taxes – Public Policy Institute of California

School Funding, COVID-19, and the 2020 Election Year

This post is excerpted from Mark Baldassare’s prepared remarks for the PPIC Statewide Survey virtual briefing on April 23, 2020.

State funding for K–12 public schools will take center stage when Governor Newsom unveils revisions to the state budget in a few weeks. The growing fiscal toll of the COVID-19 crisis is likely to affect school funding plans as a deep economic recession looms. K–12 schools have the largest share of the state General Fund, and many Californians say it is their top priority for state spending. Still, California voters seem to be pulling back their support for school funding on ballot measures.

One of the biggest surprises in the March 3 primary was the defeat of the Proposition 13 state school bond (53% voted no). The last time a state school bond failed to pass was back in 1994. Proponents have tried to explain away this loss as confusion caused by the number 13—the same as the notorious anti-tax initiative that passed in 1978.

However, outcomes of local school bond measures point to a different story. Bucking recent trends, 63% of local school bonds on the March primary ballot failed to reach the 55% threshold needed to pass. It may be that early anxieties about COVID-19 resulted in voter caution about extending debt. In the absence of exit polls to validate this theory, the April PPIC Statewide Survey sheds light on what may have happened. It also offers sobering news for efforts to convince voters to support school funding measures in the November election.

First, though, let’s dispense with the notion that views about school funding have fundamentally shifted. Today, 55% of California likely voters say that state funding for their local public schools is not enough. And 53% would vote yes on a state school bond while 50% would vote yes on a local school bond. Moreover, 53% percent would vote yes on a split roll property tax to fund local public schools—a measure that appears headed for the November ballot. All of these results today are similar to those last April, suggesting that basic attitudes about school funding are fairly stable.

But current conditions appear to be having a strong effect on the timeframe for public support. Our survey was conducted from April 1 to 9—roughly a month from the primary and a few weeks into stay-at-home orders. We find that most likely voters say it is a “bad idea” to issue state (54%) or local (54%) school bonds at this time. Majorities of Californians without children in public school agree (bad idea: state 56%, local 57%). Fewer than half across the state’s regions say it is a good idea to issue these bonds now. Only those with children in public school think that it is a good time to issue state (57%) or local school bonds (58%).

Why? Californians have had their world shaken by the COVID-19 crisis. Since January there has been a 36-point increase in expectations for bad economic times in California over the next 12 months (42% to 78%)—sending us to depths of consumer pessimism not seen since the Great Recession. And right now, 74% percent are worried about negative impacts of the coronavirus on their personal finances.

This pessimism is likely to have profound implications for school funding measures on the November ballot. The state’s fiscal and economic problems will weigh heavily on voters’ minds when they are asked to make decisions on spending, taxes, and bonds. Many may be reluctant to ask taxpayers (like themselves) to foot the bill, or to increase commercial property taxes, to make up for shortfalls in school funding.

We can also expect a rocky road ahead for the governor and state legislature. Although our April survey found a steep rise in the governor’s and legislature’s approval ratings around handling K–12 public education, state leaders now face the prospect of having to cut back on popular plans to increase school funding. During the Great Recession, we saw the governor’s and legislature’s approval ratings tumble with state budget cuts to local schools.

Our surveys will be closely monitoring all of these dynamics as California heads toward a much-anticipated November presidential election.

Video: Californians and Their Government

Joe Biden, Elizabeth Warren, and Bernie Sanders continue to lead the field in California’s primary race. Most Californians say President Trump should be impeached and removed from office, though views are mixed on how Democrats in Congress are handling the impeachment inquiry. In Sacramento last Wednesday, PPIC researcher Alyssa Dykman outlined these are other key findings from PPIC’s latest statewide survey, which was conducted before the November 20 debate.

Among Democrats and Democratic-leaning likely voters, support for Joe Biden (24%), Elizabeth Warren (23%), and Bernie Sanders (17%) is much higher than for Kamala Harris (8%), Pete Buttigieg (7%), and Andrew Yang (5%). No other candidate is preferred by more than 1%, while 9% say they don’t know which candidate they would choose.

Views on impeachment are divided along party lines: 83% of Democrats, 51% of independents, and 11% of Republicans think the president should be impeached and removed from office. Democrats are also much more likely than independents or Republicans to approve of the way the inquiry is being handled in Congress.

In other news, most Californians are concerned about wildfires (34% very, 29% somewhat) and power shutoffs (32% very, 27% somewhat). Governor Newsom gets mixed reviews for his handling of these issues: 46% of adults and 42% of likely voters approve, while 39% of adults and 46% of likely voters disapprove. Only about a third of Californians have either a great deal or quite a lot of confidence in their utility providers.

