The real reason California is in such bad shape.
By Chris Reed
In covering California’s endless budget woes, the media are always quick to trot out tired clichés about the Golden State’s being ungovernable because its clueless residents want costly programs but balk at paying the taxes needed to cover them. Over the past month, writers for the New York Times have weighed in five times with veiled or direct condemnations of California’s constitutional requirement that tax increases be approved by two-thirds of state legislators. In a May 25 column, Paul Krugman endorsed this conventional wisdom and added a pot shot at the landmark 1978 California ballot initiative that capped the rate at which property taxes could increase: “The seeds of California’s current crisis were planted more than 30 years ago, when voters overwhelmingly passed Proposition 13, a ballot measure that placed the state’s budget in a straitjacket.”
The major network-news shows have offered a similarly simplistic framing. On June 2, ABC News reporter Laura Marquez said that the Golden State’s schools and social services were in dire straits because of laws that make raising taxes a “virtual impossibility.” This was in keeping with ABC’s party line, spelled out on the May 24 edition of This Week with George Stephanopoulos. The host — to the earnest agreement ofWashington Post columnist E. J. Dionne — said that more federal help for California should come with conditions. Just as the federal government attached strings to its aid for New York City in 1975, said Stephanopoulos, Washington should force California to abandon its two-thirds rule on tax hikes and to “do away with Proposition 13.”
Despite its superficial appeal, this narrative is unconvincing. For instance, the claim that California voters balk at paying for what they want is easily refuted. There is no evidence that the public wanted the state and public-schools work force to explode by 24 percent — from 719,000 to 895,000 — between 1997 and 2007. There is no evidence that the public wanted never-ending pay and benefit increases for these public employees, in particular an obscene 37 percent raise given to prison guards. There is no evidence of public support for a 1999 law that allows many of these workers to retire in their 50s with pensions of up to 90 percent of their last annual salary.
Meanwhile, the argument that the two-thirds requirement to raise taxes has subverted sound governance implies that this obstacle has kept taxes unrealistically low. Hardly. California has the nation’s highest sales and gasoline taxes, the first- or second-highest income tax (depending on how it’s measured), and the highest business taxes in the West.
The claim that Proposition 13 crippled California’s revenue stream also doesn’t hold up. Because assessments can be raised to current values when property changes hands, property-tax revenue went from $6.4 billion in 1980–81 to $43 billion in 2006–07. That’s a nearly 600 percent increase, which is far higher than the combined rate of population growth and inflation over the same period. In fact, property-tax revenue went up at a slightly higher rate than overall state revenue. Krugman’s assertion that Proposition 13 amounts to a budgetary “straitjacket” is further undercut by the latest Tax Foundation data, which rank California 19th (out of all 50 states) in property taxes as a percentage of total state taxes.
Given this backdrop, it’s simply daffy to blame California’s budget process, its voters, or Proposition 13 for the state’s inability to live within its means. Blame the majority Democrats in the state legislature who have done unions’ bidding for the past decade — spiking public employees’ pay and benefits, expanding government programs to offer ever more taxpayer-subsidized services, using borrowing and other gimmicks when revenue was weak and spending every last dime when it was strong, and constantly adding new burdens to business that hurt tax collections and drove employers (and jobs) elsewhere.
Once merely a powerful special interest, these public-sector unions now have a chokehold on the state. Here’s how extreme it is: For years, two of California Democrats’ top priorities have been enrolling more poor children in state health programs and encouraging individual homeowners and businesses to install solar panels to generate their own power. But at the behest of unions, Democratic legislative leaders killed a measure to allow parents to enroll their kids online because it might have led to layoffs of clerks at county social-services offices. They also killed a bill touted by Gov. Arnold Schwarzenegger to create incentives for solar-panel installation because it didn’t mandate the use of union labor.
Such immense union power is the central reality of California politics. That is why Schwarzenegger spent his first two years as governor trying to rein it in. Unfortunately, he gave up in late 2005 after his reform initiatives were defeated in a special election. Since then, he has focused on becoming a Teutonic Green Giant on climate-change issues.
The next time the usual suspects spout the usual clichés about why the Golden State is ungovernable, turn down the sound or turn the page. When it comes to California, the Stephanopouluses and Krugmans of the world don’t know what they’re talking about.
