Tax Measures Everywhere—For What Purposes?

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

The coming March 3 California primary election is not simply about the presidential contest and legislative races, it’s also about taxes—big time. Voters will decide on a record 231 local tax and bond measures (backed by taxes) across the state.

The California Taxpayers Association amassed a listing of the 231 measures, which cover the gambit from general obligation bonds funded by property taxes to parcel taxes to cannabis taxes to document transfer taxes to sales taxes to hotel taxes. According to brief summaries of the multiple tax measures the money will go for schools, parks, law enforcement, road paving, open spaces and all kinds of government services – or will it?

Never mentioned in any of the descriptions is the hidden cost driver for many local governments and schools– pension liabilities.

The story is well told. As University of California Public Policy and Political Science professor Sarah Anzia summed up her article in the Washington Post last summer, “Out of the public eye, public-sector pension expenditures are quietly and persistently eating into local government budgets.”

According to CalTax, the number of measures marks a 165-percent increase over the last presidential primary. In June 2016, voters were presented with 87 local tax and bond measures and approved 67.

The dramatic increase in the number of taxes can be directly tied to the need for government entities to deal with their pension obligations. While the funds raised by the taxes may not go directly into pensions, the new money can replace dollars that can be shifted to fund the pensions. Even the school bonds could have some effect on money needed for pensions. While the bond money is spent on school construction or maintenance, no money for maintenance need be taken from a school’s general funds, making that money available for other purposes like pensions and guaranteed health care.

In a recent report on school funding, the Legislative Analyst noted that despite exceptional growth in school funding in recent years, “Pension costs have been the most significant compensation pressure facing districts. Since 2013‑14, districts’ pension costs have increased by $4.7 billion—more than doubling. For 2020‑21, we expect total school district pension costs to increase by at least another $800 million.”

The problem also exists for local governments. A couple of years ago the League of California Cities issued a report that said over a twenty-year period the percentage of city budgets statewide would  double for pension payouts from around 8% in 2006 to nearly 16% in 2025. In some cities that percentage has already been topped. Los Angeles City puts aside about 20% of its budget for pensions.

So sure, the tax increases will bring more money in for schools, parks, law enforcement, road paving, open spaces and all kinds of government services, but a healthy portion of that revenue or the money it replaces will end up in pensions. For the sake of transparency, supporters of the tax increases should tell the voters. Let them decide if that’s a good reason to raise more taxes.

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