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Californians Overwhelmingly Support New Local Bonds and Taxes

Two weeks ago, using information supplied by the California Taxpayers Association, we called attention to “$6.2 Billion in New Borrowing on June 7th Primary Ballot.” As noted, “Next week voters will be asked to approve 46 local bond measures totaling $6.18 billion in new debt, along with 52 local tax proposals. If history is any indication, more than 80% of them will pass.”

So how did they do?

The following table shows the results so far. With bonds, the trend is clear – they nearly all still pass. That’s partly because school bonds only require a 55% majority to pass, whereas with most tax increases, passage still requires a two-thirds vote. And while the rate of passage is lower for tax increases, the latest election shows two out of three passing.

Local Tax and Bond Ballot Propositions – June 7th 2016
Status of passage as of June 14th, 2016
20160614-UW-RingCalTaxVoteChart1

The data after one week, as shown, indicates that if the “too close to call” decisions end up splitting at the same ratios as the already decided propositions, 66% of the tax proposals will pass, and a whopping 93% of the bond proposals will pass.

Why?

To answer this question, here are some comments from Jon Coupal, head of the Howard Jarvis Taxpayers Association, one of the largest and most effective taxpayer organizations in the U.S. He listed a few key reasons:

(1) The true tax impact is not evident from the ballot label.

(2) There is a lot of voter of misunderstanding about how much money we already spend on education. Very few Californians realize we spend, at a minimum, 40% of our general fund budget on education.

(3) Local taxpayers don’t have nearly the resources or the sophistication to run big campaigns against the teachers unions and the construction industry.

(4) Many times, these proposals are placed on the ballot in a way to ensure there is no opposition argument – for example, they are added when there are only 72 hours left to get an opposing argument submitted. Procedural rules are manipulated to suppress opposition.

When asked how this could change, Coupal did not seem optimistic, but had a few suggestions. He noted that his organization and other reform groups are supporting bills to require greater transparency on taxes and bonds. In particular, he stressed the need for more public disclosure of the financial impact. Coupal also mentioned the need for more public education, stating that “voters don’t understand that when people say it’s for the kids, it’s actually for the unions.

With what data is available, it’s interesting to review some of the tax proposals that did not pass. The following table shows the proposed tax increases that voters turned down on June 7th:

Failed Local Propositions to Increase Taxes – June 7th 2016

20160614-UW-RingFailedTaxes

Without dissecting the specific campaign dynamics, voter demographics, and other particular conditions in each case, there isn’t a clear indication why some local tax proposals failed, while two-thirds of them passed. One of the most expensive of all proposed parcel taxes, failed Measure C-16 in San Luis Obispo County’s Cayucos Fire Protection District, would have increased the annual assessment per house for fire protection services from $100 to $500. On the other hand, thrifty voters in Siskiyou County rejected a parcel tax that would have only cost each household $5 per year.

Similarly, when it comes to failed proposals to increase sales taxes, there is no common theme in the data. The failed proposals ranged from an increase of an eighth of one percent to a full percent, which mirrored the range of the measures that passed. The explanations from proponents were various, including public safety, general services, road and transit upgrades, and library services. Interestingly, two of the failed tax increases, in Napa and Solano counties, only required a majority vote.

Ultimately, despite California’s sporadically rebellious populace when it comes to new state taxes – Propositions 1A through 1E on the state ballot in 2009 were all rejected by voters – their track record on local taxes and bonds remains consistently pro-tax. Voters need to realize that local tax increases do not begin to cover already scheduled increases to pension fund contributions, to fund pension benefits that are – even for non public safety – two to three times more generous than Social Security. Voters need to realize that school bond measures are usually to fund work that used to be paid for out of operating budgets, before the pension and compensation commitments got out of control.

And behind these hidden agendas impelling new tax increases, behind every broken budget and faltering service, voters need to understand that government unions are the cause.

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Ed Ring is the president of the California Policy Center.

