Proposition 22: Prohibits the State from Borrowing or Taking Local Government Funds
- Pros & Cons -
Prohibits the State from Borrowing or Taking Local Government Funds
Initiative Constitutional Amendment
Should the California Constitution be amended to prohibit the state, even during a severe fiscal hardship, from redirecting certain tax revenues dedicated to transportation or local governments?
Under the State Constitution, state and local government funding and responsibilities are interrelated. The two levels of government share revenues raised by some taxes and share costs for some programs, including health and social services. While the state does not receive any property tax revenues, it has authority over distributing these revenues among local agencies and schools.
State law allows cities and counties to form redevelopment agencies to make improvements to deteriorated urban areas. A redevelopment agency may use a portion of tax revenues collected from an improved area to repay debt it incurred on the project.
Over the years, the state has made decisions that have affected local government revenues and costs–sometimes benefitting the state fiscally, and sometimes benefitting local governments. During this period, voters have approved ballot measures that allow the state more authority to shift certain revenues, and, conversely, have approved ballot measures that changed the Constitution to restrict the state’s authority to shift certain revenues.
This proposition would limit the state’s authority to:
- Use state fuel tax revenues to pay debt service on transportation bonds.
- Borrow or change the distribution of state fuel tax revenues.
- Redirect redevelopment agency property taxes to any other local government.
- Temporarily shift property taxes from cities, counties, and special districts to schools.
- Use vehicle license fee (VLF) revenue to reimburse local governments for state mandated costs.
The proposition would shift some debt-service costs to the state General Fund and prohibit the General Fund from borrowing fuel tax revenues. The state would have about $1 billion less available for General Fund programs in 2010-2011. The total annual fiscal effect from these changes is not possible to determine, but could range from about $1 billion annually to several billion dollars in some years.
By contrast, state and local transportation programs, as well as local governments, would gain an amount equivalent to what the state no longer has available. Local governments would have more stable tax flows.
- Prop 22 would stop state raids on local government and transportation funds.
- This would stop the state from diverting fuel taxes voters dedicated to local road repairs and public transportation.
- Prop 22 would not increase taxes.
- Prop 22 would keep more local tax dollars where there's more accountability to voters.
- If Prop 22 passes, schools stand to lose funds immediately.
- Prop 22 would reduce funding available for health care just as the safety net for children is collapsing.
- Prop 22 would lock protection for redevelopment agencies into the state Constitution.
- Prop 22 would limit the state's flexibility to deal with a budget crisis.