After all these years, liberals are still wrong about Proposition 13

Howard-JarvisForty years ago this week, California voters began the modern tax revolt movement that spread across America like wildfire. The idea that citizens could take back control from an overreaching government helped to propel Ronald Reagan to the presidency. Reagan, who had a close friendship with Howard Jarvis, took his message of limited government to Washington and his message of freedom to the world.

Proposition 13 cut property taxes, put limits on their rise, and toughened the requirements for passing other tax increases. It passed overwhelmingly in June 1978, and ever since, liberals have failed to acknowledge how wrong they were about it — both in terms of politics and policy.

Two months before the vote, California’s then Gov. Jerry Brown (version 1.0), was quoted in the New York Times as saying “I don’t think there is one credible observer who thinks Proposition 13 will endure over the long period.” Forty years later, it’s Brown who is heading into the political sunset while Proposition 13 continues to protect grateful California taxpayers.

So-called “experts” were also wrong in their dire predictions about the harm that would be inflicted on California if Prop. 13 were to pass. One of the TV commercials run by the well-funded opposition campaign featured a doom-saying UCLA economist who predicted that California would be plunged into a deep recession if voters approved the measure. But in the years immediately following passage, California had an extraordinarily booming economy.

Progressives like to perpetuate another falsehood about Prop. 13 in their ceaseless efforts to divide and conquer the taxpayer coalition that supports the law. They seek to target the owners of business properties who, like homeowners, benefit from predictable taxes under Prop. 13. A false argument is advanced that during the 1978 campaign, voters weren’t told that Proposition 13 protections would be extended to business properties as well as homes.

This simply isn’t true.  The opponents of Prop. 13 themselves repeated that fact throughout the campaign and, specifically, in the official ballot pamphlet.

Perhaps the granddaddy of all lies about Proposition 13 is how it “destroyed education” in California. This falsehood is repeated so often and with such vigor that it is accepted as established fact by liberal elites and mainstream media. For example, just a couple of weeks ago, Sacramento mayor and former Senate leader Darrell Steinberg blamed Prop. 13 for “years of cutbacks to arts funding in public schools.” This despite record revenues being pumped into education. …

Click here to read the full article from the L.A. Daily News

In Sacramento, Democrats are run by the unions

Unions2June 6 marks the 40th anniversary of voters’ overwhelming approval of Proposition 13, which has been protecting all California taxpayers ever since.

Some people mistakenly think Prop. 13 protects only homeowners, because it cut the property tax rate statewide to 1 percent and put a stop to uncontrolled increases in assessed value. But it did something else, too. It required voter approval of local tax increases and set the threshold for approval of special taxes at a two-thirds vote.

For 40 years, big-spending politicians have been looking for loopholes.

Take parcel taxes, for example. A parcel tax sounds like a tax on UPS deliveries, but it isn’t. It’s a tax on real estate parcels. Under Prop. 13, politicians can’t raise property taxes that are based on the value of property, but they figured out that they could add a flat tax to property tax bills if it wasn’t based on value.

Under Prop. 13, two-thirds of voters have to be convinced to approve parcel taxes.

Politicians figured out that the two-thirds threshold would be easier to reach if they exempted a lot of people from having to pay the tax. Certainly people who won’t have to pay a tax are more likely to vote for it. And politicians who vote for the exemptions can say they voted for a tax break, even though they were raising taxes at the time.

An example of this was the Legislature’s action in 2008 to exempt people on Social Security Disability from paying education parcel taxes. HJTA opposed this bill because it undermined the two-thirds vote requirement for parcel taxes established under Prop. 13. The more classes of people who are exempted, the more the two-thirds vote will be watered down, and the easier it is to raise taxes.

Taxpayers are hit twice by the exemption trick. Taxes are raised more often, but the exemptions mean the government receives less revenue. So the likelihood of other taxes being raised to make up the difference in the future is that much greater.

But when something is working for the politicians, it tends to stick around.

Politicians love picking winners and losers.  It means power over the lives of others and provides a great source of campaign contributions.

The “progressive” legislators who control California’s government favor government employee union organizations — the most powerful force in Sacramento. Every favor granted to public sector unions is a transfer of wealth from taxpayers and the private sector to government employees and the public sector.

Right now, the Legislature is considering a bill that would exempt teachers and education support staff from paying education parcel taxes. Senate Bill 958, which has passed the Senate and is now in the Assembly, was initially a statewide proposal but has been narrowed to target only the Davis Joint Unified School District in Yolo County.

