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Q&A

What is Proposition 98 and How Does the State Budget Shortfall Affect It?

February 2024 | By Jonathan Kaplan and Erik Saucedo

A group of students work together to solve the problems in their textbook during their precalculus class. Resource Title: What is Proposition 98 and How Does the State Budget Affect It?

key takeaway

Despite California’s commitment to funding education through Proposition 98, increased child poverty and budget shortfalls pose substantial challenges.

All California students deserve the opportunity to learn and achieve their goals. Recognizing the critical role schools play in supporting student success, California voters adopted Proposition 98 (Prop. 98), which established an annual minimum funding guarantee for public K-12 schools and community colleges. 

When students and their families struggle to make ends meet, their educational success is put at risk. The poverty rate for children in California more than doubled from 2021 to 2022, suggesting that more support is needed to help families meet their basic needs. 

Helping Californians meet those needs while adequately funding K-14 education is challenging when the state experiences a budget shortfall that results from revenues falling far short of projections — as is the case this year. Understanding Prop. 98 and its interaction with the state budget is essential to assess policymakers’ options for addressing the challenges this year’s state budget presents.

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What is Proposition 98?

Prop. 98 is a constitutional amendment adopted by California voters in 1988 that establishes an annual minimum funding level for K-14 education each fiscal year — the Prop. 98 guarantee. Prop. 98 funding comes from a combination of state General Fund revenue and local property taxes. Prop. 98 spending supports K-12 schools (including transitional kindergarten), community colleges, county offices of education, the state preschool program, and state agencies that provide direct K-14 instructional programs. While Prop. 98 establishes a required minimum funding level for programs falling under the guarantee as a whole, it does not protect individual programs from reduction or elimination.

How is the Prop. 98 minimum funding guarantee calculated?

Each year’s Prop. 98 guarantee is calculated based on a percentage of state General Fund revenues or the prior year guarantee adjusted for K-12 attendance and an inflation measure.1The inflation measure is either the percentage change in state per capita personal income for the preceding year or the annual change in per capita state General Fund revenues plus 0.5 percent. Since some of this information is not available until after the end of the state’s fiscal year, the Legislature funds Prop. 98 at the time of the annual Budget Act based on estimates of the Prop. 98 minimum funding level. 

Once the final Prop. 98 guarantee is determined, the process of reconciling the actual and estimated guarantee is known as “settle up.” If the final Prop. 98 guarantee turns out to be higher than initially estimated, the Legislature must provide additional funding to make up the difference. On the other hand, if the Prop. 98 spending requirement is below the funding level assumed in a budget act, the Legislature has the option to amend the Budget Act to reduce funding to the lower revised minimum Prop. 98 guarantee.2The Legislature also can suspend Prop. 98 for a single year by a two-thirds vote of each house.

To the extent that the Legislature provides funding above the Prop. 98 minimum guarantee, it can increase the following year’s Prop. 98 minimum funding level and state spending required to fulfill the Prop. 98 obligation in future years. In other words, deciding to provide funding above the Prop. 98 minimum guarantee for one budget year can increase the minimum funding level for the subsequent year’s budget and beyond.

What is the Prop. 98 reserve?

California voters approved a constitutional amendment in 2014 that established the Public School System Stabilization Account (the PSSSA) – the Prop. 98 reserve. Constitutional formulas require the state to make deposits into, and withdrawals from, the Prop. 98 reserve. When the state faces a budget problem, discretionary withdrawals from the Prop. 98 reserve may also be made if the governor declares a budget emergency and the Legislature passes a bill to withdraw funds, which can only be used to support K-14 education.

Why is California facing a budget shortfall? And how large is it?

California faces a budget shortfall, also known as a “budget problem,” of tens of billions of dollars. The shortfall is based on estimates of revenues and spending across three fiscal years: 2022-23, 2023-24, and 2024-25 (the fiscal year that begins on July 1, 2024). This three-year period is known as the “budget window.” The main reason for the budget problem is that state revenue collections have fallen short of projections. A large portion of the problem is related to state revenues for the 2022 tax year, which are estimated to be about $25 billion lower than what policymakers expected when they adopted the budget for the current fiscal year last summer.

The extent of the 2022 revenue shortfall only became clear in late 2023 due to the extension of tax filing deadlines for 2022 taxes to November 2023. Because of this delay, state leaders had to finalize the 2023-24 budget last June with much less complete revenue information than usual, and they enacted a budget assuming significantly more revenue for the 2022 tax year than actually materialized.

How does California’s budget problem affect the Prop. 98 guarantee?

