A Deliberative Poll for CA's Future :: Summer 2011

State-Local Reform

MORE TOPICS:  TAXATION & FISCAL POLICY | INTIATIVE PROCESS | REPRESENTATION

Like other states, California’s public services are delivered by a system of governments that include cities, counties, and the state and federal government. Each governmental level makes decisions about these programs’ rules, design, funding. This system makes sure that we all share a set of core services as Americans, a different set as Californians, and another that defines our local communities. It also recognizes that there is tremendous variety within the nation and the state and that it’s important for some government services to reflect the unique needs of geographic areas.

While some think California’s government structure is fine as it is, others suggest the relationship between the state and local levels has broken down. They believe that government is no longer doing a good job at managing issues like education, public safety and aid to the poor.

Restructuring state and local government involves difficult decisions about what services are best performed by each level of government. The answers are not simple and often involve important value judgments about the kind of state we want to live in. For example, how much difference should there be between localities in the amount of aid given to the poor, or the money for school children or for public safety? And what level of those services should the state guarantee for all Californians? The questions are also complicated by the federal government, which gives money for some state and local programs, along with rules about how it can be spent.

State and Local Government in California Today: Legally, California has many types of local governments, including counties, cities, regional governments, special districts, school districts and community college districts. The way the state divides government responsibility across these various levels is more complex in California than elsewhere. Many services involve multiple layers of government. For example, in public safety, local police arrest a criminal who is tried in a county courthouse and sentenced to serve time in a state prison. Some health care programs operate with money and rules from local, state, and federal levels combined. Government responsibilities also change over time as budget decisions, ballot initiatives, and legislative reforms continue to shape the state-local partnership.

Another complexity is the wide variety of local governments in California and the ways they are governed. While the federal and state governments have single seats of power, local government power is spread over counties, cities, special districts and regional boards or commissions. As a result, the structure of local government is layered with overlapping jurisdictions and disjointed responsibilities. On the one hand, it is designed to reflect California’s diverse demands and varied resources, but it also raises questions about efficiency.  

Defining the problem in California: Local governments in California are often much more dependent on money from the state than is true elsewhere. This is particularly the case with counties and school and community college districts, and less so for cities. As a result, counties and schools are more vulnerable to state budget shortfalls. The state is also influential in local policy because it distributes the money from property taxes.

Much of this dynamic is the result of state budget decisions and voter-approved initiatives, most notably the landmark Proposition 13, passed by voters in 1978, which changed the relationship between California’s state and local governments. Before Proposition 13, local government entities were able to set their local property tax rate at the level they needed to pay for local decisions. Proposition 13 cut the property tax rate and does not allow the growth in assessed value to increase more than 2 percent per year. As a result, local governments lost more than half of their property tax revenue and were no longer able to adjust the rate to pay for local services. In addition, the proposition made it more difficult for state and local governments to raise taxes, requiring a two-thirds majority of local voters to approve a new “special tax” and a similar two-thirds majority of the state Legislature to approve new state taxes.

The state responded to Proposition 13 by taking on responsibility for financing a major portion of K-12 education and community colleges. It also took over many county programs that should be a state responsibility, in an effort to save counties money.  With the new power to distribute the property tax, the state used its resources to “back-fill” some of the lost property tax to cities, counties and special districts.  

Many believe that problems in the state and local relationship today still reflect the fact that local officials don’t have the flexibility or authority to properly perform their jobs because their services are too dependent on uncertain funding and strict regulation from the state. They also say the structure makes it more difficult to hold officials accountable when things aren’t working. Local officials often blame the state because it sets so many rules and provides so much of the money. But state officials can also say that they are not running many of the programs.

These problems have been discussed for many years and they’ve proven especially difficult to resolve because they often involve disagreement about alternatives and very complex judgments about what California should look like. Some believe Proposition 13 should be reconsidered, even though opinion polls indicate that it remains very popular. Others believe the solution is to restore some of the independence and control that local governments have lost, including more opportunity for local voters to raise money from sources other than the property tax.

At the same time, shifting many programs to the local level means that there will be big differences throughout the state in the quality of some services, like education, assistance for the poor and public safety. One question is whether Californians want to tolerate these differences. Another is how much the state’s wealth should be spread around because it will be far more difficult for the state’s poorer areas to generate money for quality services that it will be for wealthier communities.

Here are some, but certainly not all, choices to consider about government restructuring:

  • Don’t tinker with the state’s government structure.  It may have flaws, but it generally serves Californians well.
  • Let local governments get money for and take control of key programs, as long as they deliver the service and are managed well.
  • Encourage regional cooperation by letting local governments raise taxes with voter approval, as long as they coordinate with other local governments and meet goals set by the state.
  • Create a stable and flexible source of money for regional priorities by designating a portion of the tax revenue generated by a growing economy to pay for issues that are identified by a regional authority.
  • Direct any savings that comes from successful local management of resources to local governments, in exchange for monitoring their own performance and being accountable, transparent, and innovative in their operations.
  • Require state and local governments to identify explicitly the results they want to get through their policy decisions and service delivery and publish annual reports about progress towards those goals.
 
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