Other survey highlights:

Six in ten Californians (61% adults, 63% likely voters) say things in the US are generally going in the wrong direction, but about half think the nation will have good times financially over the next 12 months.
Nearly two-thirds of adults (63%) say California is divided into the “haves” and the “have nots”; 41 percent say they are haves, while 44 percent see themselves as have nots.
Most Californians are very concerned about homelessness in their communities; majorities across regions say the number of homeless people in their local community has increased over the past 12 months.
A potential citizens’ initiative that would raise state income taxes on the wealthiest Californians to fund K–12 public schools has majority support. Fewer than half of likely voters favor two other measures—a school construction bond and a “split roll” property tax—that would benefit the K–12 system.

Californians and Their Tax Burden

It’s April 15—the perfect day to explore how Californians feel about the state and local tax system and how much they pay in taxes. According to the most recent PPIC Statewide Survey, seven in ten Californians believe that California currently ranks near the top (48%) or above average (22%) in state and local tax burden per capita. The public’s perception is somewhat in line with fiscal facts: California’s state and local tax collections per capita in 2015 were 10th-highest in the nation (Tax Policy Center, September 2018).

Notably, Republicans (65%) are much more likely than Democrats (47%) and independents (48%) to say California’s state and local tax burden is near the top. The share of Californians expressing this view increases with rising income (39% under $40,000, 52% $40,000 to $80,000, 61% $80,000 or more) and this view is more common among whites (57%) than among other racial/ethnic groups (47% Asian Americans, 44% African Americans, 38% Latinos).

Half of Californians (52%)—a record-high share—say that the state and local tax system is either not too fair (25%) or not at all fair (27%). This marks a 10-point increase since March 2017 and a 21-point increase since the first time we asked this question in June 2003. There are notable differences along partisan lines. More than two in three Republicans (69%) see the state and local tax system as not too or not at all fair, as do nearly six in ten independents (58%), compared to about four in ten Democrats (43%).

The belief that the system is not fair is widely held across regions, ranging from a high of 60% in the Inland Empire to 45% in the San Francisco Bay Area. Lower-income adults (46%) are somewhat less likely than more-affluent adults (60% $40,000 to $80,000, 54% $80,000 or more) to say that the current state and local tax system is not fair.

A record-tying 60% of Californians say they pay much more (39%) or somewhat more (21%) than they should in state and local taxes. The share saying they pay much more than they should is a record high and has increased 13 points since we first asked this question in February 2003. This view is widely held across regions and demographic groups. Notably, Republicans (61%) are more than twice as likely as Democrats (25%) and much more likely than independents (42%) to say they pay much more than they should.

That said, California voters have passed tax increases in recent years, including extending the Proposition 30 income tax increases in 2016 and rebuffing an effort to repeal the recently passed increase to the state gas tax in 2018. Further, voters across the state have been more than willing to pass local tax measures. With a new governor and a supermajority of Democrats in the state legislature, are new taxes on the horizon? Stay tuned as the PPIC Statewide Survey gauges public support for any new proposals.

Money Measures and the November Ballot

Earlier this year, we looked at how voters responded to the 107 money measures on the June ballot. The November election featured a considerably larger number of taxes, bonds, and fees: local governments asked voters to make decisions on 397 money-related questions, by our count. Most of these measures passed (314 or 79%), though success rates varied across types of taxation or borrowing.

Overall, most bonds passed (98 of 128), but the share of successful bonds for K–12 schools and community colleges (92 of 116, or 79%) was higher than the share of general obligation bonds in other spending areas (6 of 12, or 50%). Since Proposition 39 (which passed in 2000) lowered the passage threshold for school bond measures to 55%, more than 1,400 school bonds have been placed on ballots, and voters have approved more than 80% of them. Of the 92 school bonds that passed this year, 65 met the 55% threshold but fell short of a two-thirds majority.

Parcel taxes, California’s unique way of increasing property taxes in the Proposition 13 era, were the least successful type of taxes on the November ballot. However, voters did approve 60% of these measures (36 of 60), which is in line with their historical success rate. Most parcel taxes proposed by school districts passed (11 of 16, or 69%), while those placed on the ballot by fire districts were less successful (9 of 19, or 47%).

Through 2017, local governments had proposed 80 measures to tax cannabis businesses, generally based on gross receipts, size (measured in square footage), or some combination of the two. On the November ballot, there were 75 cannabis tax measures. As has been the case historically, voters approved the vast majority (69, or 92%).

Is California shedding its reputation as an anti-tax state? The fact that local measures have been successful nearly 80% of the time does not necessarily reflect voter support for taxes in general. According to recent PPIC Statewide Surveys, a majority of Californians feel that their tax burden is greater than it should be and see Proposition 13 as “mostly a good thing.” Also, savvy local leaders put money measures on the ballot only when polling or canvassing suggests the probability of passage is high.

