Contributor

John Campbell

John Campbell (R-Irvine) is an Assemblyman representing the 70th District in Orange County. Mr. Campbell is the Vice-Chairman of the Assembly Budget Committee. He is the only CPA in the California State legislature and recently received a national award as Freshman Republican Legislator of the Year. He represents the cities of Newport Beach, Laguna Beach, Irvine, Costa Mesa, Tustin, Aliso Viejo, Laguna Woods and Lake Forest. He can be reached through his Assembly website and through the website for his California Senate campaign. [go to Campbell index]

Time To Fix State Tax System
Let's protect cities, counties from revenue raids and stop revenue scavenging
[John Campbell, Robert Hertzberg and Curt Pringle] 2/6/04

The past few weeks have been a roller-coaster ride for cities and counties. Early in December, they braced themselves for the impact of a multibillion-dollar budget hit due to the cut in the car tax; a week later, they sighed in relief as the governor guaranteed their car-tax backfill. More recently, they're reacting to the governor's proposal to take $1.3 billion of the property taxes that cities and counties now collect, one of the many hard choices proposed to balance the state budget.

These trials and tribulations cast a bright spotlight on the simple fact that local residents have lost control over their own communities. City and county governments are dependent on revenues controlled by the state to provide even basic local services; desperate for funds, development decisions are often made to maximize local governments' tax revenues instead of for what is good for their residents; and the state continues to balance its budget on the backs of cities and counties.

The current system has also upset the balance between community land uses, leaving housing shortages in certain areas, long commutes for workers in housing-rich and job-poor suburbs, and fractured families in which working parents lose quality time with their children because of long commutes.

These problems are serious and require a lasting remedy. From the state Capitol to county seats and city halls, no one from either side of the aisle can reasonably argue that our current system of state and local finance is good for California.

We have been working with many leaders from state and local governments across California to develop a permanent structural solution to these problems. By increasing the proportion of property taxes that local governments keep, reducing local reliance on the sales tax and the car tax, and constitutionally protecting local revenues from state raids, we can restore local home rule and place control over the futures of cities and counties back in the hands of their residents.

Securing local revenues and protecting basic services

In recent years, local governments have become increasingly dependent on the car tax and local sales taxes to fund basic local services. The consequences of this dependence were made painfully clear when the governor, responding to voter demands, reduced the car tax, and the Legislature did not make local governments whole by backfilling these local dollars with state funds. Many cities and counties were faced with the possibility that they would need to drastically cut basic local services in order to balance their budgets.

We can end this reliance by replacing city and county revenues from the car tax and a portion of the local sales tax with a dollar-for-dollar amount of property taxes, then constitutionally protecting all local revenues from state action. Residents would pay the same property taxes they always have, but cities and counties would keep more of the property taxes that are now sent to Sacramento. They would be freed from their dependence on the state and given the secure base of funds they need to plan for the good of their communities.

Incentives for healthy communities

Today, local governments hold on to only a tiny fraction of the property taxes collected within their boundaries - often keeping only 15 percent - but collect a full 1 cent of the sales tax collected on each $1 of taxable sales generated there. As a result, city and county officials have been increasingly motivated to promote developments that generate sales-tax dollars. These skewed incentives that lead officials to focus on their bottom line rather than the needs of their communities have contributed to California's dire housing shortage, long commutes, and the rapid spread of "big box" stores and megalithic shopping centers across the state.

By increasing the proportion of property taxes that cities and counties keep and reducing local reliance on the sales tax, we can rebalance incentives for local land use, tying the financial health of local governments to the health of local communities, and freeing local decision-makers to design the communities their residents need.

Increasing state and local accountability

Tight budget years bring about an epidemic of fingerpointing between state and local leaders despite the simple fact that our constituents depend on both state and local government services. Both levels of government are in this mess together, yet voters are left chasing the accusations that volley between their local and state leaders, unable to hold either accountable for their decisions.

This circle of blame can be broken by constitutionally protecting local treasuries from state raids and sharply limiting the ability of the state to require local governments to provide new services without providing the funds to perform them. The state would be required to live within its means, and cities and counties would be protected from state intervention. Both state and local leaders could be held accountable for their decisions by voters, and could begin to build the bonds of trust needed to work together for the common good of all Californians.

Campbell is an Irvine Republican assemblyman. Hertzberg is a former Assembly Speaker. Pringle is mayor of Anaheim and a former Assembly Speaker.

This opinion piece first appeared in the Orange County Register.

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