Prop 13 and the property tax revolt
Cal. Constitution Art XIII secs. 1, 3; Art. XIIIA secs. 1-3
CALIFORNIA CONSTITUTION
ARTICLE 13 TAXATION
SEC. 1. Unless otherwise provided by this Constitution or the laws of the United States:
(a) All property is taxable and shall be assessed at the same percentage of fair market value. When a value standard other than fair market value is prescribed by this Constitution or by statute authorized by this Constitution, the same percentage shall be applied to determine the assessed value. The value to which the percentage is applied, whether it be the fair market value or not, shall be known for property tax purposes as the full value.
(b) All property so assessed shall be taxed in proportion to its full value.
SEC. 3. The following are exempt from property taxation:
(a) Property owned by the State.
(b) Property owned by a local government, except as otherwise provided in Section 11(a).
(c) Bonds issued by the State or a local government in the State. (d) Property used for libraries and museums that are free and open to the public and property used exclusively for public schools, community colleges, state colleges, and state universities.
(e) Buildings, land, equipment, and securities used exclusively for educational purposes by a nonprofit institution of higher education. (f) Buildings, land on which they are situated, and equipment used exclusively for religious worship.
(g) Property used or held exclusively for the permanent deposit of human dead or for the care and maintenance of the property or the dead, except when used or held for profit. This property is also exempt from special assessment.
(h) Growing crops.
(i) Fruit and nut trees until 4 years after the season in which they were planted in orchard form and grape vines until 3 years after the season in which they were planted in vineyard form.
(j) Immature forest trees planted on lands not previously bearing merchantable timber or planted or of natural growth on lands from which the merchantable original growth timber stand to the extent of 70 percent of all trees over 16 inches in diameter has been removed. Forest trees or timber shall be considered mature at such time after 40 years from the time of planting or removal of the original timber when so declared by a majority vote of a board consisting of a representative from the State Board of Forestry, a representative from the State Board of Equalization, and the assessor of the county in which the trees are located. The Legislature may supersede the foregoing provisions with an alternative system or systems of taxing or exempting forest trees or timber, including a taxation system not based on property valuation. Any alternative system or systems shall provide for exemption of unharvested immature trees, shall encourage the continued use of timberlands for the production of trees for timber products, and shall provide for restricting the use of timberland to the production of timber products and compatible uses with provisions for taxation of timberland based on the restrictions. Nothing in this paragraph shall be construed to exclude timberland from the provisions of Section 8 of this article.
(k) $7,000 of the full value of a dwelling, as defined by the Legislature, when occupied by an owner as his principal residence, unless the dwelling is receiving another real property exemption. The Legislature may increase this exemption and may deny it if the owner received state or local aid to pay taxes either in whole or in part, and either directly or indirectly, on the dwelling. No increase in this exemption above the amount of $7,000 shall be effective for any fiscal year unless the Legislature increases the rate of state taxes in an amount sufficient to provide the subventions required by Section 25. If the Legislature increases the homeowners’ property tax exemption, it shall provide increases in benefits to qualified renters, as defined by law, comparable to the average increase in benefits to homeowners, as calculated by the Legislature.
(l) Vessels of more than 50 tons burden in this State and engaged in the transportation of freight or passengers.
(m) Household furnishings and personal effects not held or used in connection with a trade, profession, or business.
(n) Any debt secured by land.
(o) Property in the amount of $1,000 of a claimant who– (1) is serving in or has served in and has been discharged under honorable conditions from service in the United States Army, Navy, Air Force, Marine Corps, Coast Guard, or Revenue Marine (Revenue Cutter) Service; and– (2) served either (i) in time of war, or (ii) in time of peace in a campaign or expedition for which a medal has been issued by Congress, or (iii) in time of peace and because of a service-connected disability was released from active duty; and– (3) resides in the State on the current lien date. An unmarried person who owns property valued at $5,000 or more, or a married person, who, together with the spouse, owns property valued at $10,000 or more, is ineligible for this exemption. If the claimant is married and does not own property eligible for the full amount of the exemption, property of the spouse shall be eligible for the unused balance of the exemption.
(p) Property in the amount of $1,000 of a claimant who– (1) is the unmarried spouse of a deceased veteran who met the service requirement stated in paragraphs (1) and (2) of subsection 3 (o), and (2) does not own property in excess of $10,000, and (3) is a resident of the State on the current lien date.
(q) Property in the amount of $1,000 of a claimant who– (1) is the parent of a deceased veteran who met the service requirement stated in paragraphs (1) and (2) of subsection 3(o), and (2) receives a pension because of the veteran’s service, and (3) is a resident of the State on the current lien date. Either parent of a deceased veteran may claim this exemption. An unmarried person who owns property valued at $5,000 or more, or a married person, who, together with the spouse, owns property valued at $10,000 or more, is ineligible for this exemption.
(r) No individual residing in the State on the effective date of this amendment who would have been eligible for the exemption provided by the previous section 1 1/4 of this article had it not been repealed shall lose eligibility for the exemption as a result of this amendment.
ARTICLE 13A [TAX LIMITATION]
SECTION 1. (a) The maximum amount of any ad valorem tax on real property shall not exceed One percent (1%) of the full cash value of such property. The one percent (1%) tax to be collected by the counties and apportioned according to law to the districts within the counties.
(b) The limitation provided for in subdivision (a) shall not apply to ad valorem taxes or special assessments to pay the interest and redemption charges on any of the following:
(1) Indebtedness approved by the voters prior to July 1, 1978.
(2) Bonded indebtedness for the acquisition or improvement of real property approved on or after July 1, 1978, by two-thirds of the votes cast by the voters voting on the proposition.
(3) Bonded indebtedness incurred by a school district, community college district, or county office of education for the construction, reconstruction, rehabilitation, or replacement of school facilities, including the furnishing and equipping of school facilities, or the acquisition or lease of real property for school facilities, approved by 55 percent of the voters of the district or county, as appropriate, voting on the proposition on or after the effective date of the measure adding this paragraph. This paragraph shall apply only if the proposition approved by the voters and resulting in the bonded indebtedness includes all of the following accountability requirements: (A) A requirement that the proceeds from the sale of the bonds be used only for the purposes specified in Article XIII A, Section 1(b) (3), and not for any other purpose, including teacher and administrator salaries and other school operating expenses. (B) A list of the specific school facilities projects to be funded and certification that the school district board, community college board, or county office of education has evaluated safety, class size reduction, and information technology needs in developing that list. (C) A requirement that the school district board, community college board, or county office of education conduct an annual, independent performance audit to ensure that the funds have been expended only on the specific projects listed. (D) A requirement that the school district board, community college board, or county office of education conduct an annual, independent financial audit of the proceeds from the sale of the bonds until all of those proceeds have been expended for the school facilities projects.
(c) Notwithstanding any other provisions of law or of this Constitution, school districts, community college districts, and county offices of education may levy a 55 percent vote ad valorem tax pursuant to subdivision (b).