Revenue collections falling short of projections not only creates a budget problem for the state, it also means the Prop. 98 minimum funding guarantee for K-14 education is significantly lower than the level assumed in last year’s enacted budget. Based on revenue estimates in the governor’s January 2024 budget proposal, the Prop. 98 minimum funding guarantee dropped by $14.3 billion across the three-year budget window (2022-23 to 2024-25) compared to assumptions made last June.3The amount of state funding required to fulfill the Prop. 98 guarantee across the three-year budget window dropped by $15.2 billion below the Prop. 98 funding level assumed last June. The difference between the state’s funding requirement and the $14.3 billion total decline in the Prop. 98 guarantee reflects estimates in the governor’s January 2024 budget proposal that include a $900 million increase in local property tax revenue, which offsets the $15.2 billion reduction in the state’s portion of the Prop. 98 funding obligation.

Reconciling Prop. 98 spending with revised estimates of the Prop. 98 guarantee can be challenging when the minimum funding guarantee falls — and it is especially difficult if the revised guarantee falls significantly. The current challenge of managing such a large decline in the Prop. 98 minimum funding guarantee is further complicated because the majority of the drop — $9.1 billion — is attributed to the 2022-23 fiscal year, which ended on June 30, 2023. 

The Legislature can address the challenge by amending last year’s Budget Act to reduce Prop. 98 funding to the lower revised minimum Prop. 98 guarantee. But, because the state has already allocated 2022-23 dollars to K-14 education, reducing K-14 education funding would be logistically difficult and would significantly impact K-12 schools’ and community colleges’ budgets. On the other hand, maintaining 2022-23 Prop. 98 spending above the minimum funding requirement could boost the state’s funding obligation to meet the Prop. 98 guarantee in 2023-24 and 2024-25.

How does the governor propose to address the budget problem and protect students and educators?

To help address the state budget shortfall, the governor’s January budget proposal assumes a reduction in state funding to the lower revised estimates of the Prop. 98 guarantee over the three-year budget window (2022-23 to 2024-25). To reduce Prop. 98 spending, the governor proposes a combination of spending reductions and discretionary withdrawals from the Prop. 98 reserve. 

A significant part of the governor’s plan is an $8 billion reduction in Prop. 98 spending attributable to 2022-23, which would help reduce state General Fund spending to the lower revised Prop. 98 minimum funding level. However, the governor’s proposal would not take away the $8 billion from K-12 schools and community colleges — dollars they received for 2022-23 that have largely been spent. Instead, the governor proposes a complex accounting maneuver that would shift the $8 billion in K-14 education costs — on paper — from 2022-23 to later fiscal years.

First Look: Understanding the governor's 2024-25 state budget proposal

Learn about the key pieces of the 2024-25 California budget proposal, and explore how the governor prioritized spending and determined cuts amid a sizable projected state budget shortfall.

Read Report

Specifically, $8 billion in 2022-23 costs would be spread across five state budgets from 2025-26 to 2029-30 ($1.6 billion per year). Moreover, these delayed expenses would be paid for using non-Prop. 98 funds. In other words, $8 billion in General Fund dollars from the non-Prop. 98 side of the state budget — funds that could otherwise support health, safety net, housing, and other critical services — would be spent on K-14 education but would not count as Prop. 98 spending nor boost the Prop. 98 minimum funding guarantee (the implications of this are discussed below).

In addition, to help pay for existing K-14 education program costs in 2023-24 and 2024-25, the governor proposes making $5.7 billion in discretionary withdrawals from the Prop. 98 reserve. These one-time reserve funds would help support K-14 education in 2023-24 and 2024-25 at the same time that the state reduces General Fund spending required to meet the Prop. 98 minimum funding obligation.

How could the governor’s proposal affect non-Prop. 98 spending?

The governor’s proposal would use non-Prop. 98 resources to make a total of $8 billion in payments to K-14 education starting in 2025-26, but the proposal fails to propose additional revenue or other non-spending cuts to make these payments. Because no additional alternatives are part of the plan, the proposal would create pressure to reduce spending for state budget priorities outside of K-14 education starting in 2025-26.

Shifting Prop. 98 costs to the non-Prop 98 side of the budget creates significant risks to state spending that supports California’s children and families. By creating a future obligation for K-14 education without additional resources to pay for it, the governor’s plan could force reductions in spending for programs such as child care, student aid, and social safety net services that many Californians depend on for support to make ends meet.

How can state leaders address the decline in the Prop. 98 guarantee?

Policymakers have options to address the large decline in the Prop. 98 minimum funding guarantee that include the following:

Bottom line: Policymakers can address the decline in the Prop. 98 guarantee without creating pressure to reduce spending for priorities outside of K-14 education. The decline in the state’s Prop. 98 minimum funding guarantee due to state revenues falling short of expectations creates significant challenges for state leaders this year. However, policymakers have options for addressing these challenges, including raising revenues from wealthy corporations and high-income individuals who have ample resources to contribute.