For now. …

Jon Coupal is president of the Howard Jarvis Taxpayers Association.

Click here to read the full article from the Orange County Register

November initiative would give baby boomers huge property tax break

http://www.dreamstime.com/-image14115451Older California residents who buy pricier homes could save thousands of dollars in property taxes under an initiative that has qualified for the statewide November ballot.

The initiative – backed by the California Association of Realtors – would change a key provision of Proposition 13, the state’s 40-year-old property tax law that ties a home’s assessed value to its sales price and caps the property tax rate at 1 percent of that value.

Under the initiative, people over the age of 55 moving within the state could pay property taxes based on the sales price of the home they are leaving.

For example, if a resident sells his or her home for $400,000 in Sacramento and then buys a condo in San Francisco for $1 million, their property tax rate would be discounted thanks to the lower Sacramento home value. In that instance, if the resident’s Sacramento assessed value was $200,000, the formula would result in a San Francisco assessed value of $800,000 on the $1 million condo, 20 percent less than it would be otherwise. …’

Click here to read the full article from the Sacramento Bee

There is no loophole in Proposition 13

property taxFor decades, California progressives have complained about a “loophole” in Proposition 13 that unfairly benefits the owners of commercial real estate to the detriment of homeowners. This characterization has been widely accepted by the mainstream media with little critical analysis.

There is no loophole in Prop. 13.

There is, however, an ambiguity in the statute implementing the measure that relates to the “change of ownership” rules. That ambiguity can be easily addressed by a statutory amendment without doing violence to Prop. 13. Both the business community and the state’s preeminent taxpayer organization, Howard Jarvis Taxpayers Association, agree that this change is necessary.

Senate Bill 1237, by state Sen. Patricia Bates, would address this technical tax issue involving fictitious entities such as limited liability corporations and complex partnerships in a way that is wholly consistent with Prop. 13.

Specifically, under Prop. 13, when you sell your home, it is reassessed to the full market value for the new purchaser. Of course, the new buyer still enjoys the 1 percent rate cap and the certainty that the taxable value of the property will not increase more than 2 percent per year.  But for properties that have been under the same ownership for decades, the “taxable” value of the property can be just a fraction of the market value. That is why Howard Jarvis and Paul Gann provided in Prop. 13 that upon change of ownership, property would, at least initially, be taxed at market value. After purchase, it receives the same 2 percent limitation on annual increases in taxable value as all other properties.

But some clever tax attorneys have advised clients that they can avoid Prop. 13’s intent to treat commercial transactions the same as homeowners by creating fictitious entities that themselves are transferred in an inappropriate attempt to avoid reassessment. This violates the spirit of Prop. 13 and actually gives the enemies of Prop. 13 a justification for arguing that all of Prop. 13’s protections should be stripped away for commercial property. It also explains why public employee unions continue to oppose bills such as SB1237, because it would deprive them of their best argument in the ongoing fight to remove Prop. 13’s protections for commercial property. Indeed, the enemies of Prop. 13 are already working to qualify this very initiative for the 2020 statewide ballot. …

To read the entire column, please click here.

Enemies of Prop. 13 Delay Attack on Iconic Initiative

property taxA reporter for the Bay Area News Group stopped by the government office in Santa Clara County and concluded that while people standing in line to pay their property taxes were upset with the heavy burden, they had scant knowledge of California’s iconic Proposition 13. What most were probably unaware of is that their taxes would be at least twice as high without Prop. 13.

Many people who live in California today were not here in 1978 when Proposition 13 was passed overwhelmingly by voters. Today’s younger homeowners have little idea how frightened and angry citizens were in the mid-1970s when their property taxes doubled or even tripled from the previous year.  Homeowners were literally being taxed out of their homes.

But despite having no personal memory of the pre-Prop. 13 era, most Californians have at least heard of Proposition 13 and, when prodded, recall it somehow helps to keep escalating property taxes in check.

In June, Proposition 13 will hit its 40th birthday. While long-time homeowners will surely celebrate, those in government with an insatiable appetite for taxpayer dollars are hoping that voters will be ready to weaken it.  But previous attacks on Proposition 13 have come up short. At most, Prop. 13 was weakened by court decisions involving fees and charges as well as attacks on the two-thirds vote requirements.  But those attacks were quickly countered by subsequent ballot initiatives such as Proposition 218 in 1996, the Right to Vote on Taxes Act, which reinforced Prop. 13’s original intent.

