Report From the Capitol

By: David Wolfe, HJTA Legislative Director

Another September is upon us, which means that the Legislature is once again wrapping up its business by sending hundreds of bills to Governor Schwarzenegger for his signature or veto. Despite a very busy 2009 (one consumed by a special election, revenue shortfalls, and two budget debates so far!) HJTA was still there faithfully representing you in the halls and committee rooms of the State Capitol.

The Association took positions on 80 bills this year, about 25 of which are still active. Many of these bills do damage to Proposition 13, either through watering down its 1% property tax cap or through tax-like fees that are not required to get two-thirds voter approval. Here are some examples.

Assembly Constitutional Amendment 9, by Marin County Assemblyman Jared Huffman would lower the required vote to pass bonds and special taxes to 55% in order to fund public safety improvements. These local government bonds are “below the line” exactions that do not count against Proposition 13’s cap. This bond debt is placed on your property tax bill for up to 30 years, and is one of the reasons that, even with Proposition 13, California only ranks 22nd in per capita property tax collections according to the Tax Foundation. By making it easier to increase your property taxes, all homeowners suffer. It is not a good message to be sending in the worst housing market of a generation. Further, non-homeowners and renters who don’t pay property taxes have more of a say with a lower vote threshold, and they care much less about protecting your property from higher taxes.

Another bill is Senate Constitutional Amendment 6, by Bay Area State Senator Joe Simitian. This measure would lower the threshold to pass school facility parcel taxes to 55%. Like ACA 9, this represents another below the line reduction that waters down Proposition 13 by not counting against its cap. It is important to note though just how regressive parcel taxes are because each house gets hit with the same tax, whether you live in a mansion or a bungalow. Both measures are on their respective legislative floors, awaiting an unlikely two-thirds vote to move to the other house. Currently, there are six of these constitutional amendments in the Legislature.

An example of a “tax-like fee” that waters down Proposition 13 is AB 73 by Bay Area Assemblywoman Mary Hayashi. Hayashi’s bill would allow a municipality like a city or county to charge $2 more for marriage licenses and other certified certificates to fund domestic violence programs. In HJTA’s view, this does not meet the definition of a true fee. A fee is supposed to be paid in order to mitigate harm caused by the fee-payer, or to establish a regulatory program. By funding a program that has nothing to do with marriage, AB 73 fails to meet that standard and violates the Constitution. Therefore, it should be keyed as a special tax, requiring a two-thirds vote of the local electorate.

A complete list of our bill positions can be found by clicking on the appropriate tab within the “Legislative Action” section on the right side of the screen.

Finally, a brief word on the state budget that was passed by the Legislature in August. HJTA is pleased that this budget, unlike the last one passed in February, does not include any tax increases. It is a major victory that demonstrates that the Legislature heard loud and clear the message that was sent during the May 19th special election: voters do not want any more taxes! Also, despite a growing number of attacks in the media and elsewhere, Propositions 13 and 218 were also protected and remain in place. This is a budget deal that made billions in real cuts, and brings California somewhat down the path toward fiscal stability.

However, we are under no illusions that this is a budget that will be sufficient to see California through its current fiscal decline. At least $17 billion will have to be repaid back to the state in within the next five years. Among the most egregious of these ‘revenue deferral’ proposals includes paying state employees salaries in June one day later. By making this $1.3 billion payment on July 1, this payment does not need to be counted as an expense in the current fiscal year. We are also concerned that $2 billion in local government borrowing will lead to increased pressure to pass more local bonds and special taxes, watering down Proposition 13 and placing more long term burdens on you, the taxpayer. We firmly believe that this budget will have to be revised yet again, (the third time this year) sometime in October or November. This represents another opportunity for the Legislature to increase taxes, something we will obviously continue to be vigilant against.