A more precise interpretation of recent results might be that local governments have been very successful at identifying the type of taxes and purposes around which they can mount successful campaigns. Moreover, recent local measures have been put before voters during a period of economic growth. It will be interesting to see if they continue to succeed going forward.

Local Measures Address Water, Fire in the Midterm Elections

The biggest water news from the recent election was the failure of the $8.9 billion statewide water bond, Proposition 3. This was the first time voters have rejected a statewide water bond since 1990. But this wasn’t the only story for water-related measures on Californians’ ballots. The midterms saw 33 local measures go to the voters that addressed issues ranging from flood protection to fire resilience. Here we summarize a few key votes.

In Los Angeles County, Measure W passed. This measure allows the county to collect a parcel tax of 2.5 cents per square foot of impermeable surfaces (such as concrete sidewalks and pavement) to fund rain and stormwater capture and clean-up projects, in addition to projects addressing water quality and groundwater recharge. The measure exempts permeable surfaces from the tax, which could incentivize developers to incorporate more green solutions into development and renovation projects.

In the Bay Area, San Francisco and San Jose both passed local bonds to modernize infrastructure. San Francisco easily passed Measure A, which will issue $425 million in bonds to strengthen the Embarcadero seawall to better withstand earthquakes and rising sea levels. San Jose’s Measure T will allocate $650 million in bonds to repair the city’s aging infrastructure. Although almost half of this bond is dedicated to repaving streets, the measure also includes $85 million for flood protection—a response to the 2017 Coyote Creek flood that caused $100 million in property damage. The bond will fund “green infrastructure” projects in the local floodplain to reduce the risks of future floods and groundwater contamination.

Across the state, the rise in devastating wildfires resulted in nine measures addressing fire protection and intervention services in communities, to be paid for through utility taxes, sales taxes, and parcel taxes. Four of these measures passed, while five failed.

Sonoma County’s newly adopted park and ecosystem restoration bill―Measure M, a one-eighth cent sales tax increase―will collectively fund wildfire prevention, ecosystem restoration, and projects to safeguard water supplies, including rivers and streams. Measure FF passed in Alameda and Contra Costa Counties; it extended an existing parcel tax to fund wildfire prevention and water quality activities on East Bay Regional Park District lands, as well as park maintenance. But voters didn’t approve Measure P in Laguna Beach (Orange County), which proposed a sales tax to pay for wildfire safety measures. It would have funded projects such as undergrounding overhead power lines.

Although the failure of Proposition 3 caught some by surprise, it’s important to remember that state bonds play a relatively minor role in funding California’s water needs. Local revenues—from water and sewer bills to taxes—provide 85% of water funding. The newly passed ballot measures carry on that tradition, with Californians across the state voting to address their communities’ needs and priorities for water, fire safety, and the environment.

Funding Measures and the June Ballot

Last week’s primary election garnered considerable statewide and national attention, with much of the focus on the governor’s race and contested congressional seats. Further down the ballot, however, voters were asked to decide on millions of dollars of local tax, bond, and fee initiatives. On the whole, these measures enjoyed considerable success across the state.

We found that Californians voted on 107 local tax, bond, and fee measures, representing the range of fiscal tools that local jurisdictions can use to raise revenue and borrow funds. Bond measures were the most popular, with 42 different local governments seeking voter approval (37 K–12 school districts; 2 community college districts; 3 cities). There were also 32 parcel tax measures; those related to K–12 schools (12) and fire/public safety (10) were most common. Ballots also included proposals to impose or increase taxes on cannabis (13) general sales (9), gross business receipts (2), and hotel stays (3). And there were proposals to raise utility fees (3), business license fees (1), and bridge tolls (1).

Most of the long list of funding proposals passed—but just putting a measure on the ballot did not guarantee success. Although counties are still counting some ballots, which could affect a race or two, at this time, we observe the following:

Overall, voters passed 76 of the 107 measures.
Of the 39 school bond measures, 30 passed. Proposition 39, passed in 2000, lowered the threshold for passing school bonds from a two-thirds majority to 55%. Had these measures been subjected to the previous standard, only 11 would have passed. The 19 measures approved under the current standard increased borrowing for investment in public schools by $1.8 billion.
On the heels of one of the states’ worst seasons of wildfires on record, California voters held the line on parcel taxes intended to support fire protection, with only 3 of the 9 measures passing.
All 13 of the cannabis tax proposals passed overwhelmingly.

California touched off a revolt against taxes 40 years ago. Primary voters in 2018 generally voted for increases but were relatively discriminating in their support, depending upon the type of tax and its intended purpose. This discernment comes at a time when the state’s economy is growing and unemployment is low. It will be interesting to see what happens in November, when we expect to see even more funding measures on the ballot.

Tax Day: Californians Feel Overburdened

Tax day is here, and Californians are feeling particularly burdened.

