Transcript Poli 103A California Politics The Layers of Government

Poli 103A California Politics
The Layers of Government
The Layers of Government

Competing Visions of Local Govt.

Proposition 13 and its Aftermath

The New Incentives for Locals
• Local Government 101
• The Tiebout Hypothesis
• Guarantees of Equality
Competing Visions of Local Govt.:
Local Government 101

Four layers of local government in CA:
• 58 Counties. Ranging in size from 1,200
in Alpine to 9 million in Los Angeles,
counties implement health and welfare
programs, prosecute and defend crimes,
build roads and plan.
• 476 cities repair roads, collect trash,
buy water, employ cops, and make zoning
decisions either through a strong mayor
or a city manager/council format.
Competing Visions of Local Govt.:
Local Government 101
• 4800 special districts overlap with city
and county borders to perform a special
function ranging from running schools to
buying H2O to abating mosquitoes.
They’re California’s hidden governments.
• A few regional bodies (ABAG, SCAG,
SANDAG, SCAQMD) bring together
fragmental local governments to plan
transportation, air quality, etc.
Competing Visions of Local Govt.:
Local Government 101

Why are there so many cities in
California today?
• The Lakewood Plan.
Starting with the
city of Lakewood in 1954, cities have
contracted with counties for expensive
services like police and fire protection.
This economy of scale allows smaller
cities to incorporate, and 31 new cities
formed within LA County by 1964.
Competing Visions of Local Govt.:
The Tiebout Hypothesis

In 1956, economist Charles Tiebout
set forth the following hypothesis:
• People “vote with their feet” by choosing
to live in an area where the package of
public services (roads, schools, cops,
welfare) and tax levels suits them.
• Rather than waiting for the next election
to change policies, people simply move.
Competing Visions of Local Govt.:
The Tiebout Hypothesis
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Implications of the Hypothesis:
• Preferences are expressed through
behavior, so we can learn what is good
policy by looking at home prices.
• People sort themselves into areas in a
way that is economically efficient.
• (Key) It is important to allow variation in
tax rates and service packages, so that
feet have a chance to vote.
Competing Visions of Local Govt.:
Guarantees of Equality

What happens when the Lakewood
Plan, secession, and voting by your
feet combine to sort all of the high
income/low demand residents (or
businesses) into one small city?
• This leaves the low income/high demand
folks in a fiscally strapped city.
• Variation in service packages can begin to
look unfair.
Competing Visions of Local Govt.:
Guarantees of Equality

The 1974 Serrano v. Priest decision
declared local variation in school
funding unconstitutional.
• It specified that the per pupil funding
that came from property tax revenues
should be equalized, varying <$100.
• This equity test grew to $350, was
broken into six types of schools, and
didn’t cover other revenue sources.
Proposition 13 and its Aftermath
The Property Tax “Crisis”

State and local governments rely on
four sources of income:
• Income tax (collected and kept by the
state in California)
• Sales tax (split between state and locals)
• Fees (assessed by both state and locals
on specific activities)
• Property tax (prior to 1978, this was
locals source of income and flexibility)
Proposition 13 and its Aftermath
The Property Tax “Crisis”

For homeowners, when property value
goes up – and your property is
reassessed to reflect this – your
property taxes go up, even though you
are not getting additional income.

Inflation in the 1970s drove up tax
bills, putting money in state and local
coffers but threatening those on fixed
incomes, especially seniors.
Proposition 13 and its Aftermath
The Property Tax “Crisis”

By 1977, locals thrived and the state
built up a $6 billion surplus, but
Gov. Jerry Brown and the Legislature
couldn’t agree on a property tax cut.

Voter anger set the stage for political
entrepreneurs Howard Jarvis and
Paul Gann to start a nationwide tax
revolt with Proposition 13.
Proposition 13 and its Aftermath
The Initiative
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1. Limited property taxes to 1% of the
assessed value of the property.
2. Assured that properties would only
be reassessed when changing owners.
3. Sent all of the money to counties,
who would then divide between layers.
4. Required a 2/3 vote of both houses
of the Legislature to raise taxes.
Proposition 13 and its Aftermath
The Initiative
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Its supporters attacked big
government rather than getting
bogged down in the details.

Its opponents put up the competing
Prop. 8, a cut and “split roll.”
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On June 6, 1978, it passed with 65%
of the vote after assessments climbed.
Proposition 13 and its Aftermath
The Aftermath
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Up for reelection, Jerry Brown chose
not to let voters feel the local service
cuts that would have come from the
$7 billion cut in property taxes.
The state sent its surplus to bail out
local governments, and then took over
school and Medi-Cal funding.
Locals became the state’s charity case.
Proposition 13 and its Aftermath
The Initiative
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Constraints on Local Governments:
• Prop. 13 took away their ability to control
their primary revenue source.
• The aftermath put them at the whim of the
state, which rips them off when in crisis
($2.6 billion in 1993, $1.3 post .bomb)

Effects: Equalization at a lower level,
making it hard to vote with your feet.
The New Incentives for Locals
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Prevented from raising property taxes,
local governments have turned to fees
and another revenue source:
• Sales Tax.
Cities collect a penny for every
dollar spent within their borders.
• It does not matter who spends the money
or where the goods are made.
• Cities now compete fiercely for retailers.
The New Incentives for Locals

This has led to fiscalization of land use:
• Cities want retailers rather than
manufacturers who bring good jobs.
• They compete by offering cheap land and
building infrastructure.
• Bill Fulton argues that the “sellscape” is
viewed “not as a place where people live
and work and dies, but as a cash register.”
Discussion Section Questions

What are the assumptions required
for the Tiebout Hypothesis to work?
Do you think they are reasonable?

Should we mandate that local
governments provide exactly the
same package of taxes and services?