SECTION 2. (a) The “full cash value” means the county assessor’s valuation of real property as shown on the 1975-76 tax bill under “full cash value” or, thereafter, the appraised value of real property when purchased, newly constructed, or a change in ownership has occurred after the 1975 assessment. All real property not already assessed up to the 1975-76 full cash value may be reassessed to reflect that valuation. For purposes of this section, “newly constructed” does not include real property that is reconstructed after a disaster, as declared by the Governor, where the fair market value of the real property, as reconstructed, is comparable to its fair market value prior to the disaster. For purposes of this section, the term “newly constructed” does not include that portion of an existing structure that consists of the construction or reconstruction of seismic retrofitting components, as defined by the Legislature. However, the Legislature may provide that, under appropriate circumstances and pursuant to definitions and procedures established by the Legislature, any person over the age of 55 years who resides in property that is eligible for the homeowner’s exemption under subdivision (k) of Section 3 of Article XIII and any implementing legislation may transfer the base year value of the property entitled to exemption, with the adjustments authorized by subdivision (b), to any replacement dwelling of equal or lesser value located within the same county and purchased or newly constructed by that person as his or her principal residence within two years of the sale of the original property. For purposes of this section, “any person over the age of 55 years” includes a married couple one member of which is over the age of 55 years. For purposes of this section, “replacement dwelling” means a building, structure, or other shelter constituting a place of abode, whether real property or personal property, and any land on which it may be situated. For purposes of this section, a two-dwelling unit shall be considered as two separate single-family dwellings. This paragraph shall apply to any replacement dwelling that was purchased or newly constructed on or after November 5, 1986. In addition, the Legislature may authorize each county board of supervisors, after consultation with the local affected agencies within the county’s boundaries, to adopt an ordinance making the provisions of this subdivision relating to transfer of base year value also applicable to situations in which the replacement dwellings are located in that county and the original properties are located in another county within this State. For purposes of this paragraph, “local affected agency” means any city, special district, school district, or community college district that receives an annual property tax revenue allocation. This paragraph applies to any replacement dwelling that was purchased or newly constructed on or after the date the county adopted the provisions of this subdivision relating to transfer of base year value, but does not apply to any replacement dwelling that was purchased or newly constructed before November 9, 1988. The Legislature may extend the provisions of this subdivision relating to the transfer of base year values from original properties to replacement dwellings of homeowners over the age of 55 years to severely disabled homeowners, but only with respect to those replacement dwellings purchased or newly constructed on or after the effective date of this paragraph.
(b) The full cash value base may reflect from year to year the inflationary rate not to exceed 2 percent for any given year or reduction as shown in the consumer price index or comparable data for the area under taxing jurisdiction, or may be reduced to reflect substantial damage, destruction, or other factors causing a decline in value.
(c) For purposes of subdivision (a), the Legislature may provide that the term “newly constructed” does not include any of the following: (1) The construction or addition of any active solar energy system. (2) The construction or installation of any fire sprinkler system, other fire extinguishing system, fire detection system, or fire-related egress improvement, as defined by the Legislature, that is constructed or installed after the effective date of this paragraph. (3) The construction, installation, or modification on or after the effective date of this paragraph of any portion or structural component of a single- or multiple-family dwelling that is eligible for the homeowner’s exemption if the construction, installation, or modification is for the purpose of making the dwelling more accessible to a severely disabled person. (4) The construction, installation, removal, or modification on or after the effective date of this paragraph of any portion or structural component of an existing building or structure if the construction, installation, removal, or modification is for the purpose of making the building more accessible to, or more usable by, a disabled person.
(d) For purposes of this section, the term “change in ownership” does not include the acquisition of real property as a replacement for comparable property if the person acquiring the real property has been displaced from the property replaced by eminent domain proceedings, by acquisition by a public entity, or governmental action that has resulted in a judgment of inverse condemnation. The real property acquired shall be deemed comparable to the property replaced if it is similar in size, utility, and function, or if it conforms to state regulations defined by the Legislature governing the relocation of persons displaced by governmental actions. This subdivision applies to any property acquired after March 1, 1975, but affects only those assessments of that property that occur after the provisions of this subdivision take effect.
(e) (1) Notwithstanding any other provision of this section, the Legislature shall provide that the base year value of property that is substantially damaged or destroyed by a disaster, as declared by the Governor, may be transferred to comparable property within the same county that is acquired or newly constructed as a replacement for the substantially damaged or destroyed property. (2) Except as provided in paragraph (3), this subdivision applies to any comparable replacement property acquired or newly constructed on or after July 1, 1985, and to the determination of base year values for the 1985-86 fiscal year and fiscal years thereafter. (3) In addition to the transfer of base year value of property within the same county that is permitted by paragraph (1), the Legislature may authorize each county board of supervisors to adopt, after consultation with affected local agencies within the county, an ordinance allowing the transfer of the base year value of property that is located within another county in the State and is substantially damaged or destroyed by a disaster, as declared by the Governor, to comparable replacement property of equal or lesser value that is located within the adopting county and is acquired or newly constructed within three years of the substantial damage or destruction of the original property as a replacement for that property. The scope and amount of the benefit provided to a property owner by the transfer of base year value of property pursuant to this paragraph shall not exceed the scope and amount of the benefit provided to a property owner by the transfer of base year value of property pursuant to subdivision (a). For purposes of this paragraph, “affected local agency” means any city, special district, school district, or community college district that receives an annual allocation of ad valorem property tax revenues. This paragraph applies to any comparable replacement property that is acquired or newly constructed as a replacement for property substantially damaged or destroyed by a disaster, as declared by the Governor, occurring on or after October 20, 1991, and to the determination of base year values for the 1991-92 fiscal year and fiscal years thereafter.
(f) For the purposes of subdivision (e): (1) Property is substantially damaged or destroyed if it sustains physical damage amounting to more than 50 percent of its value immediately before the disaster. Damage includes a diminution in the value of property as a result of restricted access caused by the disaster. (2) Replacement property is comparable to the property substantially damaged or destroyed if it is similar in size, utility, and function to the property that it replaces, and if the fair market value of the acquired property is comparable to the fair market value of the replaced property prior to the disaster.
(g) For purposes of subdivision (a), the terms “purchased” and “change in ownership” do not include the purchase or transfer of real property between spouses since March 1, 1975, including, but not limited to, all of the following: (1) Transfers to a trustee for the beneficial use of a spouse, or the surviving spouse of a deceased transferor, or by a trustee of such a trust to the spouse of the trustor. (2) Transfers to a spouse that take effect upon the death of a spouse. (3) Transfers to a spouse or former spouse in connection with a property settlement agreement or decree of dissolution of a marriage or legal separation. (4) The creation, transfer, or termination, solely between spouses, of any coowner’s interest. (5) The distribution of a legal entity’s property to a spouse or former spouse in exchange for the interest of the spouse in the legal entity in connection with a property settlement agreement or a decree of dissolution of a marriage or legal separation.
(h) (1) For purposes of subdivision (a), the terms “purchased” and “change in ownership” do not include the purchase or transfer of the principal residence of the transferor in the case of a purchase or transfer between parents and their children, as defined by the Legislature, and the purchase or transfer of the first one million dollars ($1,000,000) of the full cash value of all other real property between parents and their children, as defined by the Legislature. This subdivision applies to both voluntary transfers and transfers resulting from a court order or judicial decree. (2) (A) Subject to subparagraph (B), commencing with purchases or transfers that occur on or after the date upon which the measure adding this paragraph becomes effective, the exclusion established by paragraph (1) also applies to a purchase or transfer of real property between grandparents and their grandchild or grandchildren, as defined by the Legislature, that otherwise qualifies under paragraph (1), if all of the parents of that grandchild or those grandchildren, who qualify as the children of the grandparents, are deceased as of the date of the purchase or transfer. (B) A purchase or transfer of a principal residence shall not be excluded pursuant to subparagraph (A) if the transferee grandchild or grandchildren also received a principal residence, or interest therein, through another purchase or transfer that was excludable pursuant to paragraph (1). The full cash value of any real property, other than a principal residence, that was transferred to the grandchild or grandchildren pursuant to a purchase or transfer that was excludable pursuant to paragraph (1), and the full cash value of a principal residence that fails to qualify for exclusion as a result of the preceding sentence, shall be included in applying, for purposes of subparagraph (A), the one-million-dollar ($1,000,000) full cash value limit specified in paragraph (1).
