California’s Folly — Prop. 13
In November 1978, Harper’s magazine published my article on the passage of Proposition 13 with the headline, “Californians Rush for Fool’s Gold.”
At that time, Prop. 13 was getting lots of national media attention. The pundits of type and tube were hyping California as the pacesetter for a post-Watergate America. At the same time, the cultural gurus were proclaiming it to be a proving ground for paradise.
Even George F. Will, the usually cautious Washington Post columnist, declared: “The East Coast, landfall for immigrants of all sorts, once was the laboratory of American politics. Today California, land’s end for migrants of all sorts, is the laboratory.”
Birthplace of the “less is more” philosophy, the Golden State had become both the cultural fad-fashioner of the nation and a dominant political force. What did this imply for the nation politically? Many observers referred to California’s trendiness as a hopeful sign of America’s greening.
While reflecting upon the “have a nice day” patter of the pundits who were heaping praise on Prop. 13, I recalled something that Albert Einstein had said: “There are only two things in this world that I’m fairly sure about. That E=mc2, and man’s capacity for folly. And I’m not that certain about the first.”
Indeed, Prop. 13 was to become California’s Folly.
I thought then, and am firmly convinced now, that the key elements in the proposition — the taxation formula and the two-thirds legislative requirement — would be responsible for causing a fiscal and social disaster. These two requirements have in time helped to lead the state into financial bankruptcy and created a dysfunctional state government. And the social consequences that I predicted then and which are all too apparent now are a race to the bottom in education (from K through our highly esteemed university system); public health; social services; public safety; arts, libraries and culture; and infrastructure development; as well as crippling the ability of local governments to provide basic amenities.
In one way or another, almost everyone will pay a price; but the middle class, the working class and the poor — those who are dependent on public services — will be hurt the most because of cutbacks.
What I did not anticipate is that the financial squeeze would be exacerbated by a rigid and myopic band of ideologically reactionary Republicans in the state Senate who seem uniformly opposed to common sense and the public good. The problems were compounded by the recall of a governor, Gray Davis, who tried to ameliorate the deficit with a fair tax on auto registration. And he was replaced by a governor, Arnold Schwarzenegger, who has neither the will nor the stomach to deal with the terminal negativity of his own party in the Legislature.
So, instead of the greening of America, we got the greeding of America for three decades, fueled by the media hoopla over Prop. 13 and exemplified by the national policies of Ronald Reagan and George W. Bush.
Finally, as we head into a year of campaigning for the governorship and the Legislature, it is my fervent hope that the California electorate will have learned its lesson and will elect leaders who have the courage to restore equity and fairness to the state’s economic and social policies.
A healthy beginning would be to amend Prop. 13 by removing its protections for commercial property while retaining the benefits for homeowners, as well as passing a straightforward referendum that simply states: “All legislation actions based on revenue and budget shall be determined by majority rule.”
Now is the time to face reality and right the wrongs of the past. We cannot afford to live with — or pass on to our children and grandchildren — the painful consequences of 30 years of regressive policies and government by provisional catastrophe.
Excerpt from Harper’s magazine, November 1978:
… The reactionary dream of George Wallace and Ronald Reagan, repudiated by the nation at large in 1968 and again in 1976, has come to pass in California under the rubric of “a people’s tax revolt.” Four months after the passage of Proposition 13 by an enthusiastic majority in that benighted state, politicians elsewhere in the country have declared themselves in possession of a new revelation. In primary and election campaigns this fall, they have been saying that big government needs to be reduced, and they advertise themselves as courageous representatives of an electorate righteously aroused.
Before the rest of the nation joins the headlong rush to the sea, the fine print in Proposition 13 deserves a slightly more careful examination than has been provided by the wise men of the doting media.
A number of states have adopted the initiative and referendum process, but none has used it so often as California. The initiative has not proved to be a very sound means of enacting legislation. Initiatives are typically reflexive, emotional reactions to an issue, poor substitutes for the hearings, debates, compromises, and deliberations that distinguish the legislative process. And so with Proposition 13.
