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Proposition 13: Taking Its Toll on San Carlos

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Love it or hate it, Proposition 13: The People’s Initiative to Limit Property Taxation, is about to go even further under the microscope.  Proposition 13 is directly related to many of the budget shortfalls in San Carlos, from all of the department budgets at City Hall to the San Carlos School District.  Below I have detailed the full history of Proposition 13 as well as its current effect on San Carlos.

Where Proposition 13 came from

Passed by California voters on June 6, 1978, Proposition 13 gained national attention and was a main player in the “taxpayer revolt” of the early 1980s.  Origins of Proposition 13 can be traced back to a 1976 California Supreme Court Case, Serrano v. Priest. This case illuminated California’s inability to abide by its own constitution as well as the 14th Amendment of the U.S. Constitution (which deals with equal protection).  The California Constitution stated that the legislature was to provide a free education for each school district in the state.  The 14th Amendment states that all have the right to equal protection under the law.  The essence of the court ruling was that the amount of funding going to different districts was inadvertently favoring the more wealthy school districts, and thus other districts were not receiving the same “equal protection” as other school districts in California.

Put more succinctly, districts with higher property valuations were able to fund their schools at a lower percentage of property taxes, than those districts which did not have high property values.

Concurrently, California was experiencing massive growth in all areas, and property values were rising.  Without the cap on property taxes, many retired Californians were subjected to constantly increasing taxes each year.

The combination of the court ruling, a surge in property valuations and palpable public angst over out-of-control taxes, the legislature was forced to come up with a suitable answer to the escalating property tax issue.

Enter Proposition 13

Proposition 13 was the popular answer.  After being placed on the ballot the measure passed with 65% of the vote.  All but three counties in California voted in favor of the measure.

The passage of Proposition 13 meant that:

(1)  The annual real estate tax on a parcel of property was limited to 1% of its value.

(2)  The assessed value could only be increased by a maximum of 2% per year, until a change of ownership exists.

How Proposition 13 has affected San Carlos schools:

To say that San Carlos schools have been crushed by the ramification of Proposition 13 is an understatement.  When Proposition 13 passed, the local revenue that was once plentiful was cut by over 57%.  As a result, the State of California had to step in and start to take over more of the funding of items such as San Carlos schools.  The irony of this situation is that San Carlos thought it was doing its citizens a favor in the late 1970s by lowering the amount of its local property taxes that were to be earmarked for public schools.  When San Carlos lowered this amount, the State froze that percentage and has made San Carlos exist on that low percentage ever since.  In the late 1970s, supporters of Proposition 13 assured everyone that the State of California would make up the difference with any budget shortfalls to the schools.  Obviously, this never happened.  Not only did the State not make up the difference, the State instead started to raid the low levels of funding for other needs.  Throughout the last 12 years San Carlos has been asked to do more with less money.  Our schools switched over to a charter system as a way of attracting out of district students and maximizing its funding.  The schools are essentially on life support and depend on parcel taxes, volunteerism, fundraising and the herculean efforts of the San Carlos Education Foundation, just to keep its head above water and keep the programs that have made it a wonderful educational experience for so many.

How Proposition 13 has affected the City of San Carlos:

Proposition 13 drastically cut the amount of local property taxes received by the City of San Carlos.  In addition, State of California has been consistently taking a larger piece of the pie which is used to fund the city.  The result is a fiscal emergency.

What’s being done?

The obvious answer is to modify the strict guidelines of Proposition 13.  The problem is that most politicians will not venture near the topic for fear of the massive political clout and money behind the supporters of Proposition 13.  As many baby boomers continue to retire in California and depend on the benefits of Proposition 13, you can expect even more pushback against any talk of modification.

Many cities similar to San Carlos have added parcel taxes, utilities taxes, transfer taxes, increased sales taxes….basically anything that would give them an additional revenue stream.  San Carlos sent Measure U (sales tax increase) to defeat in November which would have helped close the current budget shortfall from 3.5M to 1.5M.

Summary

Proposition 13 is not solely to blame for the current crisis in our schools and city, but it is a significant contributor.  Something has to give.  After internal budget cuts are made and tax increases are voted down, we need to find a way to keep more of our local property taxes.

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