California State Constitution. [10] The Commission ultimately removed about 40,000 words from the constitution. Governor Brown was definitive that he would not seek to change the law, a third rail in California politics. "The Genesis of Proposition 218: A History of Local Taxing Authority." The Chief Justice may convene the court at any time. The Table of Contents includes each Article heading and corresponding section numbers.Table of Contents includes each Article heading and corresponding section numbers. While Proposition 13 stabilized the base, governments would adjust the rate annually to counteract changes to the base prior to Proposition 13. [111] Despite this, pro-housing YIMBY groups in California have supported the split roll campaign. ", "Will There Ever Be a Perfect Way to Fund Schools? [77] Proposition 218 was sponsored by the Howard Jarvis Taxpayers Association as a constitutional follow-up to Proposition 13. In 1992, a legal challenge (Nordlinger v. Hahn) was considered by the United States Supreme Court, which subsequently ruled 8–1 that Proposition 13 was constitutional. [101] The measure is opposed by a coalition of current and former elected officials, statewide organizations, regional organizations and businesses. 67) during 1978 that amended Proposition 13. These rules apply equally to all real estate, residential and commercial—whether owned by individuals or corporations. The new measure would raise $6.5 billion to $11.5 billion a year, depending on the strength of real estate markets, after refunding $500 million to $1 billion of income tax losses and new administrative fees related to the measure. [11] The ensuing anger started to form into a backlash against property taxes which coalesced around Howard Jarvis, a former newspaperman and appliance manufacturer, turned taxpayer activist in retirement. [11] Several amendments involved the authorization of the creation of state government agencies, including the State Compensation Insurance Fund and the State Bar of California; the purpose of such amendments was to insulate the agencies from being attacked as an unconstitutionally broad exercise of police power or inherent judicial power. ", "Senator Peace: Cure Prop. As of 2020, it is in the inactive file.[95]. Prior to implementation of Proposition 13, the state of California saw significant increases in property tax revenue collection "with the share of state and local revenues derived from property taxes increasing from 34% at the turn of the decade to 44% in 1978 (Schwartz 1998)." [5][51] In terms of public services, office and retail development are further incentivized because they do not cost the local governments as much as residential developments. 3d 628. This noted that under California's state constitution a stronger protection applies than under the U.S. Constitution's Eighth Amendment; the former prohibits punishments that are "cruel or unusual", while the latter only prohibits punishments that are "cruel and unusual". Initiatives can be proposed by the governor, legislature, or by popular petition, giving California one of the most flexible legal systems in the world. California's original constitution was drafted in both English and Spanish by American pioneers, European settlers, and Californios (Hispanics of California) and adopted at the 1849 Constitutional Convention of Monterey, following the American Conquest of California and the Mexican-American War and in advance of California's Admission to the Union in 1850. Due to severe inflation during the 1970s, reassessments of residential property increased property taxes so much, that some retired people could no longer afford to remain in homes they had purchased long before. and that "Even with Proposition 13 protections, California has higher property taxes than two-thirds of the nation. Among those who voted for Proposition 13, only one in five also voted for Proposition 8, while Proposition 8 was endorsed by fully 91% of those who voted "no" on Proposition 13. [69], The survey also found that 40% of Californians, and 50% of likely voters said that Proposition 13's supermajority requirement for new special taxes has had a good effect on local government services provided to residents, while 20% of both Californians and likely voters said it had a bad effect, and the remainder felt it had no effect. Howard Jarvis and Paul Gann were the most vocal and visible advocates of Proposition 13. It also restricts Proposition 58 and Proposition 193 to solely inherited primary residences, with an exemption cap of $1 million in value at the time of death, and requires the heir to continually live in the residence or face reassessment. Yet of 30 anti-tax ballot measures that year, only 13 measures passed. [70] Schwarzenegger, believing that such an act would be inadvisable politically and could end his gubernatorial career, said, "I told Warren that if he mentions Proposition 13 again he has to do 500 sit-ups. ", "What has Proposition 13 meant for California? The Constitution emerged from a convention—a convention of the states. From a peak of about 4.5% for the nation overall, and 4.0% for California, both peaking in the early 1970s, the nation overall as well as California spent declining percentages on public education in the decade from 1975-1985. The proposition decreased property taxes by assessing values at their 1976 value and restricted annual increases of assessed value to an inflation factor, not to exceed 2% per year. 2. [102], According to the California Legislative Analyst's Office (LAO) and the California Assessor's Association, the initiative could potentially generate an additional $6-$10 billion of tax revenue per year, which would go towards additional funding of local governments (60%) and public schools (40%), after reimbursing the State for reductions in personal income tax and corporate tax revenue caused by the deductibility of the property tax under existing law and reimbursing counties for the hiring of up to 900 new assessors statewide at a total cost of $517-$639 million a year. It appeared on the November 2020 ballot and was passed by a narrow margin. 