4 in November 1979) limited localities' spending increases according to increases in the number of residents and inflation. A chamber of commerce official, himself a real-estate developer, summed up the problem:

[I]f we want quality services, we have to be able to pay for them. It's not going to come free. . . . [W]e are very concerned about the contribution that community colleges and schools make. . . . [l]t's a fundamental asset to this country. . . . In [high-] growth areas the responsiveness of the State

cannot be relied upon to meet the local demand . . . to provide the kind of services that the community thinks are important in a vibrant and growing economic area. . . . And frankly we see that as a serious negative effect of Prop. 13.^[26]

In contrast to this ideal image of high quality education serving an advanced economy, in thirty seconds the 1994 earthquake revealed the state university at Northridge for what it was: a hastily constructed, now-flawed monument to bygone modernism. California infrastructure had become, embarrassingly and undeniably, inadequate.

Since additional infrastructure and services would be needed to support any new development, local officials became reluctant to approve new ventures, which would further burden their budgets. One city planner calculated that in Woodland, a city near Sacramento, tract homes would cost the city more in services (police, fire, sewage, water, etc.) than the city would receive in taxes. For every property tax dollar from the development, the city would only get six cents, the rest redistributed and lost to the counties, school districts, and other cities throughout the state. As a Contra Costa County supervisor put it, "Why should we be voting for new land uses when that land use does not pay?" We shouldn't, answered twenty-six cities that placed a slow-growth initiative on the ballot in fast-growing Orange County.^[27]

Localities approved growth only when developers themselves paid up front for the necessary infrastructure. Cities and towns had been unable to raise enough revenue from the populace to pay for new infrastructure because Proposition 13 had limited property tax rates and required a two-thirds vote to enact local special taxes. Fees for specific services, however, were not considered taxes. Local governments made developers pay directly for sewer and water lines, streets, streetlights, and sidewalks; for permits, zoning variances, evaluations and checks of plans, and inspections; and, sometimes, even for entire schools—around $5,000 dollars for the average home in 1986, triple the cost in 1975, even after inflation.

Tired of paying developer fees to build new schools, the California Building Industry Association and the California Chamber of Commerce wanted to make it easier to tax the public for schools and thus they supported Proposition 170. Prop. 170 would have overturned the Prop. 13 requirement of a two-thirds majority for school construction bonds, substituting a majority vote instead. Richard Close of the Sherman Oaks Homeowners caught them in the act. The campaign over Prop. 170 was a rematch with Kirk West, the old adversary of Proposition 13 who now headed the California Chamber of Commerce. Close had the winning argument, that Prop. 170 "will increase property taxes at a time when

people can't afford current property taxes." This time there were no ads showing the faces of disappointed children.^[28]

In short, Proposition 13 taxed newly purchased homes and businesses more than older ones, reduced infrastructure spending, and increased developers' fees, all of which inhibited growth in California. With Prop. 13 came slower growth, and this was exactly what many proponents of Prop. 13 had wanted all along. At the time of Proposition 13, leaders of homeowners' groups were wary of population growth that would crowd their neighborhoods and were suspicious of business development that might interfere with their quality of life (see chapter 3). Sixteen years after the passage of Proposition 13, many of the same community leaders continued to articulate reservations about growth, despite the ongoing recession: "I think development should be slowed down. . . . I don't think we can support [growth] . . . I don't think the economy can support it. . . . Where it used to take me five minutes to go through town it now takes me fifteen. . . . I've always been a . . . slow growther in Monterey Park ever since I got involved."^[29] When asked about growth, a longtime officer of the homeowners' group in the town of El Segundo replied: "No . . . our infrastructure can't accommodate it. Our streets can't accommodate it. . . . [When] we had all of these [office] buildings filled, . . . if you had a heart attack and you had to get to the hospital with a paramedic service at 5 o'clock you would have died in a traffic jam trying to get there."

One can fault the Proposition 13 generation of homeowners for rejecting population growth because the newcomers were not like themselves. One can question their reluctance to pay for the next round of human services needed by the expanding population because the next round was not theirs. But perhaps tax protesters had a point when they doubted whether government subsidies to businesses could encourage economic growth. One infrastructure project begun with the hopes of stimulating business ended up merely as government waste:

You know this talk about water reclamation or availability of water. This is a desert. They have to bring in water from somewhere else in order to make this area work. Ah, they've come up with so many of these plans and they don't seem to recognize that the more growth they have here, that the more the water is going to become a scarce resource. Now they've decided to go into this massive water reclamation plant which we're building here. Yes, we're taking the water from Hyperion Sewage Plant and reprocessing it. . . . Standard Oil or Chevron was supposed to use 60 percent of it; however, after building this massive plant, putting it on my tax bill, on my water bill, built this massive reclamation plant, it turns out that Chevron can't use the water because there's too much ammonia in it. Now they have this piped; they're digging these massive tunnels you know for pipes, so

they can bring this water to the city parks and to the schools. And in the meantime someone . . . finds . . . legionella in the water.^[30]

The Proposition 13 generation of homeowners could have made their hero William Mulholland, who fought to bring fresh water from the north cascading over the olive hills of Los Angeles to sustain the businesses, farms, and builders of an ever-growing metropolis. The new arrivals to California at the end of the twentieth century, some of them escaping countries that even had cholera in the drinking water, needed a different kind of hero: a provider of human services, someone who would insure that people would be refreshed and not poisoned from the tap. But perhaps this hero would never come to be, because she had lost her job the year after Proposition 13 passed.