A record-high number of adults (72%) say that California ranks above average or near the top in per capita state and local tax burden compared to other states. This perception is close to the fiscal facts: a Tax Foundation report ranked California’s 2014 state and local tax collections per capita as 13th-highest in the nation.

Taxes are not only perceived to be high, but they are also viewed as disproportionate: a majority of Californians (56%) say they pay more taxes to state and local governments than they feel they should (37% much more, 19% somewhat more). Californians’ views were similar last March (58%), following an extension of income tax increases on high-earning residents. Today, traditionally tax-opposed Republicans (78%) are much more likely than independents (63%) and far more likely than Democrats (47%) to say that they pay much or somewhat more than they should. This perception is also more common across higher-income groups (65% $80,000 or more, 58% $40,000 to under $80,000). Lower-income groups are more divided: among residents with household incomes under $40,000, 47% say they pay more or somewhat more than they should, while 40% say they pay the right amount.

How do these views align with approval ratings of state elected officials? Among those who say they pay much more than they should, 50 percent disapprove of the way Jerry Brown is handling his job, 60 percent disapprove of the California Legislature, and 57 percent disapprove of the way that the state legislators representing their assembly and senate districts are doing at this time.

Nonetheless, legislators are moving forward with more tax proposals. According to a recent California Tax Foundation Report, the state legislature introduced 33 bills and constitutional amendments since the start of the 2017–18 legislative session that could increase taxes and fees by over $269 billion annually, though few are likely to become law. The most expensive proposals include a government-run healthcare tax, a sales tax on services, and a new tax on California businesses. These proposals come in the midst of an election year and expected state budget reserve of nearly $16 billion.

Californians will soon have the opportunity to make significant decisions at the ballot box—choosing new leaders and helping to shape the state’s future. Stay tuned to the PPIC Statewide Survey for timely coverage of this year’s election and Californians’ leadership preferences.

Video: John Chiang’s Priorities

John Chiang, the state’s treasurer and a candidate for governor this year, was asked last week to name the top three issues that will make the most difference for the state’s future. The question is the first one Mark Baldassare, PPIC president and CEO, asks of all gubernatorial candidates appearing before PPIC audiences. Chiang said his priorities are

Education
Housing
Jobs, climate change, health care—issues Chiang lumped together as the “things that are absolutely critical in everybody’s life.”

Chiang praised Governor Jerry Brown for the state’s K–12 finance formula that targets extra resources toward lower-income students, English Learners, and those in foster care. He said he would target more money toward students with special needs.

Referring to the state’s housing situation as an “extraordinary crisis,” Chiang said that even if an affordable housing bond measure passes in November, the state will need to return to the voters to get more money. He advocated reviving local redevelopment agencies, which the governor eliminated in 2011, to give local governments an economic tool to build housing.

Chiang referred to his background as treasurer, state controller, and member of the state Board of Equalization in emphasizing the need to ensure a way to pay for proposals such as single-payer health care—an idea he said he favors in concept. While describing the current system as inefficient, he said that the state can’t achieve single payer health care immediately. How long will it take? Chiang said more clarity from the federal government is crucial to understanding what the state can afford. “Let’s build what we can build. We don’t have to build a mansion at the beginning. Let’s build a starter house.” Chiang also said that the state needed to figure out how to insure an additional 2.9 million Californians who are currently uninsured.

The conversation with Chiang is part of the PPIC Speaker Series on California’s Future. PPIC is inviting all major candidates for governor to participate if they reach a certain threshold in the polls. The goal is to give Californians a better understanding of how the candidates intend to address the challenges facing our state.

Watch all candidate videos

Video: Travis Allen’s Priorities

Mark Baldassare, PPIC president and CEO, asked Assemblymember Travis Allen, candidate for governor in 2018, to name the top three issues with major consequences for the state’s future—a question Baldassare has asked of all gubernatorial candidates appearing before PPIC audiences. Allen said his top priorities would be

Cutting taxes
Getting tough on crime, and
Fixing roads and expanding freeways

Allen, who is campaigning to repeal the state gas tax increase passed last year, said California is already collecting enough tax revenue to improve roads and unclog the freeways.

“We can fix our roads, we can expand our freeways, we don’t need to raise taxes further to do it,” he said. He added that voters should be the ones to decide if they want to raise taxes.

The conversation with Allen is part of the PPIC Speaker Series on California’s Future. PPIC is inviting all major candidates for governor to participate if they reach a certain threshold in the polls. The goal is to give Californians a better understanding of how the candidates intend to address the challenges facing our state.

Watch all candidate videos

Commentary: Will California’s Pot Law Limit Illegal Marijuana Sales?

This commentary was published in Newsweek on January 2, 2018.

The new year brings with it a new age of legal marijuana: As of Monday, the growing, sale and use of recreational cannabis in California is now legal for individuals over the age of 21. But will it change much in the state?

Read the full commentary on newsweek.com.