Reform Prop. 13 to fund education

STATE ISSUES: State officials should put a measure on the 2016 ballot that would fairly evaluate property values for taxation purposes.

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The incessant debate over funding for public education in California over the past few years indicates that an adequate solution to the quandary posed by state budget cuts remains elusive. But a student coalition called Fund the UC has put its finger on a practical solution that hasn’t received enough serious consideration from public officials: reforming Proposition 13.

Prop. 13, long considered untouchable, is the elephant in the room whenever the state government’s ability to meet its financial obligations is called into question. The 1978 law reduced California residential and commercial property taxes to 1 percent of their 1975 value and restricted annual increases in assessed property values to 2 percent per year.

Fund the UC is currently lobbying state officials in Sacramento to put a Prop. 13 reform measure on the 2016 California ballot that would do away with the 2 percent maximum yearly increase for commercial property assessments in favor of assessing the properties at their actual market value.

Since its inception, Prop. 13 has been devastating to state revenue,and thus to state funding for education. In the 1960s, California had one of the best public school systems in the country. Today, California occupies the bottom of national education rankings, and was 47th in 2011 in per-pupil spending among the 50 states and the District of Columbia. According to the Public Policy Institute of California, eliminated school districts’ ability to raise property tax rates for their schools. Thus, Prop. 13 likely played a significant role in the decline of the state’s educational quality.

Currently, California receives about  $11 billion in taxes on nonresidential property annually. The California Legislative Analyst’s Office projects reforms like the ones Fund the UC advocates will increase state tax revenue by $4 to 5 billion, with $2 billion of that projected to be spent on education.

Undeniably, reforming Prop. 13 as it applies to commercial business will hurt or slow some business activity, and of course, that is not desirable. But the reforms would end an unnatural advantage these businesses have received by ending the practice of grossly underestimating the value of the businesses’ property.

And although repealing some of the commercial property tax caps will somewhat burden business in the short term, development of human capital through education is the best enabler of future growth and economic resiliency. Thus, reforming Prop. 13 will improve California’s economic outlook.

By urging a reform of unfair methods of taxing businesses, Fund the UC hopes to get a measure on the state’s 2016 ballot capable of improving the state’s public education system and thus its long-term economic health. Demanding a market-based valuation of business property for purposes of taxation is an important first step; an even more complete solution may lie in the fair taxation of residential property as well, stemming from a complete repeal of Prop. 13.