November 11, 2003
SUBJECT: Approval of Resolution in Support of Statewide Ballot Initiative to Require Voter Approval Before State Government May Take Local Tax Funds
REPORT IN BRIEF
The League of California Cities (LCC) and other local government associations have joined forces to sponsor a ballot initiative in November 2004 that will amend the constitution to require voter approval before the state can divert, confiscate, shift or otherwise take local funds to finance state purposes. The LCC is encouraging cities and counties to approve the attached resolution in support of the initiative. This report summarizes the ballot initiative and related City policies. Staff recommends that Council approve the attached resolution.
BACKGROUND
Within the League of California Cities, there is widespread agreement that the state-local fiscal relationship is not working. One of the reasons noted by the LCC is that state leaders no longer respect the difference between state and local tax revenues. In recent years, the state legislature and governor have approved laws that divert, use or delay the payment of local tax revenues to local governments that finance public safety, public health, parks and recreation, library, street maintenance and other vital community services.
Since 1991 more than $30 billion of local property taxes have been diverted from local governments. The state has used these funds to finance its constitutional funding obligation to public education, allowing it to increase state general fund spending for other state programs. This has come at the expense of vital local public safety and other services - costing cities more than $800 million this year, or $6.9 billion in lost local property taxes over the past twelve years.
Recently the state also shifted costs for state-sponsored programs and delayed constitutionally required reimbursements to local governments for a number of state-mandated programs and services. In the last two fiscal years, the state has “deferred” over $1 billion in constitutionally required reimbursements to local governments for mandated services and programs.
It is for these reasons that the LCC is sponsoring this statewide ballot initiative and is encouraging cities and counties to support the initiative.
EXISTING POLICY
Legislative Action Policy - 7. Planning and Management 7.1 Fiscal Management ii) State (1) Protect the authority of charter cities to control local revenues. Oppose the reconfiguration of revenue distribution formulas to take revenues away from local government to fund state programs.
DISCUSSION
City and other local government leaders know that in the current state budget crisis, this problem will only get worse if action is not taken to address the issue. As a result, the LCC and other local government associations have joined forces to sponsor a ballot initiative in November 2004 to put the voters in charge of whether local tax dollars should be used to fund state services.
This initiative would not prevent structural reform of the fiscal system. It would simply require that structural changes be planned collaboratively by state and local leaders and approved by the voters. It would not raise taxes and it would not repeal laws the state has already passed. It would not require the return of property taxes already taken. It would accomplish two things:
Public Vote Required. Require approval by a majority of the electorate before a proposed state law may take effect that appropriates, reallocates, redistributes, reduces or suspends the payment of local tax revenues (sales, property and VLF) to cities, counties and special districts; and
Reimburse for Mandated Costs. Clarify that the state must reimburse local governments for a new mandated program or higher level of service, protecting local governments from cost shifts.
FISCAL IMPACT
There is no immediate fiscal impact. However, the intent of the ballot initiative is to stop future revenue diversion from local government and to clarify state reimbursement of mandated costs.
PUBLIC CONTACT
Public contact was made through posting of the Council agenda on the City's official notice bulletin board, posting of the agenda and report on the City's web page, publication of the Council agenda in the San Jose Mercury News, and the availability of the report in the Library and the City Clerk's Office.
ALTERNATIVES
1. Council approves attached resolution to support a statewide ballot initiative to require voter approval before state government may take local tax funds.
2. Council does not approve attached resolution to support a statewide ballot initiative to require voter approval before state government may take local tax funds.
3. Council takes no action at this time.
RECOMMENDATION
Staff recommends Alternative #1.
Prepared by:
Katherine Bradshaw Chappelear
Manager of Youth and Family Services
Reviewed by:
Coryn Campbell, Manager
Neighborhood and Community Services
Reviewed by:
Amy Chan
Assistant City Manager
Approved by:
Robert S. LaSala
City Manager
Attachments
A. City Council Resolution to support statewide ballot initiative to require voter approval before state government may take local tax funds.