(i) (1) Notwithstanding any other provision of this section, the Legislature shall provide with respect to a qualified contaminated property, as defined in paragraph (2), that either, but not both, of the following apply: (A) (i) Subject to the limitation of clause (ii), the base year value of the qualified contaminated property, as adjusted as authorized by subdivision (b), may be transferred to a replacement property that is acquired or newly constructed as a replacement for the qualified contaminated property, if the replacement real property has a fair market value that is equal to or less than the fair market value of the qualified contaminated property if that property were not contaminated and, except as otherwise provided by this clause, is located within the same county. The base year value of the qualified contaminated property may be transferred to a replacement real property located within another county if the board of supervisors of that other county has, after consultation with the affected local agencies within that county, adopted a resolution authorizing an intercounty transfer of base year value as so described. (ii) This subparagraph applies only to replacement property that is acquired or newly constructed within five years after ownership in the qualified contaminated property is sold or otherwise transferred. (B) In the case in which the remediation of the environmental problems on the qualified contaminated property requires the destruction of, or results in substantial damage to, a structure located on that property, the term “new construction” does not include the repair of a substantially damaged structure, or the construction of a structure replacing a destroyed structure on the qualified contaminated property, performed after the remediation of the environmental problems on that property, provided that the repaired or replacement structure is similar in size, utility, and function to the original structure. (2) For purposes of this subdivision, “qualified contaminated property” means residential or nonresidential real property that is all of the following: (A) In the case of residential real property, rendered uninhabitable, and in the case of nonresidential real property, rendered unusable, as the result of either environmental problems, in the nature of and including, but not limited to, the presence of toxic or hazardous materials, or the remediation of those environmental problems, except where the existence of the environmental problems was known to the owner, or to a related individual or entity as described in paragraph (3), at the time the real property was acquired or constructed. For purposes of this subparagraph, residential real property is “uninhabitable” if that property, as a result of health hazards caused by or associated with the environmental problems, is unfit for human habitation, and nonresidential real property is “unusable” if that property, as a result of health hazards caused by or associated with the environmental problems, is unhealthy and unsuitable for occupancy. (B) Located on a site that has been designated as a toxic or environmental hazard or as an environmental cleanup site by an agency of the State of California or the federal government. (C) Real property that contains a structure or structures thereon prior to the completion of environmental cleanup activities, and that structure or structures are substantially damaged or destroyed as a result of those environmental cleanup activities. (D) Stipulated by the lead governmental agency, with respect to the environmental problems or environmental cleanup of the real property, not to have been rendered uninhabitable or unusable, as applicable, as described in subparagraph (A), by any act or omission in which an owner of that real property participated or acquiesced. (3) It shall be rebuttably presumed that an owner of the real property participated or acquiesced in any act or omission that rendered the real property uninhabitable or unusable, as applicable, if that owner is related to any individual or entity that committed that act or omission in any of the following ways: (A) Is a spouse, parent, child, grandparent, grandchild, or sibling of that individual. (B) Is a corporate parent, subsidiary, or affiliate of that entity. (C) Is an owner of, or has control of, that entity. (D) Is owned or controlled by that entity. If this presumption is not overcome, the owner shall not receive the relief provided for in subparagraph (A) or (B) of paragraph (1). The presumption may be overcome by presentation of satisfactory evidence to the assessor, who shall not be bound by the findings of the lead governmental agency in determining whether the presumption has been overcome. (4) This subdivision applies only to replacement property that is acquired or constructed on or after January 1, 1995, and to property repairs performed on or after that date.
(j) Unless specifically provided otherwise, amendments to this section adopted prior to November 1, 1988, are effective for changes in ownership that occur, and new construction that is completed, after the effective date of the amendment. Unless specifically provided otherwise, amendments to this section adopted after November 1, 1988, are effective for changes in ownership that occur, and new construction that is completed, on or after the effective date of the amendment.
SEC. 3. (a) Any change in state statute which results in any taxpayer paying a higher tax must be imposed by an act passed by not less than two-thirds of all members elected to each of the two houses of the Legislature, except that no new ad valorem taxes on real property, or sales or transaction taxes on the sales of real property may be imposed.
(b) As used in this section, “tax” means any levy, charge, or exaction of any kind imposed by the State, except the following: (1) A charge imposed for a specific benefit conferred or privilege granted directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the State of conferring the benefit or granting the privilege to the payor. (2) A charge imposed for a specific government service or product provided directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the State of providing the service or product to the payor. (3) A charge imposed for the reasonable regulatory costs to the State incident to issuing licenses and permits, performing investigations, inspections, and audits, enforcing agricultural marketing orders, and the administrative enforcement and adjudication thereof. (4) A charge imposed for entrance to or use of state property, or the purchase, rental, or lease of state property, except charges governed by Section 15 of Article XI. (5) A fine, penalty, or other monetary charge imposed by the judicial branch of government or the State, as a result of a violation of law.
(c) Any tax adopted after January 1, 2010, but prior to the effective date of this act, that was not adopted in compliance with the requirements of this section is void 12 months after the effective date of this act unless the tax is reenacted by the Legislature and signed into law by the Governor in compliance with the requirements of this section.
(d) The State bears the burden of proving by a preponderance of the evidence that a levy, charge, or other exaction is not a tax, that the amount is no more than necessary to cover the reasonable costs of the governmental activity, and that the manner in which those costs are allocated to a payor bear a fair or reasonable relationship to the payor’s burdens on, or benefits received from, the governmental activity.
Amador Valley Joint Union high School Dist. v. State Board of Equalization (1978), 22 Cal.3d 20
Amador Valley Joint Union High Sch. Dist. v. State Bd. of Equalization (1978), 22 Cal.3d 208, 149 Cal.Rptr. 239
RICHARDSON, Justice.
In these consolidated cases, we consider multiple constitutional challenges to an initiative measure which was adopted by the voters of this state at the June 1978 primary election. This measure, designated on the ballot as Proposition 13 and commonly known as the Jarvis-Gann initiative, added article XIII A to the California Constitution.
It is a fundamental precept of our law that, although the legislative power under our constitutional framework is firmly vested in the Legislature, “the people reserve to themselves the powers of initiative and referendum.” (Cal.Const., art. IV, s 1.) It follows from this that, “the power of initiative must be liberally construed . . . to promote the democratic process.”
The petitioners’ primary argument is that article XIII A represents such a drastic and far-reaching change in the nature and operation of our governmental structure that it must be considered a “revision” of the state Constitution rather than a mere “amendment” thereof. As will appear, although the voters may accomplish an amendment by the initiative process, a constitutional revision may be adopted only after the convening of a constitutional convention and popular ratification or by legislative submission to the people.
Prior to 1962 a constitutional revision could be accomplished only by the elaborate procedure of the convening of, and action by, a constitutional convention (art. XVIII, s 2). This fact suggests that the term “revision” in section XVIII originally was intended to refer to a substantial alteration of the entire Constitution, rather than to a less extensive change in one or more of its provisions. Many years ago, we described the fundamental distinction between revision and amendment as follows: “The very term ‘constitution’ implies an instrument of a permanent and abiding nature, and the provisions contained therein for its revision indicate the will of the people that the underlying principles upon which it rests, as well as the substantial entirety of the instrument, shall be of a like permanent and abiding nature. On the other hand, the significance of the term ‘amendment’ implies such an addition or change within the lines of the original instrument as will effect an improvement, or better carry out the purpose for which it was framed.”