Knowing that a direct attack on Proposition 13’s protections for homeowners is a fool’s errand, the tax-and-spend interests have focused on raising property taxes on business property. This so-called “split roll” effort has gone on for about 30 years and has never really gained any serious traction. According to these interests, 2018 was going to be the year where they would finally be able to take a big chunk out of Prop. 13 by hitting commercial real estate with several billion dollars in higher taxes.

The optimism displayed by Proposition 13’s detractors has been based in large part on the expected “blue wave” of voters coming out in support of progressive candidates. Liberal Democrats believe, rightly or wrongly, that voter disgust with the Trump administration might at least allow them to regain control of the U.S. House of Representatives. The thinking, at least until recently, has been that November of 2018 would be the right moment to fracture the pro-Proposition 13 alliance because of an energized progressive base, low voter turnout and fading memories of 1978.

But a funny thing happened on the way to the ballot box. After beginning a serious effort to collect signatures for their “split roll” initiative, the proponents have taken their foot off the gas and announced that, instead, they will attempt to qualify the measure for the 2020 ballot. The ostensible reason for the delay is that it would give them more time to expand their coalition (of course, the same can be said for Prop. 13 defenders) and that the voter turnout model in 2020 would be better for them – a dubious claim indeed.

Split-roll proponents might be having second thoughts about what they thought was a weakening of support for Prop. 13 or the political strength of their own coalition. Perhaps they’ve seen polling – both private and public – revealing Proposition 13’s continued popularity. Whatever the reason, this November’s election will not present a direct threat to Proposition 13. …

Click here to read the full article from the Orange County Register

Jerry Brown Blames California’s Coming Insolvency on Prop. 13

SACRAMENTO, CA - OCTOBER 27: California Governor Jerry Brown announces his public employee pension reform plan October 27, 2011 at the State Capitol in Sacramento, California. Gov. Brown proposed 12 major reforms for state and local pension systems that he claims would end abuses and reduce taypayer costs by billions of dollars. (Photo by Max Whittaker/Getty Images)

Gov. Jerry Brown is blaming California’s coming insolvency on Proposition 13, which was passed in response to his first term policies in the late 1970s.

Gov. Brown has been warning Californians since May that the state’s eight-year economic expansion will not last forever, and the next “moderate recession” could cause state revenues to fall by $55 billion over the following three years.

To put the size of such a challenge in perspective, California’s annual spending budget for general government payroll and benefits is only $10 billion.

At the Jan. 10 press conference following release of his last proposed 2018-19 state budget, Brown blamed Proposition 13 three times for the precarious financial condition he has had to wrestle with in his four terms as governor of the Golden State.

Jerry Brown was 36 when he was first elected governor in 1974. He ran in his first election campaign in 1974 on a promise to pass a Balanced Budget Amendment to fight Gov. Ronald Reagan’s deficit spending. But once in office, Brown fought oil company drilling and arrogantly pushed for new spending on expensive environmental mandates.

With inflation rampant and senior citizens scared that unlimited increases in property tax would take their homes, Howard Jarvis rallied voters to gathered hundreds of thousands of signatures to put Proposition 13 on the ballot in 1978. Despite opposition from Brown and every Democrat politician in Sacramento, the initiative passed with a 62.6 percent majority. Brown was forced to slash spending by $5 billion, or 20 percent.

Gov. Brown told reporters 40 year later, “The passage of Proposition 13, and the insertion of the state government into local funding and local decision-making, has radically changed the nature of California government.”

Brown remained quiet in June 2015 when the Democrat super-majority in the California Legislature wanted to put an amendment on the state ballot to eliminate Prop 13 restrictions on taxing commercial and industrial property.

But with polling for split-roll never receiving over 50 percent support, Gov. Brown ended the tax increase push in October when he told real estate interests that Prop 13 was California’s “political third rail” and that he would not support any vote to change the law.

Gov. Brown has proposed a $190.3 billion balanced budget for the 2018-19 fiscal year beginning July 1. It is the sixteenth and last budget in his four terms as governor. Brown’s budget proposal includes a $5 billion allocation to his voter-approved Proposition 2 “rainy day” fund, bringing the total reserve fund to $13.5 billion.

