Fiscal Earthquakes and Other Tremors

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Fiscal Earthquakes and Other Tremors

• Fred Silva, Senior Fiscal
• Policy Advisor

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What is the Problem?

• State and local government finance system is
  interdependent.
• California has persistent imbalances between
  revenues and expenditures.
• Local governments lack independent control of
  local resources.

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History Helps to Understand the Problem

• Early 20th Century actions taken to protect local
  revenues and build basis for strong community
  governments
• Separation of state and local revenues
• Strengthened home rule powers
• Counties continued as agents of the State
• Schools granted more independence

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Late Century Challenges to Community Based Finance

• As the state grew more complex so did the drive
  for uniformity and state control
• State forced to overcome local diversity in
  revenue authority
• Pre-Proposition 13 limits imposed on taxing power
• Local subventions became part of state budget
  solutions (1980s-90s)

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Local Finance Post-Proposition 13

• Cities less locally controlled revenue land use
  decisions to enhance tax revenue.
• Counties treated as agents of the state, with a
  limited countywide revenue base.
• School Districts less interest in a local
  revenue base since the state controls the school
  finance system.

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Implementing New Principles of Community Finance

• Amend this section of Proposition 13
• The one percent (1) tax to be collected by the
  counties and apportioned according to law to the
  districts with the counties.

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