Our analysis in determining whether a particular constitutional enactment is a revision or an amendment must be both quantitative and qualitative in nature. For example, an enactment which is so extensive in its provisions as to change directly the “substantial entirety” of the Constitution by the deletion or alteration of numerous existing provisions may well constitute a revision thereof. However, even a relatively simple enactment may accomplish such far reaching changes in the nature of our basic governmental plan as to amount to a revision also.
Petitioners insist, however, that the new article also will have far reaching qualitative effects upon our basic governmental plan, in two principal particulars, namely, (1) the loss of “home rule” and (2) the conversion of our governmental framework from “republican” to “democratic” form. A close analysis of XIII A convinces us that its probable effects are not as fundamentally disruptive as petitioners suggest.
[Discussion of the home-rule challenge is omitted.]
b.) Loss of republican form of government. Continuing their thesis that XIII A is a constitutional revision not an amendment . . ., petitioners next maintain that the operation of the article, and particularly section 4 thereof, will result in a change from a “republican” form of government (i. e., lawmaking by elected representatives) to a “democratic” governmental plan (i. e., lawmaking directly by the people).
Contrary to petitioners’ assertion, however, we are convinced that article XIII A is more modest both in concept and effect and does not change our basic governmental plan. Following the adoption of article XIII A both local and state government will continue to function through the traditional system of elected representation. Other than in the limited area of taxation, the authority of local government to enact appropriate laws and regulations remains wholly unimpaired. The requirement of section 4 that any “special taxes” must be approved by a two-thirds vote of the “qualified electors” restricts but does not abolish the power of local governments in the raising of revenue. We decline to hold that such a “super-majority” requirement, the two-thirds vote, standing alone and limited to the subject of taxes, constitutes a substantial constitutional revision which cannot be accomplished through an initiative.
Notwithstanding our continuing representative and republican form of government, the initiative process itself adds an important element of direct, active, democratic contribution by the people. We thus conclude that section 4 of article XIII A, and its requirement of substantial popular support, beyond that of a bare majority for the approval and adoption of “special” local taxes adds nothing novel to the existing governmental framework of this state.
In summary, we believe that it is apparent that article XIII A will result in various substantial changes in the operation of the former system of taxation. Yet the article XIII A changes operate functionally within a relatively narrow range to accomplish a new system of taxation which may provide substantial tax relief for our citizens. We decline to hold that such a limited purpose cannot be achieved directly by the people through the initiative process.
Although we express neither approval nor disapproval of the article from the standpoint of sound fiscal or social policy, we find nothing in the Constitution’s revision and amendment provisions (art. XVIII) which would prevent the people of this state from exercising their will in the manner herein accomplished. Indeed, if the foregoing description of the initiative as a “legislative battering ram” is accurate it would seem anomalous to insist, as petitioners in effect do, that the sovereign people cannot themselves act directly to adopt tax relief measures of this kind, but instead must defer to the Legislature, their own representatives. We conclude that article XIII A fairly may be deemed a constitutional amendment, not a revision
CONCLUSION
Petitioners and the amici curiae who support them have mounted substantial and serious legal challenges to the provisions of article XIII A. In doing so they have expressed a commendable and sincere concern that the modifications of the California tax system which are mandated by the new article will impose intolerable financial hardships and administrative burdens in different forms and with varying intensity on public entities, programs, and services throughout California. Yet, as we have recently acknowledged, it is our solemn duty “to jealously guard” the initiative power, it being “one of the most precious rights of our democratic process.” Consistent with our own precedent, in our approach to the constitutional analysis of article XIII A if doubts reasonably can be resolved in favor of the use of the initiative, we should so resolve them. This we have done.
Having carefully considered them, we have concluded that article XIII A survives each of the substantial challenges raised by petitioners. The orders to show cause previously issued in these cases are discharged, and the respective petitions are denied.
Los Angeles County Transportation Commission v. Richmond (1982), 31 Cal.3d 197
Los Angeles County Transportation Commission v. Richmond (1982), 31 Cal.3d 197, 643 P.2d 941, 182 Cal.Rptr. 324
MOSK, J.
The issue in this case is whether the Los Angeles County Transportation Commission (LACTC) may, consistent with the provisions of section 4 of article XIII A of the California Constitution, impose a “retail transaction and use tax” in Los Angeles County with the consent of a majority of the voters, but less than two-thirds of their number.
On June 6, 1978, the voters approved Proposition 13 by initiative (now Cal. Const., art. XIII A). Section 4 of article XIII A provides, “Cities, Counties and special districts, by a two-thirds vote of the qualified electors of such district, may impose special taxes on such district, except ad valorem taxes on real property or a transaction tax or sales tax on the sale of real property within such City, County or special district.”
Following adoption of Proposition 13, LACTC enacted a sales tax in accordance with the requirements of the Public Utilities Code, and the voters of the county approved the measure by a 54 percent majority in November 1980. George U. Richmond, LACTC’s own executive director, refused to take steps to implement the tax3 upon the advice of the Attorney General that the measure was not adopted in accordance with the requirements of section 4 because it had not received the approval of two-thirds of the voters.
In Amador Valley Joint Union High Sch. Dist. v. State Bd. of Equalization (1978) 22 Cal.3d 208 [149 Cal.Rptr. 239, 583 P.2d 1281], we upheld the validity of article XIII A against a broad range of challenges to its constitutionality. We emphasized, however, that problems which might arise respecting the interpretation of particular provisions of the measure were deferred for resolution in future cases in which the application of such provisions were in issue.
This case involves the application of section 4 to the sales tax enacted by LACTC and adopted by a majority of the voters of Los Angeles County. We must decide whether imposition of the tax violates the prohibition against the levy of a “special tax” by a “special district” without a two-thirds vote of the electors. We shall conclude that the tax was validly adopted by a majority vote because LACTC is not a “special district” within the meaning of section 4. As we explain below, the goal of article XIII A is real property tax relief, and a governmental body like LACTC, which does not have the power to levy a property tax, is not the type of “special district” governed by the section.
Before considering which of these various definitions is appropriate in the context of section 4, we examine an issue not raised by the parties but which we view as critical to our conclusion: the standard that is proper in interpreting the ambiguous language of section 4.
In applying these rules, we cannot overlook the nature and effect of the two-thirds vote requirement set forth in section 4. By its terms, a majority – but less than two-thirds – of the voters statewide6 has determined that in a local election involving a matter of primarily local interest, a minority of voters can preclude the majority from imposing a “special tax” confined to the taxpayers of the local entity, to finance local projects or services.
In resolving the meaning of the ambiguous language of section 4, it is appropriate to consider the substance and effect of the extraordinary majority requirement.
We discern some significance in the fact that section 4 was adopted by the voters throughout the state, whereas the extraordinary majority requirement is imposed on local entities. In theory, a bare majority of voters in a statewide election may decide that the affirmative votes of even 65 percent of the electorate of a local entity are insufficient for adoption of a tax which substantially affects the taxpayers of the local entity. The sales tax enacted here by LACTC is of primary concern to local voters: the taxpayers of the district pay the bulk of the tax with their purchases, rather than the population of the state as a whole; the tax is adopted for the purpose of supporting programs or services for the local population; and it is the electors of the district who demonstrate by a majority vote that they are willing to increase their taxes. Yet because a majority of the voters of the state has determined that a two-thirds vote is required to adopt the tax, the will of the majority of the local voters may not prevail.
The purpose of our discussion is not to throw doubt on the constitutionality of the two-thirds vote requirement in section 4, but rather to establish the framework in which the ambiguity in the language of the provision should be resolved. In view of the fundamentally undemocratic nature of the requirement for an extraordinary majority and the matters discussed above, the language of section 4 must be strictly construed and ambiguities resolved in favor of permitting voters of cities, counties and “special districts” to enact “special taxes” by a majority rather than a two-thirds vote.