Breitbart News reported that Brown’s conservative budget proposal is a direct challenge to his own party. His former Democrat allies in the California legislature announced a budget plan in December that includes spending $4.3 billion more than on social justice issues — including providing illegal aliens with eligibility for California’s Medicaid program; expanding a tax credit for the working poor; boosting preschool and child care; and increasing college scholarships to reduce reliance on student loans.

This article was originally published by Breitbart.com/California

These ballot initiatives could be headed your way in November

Voting BoothsDirect democracy can be an exhausting business.

This year civically engaged Californians will be expected to have informed opinions about affordable housing and park funding, how best to divvy up cap-and-trade money, how to spend the state’s new gas tax money, and when new voter-approved laws ought to be enacted.

And those are just the measures on the ballot so far.

Joining those five—all of which come referred from the Legislature and most of which are destined for the June ballot—are the citizen-backed proposals, which must compete for spots on the November ballot. More than 40 have already been cleared to be passed around the state gathering signatures, while another dozen await the go-ahead from the state attorney general.

What’s on the menu this year? It’s still too soon to say for sure, but here are some major themes and a few examples of what you can expect to see:

Fiscal Fixers

California pioneered fiscal populism with voter-approved constitutional amendments like Prop. 13. So it wouldn’t be a California election without at least a few voter-backed proposals that take a blow torch to the state tax code.

  • Lower Taxes:

Last year, the Democrats kicked off the legislative session by passing a $5 billion-plus transportation plan, funded with new fuel and vehicle fees. There’s a reason they chose to raise the gas tax as far from election day as possible.

Now two initiatives have been proposed in response: One, backed by San Diego Republican Carl DeMaio, would require voter approval for this and all future fuel and vehicle tax hikes. The second, supported by Republican gubernatorial candidate Travis Allen, would simply repeal the fuel and vehicle fees. The DeMaio initiative has made more progress so far, but either way, the California GOP’s political good fortune in 2018 may rest on anti-gas tax fervor.

In the meantime, it’s an election year so expect another fight about property taxes. Prop. 13, California’s original tax revolt initiative, caps the rate that property taxes can increase on a particular homeowner from one year to the next. The longer a homeowner stays in an appreciating house, the stronger the incentive to stay put and keep your low taxes, even if downsizing or relocating might be more practical. The California Association of Realtors has proposed a solution: change the California Constitution to allow older or disabled homeowners to take a portion of their lowered property tax base with them when they move.

The Howard Jarvis Taxpayers Association, named for the father of Prop. 13, has proposed a simpler way to lower taxes: give qualifying homeowners and renters a $500 tax credit.

  • Higher Taxes:

While the Realtors push for an expansion for Prop. 13, a growing coalition of progressives will soon be campaigning for a partial rollback. This proposed initiative would strip the benefits of lower property taxes from certain industrial and commercial properties and use the additional revenue to fund schools.

The Service Employees International Union-United Healthcare Workers has proposed a more straightforward source of revenue: hike taxes on millionaires by 1 percent and channel the money to hospitals serving low income Californians.

Nuclear options

For those who believe our politics are dysfunctional, and compromised beyond repair, these initiatives propose a new start for California.

  • Decentralization:

Republican gubernatorial candidate John Cox has a vision to blow up the Legislature. That is, he wants to increase the number of legislators from its current 120 to roughly 12,000 with each lawmaker representing 5,000 to 10,000 Californians. Cox, who has already submitted the required number of signatures for the measure, believes the “neighborhood legislature” would make representatives more accountable and less beholden to outside campaign cash. Still, this small army of lawmakers would vote for 80 assembly members and 40 state senators to send to Sacramento, thus obviating the need to convert the state capitol building into a football stadium.

Or if 12,000 subdivisions of the state is too many, how about three? Tim Draper, the Silicon Valley venture capitalist who unsuccessfully campaigned in 2014 to split California in six, is now pushing for a more modest three-state solution. Under the proposal, the state would be divided into Northern California, California, and Southern California.

  • Separation:

The 2018 election is rapidly approaching, but many California progressives are still recovering from 2016. Thus, two nascent initiatives that would push the state toward a clean break from the other 49 states. One proposalwould call for a Constitutional Convention where California would submit a legal pathway to possible independence. The other, a constitutional amendment backed by Bush-era anti-war activist Cindy Sheehan, would declare the state’s intent to become an “autonomous nation.” It is unclear how likely it is that either measure will make it onto the ballot.