California's $12.3 Billion in Proposed School Bonds: Borrowing vs. Reform

“As the result of California Courts refusing to uphold the language of the High Speed Rail bonds, the opponents of any bond proposal, at either the state or local level, need only point to High-Speed Rail to remind voters that promises in a voter approved bond proposal are meaningless and unenforceable.”
–  Jon Coupal, October 26, 2014, HJTA California Commentary

If that isn’t plain enough – here’s a restatement: California’s politicians can ask voters to approve bonds, announcing the funds will be used for a specific purpose, then they can turn around and do anything they want with the money. And while there’s been a lot of coverage and debate over big statewide bond votes, the real money is in the countless local bond issues that collectively now encumber California’s taxpayers with well over $250 billion in debt.

Over the past few weeks we’ve tried to point out that local tax increases – 166 of them on the November 4th ballot at last count, tend to be calibrated to raise an amount of new tax revenue that, in too many cases, are suspiciously equal to the amount that pension contributions are going to be raised over the next few years. For three detailed examples of how local tax increases will roughly equal the impending increases to required pension contributions, read about Stanton, Palo Alto, and Watsonville‘s local tax proposals. It is impossible to analyze them all.

As taxes increase, money remains fungible. More money, more options. They can say it’s for anything they want. And apparently, bonds are no better.

At last count, there are 118 local bond measures on the November ballot. And not including three school districts in Fresno County for which the researchers at CalTax are “awaiting more information,” these bonds, collectively, propose $12.4 billion in new debt for California taxpayers. All but six of these bond proposals (representing $112 million) are for schools. Refer to the list from CalTax to read a summary of what each of these bonds are for – “school improvements,” “replace leaky roofs,” “repair restrooms,” “repair gas/sewer lines,” “upgrade wiring,” “renovate classrooms,” “make repairs.”

To be fair, there are plenty of examples of new capital investment, “construct a new high school,” for example, but they represent a small fraction of the stated intents. On November 4th, Californians are being asked to borrow another $12.3 billion to shore up their public school system. They are being asked to pile another $12.3 billion onto over $250 billion of existing local government debt, along with additional hundreds of billions in unfunded retirement obligations for state and local government workers. They are being asked to borrow another $12.3 billion in order to do deferred maintenance. We are borrowing money to fix leaky roofs and repair restrooms and sewers. This is a scandal, because for the past 2-3 decades, California’s educational system has been ran for the benefit of unionized educators and unionized construction contractors who work in league with financial firms whose sales tactics and terms of lending would make sharks on Wall Street blush. These special interests have wasted taxpayers money and wasted the educations of millions of children. Their solution? Ask for more money.

Nobody should suggest that California’s public schools don’t require investment and upgrades. But before borrowing more money on the shoulders of taxpayers, why aren’t alternatives considered? Why aren’t educators clamoring for reforms that would cut back on the ratio of administrators to teachers? Why aren’t they admitting that project labor agreements raise the cost to taxpayers for all capital investments and upgrades, and doing something about it? If their primary motivation is the interests of students, why aren’t they supporting the Vergara ruling that, if enforced, will improve the quality of teachers in the classroom at no additional cost? Why aren’t they embracing charter schools, institutions whose survival is tied to their ability to produce superior educational outcomes for far less money? Why don’t they question more of these “upgrade” projects? Is it absolutely necessary to carpet every field in artificial turf, a solution that is not only expensive but causes far more injuries to student athletes? Is it necessary to spend tens of millions per school on solar power systems? Does every high school really need a new theater, or science lab? Or do they just need fewer administrators, and better teachers?

And to acknowledge the biggest, sickest elephant in the room – that massive, teetering colossus called CalSTRS, should teachers, who only spend 180 days per year actually teaching, really be entitled to pensions that equal 75% of their final salary after only 30 years, in exchange for salary withholding that barely exceeds what private employees pay into Social Security? Thanks to unreformed pensions, how many billions in school maintenance money ended up getting invested by CalSTRS in Mumbai, Shanghai, Jakarta, or other business-friendly regions?

How much money would be saved if all these tough reforms were enacted? More importantly, how much would we improve the ability of our public schools to educate the next generation of Californians? Would we still have to borrow another $12.3 billion?

Here’s an excerpt from an online post promoting one of California’s local school bond measures: “It will help student academic performance, along with ensuring our property values. If you believe that strong schools and strong communities go hand in hand, please vote…”

Unfortunately, such promises are meaningless and unenforceable. The debt is forever.

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Ed Ring is the executive director of the California Policy Center.