[Justice Mosk concluded:] Since the aim of the legislation was to broaden the rights of local entities to adopt taxes, the application of the definition contained in section 50077 to limit these rights would be unwarranted. There is nothing to indicate that the Legislature intended to withdraw from a local entity like LACTC the power to levy a tax by a majority vote if Proposition 13 did not compel such a restriction.
We hold that the sales tax in issue here was validly adopted by a majority vote and that, therefore, Richmond must take appropriate steps to implement its imposition.
Let a peremptory writ of mandate issue as prayed.
Nordlinger v. Hahn, 505 U.S. 1 (1992)
Justice BLACKMUN delivered the opinion of the Court.
In 1978, California voters staged what has been described as a property tax revolt1 by approving a statewide ballot initiative known as Proposition 13. The adoption of Proposition 13 served to amend the California Constitution to impose strict limits on the rate at which real property is taxed and on the rate at which real property assessments are increased from year to year. In this litigation, we consider a challenge under the Equal Protection Clause of the Fourteenth Amendment to the manner in which real property now is assessed under the California Constitution
By 1978, property tax relief had emerged as a major political issue in California. In only one month’s time, tax relief advocates collected over 1.2 million signatures to qualify Proposition 13 for the June 1978 ballot. On election day, Proposition 13 received a favorable vote of 64.8% and carried 55 of the State’s 58 counties.. California thus had a novel constitutional amendment that led to a property tax cut of approximately $7 billion in the first year. A California homeowner with a $50,000 home enjoyed an immediate reduction of about $750 per year in property taxes
Article XIIIA combines a 1% ceiling on the property tax rate with a 2% cap on annual increases in assessed valuations. The assessment limitation, however, is subject to the exception that new construction or a change of ownership triggers a reassessment up to current appraised value. Thus, the assessment provisions of Article XIIIA essentially embody an “acquisition value” system of taxation rather than the more commonplace “current value” taxation. Real property is assessed at values related to the value of the property at the time it is acquired by the taxpayer rather than to the value it has in the current real estate market.
Over time, this acquisition-value system has created dramatic disparities in the taxes paid by persons owning similar pieces of property. Property values in California have inflated far in excess of the allowed 2% cap on increases in assessments for property that is not newly constructed or that has not changed hands. As a result, longer term property owners pay lower property taxes reflecting historic property values, while newer owners pay higher property taxes reflecting more recent values. For that reason, Proposition 13 has been labeled by some as a “welcome stranger” system-the newcomer to an established community is “welcome” in anticipation that he will contribute a larger percentage of support for local government than his settled neighbor who owns a comparable home.
The Equal Protection Clause of the Fourteenth Amendment, § 1, commands that no State shall “deny to any person within its jurisdiction the equal protection of the laws.” Of course, most laws differentiate in some fashion between classes of persons. The Equal Protection Clause does not forbid classifications. It simply keeps governmental decisionmakers from treating differently persons who are in all relevant respects alike.
The appropriate standard of review is whether the difference in treatment between newer and older owners rationally furthers a legitimate state interest. In general, the Equal Protection Clause is satisfied so long as there is a plausible policy reason for the classification, the legislative facts on which the classification is apparently based rationally may have been considered to be true by the governmental decisionmaker, and the relationship of the classification to its goal is not so attenuated as to render the distinction arbitrary or irrational. This standard is especially deferential in the context of classifications made by complex tax laws.
We have no difficulty in ascertaining at least two rational or reasonable considerations of difference or policy that justify denying petitioner the benefits of her neighbors’ lower assessments. First, the State has a legitimate interest in local neighborhood preservation, continuity, and stability. The State therefore legitimately can decide to structure its tax system to discourage rapid turnover in ownership of homes and businesses, for example, in order to inhibit displacement of lower income families by the forces of gentrification or of established, “mom-and-pop” businesses by newer chain operations. By permitting older owners to pay progressively less in taxes than new owners of comparable property, the Article XIIIA assessment scheme rationally furthers this interest.
Second, the State legitimately can conclude that a new owner at the time of acquiring his property does not have the same reliance interest warranting protection against higher taxes as does an existing owner.
Petitioner and amici argue with some appeal that Article XIIIA frustrates the “American dream” of home ownership for many younger and poorer California families. They argue that Article XIIIA places startup businesses that depend on ownership of property at a severe disadvantage in competing with established businesses. They argue that Article XIIIA dampens demand for and construction of new housing and buildings. And they argue that Article XIIIA constricts local tax revenues at the expense of public education and vital services.
Time and again, however, this Court has made clear in the rational-basis context that the “Constitution presumes that, absent some reason to infer antipathy, even improvident decisions will eventually be rectified by the democratic process and that judicial intervention is generally unwarranted no matter how unwisely we may think a political branch has acted”. Certainly, California’s grand experiment appears to vest benefits in a broad, powerful, and entrenched segment of society, and, as the Court of Appeal surmised, ordinary democratic processes may be unlikely to prompt its reconsideration or repeal. Yet many wise and well-intentioned laws suffer from the same malady. Article XIIIA is not palpably arbitrary, and we must decline petitioner’s request to upset the will of the people of California.
The judgment of the Court of Appeal is affirmed.
“California Proposition 13” (Ballotopedia)
Arthur O’Sullivan, Property Tax Revolts
Bruce Bartlett, “Proposition 13 at Age 35”
Spending and public finance
Cal. Constitution Art. XIIIB
CALIFORNIA CONSTITUTION
ARTICLE 13B GOVERNMENT SPENDING LIMITATION
SEC. 1. The total annual appropriations subject to limitation of the State and of each local government shall not exceed the appropriations limit of the entity of government for the prior year adjusted for the change in the cost of living and the change in population, except as otherwise provided in this article.
SEC. 6. (a) Whenever the Legislature or any state agency mandates a new program or higher level of service on any local government, the State shall provide a subvention of funds to reimburse that local government for the costs of the program or increased level of service, except that the Legislature may, but need not, provide a subvention of funds for the following mandates: (1) Legislative mandates requested by the local agency affected. (2) Legislation defining a new crime or changing an existing definition of a crime. (3) Legislative mandates enacted prior to January 1, 1975, or executive orders or regulations initially implementing legislation enacted prior to January 1, 1975. (4) Legislative mandates contained in statutes within the scope of paragraph (7) of subdivision (b) of Section 3 of Article I.
(b) (1) Except as provided in paragraph (2), for the 2005-06 fiscal year and every subsequent fiscal year, for a mandate for which the costs of a local government claimant have been determined in a preceding fiscal year to be payable by the State pursuant to law, the Legislature shall either appropriate, in the annual Budget Act, the full payable amount that has not been previously paid, or suspend the operation of the mandate for the fiscal year for which the annual Budget Act is applicable in a manner prescribed by law. (2) Payable claims for costs incurred prior to the 2004-05 fiscal year that have not been paid prior to the 2005-06 fiscal year may be paid over a term of years, as prescribed by law. (3) Ad valorem property tax revenues shall not be used to reimburse a local government for the costs of a new program or higher level of service. (4) This subdivision applies to a mandate only as it affects a city, county, city and county, or special district. (5) This subdivision shall not apply to a requirement to provide or recognize any procedural or substantive protection, right, benefit, or employment status of any local government employee or retiree, or of any local government employee organization, that arises from, affects, or directly relates to future, current, or past local government employment and that constitutes a mandate subject to this section.