Preserving the Fathers or the Habits of Community?

The proponents of Proposition 13 took a stand in favor of established owners and against the new purchaser. In doing so, they stood against growth, against free-market turnover, and for community preservation. The U.S. Supreme Court consecrated these choices into legitimate interests of state. Under Prop. 13, long-standing owners kept old assessments, which were significantly less than market value, whereas new property owners were assessed the full current market value. The Supreme Court upheld the constitutionality of this apparent inequality, arguing in Nordlinger v Hahn (1992) that the unequal treatment was justified because it enabled longstanding owners to remain in the community, contributing to the state's "legitimate interest in local neighborhood preservation, continuity, and stability." With Prop. 13, longtime owners kept their low assessments as long as they did not move, thereby encouraging owners to stay longer. This incentive, however, interfered with the free mobility of a high-turnover real estate market. If there had to be a choice made between the realtor sending out stacks of postcards saying "I have a buyer interested in your property" and the retired homeowner who could not afford to buy again, the Court's ruling in the case indicated that the latter was to be favored.

Prop. 13 was another choice—for limited government protecting those who had already bought property—and against an active government promoting growth and broader opportunities for home ownership. The Supreme Court argued that favoring existing property owners over new property owners could also be a legitimate state interest. Prop. 13 protected the "reliance interests" of established property owners because those who had already bought have a greater stake in state policy. An "existing owner,

already saddled with his purchase, does not have the option of deciding not to buy his home if taxes become prohibitively high. . . . [T]he state may decide that it is worse to have owned and lost than never to have owned at all," wrote an aging Justice Blackmun.^[31]

Many Prop. 13 generation homeowners still thought that long-standing property owners should be protected from government programs aimed at helping those who have not yet owned at all, many of them newcomers to California. Some wanted measures even more drastic than Prop. 13:

What we've done with current policies . . . in our state is basically unemploy and disenfranchise the educated populace and make sure we get government programs for the uneducated. [W]hat we are left with is guys that dress in their pajamas when they go to school with a backward baseball cap. . . . I'd like to see negative growth, I'd like to see a negative outflow. It would help the state, yes. . . . I think they also ought to restrict all government services such as umbrella services like that to citizens.^[32]

However, if community is truly to be preserved, it cannot be based merely among the long-standing property owners, separated from others along racial and ethnic lines. The lesson of South Africa applies here, all too well. If California is to have any sense of community in the future, then it must include, for example, the Latino children who now comprise two-thirds of the students in the Los Angeles Unified School District.^[33]

If a sense of community is to be maintained, then we should return to the original spirit of Prop. 13 and of the revolutionary fathers and mothers of the thirteen colonies whose slogan was not "Read my lips: No new taxes," but "No taxation without representation." Proposition 13 began as a protest against unresponsive government, as a movement of citizens to regain their voice over local government and its budget. Ironically, the victory of Prop. 13 has further removed budgetary decisions away from local communities. In communities with long histories of independent self-government, after Prop. 13 town councils were prohibited from raising property taxes to pay for amenities, even if a majority of residents wanted them. In San Marino and Beverly Hills, where well-funded school systems had been a source of civic pride, citizens could improve their local schools only if two-thirds of the voters approved a bond; each town failed at least twice. Under Proposition 13, all local agencies had to turn the property tax revenues they collected over to the state government in faraway Sacramento, where politicians every year made last-minute decisions as to whether school districts, cities, or counties would receive more money. A chamber of commerce official in Irvine, who favored higher educational spending, complained: "The result of Prop. 13 was the shift of the tax base from local property to [the] State General Fund. It disempowered locally elected

board members in the control of revenues. . . . The Legislature became the school board, so we in effect have lost local control of our schools. . . . "^[34]

Sacramento was also dictating to localities about law enforcement, defining new crimes and specifying sentences, which forced cities and counties to spend their tax revenues accordingly. The state told counties how much they had to pay for the Medicaid and AFDC programs. By 1988, spending on these and other mandates took up 55 percent of the generalpurpose revenues of California counties.

Citizens did not have the power to decide on the level of local services, enact taxes that they wanted, keep their tax dollars within a local jurisdiction under the responsibility of a local official, or use the tax dollars for specific activities within their localities. Local government had been bypassed. Instead, many local tax dollars were redistributed by Sacramento, and could end up being sent to some other locality for a service not envisioned by the taxpayer. Prop. 13 had empowered neither the citizens nor their local communities; it had empowered the state.^[35]

To reclaim local government in the original spirit of Prop. 13, communities must be allowed to take responsibility for certain programs, making their own decisions about raising taxes and using revenues to solve problems. Social-service programs in mental health, child welfare, drug abuse, job training, short-term corrections, and housing might well be more effective if cities and counties were responsible for administering and coordinating them at the local level, drawing on the expertise and assistance available in their communities as well. But to match added responsibilities, localities also need a larger share of the tax revenues that presently fill the state treasury. Localities need the power to set their own tax rates, above the 1 percent level if it is so deemed necessary by the electorate, and to use the resulting revenues for local purposes.^[36] Only then will citizens be truly able to achieve what they had hoped for with Proposition 13—democratic control over taxing and spending by local government.