Money Measures

This is where lawmakers and interest groups come to the voter, hat in hand, asking permission to borrow a bit of extra money. Voters decide whether the new investment is worth the extra debt—though historically, voters have seen more benefit than cost. Since 1986, Californians have approved $9 in fresh borrowing for every $10 requested of them.

  • New money for green things:

Last fall, lawmakers passed a bill to put a $4 billion borrowing planon the ballot. If approved, the borrowed money will fund a variety of natural resource projects: building new parks in low income neighborhoods, remediating soil and wetlands around the Salton Sea, revamping aging dams and levees, and funding grants to adapt to climate change. Voters will review the plan in June.

Conservation groups are gathering signatures for a $8.9 billion initiative exclusively to improve and expand water infrastructure—from drinking water to flood management to ecosystem restoration.

  • New money for housing:

Remember the package of housing bills the Legislature narrowly passed at the end of last session? One major component was a $4 billion bond measure placed by the Legislature on the November ballot. Roughly $3 billion would be slated for new affordable housing construction and $1 billion for below-market home loans for veterans.

  • Also in the running…

Two more bond measures were submitted last month: One plan would borrow $1.5 billion to fund new buildings and other improvements at children’s hospitals. The other would borrow $2 billion to fund cleanup of mold, asbestos, and lead at homes and schools.

Patch Ups

Sometimes legislators need to tie up legislative loose ends or keep promises made to political allies. Here’s the place on your ballot where the sausage gets made.

  • Legislative sweeteners:

When Democrats sought to renew the state’s cap-and-trade program last summer, they needed the votes of a few moderate Republicans. Under cap and trade, the state restricts greenhouse gas emissions and auctions off the right to pollute. Democrats offered an assurance to the GOP holdouts by putting a new constitutional amendment on the ballot: Any cap-and-trade auction revenue raised after 2024 would require the approval of two-thirds of both the Assembly and Senate before it could be spent, making Republican involvement more likely. In June, voters will decide what that assurance is worth.

Second, the gas tax. Earlier last year, when Democrats raised the tax on gasoline along with other vehicle fees to pay for road and transit improvements, they also passed a ballot-bound constitutional amendment alongside it. If approved by the voters, it will create a budgetary “lockbox” for the new gas tax money that can be tapped only for transportation projects. Putting this measure on your June ballot was intended to inoculate the transportation bill against future political attack. It didn’t.

  • Constitutional tweaks:

Unless otherwise specified, if a ballot measure gets over 50 percent of the vote on election night, it becomes law the following morning. But what if a vote is too close to call? Or called incorrectly only to be changed after absentee ballots are counted? This amendmentreferred by the Legislature, also up in June, would delay the enactment of new voter-approved laws until five days after the Secretary of State has called the result.

Workarounds

For special interest groups, the California ballot is a second chance. If you failed to convince enough lawmakers to advance your agenda during the legislative session, why not try the voters? At the very least, mounting a credible initiative campaign is a good way to force your political adversaries to the bargaining table.

  • Another shot at health reform:

Last year the SEIU-United Healthcare Workers failed to convince lawmakers to pass two bills that would have placed new pricing and staffing requirements on the state’s for-profit dialysis clinics. While the union tries to revive those efforts, they’ve launched a measure that would require clinics to pay payers (namely, health insurance companies) back for any charge more than 115 percent of the statewide average cost of care. Note that this is all happening as the union tries to organize the state’s dialysis clinic technicians.

A bolder health initiative campaign proposes to set up a health care fund exempt from the spending caps and revenue sharing requirements that constrain other areas of the budget. Most budget experts argue that this is a necessary first step before the Legislature can pass a state-run, single-payer health insurance program—an effort that was put on hold in the Assembly last year.

  • Another shot at the labor code:

From the other side of the political spectrum, three similar initiative proposals—still in the early signature gathering stage—take aim at the Private Attorneys General Act. Ever since the law was enacted in 2004, giving workers the right to sue their employers on behalf of the state for alleged labor code violations, business interests have argued that it gives too much power to workers and their attorneys to sue over minor infractions. Last year, three bills to weaken the law failed to gain traction. Each circulating initiative would make it more challenging to bring cases and less profitable for the attorneys who bring them.

  • Another shot at housing:

For more than two decades, California cities have been barred from passing rent control ordinances—rules that restrict the ability of landlords to raise rents. The state’s ever-increasing cost of living has put pressure on lawmakers to change that. They resisted last year, but 2018 brings fresh opportunities—a new bill in the Legislature and a proposed ballot initiative that would repeal the ban on rent control.

