Clearing Up Some Confusion About the Governor’s Proposed Tax Initiative

By now, many Californians are well aware that Governor Jerry Brown is seeking to qualify an initiative for the November ballot that would ask voters to temporarily boost sales and income taxes, with the increase primarily affecting the wealthiest Californians. What is less well known is that the Governor’s measure is also the keystone of the state’s effort to permanently transfer – or “realign” – several public safety, health, and human services programs, along with a dedicated source of funding, to the counties, a process that began last year. In particular, the Legislature redirected to counties two existing revenue streams – portions of the state sales tax and the Vehicle License Fee (VLF) – that are intended to flow to counties indefinitely in order cover the cost of the realigned programs. Counties, however, hoped for greater certainty than a change to state law can provide. The Governor’s initiative would address that concern by placing the revenue shift in the state Constitution, thereby guaranteeing that the sales tax and VLF dollars set aside for realignment will continue to flow for that purpose. The measure would also provide key legal protections for both the state and the counties as realignment rolls out, as we explain in our recent report.

Unfortunately, there appears to be some confusion about the relationship between the realignment provisions and the temporary taxes in the Governor’s measure. A recent post on Prop Zero, for example, claims that “much of the tax revenues [the Governor] would raise in his measure go to providing funding to locals for his realignment plans.” The post further argues that the Governor’s measure makes “the mistake of establishing a permanent change in governance … with temporary taxes.” This analysis is off the mark. As explained above, the Governor’s measure would place in the state Constitution the current, ongoing revenues that were already shifted to counties as part of last year’s realignment. In other words, the measure would combine a permanent change in governance with a permanent source of funding for counties’ new responsibilities. In contrast, the Governor’s proposed temporary tax increase has nothing to do with realignment. Instead, it would raise revenues in order to help balance the budget and stabilize the state’s fiscal situation.

In short, the Governor’s initiative encompasses two separate sets of revenues with different purposes and time frames – and never the twain shall meet.

– Scott Graves