Jon Coupal- Columnist
is an attorney and president of the Howard Jarvis Taxpayers
Association -- California's largest taxpayer organization with
offices in Los Angeles and Sacramento. [go to website] [go
to Coupal index]
or a Blessing?...
[Jon Coupal] 7/1/05
The tax revenue windfall. For local government officials, it
is the major topic of conversation. They are delighted that the
hot real estate market is providing billions of additional dollars
to county coffers around the state. For Los Angeles, it represents
a cool one billion dollars in new revenue, a nearly 10 percent
increase over last year. San Bernardino County anticipates its
tax receipts to double to about $320 million.
However, you'll have to pardon us if we don't join the celebration
The last time we saw government officials so excited was in
the late 1990s after Gray Davis took office. Fueled by the dot.com
boom, state government took in unexpected revenue over three
successive years of $6 billion, $10 billion and $12 billion.
It was an embarrassment of riches, but Davis and the Legislature
quickly proved they had no shame.
watchdogs like the Howard Jarvis Taxpayers Association recommended
that the state make prudent use of
the windfall by
returning the money to taxpayers; using it for one time expenditures
like school construction (and thereby eliminating the need for
costly bonds); establishing a "rainy day" fund; or
a combination of the three.
However, with all this new revenue, state leaders had a major
relapse with their spending addiction. Assuming these elected
worthies have even taken Economics 101, their apparent euphoria
made them forget that economies -- by their very nature -- are
cyclical. Significant upturns and downturns are not the exception,
they are the rule.
With unrestrained glee, California politicians during the Gray
years took on new long-term spending commitments by expanding
programs, hiring thousands of new employees and providing generous
benefit increases to current workers.
latter, when the Silicon Valley miracle became the "dot.bomb," the
state found itself handcuffed by a structural deficit that
continues to plague
finances to this
day. Commitments to unsustainable spending cost Davis his job,
and the Herculean task of undoing the damage has eroded a good
chunk of the popularity and political capital of successor Arnold
Schwarzenegger. After all, those who benefited from the ill-considered
binge-spending of the previous administration, mostly government
employees, are not giving up without a fight. They have committed
millions of advertising dollars to a campaign to undermine our
So what about our local officials who are now giddy over unexpected
revenue? Have they learned anything from the disastrous conduct
of their Sacramento brethren who faced a similar dilemma?
Local officials are still smarting over money first taken from
them by the state during the recession of the early 1990s, funds
that continued to be expropriated through good times and bad
until an agreement with the governor last year placed limits
on how much locals could lose.
While the state was taking local money even in good times, any
shortfall was made up by imposing new local taxes, assessments,
fees and charges. Those levies should be appropriately reduced
now that revenue levels are escalating, or local governments
will end up with an unjustified windfall at the expense of taxpayers.
Instead, many local governments are adding insult to injury
by still calling for tax and fee increases even as property tax
revenues are rolling in. During state government's boom times,
many local officials joined the party by agreeing to lavish benefit
increases for local government employees. Now that the bills
are coming due, they are learning that supporting these obligations,
too, is proving unsustainable, so they are thrashing about, always
searching for new sources of revenue, i.e., taxes.
The budget decisions now being made by local politicians will
be heavily influenced by the new property tax revenue. Taxpayers
will be watching closely. We hope they pass the test by acknowledging
that even in real estate there are peaks and valleys and that
these major increases in tax receipts cannot be expected to continue
is an attorney and President of the Howard Jarvis Taxpayers
2005 Howard Jarvis Taxpayers association