PPIC Report: Long-term Reliance on State Money -- California Capitol Hill Bulletin -- Volume 10, Bulletin 3 -- February 14, 2003

California's local governments have been increasingly reliant over the past two decades on state money to provide critical local services, a new study by the Public Policy Institute of California (PPIC) shows. Whereas other local administrations throughout the country have been steadily moving in the direction of self-reliance, in California the trend has been towards the opposite.

According to the study, local governments in the state raised and spent 50 percent of their own funds in 1997 as compared to 58 percent in 1977, while the funds that local governments raised and spent elsewhere in the nation increased from 57 to 62 percent between 1977 and 1997. The study also states that California counties went from raising half of all their own funds to raising only 36 percent, while counties in other states increased their use of self-raised funds from 57 to 70 percent.

Part of the reason why local governments in California are more reliant on state funds than their counterparts in the rest of the nation resides with a series of restriction that voters have placed on the ability of local governments to raise local revenue. Beginning with Proposition 13 in 1978, which limited property tax rates, increases in assessed property, and the passage of special taxes, local governments have found it difficult to raise revenue through traditional methods of taxing and fees.

The study, authored by PPIC's Kim Rueben and Pedro Cerdan and titled Fiscal Effects of Voter Approval Requirements on Local Governments, explores the ways local governments in California have used the ballot to raise taxes, assess fees, and pass bond measures. Their findings indicate substantial variation in voter reaction to fiscal measures depending on region, election timing, the type of measure proposed, and the service to be funded.

The authors report that from 1986 to 2000, California voters passed 42 percent of taxes and fees measures and 48 percent of bonds of the total 2,500 local tax and bond measures. Most bond measures were proposed and passed by school districts. In addition, the study found that passage rates varied according to which services would be funded, with transportation and emergency service measures passed most often at 56 percent of the time, and recreation and park measures passed least often at 29 percent of the time. The authors also note regional differences in the number of proposals and passage rates. Local governments in the Bay Area and in southern regions proposed revenue measures the most often, and those measures passed at the highest rate. There were also differences in passage rates across types of government, with county tax measures passing 32 percent of the time, city measures passing 40 percent of the time, and special district elections passing 47 percent of the time. The authors note that a dedicated tax measure is more likely to garner voter support than a general tax, despite the fact that special taxes require a supermajority for approval.

For more information about this study, please visit PPIC's website at http://www.ppic.org.

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