New local taxes and new local borrowing are a regular phenomenon in California elections, but this year our government union controlled politicians have outdone themselves. Let’s compare:

November 2014 – $11 billion in new borrowing proposed via 118 local bond measures, 81% passed. Of the 117 local proposals for new taxes, 68% passed.

June 2016 – $6.2 billion in new borrowing proposed via 48 local bond measures, an estimated 93% passed. Of the 42 local proposals for new taxes, an estimated 66% passed.

November 2016 – $32.2 billion in new borrowing via 193 local bond measures, and 224 local proposals for new taxes!

Not only do these general and primary and special election tax and bond measures accumulate year after year, but they nearly always pass! The primary source for this information is the California Tax Foundation, who have just produced another excellent guide “Local Tax and Bond Measures 2016.” This time, they have not only compiled a list of all of the proposed local taxes and bonds, but for each of the proposed new local taxes, they have compiled the projected annual collections. The result is stunning.

2016 California Local Tax and Bond Measures
20160927-uw-local-taxes

As this table reports, $32.2 billion in new borrowing is being proposed, nearly all of it for schools and colleges. At 5.0% annual interest with a 30 year repayment plan, this borrowing will cost property owners another $2.0 billion per year in increased property taxes. If over 90% of these bonds are approved by voters, as recent history indicates is likely, California’s taxpayers will suddenly have saddled themselves with nearly $30 billion in new government debt.

Also as reported on the above table, the 224 proposed tax increases are estimated to cost taxpayers at least $2.9 billion per year. “At least,” because CalTax was unable to find revenue projections for 29 of them. And while “sin taxes” on marijuana and soda promise to bring in $58 million and $18 million, respectively, it is sales tax, that everyone pays, that will bring in most of the revenue, over $2.3 billion.

Because local taxes are numerous and dispersed onto hundreds of differing ballots across the state, they don’t get the visibility that state tax increases generate. But collectively they are just as significant. California’s Prop. 30, passed by voters in 2012, generated about $6.0 billion per year. That same tax, which was supposed to be temporary, will be extended through 2030 if voters approve Prop. 55 this year. But if you compare this statewide tax to the proposed local taxes, $2.9 billion per year, along with required payments on the local bonds, $2.1 billion per year, you are adding another $5.0 billion annual burden to taxpayers.

Passing Prop. 30 was a major fight. Similarly, Prop. 55 has huge visibility with voters. But because nearly all of the local measures pass, and because dozens if not hundreds of them appear on the ballot every election, local taxes and bonds matter more. Invisible, ongoing, and ever expanding, they are silently elevating the cost-of-living for ordinary Californians as much or more than state taxes.

Where does this money really go? Why is there an insatiable thirst for more taxes and more borrowed funds?

One word:  Pensions. One cause:  Government unions and their allies in the financial community, who together comprise what is by far the most potent political lobby in California.

A May 2016 analysis by the California Policy Center, using the most recent data available from the U.S. Census Bureau, estimated that during 2014, California’s 80+ independent state/local government employee pension systems received $30.1 billion in contributions (ref. table 2-A). Later in that same report, on table 2-C which is displayed below, one can see how much these pension systems actually need to remain financially healthy. At a minimum, they are collecting $8.0 billion per year LESS than they need. And that is if the investments they’ve made yield an annual return of 7.5% per year for the next 30 years. At the modest reduction of that projection to 6.5% – which even CalPERS has announced they are going to phase in as their new projection for calculating required annual contributions, these pension systems are collecting $22.2 billion per year LESS than they need.

California State/Local Pension Funds Consolidated
2014 – Est. Funding Status and Required Contributions at Various ROI

20160516-CPC-Ring-pension-liabilities

If California’s state and local government workers participated in Social Security like the rest of California’s workers, instead of receiving guaranteed defined benefit pensions that on average pay FOUR TIMES what Social Security recipients can expect, there would be no insatiable need for more money for the pension systems. Even if California’s state and local government workers merely received defined benefits that paid, on average, TWICE what Social Security recipients can expect, these pension funds would currently have surpluses. Moreover, there would be money left over in local municipal and school district operating budgets to maintain facilities, instead of having to perpetually borrow.

Six billion per year ala Prop. 30 and Prop. 55. Another five billion per year thanks to new proposed local taxes and borrowing just this November. And it’s not even close to enough. California’s state and local government pension systems are going to need somewhere between $50 to $60 billion per year to stay afloat, and currently they’re collecting barely more than half that much.

No wonder there’s the perennial scramble for more. More. MORE.

 *   *   *

Ed Ring is the president of the California Policy Center.

6 Responses to For Nov. 8th: $32B in Local Borrowing, $2.9B in Local Tax Increases

  1. Blah, blah, blah.

    Sun Tzu says: “If you know neither the enemy nor yourself, you will succumb in every battle.”

    With respect to school bonds, you clearly know neither the enemy nor yourself, perhaps through cognitive dissonance.

  2. Ed Ring says:

    Richard Michael: You have written eloquently on this matter. For example, you argue that public funds are often used by public agencies to connect with voters. In your own words, here is an excerpt from your comment posted on June 15, 2016:

    “Proposition 39 made an exception in the California Constitution to the rule that all bonded indebtedness requires approval by “two-thirds of the votes cast by voters voting.” The exception expanded the scope of the uses of the bond proceeds “only if the proposition approved by the voters” includes four “accountability requirements”. The Education Code was further amended to add the requirement of an independent citizens’ oversight committee, as oxymoronic as that is.

    None of the bond measures, currently and for many previous years, proposed by school and community college districts meet the accountability requirements set out in the Constitution. The result is that every one these measures is a blank check without even the semblance of accountability.

    This is the consequence of a school bond cartel growing up around Proposition 39 bonds whose only goal is to feed the insatiable need for profits for its private firm members and the insatiable wish for money for its public official members. It’s a marriage made in hell.

    Local elected officials are also pretty much an oxymoron. When was the last time you saw a governing board vote against the recommendation of its unelected and unaccountable administration?

    The only thing standing in the cartel’s way are the voters, who for the most part are fed nothing but propaganda using public funds (criminal violations) by the cartel.”

  3. michael says:

    “If you know neither the enemy nor yourself, you will succumb in every battle.”

    Which is why idiots continue to approve these bonds and taxes thus the relevance of this article.

  4. Colonel Bill Kilgore says:

    Tax’em good and hard, then tax’em again.

    Tax the shiite outta ’em!

    Tax’em to the stone age, son!

    I love the smell of tax increases in the morning!

  5. TB says:

    More and more people are beginning to realize that Defined Benefit plans like public pensions are not sustainable, including the private sector which has more or less done away with them. Here is my solution to this looming crisis that is only going to get worse without any correction of course:

    https://drive.google.com/file/d/0B90sU3A85q46OE9BZHJFSWEzbGM/view?usp=drivesdk

    Please help spread the word…

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