(c) A mandated new program or higher level of service includes a transfer by the Legislature from the State to cities, counties, cities and counties, or special districts of complete or partial financial responsibility for a required program for which the State previously had complete or partial financial responsibility.
SEC. 9. “Appropriations subject to limitation” for each entity of government do not include: (a) Appropriations for debt service. (b) Appropriations required to comply with mandates of the courts or the federal government which, without discretion, require an expenditure for additional services or which unavoidably make the provision of existing services more costly.
[subsequent sub-sections omitted. Ed.]
Richard Cunningham, [Introduction], in Joseph Grodin et al., The California State Constitution
Richard B. Cunningham, [introduction to Art. XIIIB, ]
in Joseph Grodin et al., The California State Constitution (2011), pp. 273-274.
Government Spending Limitation
Article XIII B, adopted by the voters in 1979, was widely known as the Gann initiative, named after its primary author and sponsor. It was also called the Spirit of 13 initiative, reflecting its close relationship to the government limitation philosophy of Proposition 13 (which had become Article XIII A the previous year). It was proposed primarily as a means of limiting the rate of growth of “state and local government spending.” It was incidentally intended to “close loopholes” that had been discovered in Proposition 13, curb government waste and user fees, and refund excess state tax funds to the taxpayers.5 As such, it has become the subject of extremely contentious political maneuvering among the legislature, taxpayer groups, local governments, and a school financing reform movement.
For the first six years after its adoption, the spending limitations created by the article had little actual effect on the state or local governments, since various economic factors operated to keep government expenditures below the limits created by the article. By the 1986-1987 fiscal year; however, the gap between the limit and government revenues had narrowed, and the limited threatened to become an effective restraint on government appropriations.6 But at that juncture, several other factors became important.
The potential impact of Article XIII B had been recognized as an opportunity by other citizens who were interested in reform of education at grade levels kindergarten through 12. As first adopted, the article had required the state government to refund excess tax revenues to the citizenry; advocates of education opposed refunds of revenue as long as schools allegedly remained inadequately funded. In 1988, they successfully urged the adoption of Proposition 98, which amended the article to require that “excess” funds be used to establish a minimum guaranteed level of funding for public schools.
Neither the original government limitation nor the school funding goals will ever be realized, however, because amendments proposed by legislature and adopted in 1990 substantially reduced the article’s impact on the budget processes of both state and local governments. Those changes were included in Proposition 111, the Traffic Congestion Relief and Spending Limitation Act of 1990, whose announced purpose was to change the spending limit in order to permit certain highway and mass transit expenditures to be made. The amendments not only made possible various expenditures for transportation but fundamentally altered the effect of the limitation on the entire state budget. As amended, the article is not expected to serve as an effective restraint on general state expenditures until “sometime during the first half of the 21st century.”7 The same 1990 amendments substantially reduced the size of the recently added guarantee of funding for schools.
Although its impact on expenditures by the state was blunted by the 1990 amendments, the article will apparently continue to limit the appropriations of local governments, which are expansively defined in section 8(d) to include effectively all forms of local government in the state. As a result, several of the sections will have a merely theoretical impact on state financing and should be analyzed instead in terms of the revenue, budgeting, and expenditure activities of local governments.
A distinct feature of the article eventually may prove to have constitutional implications that overshadow the importance of spending limits, refunds, or education budgets. Section 6 will have a major impact on the decision as to whether particular government services will continue to be performed, and paid for, by the state rather than by local levels of government. As such, it will restrain the legislature’s attempts to force local governments to absorb the financial burden of new programs or other expenditures that are made necessary by state legislative action.
County of Placer v. Corin (1980), 113 Cal.App.3d 443
County of Placer v. Corin (1980), 113 Cal.App.3d 443, 170 Cal.Rptr. 232
CARR, Associate Justice.
In this mandate proceeding, the issue is whether “proceeds of taxes” as used in Article XIII B of the California Constitution includes 1) special assessments of an assessment district and/or 2) federal grants made directly to a local entity for improvements within the assessment district.
Article XIII B was adopted less than 18 months after the addition of Article XIII A to the state Constitution, and was billed as “the next logical step to Proposition 13” (Article XIII A). While Article XIII A was generally aimed at controlling ad valorem property taxes and the imposition of new “special taxes”, the thrust of Article XIII B is toward placing certain limitations on the growth of appropriations at both the state and local government level; in particular, Article XIII B places limits on the authorization to expend the “proceeds of taxes.”
Respondent contends the funds derived from the exercise of the power of assessment and from federal grant proceeds used to pay the costs and expenses of acquisitions and improvements, are encompassed within “proceeds of taxes” and must be included in the county’s appropriations subject to limitation.
This issue is one of substantial importance, involving the continued viability of provisions for initiating and completing special improvements. “For over 60 years these laws have provided the most widely used procedure in California for the construction of a variety of public improvements including streets, sewers, sidewalks, water systems, lighting and public utility lines; property owners benefited by the improvements pay for these improvements either in cash or, at their option, by installments over a period of time.”
Our analysis of Article XIII B, section 8, subdivision (c), compels the conclusion that the framers of the initiative did not intend to include the proceeds derived from special assessments to be included within the “not restricted to” language of “proceeds of taxes.” While respondent correctly asserts that assessments are a function of the general power of taxation “there is a broad and well-recognized distinction between a tax levied for the general public good and without special regard to the benefit conferred upon the individual or property subject to the tax, and a special assessment levied to force the payment of a benefit, …
Under Article XIII B, with the exception of state subventions, the items that make up the scope of “proceeds of taxes” concern charges levied to raise general revenues for the local entity. “Proceeds of taxes,” in addition to “all tax revenues” includes “proceeds … from … ‘regulatory licenses, user charges, and user fees (only) ’ to the extent that such proceeds exceed the costs reasonably borne by such entity in providing the regulation, product or service….” Such “excess” regulatory or user fees are but taxes for the raising of general revenue for the entity Moreover, to the extent that an assessment results in revenue above the cost of the improvement or is of general public benefit, it is no longer a special assessment but a tax. We conclude “proceeds of taxes” generally contemplates only those impositions which raise general tax revenues for the entity.
We determine that Article XIII B does no more than place a ceiling on the expenditure of general state and local tax revenues and does not encompass special assessments and federal grants of the kind before us in the case at bench.
Let a peremptory writ of mandate issue.
Richard Briffault, “The Disfavored Constitution”
Richard Briffault, “Foreword: The Disfavored Constitution: State Fiscal Limits and State Constitutional Law,” 34 Rutgers L. J. 907 (2003)
I. Introduction
The dominant theme in the resurgent state constitutional jurisprudence of the last quarter-century has been the effort of many scholars and jurists to find in state constitutions a progressive alternative to the conservative turn federal constitutional doctrine has taken in the Burger and Rehnquist eras. Following the tone set by Justice William Brennan’s path-breaking 1977 article in the Harvard Law Review,1 the state constitutional law literature has sought a more expansive protection of civil liberties through state constitutional provisions dealing with criminal law and procedure,2 freedom of expression,3 and equality,4 and to ground positive rights to public services in state constitutional measures dealing with such affirmative governmental duties as education,5 welfare,6 and housing.7
With much of the analysis of state constitutional law focused on the failings of federal constitutional law,8 far less attention has been paid to a distinctive feature of state constitutions that has little to do with civil liberties or positive rights – the many provisions that seek to protect taxpayers by limiting the activities and costs of government. The Federal Constitution says next to nothing about public finance, and when it does so, it either provides authority for congressional action9 or sets procedures for raising and spending money.10 It places just a handful of substantive constraints on federal taxation11 and no restrictions on federal borrowing at all. By contrast, state constitutions accord extensive consideration to state and local spending, borrowing, and taxing. State constitutions limit the purposes for which states and localities can spend or lend their funds, and expressly address specific spending techniques.12 These “public purpose” *909 provisions narrow the range of government action and limit public sector support for private sector activities. Nearly all state constitutions impose significant substantive or procedural restrictions on state and local borrowing.13 A considerable number also limit state and local taxation.14 These provisions may be said to constitutionalize a norm of taxpayer protection.