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. State and schools. Since this amount is not indexed to inflation, its relative value would decline over time. The think tank Tax Foundation reported that in 1978, Californians had the third highest tax burden as a proportion of state income (tax-per-capita divided by income-per-capita) of 12.4% ($3,300 tax per capita, inflation adjusted). 13 fix than a pension bailout", "Local Governments Rigging Elections - Again", "Coalition Submits Signatures To Amend Proposition 13 In 2020 Election", "Proposition 13 tax split heading to vote—in the year 2020", "The Unintended Consequences of Split Roll", "California's YIMBYs: The Growth Machine's Shock Troops", "California Is Headed Toward a Titanic Battle Over Raising Property Taxes", "Big change in California's Proposition 13 could be headed to ballot", "Column: A change to Proposition 13 that homeowners can get behind", "Newsom... Likely Voters Divided On Repealing Gas Tax, Easing Proposition 13 Limits For Commercial Properties", "Schools & Communities First to Refile with Stronger Initiative, Expansive Small Business Tax Relief & Wider Path to Victory in 2020", "One step closer to what no one wants: dueling tax plans in November 2020", "Voters could change California's landmark property tax law after measure qualifies for ballot", "Farm Bureau opposes 'split-roll' tax initiative", "Union Initiative to Repeal Parts of Iconic Proposition 13 Qualifies for Ballot", "Howard Jarvis, Populist Entrepreneur: Reevaluating the Causes of Proposition 13". A Los Angeles Times article dated June 11, 1978, stated the following: "There is no question that the voters knew exactly what they were doing. "[58] The shortage in funds translated to decreased spending per student in the years following passage of Proposition 13. [93], Senate constitutional amendment 3 (SCA-3) would alter Proposition 58 by requiring reassessment at full cash value upon transfer of property to a child or grandchild, unless the property is subsequently and continuously used as a primary residence. [7], The state has been given the responsibility of distributing the property tax revenues to local agencies.[7]. Collection guide, California State Library, California History Room. According to this explanation, property owners in affluent districts perceived that the taxes they paid were no longer benefiting their local schools, and chose to cap their taxes. [108] Some opponents of the initiative, such as former Board of Equalization member George Runner, argue the initiative would harm consumers and the economy by significantly increasing business owners' operating costs, which would be passed on to customers. The measure is opposed by a coalition of business groups that raised $2.6 million for campaigns against the measure. Proposition 13 (officially named the People's Initiative to Limit Property Taxation) is an amendment of the Constitution of California enacted during 1978, by means of the initiative process. Government Code sections 13400 through 13407, known as the State Leadership Accountability Act (SLAA), was enacted to reduce the waste of resources and strengthen internal control. The California State Constitution is grouped into subject matter areas known as Articles. "[71], Gavin Newsom, when asked about the fairness of Proposition 13 in a 2010 interview with The Bay Citizen, said: "The political realities are such that Democrats, not just Republicans and Independents, are overwhelmingly opposed to making adjustments in terms of the residential side of Prop. California's Legislative Analyst's Office estimated that this would cost local governments about $100 million per year over the first few years, growing to $1 billion per year (in 2018 dollars) over time. Notwithstanding any other provision of this Constitution: (a) All taxes imposed by any local government shall be deemed to be either general taxes or special taxes. [9], That year, the electorate approved the creation of a California Constitution Revision Commission, which worked on a comprehensive revision of the constitution from 1964 to 1976. [79], It also requires voter approval before a local government, including a charter city, may impose, increase, or extend any local tax. "[107][114], Some people contend this is a way for state and local governments to pay off their significant unfunded pension liabilities rather than reforming pensions (by capping large payouts and making employees contribute more) that they feel are overly generous and adopted not because of market necessity, but because of unions' political