New Rules

California is often caricatured as the state hogtied with red tape—often applied by voters at the polls. Here are a few possible new ones, along with one regulatory rollback.

  • For companies:

In case those 10,000-word Terms and Condition policies don’t offer you the assurance of privacy, this measure would give consumers the right to learn about the kind of personal data a company is gathering about them or selling to third-parties. It would also prevent companies from discriminating against those who ask, either by denying them equal service or charging higher prices.

Another proposed initiative from the Humane Society of the United States would tighten regulations on livestock treatment—requiring farmers to provide a certain amount of floor space for confined cows, pigs, and chickens.

  • For workers:

In 2016, the California Supreme Court held that security guards in California cannot be considered on-call when on breaktime. Last year some Democrats in the Assembly unsuccessfully attempted to a pass a law that would guarantee undisturbed rest and meal time for ambulance drivers and technicians too. Now the industry is punching back with a ballot measure that would explicitly exempt them.

Of course, there are more.

To date more than 60 measures have been submitted to the attorney general’s office. Beyond those listed above, they include proposals to loosen felony sentencing guidelines, tighten felony sentencing guidelines, repeal the California’s “sanctuary state” law, tax estates to fund college aid, pay public school teachers more, defund public schools, change the state’s voting rules for primaries, criminalize abortion, and decriminalize magic mushrooms.

Would-be reformers and repealers have until late April to get their signatures in order for the November ballot.

This article was originally published by CalMatters.org

City services slashed to fund pensions, but your taxes are still going up

PensionsIn the coming months and years, California voters can expect to see a variety of tax increases pop up on their local election ballots. They will be called “public safety” taxes to hire more police or firefighters or “parks” or “library” taxes to pay for those popular public services. But don’t be fooled. Any new tax proposal is in reality a “pension tax” designed to help the California Public Employees’ Retirement System make up for shortfalls in its investment strategy.

In fact, liberal interest groups are getting ready to circulate a statewide ballot initiative that will gut Proposition 13 – the 1978 initiative that has limited property tax increases to 1 percent of a property’s sales price. It also limits property tax increases to 2 percent a year. The new initiative would remove those protections from many commercial property owners, thus raising taxes by another $11 billion a year. Money is fungible, so this is partly about paying for pensions, too.

California has an enormous problem with pension costs. Many observers see it as a crisis that threatens the economic health of the state. A recent study from the well-respected Stanford Institute for Economic Policy Research, run by former Democratic Assemblyman Joe Nation, details how pension costs already are “crowding out” public services, especially at the local level. Cities pay so much for retired employees that they are cutting spending on everything else.

“California public pension plans are funded on the basis of policies and assumptions that can delay recognition of their true cost,” according to the report. Yet pension costs still are rising and “are certain to continue their rise over the next one to two decades, even under assumptions that critics regard as optimistic.” So they are cutting “core services, including higher education, social services, public assistance, welfare, recreation and libraries, health, public works, and in some cases, public safety.”

Aside from cutting public services and running up and hiding debt levels, there’s only one other way that localities can come up with the cash to pay for these overly generous pensions, especially as pension costs consume 15 percent or more of their general-fund revenue. They will raise taxes. Meanwhile, the state government has to backfill pension costs as well, which leads to constant pressure for legislators to promote additional state-level tax increases. It’s a “heads they win, tails you lose” situation, as Californians pay more to get less.

Much of the problem goes back to 1999, when the Legislature rammed through a law to provide 50-percent pension increases to the California Highway Patrol. Backers knew that once CHP received these overly generous deals (including retroactivity, which is a pure giveaway that hikes pensions back to each employee’s starting date), pension increases would spread across the state. Indeed, they did. CalPERS said it wouldn’t cost taxpayers a “dime” because of stock-market growth, but then the market crashed.

Under the current defined-benefit system, public employees are promised an irrevocable level of pension benefits based on a formula. For instance, most California “public safety” workers (police, fire, billboard inspectors, prison guards, etc.) receive “3 percent at 50.” If they work 30 years, they get 90 percent of their final three years’ pay (often higher, because of pension-spiking gimmicks) until they die. They can retire with full benefits at age 50. Non-safety workers often receive a pension formula that lets them retire with 81 percent of their final pay beginning at age 57. These are very generous benefits given their typically high final salaries.

