What California Homeowners Should Know About the State Budget

Let’s be honest.  When politicians and pundits discuss the state budget, very little is about the impact on homeowners.  Notwithstanding the fact that a person’s home is their most important asset, this lack of perspective is understandable.  When people think about political issues impacting their status as homeowners, they are far more likely to focus on local taxation – fees for utilities, parcel taxes, local bond debt, etc.

But state finances in California can – and do – have a profound impact on one’s status as a homeowner and, unfortunately, it is rarely in a good way.  First, homeowners should be aware that there is no bright line between local governments and the state.  State laws on school finance, redevelopment, law enforcement, natural resources and transportation have a huge impact the budgets of cities, counties and special districts.

Take schools, for example.  Because of California Supreme Court rulings in the 1970’s, local school districts have lost a great deal of local control over their budgets.  (Contrary to urban legend, loss of local control had very little to do with Prop 13).  Much of K-12 funding now comes from the state.  And the amount of that funding has a lot to do with whether a local school district is “rich” or “poor.”

The complexity of the relationship between state and local governments leads some to tune out issues about the budget believing that it is not relevant to their lives.  That would be a big mistake.  Homeowners should be aware that this year’s proposed budget reflects a significant five percent increase over last year.  Not only has state spending increased every year except one during the recession, that spending has gone up 30% in five years.  California now has a $113 billion general fund budget and that doesn’t even include special funds and money from the federal government.

One of the driving forces behind higher state spending is an effort by Governor Brown and others to corral the massive obligations to the state’s pension funds and government retiree healthcare.  Brown should be applauded for his efforts to reduce debt but some of us can’t help but feel he is trying to remove sand from a beach with a pair of tweezers.  California’s accumulated debt in all forms is staggering.  In a recent piece in the Wall Street Journal, Steven Malanga of the Manhattan Institute noted how unfunded pension costs, not just in California but nationwide, are gobbling up all of the new revenue coming in to state and local governments from the economic recovery and higher taxes.

And some of those tax hikes in other parts of country are huge.  But here in California, we already have the highest income tax rate, the highest state sales tax rate and the highest gas tax in America.  In short, the tax and spend lobby is running out of options.  So who is the last remaining target?  You guessed it:  Homeowners.

And the only thing standing in their way is Proposition 13.  While other states have some limited protections for homeowners, none are as effective as California’s landmark Proposition 13.

Homeowners need to be on guard.  All those proposals to lower the 2/3 vote on local parcel taxes and bonds repaid only by property owners are just the beginning.  As the demands to make good on California’s hundreds of billions worth of debt become clear, those who are blessed with home ownership need to pay attention, not only to local politics, but to the state budget as well.

Jon Coupal is president of the Howard Jarvis Taxpayers Association — California’s largest grass-roots taxpayer organization dedicated to the protection of Proposition 13 and the advancement of taxpayers’ rights.