Fiscal limits, as well as positive rights, thus characterize state constitutional law. Indeed, the states’ fiscal constitutional provisions may offset the more widely heralded positive rights provisions. By giving priority to taxpayers over service recipients, these provisions can make it more difficult for states and localities to raise funds to finance public services.
But the real significance of fiscal limits in understanding state constitutional law is neither the barriers they create for the financing of public programs called for by positive rights advocates, nor the challenge they pose to the progressive image of state constitutional law that has dominated contemporary scholarly writing in the field. Rather, the most important lesson they provide grows out of the uncertain effect these provisions have had in actually controlling state and local finances. There is an enormous gap between the written provisions of state constitutions and actual practice. State legislatures and local governments have repeatedly sought to expand the scope of “public purpose” and to slip the restraints of the tax and debt limits.15 Increasingly, these efforts have won the approval of state courts.
Judicial interpretations have effectively nullified the public purpose requirements that ostensibly prevent state and local spending, lending, and borrowing in aid of private endeavors. Supreme court decisions in many states have also held that a host of financial instruments are beyond the scope of the constitutional debt limitations. As a result, although debt limits have altered the forms of state and local borrowing, they probably have had only a modest effect on aggregate state and local debt. The constitutional constraints on state and local taxation have been more effective, but their impact has been cushioned by judicial determinations that certain revenue-raising devices are not taxes subject to constitutional limitation.
This Article examines these fiscal limits and their significance for state constitutional law. I refer to these limits as the “disfavored constitution” for two reasons. First, they have been disfavored by state constitutional law scholars, who have largely ignored the state fiscal constitution in favor of other state constitutional provisions. Second, to a considerable degree, they have been disfavored by state courts, who frequently read the fiscal provisions narrowly, technically, and formalistically – often more like bond indentures than statements of important constitutional norms.16
IV. Tax and Expenditure Limitations: Proposition 13 and the State Fiscal Constitution
State constitutional provisions dealing with taxation and expenditure levels are both less widespread and more diverse than public purpose requirements and debt limitation provisions. Some state constitutions are silent on the subject; in others, the tax provisions, like those in the Federal Constitution, are primarily facilitative or structural rather than restrictive. They authorize certain kinds of taxation, determine which level of government shall levy what kind of tax, or establish the basic ground rules for taxation, such as the requirement of uniformity of assessments and rates,100 the classification of different categories of property or activity for different rates of taxation, or the provision of exemptions from taxation. These provisions may have some effect on state and local tax policy and may indirectly limit overall revenues,101 but their thrust is to define and assure the equal treatment of taxpayers rather than to limit tax levels per se.
Tax limitation, however, is an important theme in the state fiscal constitution, and one of growing significance. More than half the state constitutions include some substantive or procedural limitation on the level of state or local taxing or the level of spending funded by own-source revenues. Although some constitutional measures are addressed to the sales tax,102 the income tax,103 or taxation generally,104 most limitations are focused on the property tax – historically the most important form of subnational taxation and still the single most important form of local own-source revenue.105
Like the debt limitations, tax limits take many forms: limits on the property tax rate;106 limits on the increase in assessed valuation and thus on the year-to-year change in the tax liability of the property owner;107 limits on the rate of increase in state expenditures and in the revenues needed to fund them;108 and requirements that new or increased taxes be subject to either a legislative supermajority or voter approval (sometimes with popular supermajorities).109
1. Proposition 13 and Its Aftermath
The earliest tax limitations appeared in state statutes during the 1870s and 1880s and were later incorporated in many state constitutions.110 These statutes capped property tax rates at a fraction of property values. A “second round of constitutional tax limitations appeared during the Depression of the 1930s. They were aimed at forcing tax reductions, thereby stemming the tide of tax delinquencies and tax foreclosures of residential property.”111 But the most important event in the development of tax limitations – the “constitutional moment” for tax limitation comparable to the Panic of 1837 and its aftermath for public purpose and debt limitations – was in June 1978 when California adopted Proposition 13.112
Proposition 13 was a response to soaring property taxes in California, a surge attributable to housing price inflation, which was “translated automatically into higher assessed valuations.”113 When local governments failed to lower property tax rates and the state legislature failed to provide tax relief, Howard Jarvis, “a longtime opponent of government spending and ardent champion of lower taxes, organized a campaign” to get a tax relief constitutional amendment on the ballot and enacted by the voters.114
Although it built on popular concern about the property tax, Proposition 13’s reach swept well beyond that tax. Its initial provision was a relatively traditional cap on the property tax rate as a percentage of property value;115 other provisions broke new constitutional ground. Section 2 rolled back property assessments,116 but more significantly, limited future reassessments, except upon change in ownership, to the lesser of 2% per year or the rate of inflation.117 This measure, which has been emulated by six other state constitutions,118 secures property owners against inflation, while producing significantly different tax liabilities for owners of identically valued parcels, depending on when they were purchased.119 Section 3 went beyond the property tax by requiring that any increase in any state tax must first be adopted by a two-thirds vote in each house of the legislature.120 Section 4 provided that a city, county, or special district may impose a “special tax” in addition to the now-restricted property tax only with the approval of two-thirds of local voters.121
Proposition 13 had a catalytic effect, sparking tax revolts and anti-tax constitutional amendments around the country.122 Some of these focused on the property tax, while others, like Proposition 13 itself, were far more ambitious.
2. Tax Limitations and the Rise of Non-Tax Revenues
Modern tax and expenditure limitations appear to have had a real impact on state and local finances. Property tax levels, as well as the role of the property tax in financing local government, have dropped sharply across the United States, particularly in the states that adopted the most stringent property tax limitations.139 The effects of the comprehensive state revenue or expenditure limitations on state government are more uncertain, however, with some researchers finding they have had little effect,140 while others conclude that they have slowed government revenue growth.141
The effect of the tax limits in holding down the property tax, however, have been offset to some degree by increases in other local taxes and, especially, by the dramatic growth in the local use of fees, user charges, and special assessments.142 The rise in these “non-tax taxes” has had multiple policy, ideological, and political causes – but surely evasion of the tax limits is one of them.
