According to its calculation, if all pass the combined hit would be $350 million in direct tax increases and $3.6 billion in bonded indebtedness. The group notes the new debt includes “36 school bonds, 16 transactions and use taxes, 19 parcel taxes, two general obligation bonds, one business license tax, one hotel tax and two other special taxes.” Taxes, taxes, taxes.
Bonds must be paid back with interest. According to the municipal-bond firm FMS Bonds, the current interest rate for 30-year AAA-rated municipal bonds is 3.6% as of February 8, up from 3.45% the previous week. I’ve been writing about – and against – these bonds for 37 years, and the rule of thumb is to double the payback amount. That means the effective amount to pay back $3.6 billion in bond indebtedness would $7.2 billion.
Californians also will be in hock for the $6.4-billion Proposition 1 bond on the ballot for homelessness. It’s almost guaranteed to pass due to paltry opposition and public concerns about homelessness. In the ballot pamphlet mailed to voters, the Legislative Analyst estimates the cost from interest over 30 years would be only “about 10 percent more expensive than if the state paid in cash.” But based on current bond rates, that estimate appears highly optimistic.
Read John Seiler’s Free Cities Center article about how well-run cities grow.
Read Jeremy Lott’s Free Cities Center article about how higher budgets aren’t fixing Seattle’s homelessness crisis.
Although there’s no tax increase involved, state bonds are actually “delayed tax increases.” The money is repaid from the state Treasury, but the additional debt crowds out other budgets and spending priorities. That creates more pressure for tax increases. Locally, let’s look more closely at one school bond and one sales tax, which reflect what’s going on across the state.
School bonds
For decades, school bonds ballot arguments have boasted that they only go to facilities construction and repair. The bond promoters know voters want to fix leaky roofs and get new computers for their kids’ schools, but are skeptical about higher pay for teachers and administrators. But all the bonds do is allow districts to shift regular funds from construction to pay and pensions. Money is fungible.
Moreover, Gov. Gavin Newsom’s January 10 budget proposal for fiscal year 2024-25, which begins on January 1, boasts that it spends an average of $23,519 per pupil or $705,570 for a class of 30. There’s plenty of money for construction, pay, pensions and to give every teacher a weekend at Disneyland. The problem is bad spending priorities.
Culver Unified School District Measure E would approve $358 million in bonds for school improvements in the Los Angeles County district. It levies $60 per $100,000 in assessed value, which doesn’t seem like a lot. But that’s another misdirection. Zillow.com pegs the average home value in that city at $1.31 million. So the average yearly cost would be $786. Due to 1978’s property-tax-limiting Proposition 13, people who bought their homes at a lower price would pay less.
The ballot title explains, “To upgrade neighborhood schools with locally-controlled funding; improve classrooms/instructional technology for college/career readiness; fix leaky roofs, crumbling ceilings and aging, deteriorating electrical, plumbing, fire safety and security systems; repair, construct, and acquire classrooms, labs, facilities, sites, equipment.” My goodness, if Measure E isn’t passed, the roofs will fall in on the children!
After the 2022 elections, California Treasurer Fiona Ma reported 92 such K-12 school tax measures were put before voters, of which 64 passed, or 70%.
Sales tax jumps
This one should be titled the Celebrated Jumping Transactions and Use Tax of Calaveras County, after Mark Twain’s spoof, “The Celebrated Jumping Frog of Calaveras County.” Instead it’s prosaically called the Calaveras County, California, Measure A, Fire Services Sales Tax Initiative.
It imposes a 1% additional sales tax on county residents, “To fund local fire districts and the City of Angels Camp Fire Department for staffing, training, equipment, and other costs.” Calaveras is a small county in the Sierra Nevada foothills with just 45,292 people and part-time firefighters for 10 districts.
“In Calaveras County, there are many stations that are not staffed right now due to budget” problems, Chief Richard Dickinson told CBS News Sacramento. In November 2022, an identical tax measure failed, 10,030 in favor to 10,287 opposed. With the tougher economic climate this year, especially rising inflation, Measure A also face a hard time passing, although fire-related initiatives typically pass – and Calaveras County is a heavily wooded and fire-prone area.
Dickinson griped that a big problem retaining firefighters is they can make more slinging fast food. That’s because on April 1 the minimum wage for most such workers rises to $20 an hour. According to Transparent California, in 2021, the last year reported, Dickinson’s part-time total pay and benefits totaled only $61,907 a year. And in 2020, firefighter compensation was a tiny $675 for Division Chief J. Tedder and $475 for Apprentice Firefighter M. Gonzalez. By contrast, the average total annual compensation for a firefighter in wealthy Manhattan Beach is $328,000.
The state-mandated higher wage foolishly was imposed not only in high-cost San Francisco but in lower-cost rural areas. Thus a law aimed at pleasing voters in progressive cities created pressure on less-affluent inland cities. It’s an example of how state laws are encouraging even efficiently run localities to push for higher sales and other taxes.
The state treasurer reported in Nov. 2022 that only 35 of 70 local special taxes passed, or 50%. It might be harder this time. David Kline, vice president of communications and research at CalTax, told me, “Polls have shown that Californians aren’t in the mood for tax increases.”
At least voters will have the final say – those who haven’t jumped to another state.
John Seiler is on the Editorial Board of the Southern California News Group. Write to him at [email protected].