power and bad legislative choices. [34], Others argue that the real reason for the claimed negative effects is lack of trust for elected officials to spend the public's money wisely. That is exactly how the voters saw it, and that is exactly what they wanted. [51] California's spending per pupil was the same as the national average until about 1985, when it began decreasing, which resulted in another referendum, Proposition 98, that requires a certain percentage of the state's budget to be directed towards public education. Proposition 90 is similar to 1986 Proposition 60 in that it allows homeowners over the age of 55 to transfer the assessed value of their present home to a replacement home if the replacement home is located in a different county, provided the incoming county allows the transfer. Deering's California Codes Annotated. After the defeat of 2018's Proposition 5, the California Association of Realtors sponsored another measure similar to their prior initiative, the failed 2018 Proposition 5. The Case–Shiller housing index shows prices in Los Angeles, San Diego, and San Francisco appreciated 170% from 1987 (the start of available data) to 2012 while the 2% cap only allowed a 67% increase in taxes on homes that were not sold during this 26-year period. [86], In December 2011, Charles E. Young, former University of California, Los Angeles chancellor, brought a lawsuit with a team of lawyers headed by William Norris, a retired federal judge of the United States 9th Circuit Court of Appeals. CALIFORNIA CONSTITUTION ARTICLE 1 DECLARATION OF RIGHTS SEC. SEC. KFC30.5.W4. 13 problems? [55]:1[58]:2, UCSD Economics professor Julian Betts states: "What all this means for spending is that starting around 1978-1979 we saw a sharp reduction in spending on schools. Located in volumes 1, 1A, 1B, 1C, 2, 2A, and 3 entitled "Constitution." [11], Another explanation that has been offered is that spending by California's government had increased dramatically during the years prior to 1978, and voters sought to limit further growth. [20], The constitution of California distinguishes between constitutional amendments and revisions, the latter of which is considered to be a "substantial change to the entire constitution, rather than ... a less extensive change in one or more of its provisions". Similar to the prior initiative, 40% of new revenue would be allocated towards K-12 public schools while 60% would be earmarked for local governments. The study said pro-growth Kennedy-Johnson “Growth Liberals” cut federal income taxes in the highest brackets in the 1960s while local officials raised regressive state and local taxes, creating a "pocketbook squeeze" that made voters less likely to approve local levies and bonds, which eventually led to the passage of Proposition 13. ARTICLE XIII - TAXATION 1-35 :: California Constitution. [14] The return to market value in the wake of AB 80 could easily represent a mid-double-digit percentage increase in assessment for many homeowners. Disheartened by the disparity in taxation, Nordlinger viewed this reassessment as favoritism in the eyes of the law and elected to bring charges up on the Los Angeles County Tax Assessment office and its primary assessor, Kenneth Hahn. LCFF has provided an additional 20% or more in "supplemental funding" to disadvantaged school districts and can make them better funded than school districts receiving the state-required minimum "basic aid" funding. 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. 13 is a sacred doctrine that should never be questioned," he said.[6]. Title pages of the original English (left) and Spanish (right) versions of the 1849 Constitution of California. A reassessment of the property tax can only be made a) when the property ownership changes or b) there is construction done. The Constitution of California can be found in the following publications: 1. [1] The constitution was amended and ratified on 7 May 1879, following the Sacramento Convention of 1878-79. 9. Proposition 13 is embodied in Article XIII A of the Constitution of the State of California. It passed with 76% of the vote. [69], At the same time, a majority of both Californians (55%) and likely voters (56%) opposed lowering the supermajority threshold for local special taxes.[69]. During the early 1960s, there were several scandals in California involving county assessors. "[72], In 2011, California Governor Jerry Brown was quoted as saying that it wasn't Proposition 13 that was the problem, but "It was what the Legislature did after 13, it was what happened after 13 was passed" because the legislature reduced local authorities' power. [22] By 2012, it had fallen slightly to the sixth highest rate, 10.9%, ($4,100 tax per capita, inflation adjusted). 4 volumes entitled "Constitution." [18], Two universities are expressly mentioned in the constitution: the University of California and Stanford University. 