There are many reasons, apart from the proliferation of tax limitations, for the increased utilization of special assessments, fees, and charges. Yet the explosion in special taxes, fees, charges, and assessments at the state and local level in recent decades is due at least in part to the desire to evade the legal constraints on taxation resulting from Proposition 13 and its aftermath. Where the property tax is tightly limited, other taxes and non-tax revenue sources become far more legally and politically appealing. This has been facilitated by judicial decisions narrowing the scope of constitutional restrictions. For example, shortly after Proposition 13’s adoption, the California Supreme Court undermined the amendment’s restriction on local revenue sources other than the property tax.145 Section 4 of the amendment provides that a city, county, or “special district” may impose or increase a “special tax” only with the approval of two-thirds of local voters.146 One reading of this provision might be that it conditions all local taxes other than the property tax, which is restricted by the amendment’s other provisions, on local voter approval. But the court concluded that “special tax” refers only to *934 taxes whose proceeds are specially earmarked for a specific program.147 Taxes that produce revenue for the local general fund were deemed not “special” and therefore not subject to restriction.148 Similarly, while the voters might have thought that “special district” was an omnibus term for the many types of local governments other than cities and counties, the California court held that the term applies only to local governments with the power to impose the property tax.149 As a result, local governments without power to impose a property tax could adopt other new local taxes without obtaining supermajority approval from local voters.150
More generally, state courts have exempted a host of special assessments, fees, and charges from tax limitations. These decisions grow out of, but often expand, the longstanding judicial determination that fees, charges, and assessments are not taxes because they lack the hallmarks of taxation – coercion and potential for retribution. Special assessments are charges to property to finance new public infrastructure directly adjacent or connecting to the payer’s property, such as street or sidewalk paving, electric lighting, or connections to water and sewer lines. Special assessments are coercive; the payer must pay and receive the benefit whether she wants to or not, but they are not redistributive as the payer must be provided with a benefit worth at least as much as the assessment paid. Consequently, a special assessment is considered not to be a tax.151 User charges are not coercive because the obligation to pay the charge is incurred only when someone chooses to use the service subject to the charge. Similarly, for a regulatory fee intended to offset the cost of regulating a fee payer whose activity imposes some costs on the community, the fee is nominally voluntary since the duty to pay arises from the payer’s decision to undertake the activity subject to regulation. By not consuming the service or avoiding the activity, the payer could avoid the charge or fee. So, too, by reducing the amount of service consumed or the amount of activity subject to regulation, the payer can reduce her liability.152 Lacking the coerciveness that is the hallmark of a tax, user charges and regulatory fees have traditionally been treated as not subject to many of the rules applicable to taxes.
State courts have not only regularly applied the non-tax treatment of special assessments, fees, and charges to the new state tax limitations,153 they have also frequently accepted state and local government efforts to widen the scope of what may be accomplished by these non-tax taxes.
V. Explaining the Disfavored Constitution
Why have so many state courts given state fiscal limits, particularly the public purpose requirements and the debt restrictions, a crabbed and unsympathetic interpretation, tied to a narrow reading of the specific text rather than a broader approach building on the constitutional spirit of limitation and control?
First, courts tend to treat fiscal limits not as issues of fundamental rights – like speech, religion, or privacy – or as matters fundamental to government structure – like separation of powers, bicameralism, or federalism – but rather as ordinary legislation. As the California Supreme Court observed in a case narrowing the scope of Proposition 13’s requirement that new local “special taxes” receive the approval of two-thirds of local voters, “(w)e are not here concerned with a measure that affects those fundamental rights of individuals which might be endangered in the hands of a majority.”172 Decisions concerning how the state will raise or spend money, whether to invest in projects that aid the private sector, to authorize an arcane appropriation-clause debt deal, or to impose a “broad-based tax on consumers”173 to pay for local public services are seen as matters of policy and politics, not matters of rights and law, and therefore, as “best resolved by the people’s elected representatives in the Legislature”174 rather than by the courts.175
Second, the state courts often appear quite sympathetic to the goals of the programs that would be curbed by the fiscal limits. State judges, most of whom are elected,183 appear to share with state governors and legislators a belief in the legitimacy of the modern activist state and the many projects – roads, dams, schools, power plants, convention centers, stadiums, and aid to targeted industries and firms – that contemporary state and local governments undertake. This may be another aspect of the acceptance of the expanded post-New Deal public sector, not only at the federal level, but at the state and local levels as well. The political branches have assumed a responsibility for promoting jobs and growth – it is, after all, “the economy, stupid,” that makes and unmakes governments – and the courts appear to agree that politicians are right, or at least reasonable, in doing so.185 Virtually all public spending programs can be defined as promoting economic growth, as in some Keynesian sense they all do. Consequently, public purpose requirements impose little constraint on government action. By the same token, as the notion of public purpose has grown, the definition of debt has narrowed.
Finally, and this too may explain some of the difference in treatment between public purpose and debt restrictions on the one hand and the tax and expenditure limitations on the other, courts may be influenced by the degree to which the provisions reflect current political values and enjoy contemporary political support. The public purpose and debt limits tend to be quite old, typically dating back to the mid-nineteenth century, or, for the younger states, to their admission to the Union. There is little evidence that they enjoy much active current support.
By contrast, many tax and expenditure limitations, including all the more restrictive ones, were adopted relatively recently. Many are the products of grass-roots activism and were enacted by voter initiative. There are anti-tax and taxpayer rights organizations committed to their defense. In at least one instance – California’s Proposition 218 – voters responded to a state supreme court’s narrow reading of constitutional tax restrictions by enacting a new measure intended to undo some of the court’s actions.193 Where public purpose requirements and debt limitations appear to be unsupported by, if not at odds with, contemporary politics, tax and expenditure limitations continue to embody the active political current that brought them to life.
VII. Conclusion: Fiscal Limits and State Constitutional Law
Finally, what does the uncertain fate of state constitutional fiscal limits tell us about the project of state constitutional law generally? Certainly, it would be wrong to overstate the meaning or to predicate the analysis of state constitutional law on a specific and relatively discrete set of issues. The state judicial treatment of state fiscal limits may have only limited relevance to the interpretation of the civil liberties or positive rights guarantees of state constitutions. Yet, several implications emerge which may be a little unsettling to the vision of state constitutions as an independent, and progressive, alternative to a conservative Federal Constitution.
First, state constitutions are by no means simply “progressive,” if progressive is used to mean more supportive of activist, redistributive government. Even as they impose affirmative duties on their governments, state constitutions are also strongly marked by limited-government, taxpayer-protective principles that are entirely absent from the Federal Constitution. The rise of tax and expenditure limitations over the past three decades has underscored this facet of state constitutional law.
Second, turning from constitutional texts to constitutional doctrine, state constitutional law often operates in the shadow of the Federal Constitution. Even where state courts deal with state constitutional provisions that have no federal analogues, and where the United States Supreme Court cannot review their judgments, state courts may still be deeply influenced by federal constitutional jurisprudence. The state courts’ many references to state fiscal limits as matters of state economic policy, and the repeated calls for deference to the legislature on fiscal questions, indicate that state courts accept the Supreme Court’s Carolene Products settlement – the determination that economic and social matters that do not affect fundamental rights or involve discrimination against discrete and insular minorities are for the legislatures and not the courts.225 This appears to be the case even though state constitutions give extensive consideration to these matters while the federal document is largely silent about them.
Finally, state constitutional law is closely intertwined with state politics. The fiscal limits with the strongest contemporary political support do best; those limits that lack current political backing are virtually unenforced. That politics matters should not be news to students of state constitutional law. The combination of greater ease in amending state constitutions;227 the existence of the voter initiative in half the states; extensive state constitutional textual attention to the nitty-gritty of government operations; and a judiciary that is either elected228 or appointed for limited, renewable terms rather than for life all make some significant interplay between state politics and state constitutional law inevitable.229 Still, the example of the fiscal limits challenges and unsettles the notion of a state constitution as something fundamental, separate from, and constraining ordinary state politics. The fiscal limits suggest that at least for some features of state constitutions – those with direct bearing on the operations of state and local government – the constitution is constrained by politics rather than the other way around.
I suppose none of these lessons is surprising. Constitutional law is not autonomous. It is shaped by broader jurisprudential currents, the political beliefs of the judges and justices, and the politics of the surrounding society. Nor is it irrelevant. State fiscal limits have contributed to the proliferation of new forms of borrowing and revenue-raising, held down the property tax, weakened local governments, and promoted the growth of public authorities and special purpose local units. However, the example of the fiscal limits and their disfavored treatment by many state courts may be helpful in reminding us of the need for modesty in considering the potential for the emergence of state constitutional law as a source of alternative constitutional norms in the American federal system.