CalPERS invests the money in the stock market. It calculates the “unfunded pension liabilities” (i.e., debt) based on a projected rate of return for their investments. Higher expectations enable the pension funds and cities to go along their merry way, not worrying about their ability to pay for all the promises and avoiding pressure to pare back pay levels. CalPERS just lowered its rate of return from 7.5 percent to 7 percent, which is still overly optimistic.

But the lowered assumed rates mean that cities have to pay the pension fund additional fees to cover the difference. This is cutting into their operating budgets. In fact, cities have faced four rate increases in the past five years and are expecting a fifth one. A recent article tells the stories of El Segundo and Arcadia, two Los Angeles County cities that are considering hiking their sales taxes to maintain their current level of service.

El Segundo’s mayor pro tem said that in five years “the payment to CalPERS is expected to be $18 million and 25 percent of general fund revenue as the employer rate for safety employees increases from 50 percent of pay to 80 percent of pay,” reported Calpensions’ Ed Mendel. He noted that cities face a statewide cap on the size of their sales tax, but that Gov. Jerry Brown in October signed a law that allows some localities to bust through that cap.

You can see what’s coming: A push by unions to eliminate the sales-tax cap across the state, and a torrent of sales tax increases to pay for soaring pension costs. The other thing to expect: Continuing efforts to hide the size of the pension debt.

“The nation’s largest pension system is expected to adopt a funding plan … that anticipates shortfalls during the next decade and then banks on exceptional investment returns over the following half century to make up the difference,” wrote Contra Costa Times columnist Dan Borenstein this week. “It’s an absurd strategy designed to placate labor unions, who want more public money available now for raises, and local government officials who are struggling to make annual installment payments on past debt CalPERS has rung up.”

The only other hope beyond debt and taxes is if the California Supreme Court guts the so-called California Rule, which forbids governments from reducing pension benefits even going forward unless they are provided with something of equal or greater value. That “rule” has made it nearly impossible to reduce costs for current employees. But there’s no guarantee the court will roll back the rule in a case it will soon consider –  or that the state and localities will bother to cut back benefit levels even if they are allowed to do so given union political power.

In the meantime, expect not only more of the same of hidden debt and reduced government services – but tax increases at every turn.

Steven Greenhut is a contributing editor for the California Policy Center. He is Western region director for the R Street Institute. Write to him at sgreenhut@rstreet.org.

This article was originally published by the California Policy Center

Prop. 13 targeted by proposed California ballot initiative

Forty years after Proposition 13 was approved by California voters, the issue of property-tax limits could be back on the state ballot in 2018.

A coalition of liberal groups is trying to qualify an initiative for the November ballot that would remove Prop. 13’s restrictions on reassessments and tax increases for corporate-owned property.

The backers say the initiative would keep Prop. 13’s protections for homeowners, residential renters, small businesses and farmers.

They say a projected $11 billion in new revenue from corporate property taxes would be used to provide needed funding for schools and community colleges as well as parks, libraries, health clinics, home-building, homeless services, roads and bridges.

But those promises haven’t kept low-tax advocates from slamming the would-be initiative, called the California Schools and Local Communities Funding Act of 2018. …

Click here to read the full article from the OC Register

Trick or treat, your property tax bill is here

property taxWhich is scarier showing up in your mailbox — Halloween movies from Netflix or your property tax bill? For homeowners, even “The Exorcist” can’t compare in terms of pure fright as the annual envelop from the tax collector’s office. Fortunately, however, homeowners are still able to count on Proposition 13 for protection.

While progressives in the California Legislature continue to target the struggling middle class for ever higher taxes, they have been unable to break Proposition 13. That landmark 1978 initiative limits increases in a property’s assessed value to 2 percent annually and provides most property owners a good idea what their tax bill will be even before opening the envelope.

This predictability in taxation allows homeowners to budget for their taxes and provides assurance against a sudden increase that could result in losing their home to the tax collector. Whether you purchased your property last week, or 30 years ago, Proposition 13 is maintaining a reasonable limit on annual hikes in your property tax.

Still, homeowners need to examine their property tax bill carefully because mistakes can happen. Taxpayers should understand the various charges and make certain that they are not being assessed for more than they are legally obligated to pay. The best way to check a tax bill is to have your previous year’s bill handy for reference.

For most California counties, the property tax bill will show three categories of charges. They are the General Tax Levy, Voted Indebtedness and Direct Assessments. …

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