13 'Sickness' by Reassessing Commercial Property, Boosting the Homeowners' Exemption and Cutting the Sales Tax", "An experienced Jerry Brown vows to build on what he's already done", "Stirrings of Revolt: Regressive Levies, the Pocketbook Squeeze, and the 1960s Roots of the 1970s Tax Revolt", "State Board of Equalization Statement On Negative Inflation Factor for Annual Proposition 13 Adjustment", "Lower home values mean lower tax revenue", "Proposition 13 Report: More Data on California Property Taxes [EconTax Blog]", "State and Local Tax Burdens, 1977 – 2012", "How Much Does Your State Collect in Property Taxes Per Capita? From 1949 to 1979, public sector employment in California outstripped employment growth in the private sector. The bill was introduced by state assemblymember Cecilia Aguiar-Curry. The court ruled that because the tax money was targeted towards specific programs rather than general spending, it counted as a "special tax" under Proposition 13 and required two-thirds' voter approval; the tax passed with a simple majority.[49]. California Tax Reform Association Collection, 1976-1979. The measure requires reassessment when 90% of a property's ownership effectively changes, closing the property transfer loophole. [64][65][66], California has excelled in higher education since the passage of Proposition 13 by some measures; in 2019, there were five California universities in the U.S. News & World Report Best Colleges ranking top 25 and ten in the top 50; most of these ten universities are public. California Constitution, Article XIII Section 3(k) . [7], The constitution gradually became increasingly bloated, leading to abortive efforts towards a third constitutional convention in 1897, 1914, 1919, 1930, 1934 and 1947. [78] The assessment and property-related fee and charge reforms contained in Proposition 218 were in response to California local governments' use of revenue sources that circumvented the two-thirds vote requirement to raise local taxes under Proposition 13. Read this complete Constitution of the State of California 1879 Art. In the year after Proposition 13 was passed, property tax revenue to local governments declined by roughly 60% statewide. California Constitution Article XIII, §3(k) Revenue and Taxation Code §218 Government Code § 16120-16123 & 29100.6. [3], Owners of commercial real estate benefited under the original rules of Proposition 13: If a corporation owning commercial property (such as a shopping mall) was sold or merged, but the property stayed technically deeded to the corporation, ownership of the property could effectively have changed without triggering Proposition 13's reassessment provisions. 13. On the commercial and industrial side, there seems to be a lot more openness to debate...Of course, it's a difficult time to do that...when you're trying to encourage manufacturing back into your state, and you already have a cost differential between states that border us, you don't want to now increase their burden in terms of property tax on that commercial and industrial space. [21] Both require passage of a California ballot proposition by voters, but they differ in how they may be proposed. Added to the Constitution by the voters in June, 1978, Article XIIIA provides that: The maximum amount of property tax cannot exceed 1% of the property's appraised value, plus any bonds or fees. Proponents of split roll have said the intent of Proposition 13 was to protect residential property taxes from spiking and say the broad application of Proposition 13 to commercial property is a loophole[46] while opponents say voters deliberately sought to extend Proposition 13 protections to commercial property by rejecting a split roll promoted by Jerry Brown in 1978 (Proposition 8 on the same ballot), with a vote of 53-47%, and instead voted for Proposition 13 with nearly 65% of the vote. For instance, many California local governments have recently sought voter approval for special taxes such as parcel taxes for public services that used to be paid for entirely or partially from property taxes imposed before Proposition 13 became law. Proposition 13 is often considered the "third rail" of California politics, which means that politicians avoid discussions of changing it. California's K-12 public schools, which during the 1960s had been ranked nationally as among the best, have deteriorated substantially in many surveys of student achievement. Res.Ch. [51][54] These costs are typically shifted to the building's buyer, who may be unaware of the thousands in fees included with the building's cost.[51]. This caused the California Supreme Court to find capital punishment unconstitutional on state constitutional grounds in the 1972 case of People v. Anderson. In the ruling, the state's high court confirmed that an initiative cannot "revise" the constitution; Proposition 13, however, was an amendment to the California Constitution and not a revision. The LAO report did not provide a modified estimate of foregone tax revenue that considered extra state and federal income tax revenue on inherited rental property conversions.[75]. Doerr, David (February 1997). They unsuccessfully sued to overturn the Proposition 13 requirement that a two-thirds (2/3) vote of the Legislature is required to increase state taxes. 13. 13 (1978) Property "Change of Ownership, "Opinion: Don't alter California's revered Prop 13 tax initiative", "Local government financing: affordable housing and public infrastructure: voter approval", "Property taxation: change in ownership: inheritance exclusion", "California schools and local communities funding act", https://ballotpedia.org/California_Proposition_15,_Tax_on_Commercial_and_Industrial_Properties_for_Education_and_Local_Government_Funding_Initiative_(2020), "review of proposed constitutional initiative", "That 'split roll' you heard about? The most significant portion of the act is the first paragraph, which limits the tax rate for real estate: Section 1. UC is one of only nine state-run public universities in the United States whose independence from political interference is expressly guaranteed by the state constitution. 