A disarmingly simple initiative of 389 words, it limits the taxes levied on any piece of real property — houses, apartments, factories, and businesses — and makes the limitation binding on the state Legislature as an amendment to the Constitution.Proposition 13 promised to cut California’s high property taxes by some $7 billion per year, from $12 billion to $5 billion. It immediately reduces property-tax bills approximately 57 percent by rolling back the maximum rate of tax to 1 percent of the property’s 1975-76 assessed valuation, and restricts futures levies to 2 percent per year. The initiative further requires a two-thirds majority in both houses of the state legislature to approve increases in any other state tax.
Howard Jarvis, the chief architect of the initiative in concert with Paul Gann, a retired real estate salesman, spent $28,000 to secure 1,264,000 signatures, more than twice the 500,000 need to place his petition on the ballot. And amid the hoopla of his lavish public relations campaign, a number of insidious provisions in the initiative were obscured. For example, Proposition 13 states that property will be assessed at current market value “when purchased, newly constructed, or change in ownership has occurred.”
As houses are built and change hands, they will receive far higher assessments than voters were led to believe. And because families move more often than such corporate giants as Standard Oil, Lockheed, Chevron, and B of A [Bank of America], the heaviest property tax burden must shift from the corporations best able to bear it, to individuals.
Fewer houses will be built as a result of Proposition 13’s requirement of a two-thirds majority of the electorate to pass the bonds that sub-dividers depend upon to finance such public facilities as schools, fire stations, and water works. Because available housing stock will diminish, market prices are bound to soar and with them the taxes new homeowners will have to pay. A less stringent alternative was available to Californians, if they had only been willing to consider it.
Governor Jerry Brown and the state Legislature, stung by Jarvis’ achievement, drafted a compromise measure that appeared on the ballot as Proposition 8. Sponsored by Republican state Sen. Peter Behr, Proposition 8 would have given homeowners a 30 percent cut in property taxes, paid for lost revenues through state budget surplus, and placed a cost-of-living ceiling on state and local expenditures. Proposition 8 was designed to limit the growth of the state treasury rather than to diminish its existing size. Further, Proposition 8 could have been amended by the Legislature. Proposition 13 can be altered only by a two-thirds majority of California voters in another popular referendum, and thus [binds] the state to a condition of fiscal extremity.
Jarvis made a point of reminding homeowners about their $7 billion windfall. He failed to mention that $2.5 billion will be transferred to the federal government in the form of higher income taxes because Californians will have less property tax to deduct. If corporations and property owners are the winners, the losers are the disadvantaged and the poor. Chanting “limitation” mantras and raising karma, Jerry Brown helped to create the hostile anti-government atmosphere in the state that yielded Proposition 13. In his four years as governor, Brown failed to secure decent tax reform. He accumulated the largest state budget surplus in the nation’s history, and this proved the most effective weapon in the arsenal of the initiative’s advocates.
The surplus, estimated during the campaign at $3 billion to $5 billion, was indeed to be Brown’s ticket to the White House. The governor could only enhance his candidacy in 1980 by pointing to the huge surplus as evidence of his frugality. But Howard Jarvis discovered Brown’s pot of gold, and he beat Brown at his own game. When critics of Proposition 13 objected that its passage would cripple the government’s ability to provide essential human services, Jarvis had only to cite the surplus in rebuttal. It was left to the voter to imagine what would become of those services once the surplus was depleted.
Now that the amendment has passed, Brown speaks as if it had been his own idea from the first. His chidings at the National Governors’ Conference late this summer might have been uttered by Howard Jarvis himself.
Proposition 13 indeed proclaims a message, but it is not the one sung in popular chorus. The [issue] of big government versus small government is moot; big government is here to stay. The real issue is whether government will be dominated by privileged interests and their hucksters or whether ordinary people will have some say through the conventional political process. The paradox of the California referendum is that so many ordinary people voted their power away.
Professor Arthur I. Blaustein teaches Community and Economic Development and Urban Policy at the University of California, Berkeley. He chaired the President’s National Advisory Council on Economic Opportunity under Jimmy Carter. His most recent books are “Make a Difference — America’s Guide to Volunteering and Community Service,” and “The American Promise — Justice and Opportunity.”