Poli 103A California Politics The Layers of Government

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Poli 103A California PoliticsThe Layers of
Government
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The Layers of Government

• Competing Visions of Local Govt.
• Local Government 101
• The Tiebout Hypothesis
• Guarantees of Equality
• Proposition 13 and its Aftermath
• The New Incentives for Locals

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Competing Visions of Local Govt. Local
Government 101

• Four layers of local government in CA
• 58 Counties. Ranging in size from 1,200 in Alpine
  to 9 million in Los Angeles, counties implement
  health and welfare programs, prosecute and defend
  crimes, build roads and plan.
• 476 cities repair roads, collect trash, buy
  water, employ cops, and make zoning decisions
  either through a strong mayor or a city
  manager/council format.

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Competing Visions of Local Govt. Local
Government 101

• 4800 special districts overlap with city and
  county borders to perform a special function
  ranging from running schools to buying H2O to
  abating mosquitoes. Theyre Californias hidden
  governments.
• A few regional bodies (ABAG, SCAG, SANDAG,
  SCAQMD) bring together fragmental local
  governments to plan transportation, air quality,
  etc.

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Competing Visions of Local Govt. Local
Government 101

• Why are there so many cities in California today?
• The Lakewood Plan. Starting with the city of
  Lakewood in 1954, cities have contracted with
  counties for expensive services like police and
  fire protection. This economy of scale allows
  smaller cities to incorporate, and 31 new cities
  formed within LA County by 1964.

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Competing Visions of Local Govt. The Tiebout
Hypothesis

• In 1956, economist Charles Tiebout set forth the
  following hypothesis
• People vote with their feet by choosing to live
  in an area where the package of public services
  (roads, schools, cops, welfare) and tax levels
  suits them.
• Rather than waiting for the next election to
  change policies, people simply move.

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Competing Visions of Local Govt. The Tiebout
Hypothesis

• Implications of the Hypothesis
• Preferences are expressed through behavior, so we
  can learn what is good policy by looking at home
  prices.
• People sort themselves into areas in a way that
  is economically efficient.
• (Key) It is important to allow variation in tax
  rates and service packages, so that feet have a
  chance to vote.

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Competing Visions of Local Govt.Guarantees of
Equality

• What happens when the Lakewood Plan, secession,
  and voting by your feet combine to sort all of
  the high income/low demand residents (or
  businesses) into one small city?
• This leaves the low income/high demand folks in a
  fiscally strapped city.
• Variation in service packages can begin to look
  unfair.

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Competing Visions of Local Govt.Guarantees of
Equality

• The 1974 Serrano v. Priest decision declared
  local variation in school funding
  unconstitutional.
• It specified that the per pupil funding that came
  from property tax revenues should be equalized,
  varying lt100.
• This equity test grew to 350, was broken into
  six types of schools, and didnt cover other
  revenue sources.

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Proposition 13 and its AftermathThe Property Tax
Crisis

• State and local governments rely on four sources
  of income
• Income tax (collected and kept by the state in
  California)
• Sales tax (split between state and locals)
• Fees (assessed by both state and locals on
  specific activities)
• Property tax (prior to 1978, this was locals
  source of income and flexibility)

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Proposition 13 and its AftermathThe Property Tax
Crisis

• For homeowners, when property value goes up and
  your property is reassessed to reflect this
  your property taxes go up, even though you are
  not getting additional income.
• Inflation in the 1970s drove up tax bills,
  putting money in state and local coffers but
  threatening those on fixed incomes, especially
  seniors.

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Proposition 13 and its AftermathThe Property Tax
Crisis

• By 1977, locals thrived and the state built up a
  6 billion surplus, but Gov. Jerry Brown and the
  Legislature couldnt agree on a property tax cut.
• Voter anger set the stage for political
  entrepreneurs Howard Jarvis and Paul Gann to
  start a nationwide tax revolt with Proposition
  13.

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Proposition 13 and its AftermathThe Initiative

• 1. Limited property taxes to 1 of the assessed
  value of the property.
• 2. Assured that properties would only be
  reassessed when changing owners.
• 3. Sent all of the money to counties, who would
  then divide between layers.
• 4. Required a 2/3 vote of both houses of the
  Legislature to raise taxes.

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Proposition 13 and its AftermathThe Initiative

• Its supporters attacked big government rather
  than getting bogged down in the details.
• Its opponents put up the competing Prop. 8, a cut
  and split roll.
• On June 6, 1978, it passed with 65 of the vote
  after assessments climbed.

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Proposition 13 and its AftermathThe Aftermath

• Up for reelection, Jerry Brown chose not to let
  voters feel the local service cuts that would
  have come from the 7 billion cut in property
  taxes.
• The state sent its surplus to bail out local
  governments, and then took over school and
  Medi-Cal funding.
• Locals became the states charity case.

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Proposition 13 and its AftermathThe Initiative

• Constraints on Local Governments
• Prop. 13 took away their ability to control their
  primary revenue source.
• The aftermath put them at the whim of the state,
  which rips them off when in crisis (2.6 billion
  in 1993, 1.3 post .bomb)
• Effects Equalization at a lower level, making it
  hard to vote with your feet.

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The New Incentives for Locals

• Prevented from raising property taxes, local
  governments have turned to fees and another
  revenue source
• Sales Tax. Cities collect a penny for every
  dollar spent within their borders.
• It does not matter who spends the money or where
  the goods are made.
• Cities now compete fiercely for retailers.

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The New Incentives for Locals

• This has led to fiscalization of land use
• Cities want retailers rather than manufacturers
  who bring good jobs.
• They compete by offering cheap land and building
  infrastructure.
• Bill Fulton argues that the sellscape is viewed
  not as a place where people live and work and
  dies, but as a cash register.

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Discussion Section Questions

• What are the assumptions required for the Tiebout
  Hypothesis to work? Do you think they are
  reasonable?
• Should we mandate that local governments provide
  exactly the same package of taxes and services?