170192 -~ May .r City and Cou11ty of Sa11 Francisco Page9 I hereby certify that the foregoing [120][121][122], ^ Serrano: Serrano v. Priest, 5 Cal.3d 584 (1971) (Serrano I); Serrano v. Priest, 18 Cal.3d 728 (1976) (Serrano II); Serrano v. Priest, 20 Cal.3d 25 (1977) (Serrano III), A ballot initiative which capped property tax at 1% and yearly increases at 2%, Sales disincentives, higher housing costs, Greater effect on coastal metropolitan areas than on rest of state, Loss of local government power to state government, Resultant planning changes, cost or degradation of services, new fees, Legislative attempts to close the property transfer loophole (2014, 2015, 2018, and 2020), 2020 California Schools and Local Communities Funding Act of 2018, Citrin, J. and Sears, D. Tax Revolt:Something for Nothing in California (1985)Harvard Press, Mullins, D. R. (2003) Popular processes and the transformation of state and local government finance. [35] Business improvement districts are one means by which property owners have chosen to tax themselves for additional government services. state. Between 1973 and 1977, California state and local government expenditures per $1,000 of personal income were 8.2% higher than the national norm. Division 1, Property Taxation; Part 0.5, Implementation of Article Xiii a of the California Constitution. In Sierra County the tax rate is generally 1%. [91] Democrat Don Perata, former California senate leader, said this loophole is left open by his party to create justification for ending Proposition 13. [27], The think tank Institute on Taxation and Economic Policy (ITEP) considers property tax caps like Proposition 13 poorly targeted and instead advocates for "circuit breaker" caps or homestead exemptions to levy property taxes based on ability to pay;[28] yet in 2018, ITEP ranked California's tax code as the most progressive in the United States, in part due to its marginal income and capital gains rates. (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. Proposition 13 has increased the incentive for local governments to attract new commercial developments, such as big box retailers and car dealerships instead of residential housing developments, because of commercial development's ability to generate revenue through sales tax and business licenses tax. It was upheld as constitutional by the United States Supreme Court in the case of Nordlinger v. Hahn, 505 U.S. 1 (1992). ), State and Local Finances Under Pressure, (pp. Proposition 111, passed by the voters in June 1990, revised each of the adjustment factors. On May 29, 2020, the new measure qualified to appear on the November 2020 ballot after signature gatherers collected a gross total of 1.7 million voter signatures in support. The measure's five largest donors are the California Teachers Association Issues PAC, SEIU California State Council, Chan Zuckerberg Advocacy, the San Francisco Foundation, and the California Federation of Teachers COPE PROP/Ballot Committee. California Law consists of 29 codes, covering various subject areas. "[52], Due to the reduction in revenue generated from property tax, local governments have become more dependent on sales taxes for general revenue funds. It failed on the assembly floor. [55]:1[58]:2 13 [Updated]", "California Proposition 58, Real Estate Transfers Within Families (1986)", "California Proposition 193, Tax Implications of Grandparent-Grandchild Property Transfers (1996)", "Initiative Coordinator Attorney General's Office Letter", Overturning of Prop. [67], Proposition 13 is consistently popular among California's likely voters, 64% of whom were homeowners as of 2017. "[48], Local governments in California now use imaginative strategies to maintain or increase revenue due to Proposition 13 and the attendant loss of property tax revenue (which formerly went to cities, counties, and other local agencies). [90] Another Republican attempt to close the loophole was made in 2020. Proposition 13: Love it or Hate it, its Roots Go Deep, Tax and Expenditure Limitation in California: Proposition 13 & Proposition 4, Full Text of Volume 505 of the United States Reports at www.supremecourt.gov, https://en.wikipedia.org/w/index.php?title=1978_California_Proposition_13&oldid=997099729, Amendments to the Constitution of California, Articles with dead external links from August 2010, Short description is different from Wikidata, All articles with specifically marked weasel-worded phrases, Articles with specifically marked weasel-worded phrases from November 2020, Creative Commons Attribution-ShareAlike License, Marmer, Nancy. [3] The length has been attributed to a variety of factors, such as influence of previous Mexican civil law, lack of faith in elected officials and the fact that many initiatives take the form of a constitutional amendment. 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[ 4 ] Republican attempt to the. This measure will appear on the number of property transfers taking place United states. finance equalization were popular California!