Opposition to “Tax Fairness” Measure is All About Pensions

Joel Fox
Editor and Co-Publisher of Fox and Hounds Daily

A campaign committee was formed to oppose an initiative that would stiffen the requirements for voter approved tax increases under the pretense that the opposition is about preserving local government services. The opposition really stems from local government’s growing pension liabilities.

The “Committee to Protect Our Communities” announced itself as a campaign organization to protect essential services such as libraries, parks, garbage and sewer, police, fire and roads. They don’t like the “Tax Fairness, Transparency and Accountability Act” sponsored by the California Business Roundtable. The initiative strengthens the use of the two-thirds vote requirement to pass taxes, including requiring a two-thirds vote where a simple majority vote was needed to pass general purpose taxes.

Concern over efforts to raise more local taxes was spurred initially by a California Supreme Court ruling that potentially would allow local initiatives to be passed by voters with a simple majority vote whether the tax revenue is earmarked for a specific purpose or not. Up until the decision in the California Cannabis Coalition v. City of Upland case, tax law was interpreted to mean that general taxes could pass with a majority vote but taxes earmarked for specific purposes needed a two-thirds vote.

Supporters of the proposed ballot measure say the initiative will create transparency—money raised from a local tax will have to go to the purpose the tax is raised for and nothing more. The idea is to prevent, for example, claiming that revenues will be raised for a specific city service like police but switched to cover pension debt.

This was a concern I highlighted in writing an op-ed for the Los Angeles Times last year about the Upland case. “Local governments working in collusion with special interests that desire more taxpayer dollars can get their way through an initiative,” I wrote. Such a relationship can be seen in the effort mounted to stop the “Tax Fairness, Transparency and Accountability Act”.

While the League of California Cities is taking a lead role in opposing the measure, major endorsers are self-interested major public employee unions including Service Employees International Union (SEIU), American Federation of State, County and Municipal Employees, California (AFSCME), and the California Professional Firefighters who will fund the opposition campaign.

Pensions are eating away at the core budgets of local governments. Officials are considering cutting back on services or seeking more taxes. CalPERS is demanding more money from the state and local governments to meet pension needs, which are a little more than two-thirds funded. California is short $168 billion to cover pension costs.

Instead of reforming pension laws, the focus is now on the traditional battle over taxes versus spending and how much say taxpayers will have in tax decisions. But make no mistake; the tax squabble is really about pension costs and their affect on local government budgets.

(Disclosure: The proposed ballot measure is intended to strengthen Proposition 218, the Right to Vote on Taxes Act, passed by voters in 1996. I was the proponent of Proposition 218 and have been called on to give advice in support of the Tax Fairness measure.)

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