Constitutional overhaul would omit Prop. 13 property tax changes

The main group advocating for an overhaul of California's constitution is circulating draft initiative language that would bar a constitutional convention from changing the property tax portions of Proposition 13.

The 2,000 word draft document has been distributed to numerous stakeholders and experts by the Bay Area Council, a San Francisco-based business group that has been outspoken in calling for an overhaul of the state's governing document.

A spokesman for the group, John Grubb, said the document is still going through a revision process. But he does not expect the language about Prop. 13 and property taxes to change.

"If there is a hue and cry to put it in, we haven't heard it," Grubb said. "We've heard the opposite."

He added, "There are a whole bunch of reforms that we can get to without touching tax increases."

As examples, he noted other aspects of Prop. 13, which shifted "a lot of money and power" from local governments to the state. He said the Council would be supportive of ideas that moved more power back to cities and counties.

Prop. 13 was a 1978 tax revolt initiative that, among other changes, limited the amount local governments could increase property taxes every year. While the initiative made many other changes as well, the Bay Area Council's language refers only to the property tax portion. It also limits conventioneers from directly raising other taxes:

"Delegates to the convention shall be prohibited from considering and proposing revisions to the Constitution that would affect a. Property taxes associated with Proposition 13. b. Any other direct increases in taxes."

Prop. 13's critics have long said the initiative crippled education funding and local government, permanently hamstringing state government in the process. In other words, for many on the liberal side, changing Prop. 13 would be one of the main reasons to have a constitutional convention. One of the most talked-about reforms is the so-called "split roll" idea, which would limit or eliminate the rights of businesses to keep their property taxes down, as homeowners do.

"Where do you draw the line on this?" asked Lenny Goldberg, executive director of the California Tax Reform Association. "The constitution is littered with stuff about various tax protections. Should the insurance tax be in the constitution? Should the protection for the gas tax in the constitution? Prop. 98 is in the constitution. Is that up for grabs?"

Goldberg is probably the leading voice calling for Prop. 13 reform. But his basic point-that the California constitution has too much of the tax code written into the constitution-is echoed by many others. One of these is Mark Paul, senior scholar with the non-partisan New America Foundation.

"I think it's silly to have a conversation about the future direction of California without talking about Prop. 13," Paul said. "I think it's fundamental."

Paul has written and spoken extensively on the idea of a convention, which he sees as a way to deal with how "junked up" the state's constitution has gotten via the initiative process. Compared to other states, California's document is filled with "permanent victories" won at the ballot box which are nearly impossible to change via the legislative process. Paul said he would take most of the specific fiscal language out of the constitution altogether in order to free the legislature's hands, and also reform the initiative process.

"The guiding principle ought to be that less-is-more when it comes to what the constitution says in regard to fiscal issues," Paul said. "We're really on the far end of the spectrum on having imbedded into the constitution lots of policy outcomes. Constitutions are supposed to be framework that set up the rules of the game."

He added, "If you read the federal Constitution looking for rules on fiscal policy, if you blink, you'll miss them. There is very little."
Of course, this might not be a ringing endorsement to those who want to limit taxes. Grubb said the Council had both political and policy reasons for the restriction on changing Prop. 13. Taxpayer and senior citizens groups would be certain to lobby heavily against any change to the property tax portions of Prop. 13.

"We're trying to walk the razors edge of having a limited constitutional convention that can reform state government the point that it can operate again without killing the entire idea," Grubb said. "We are not the only group that feels that Prop. 13 property tax rates are a third rail."

That's the reason the idea has rarely gone anywhere in the legislature, where it would take a two-thirds vote to get a reform on the ballot. One limit that is not in the language so far is any restriction on changing the two-thirds voting requirement to pass a budget or new taxes. Grubb did say the group would lobby against such a change, however.

"As an organizational matter the Bay Area Council would be opposed to changing a two-thirds requirement on a tax increase," Grubb said.

Tax increases wouldn't be the only matter taken off the table. The language calls on conventioneers to consider only matters of governance, elections, budget and revenue distribution. As a practical matter, Grubb said, this would mean they would not be open to consider issues like gay marriage, abortion or prayer in schools.

The group plans on submitting final language to the Secretary of State's office by September, with the gold of being on the November, 2010 ballot.

In the meantime, Goldberg said he is laying the groundwork for another potential change that could eventually come via initiative. This is a project looking at how much money the state has lost via the commercial property tax provisions in Prop. 13, which often let new owners of business properties keep the old rates and pay taxes on the fraction of the true value.

"We're doing a lot of research on commercial property," Goldberg said. "It's a long term project. We think when the data gets out there, people will be fairly well appalled by what's going on.