Policymakers can also choose to withdraw more from the state’s Prop. 98 reserve to support K-14 education spending. Relying on Prop. 98 reserve funds alone may not be sufficient to cover all K-14 education expenses for which the state has made commitments. However, policymakers should look to raising revenue and other options to address the decline in the Prop. 98 guarantee that do not harm K-12 schools and community colleges or create pressure to reduce spending for state budget priorities outside of K-14 education.

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  • 1
    The inflation measure is either the percentage change in state per capita personal income for the preceding year or the annual change in per capita state General Fund revenues plus 0.5 percent.
  • 2
    The Legislature also can suspend Prop. 98 for a single year by a two-thirds vote of each house.
  • 3
    The amount of state funding required to fulfill the Prop. 98 guarantee across the three-year budget window dropped by $15.2 billion below the Prop. 98 funding level assumed last June. The difference between the state’s funding requirement and the $14.3 billion total decline in the Prop. 98 guarantee reflects estimates in the governor’s January 2024 budget proposal that include a $900 million increase in local property tax revenue, which offsets the $15.2 billion reduction in the state’s portion of the Prop. 98 funding obligation.

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For the most recent information and analysis of Proposition 1 on the November 2026 ballot, please see our latest analysis: Proposition 1: California’s Veterans and Affordable Housing Bond.

Millions of Californians who cope with behavioral health conditions — mental illness or substance use disorders — rely on services and supports that are primarily provided by California’s 58 counties. Improving California’s behavioral health system is critical to ensure access to these services for all Californians, regardless of race, age, gender identity, sexual orientation, or county of residence.

In recent years, state policymakers have launched various initiatives to transform California’s behavioral health system with the goal of improving access for Californians. The most recent of these initiatives is Prop. 1. Last year, state policymakers passed, with strong support from Governor Gavin Newsom, Senate Bill 326 and Assembly Bill 531. Together, these bills placed Prop. 1 on the March 2024 ballot.

On March 5, 2024, California voters will vote on Prop. 1, a two-part measure that would 1) amend California’s Mental Health Services Act and 2) create a $6.38 billion general obligation bond. The bond would fund:

  • Behavioral health treatment and residential facilities,
  • Supportive housing for veterans and individuals at risk of or experiencing homelessness with behavioral health challenges.

This initiative presents beneficial aspects as well as potentially adverse consequences for Californians. This Q&A provides a high-level overview of Prop. 1, including how Californians with behavioral health conditions might be impacted by its passage as well as implications for the state budget.

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Key Terms

Why Does Prop. 1 Matter for Californians?

Prop. 1 would impact how many Californians access mental health services and substance use disorder treatment in their communities. It would restructure a key funding source for county behavioral health services in ways that would increase housing supports but might adversely impact counties’ ability to provide behavioral health services.

The Mental Health Services Act (MHSA), which Prop. 1 would amend, accounts for about one-third of funding for county behavioral health services. The MHSA is essential in supporting services for Californians across different ages, addressing a spectrum of mild to severe behavioral health conditions.

Prop. 1 would also authorize a statewide bond to create mental health and substance use treatment beds, and housing with supportive services for unhoused Californians with behavioral health challenges. Increased supportive housing and access to treatment facilities is crucial for Californians. Capital funds accessed through the bond portion of Prop. 1 will slightly impact the state’s ability to make budgetary decisions year-to-year. However, the capacity of the state to issue future voter-approved bonds will decrease because California has a limited ability to finance bond measures.

Changes to the MHSA will impact a system that currently supports all Californians with behavioral health conditions. In contrast, the bond focuses on individuals with behavioral conditions who are at risk of or experiencing homelessness, which is a smaller portion of the unhoused population.

As thousands of Californians across the state experience the devastating effects of homelessness and barriers to behavioral health care, policymakers are asking Californians to consider if redirecting MHSA funds and authorizing a new general obligation bond is the right approach to addressing the state’s behavioral health and homelessness crises.

What Problem Is Prop. 1 Trying to Address?

Prop. 1 aims to support Californians who are most affected by severe behavioral health conditions (mental illness and substance use disorders) and homelessness. This initiative is designed to create designated funding for mental health services and housing or treatment units for people with behavioral health conditions who are or at risk of experiencing homelessness.

In early 2023, over 181,000 Californians were counted as experiencing homelessness — the traumatic effects of which can seriously harm individuals’ well-being. Research suggests the trauma of experiencing homelessness can cause people to develop mental health problems and worsen existing behavioral health challenges and coping behaviors like substance use.

There are data challenges in quantifying exactly how many unhoused Californians have a mental health condition or substance use disorder. The 2023 homelessness point-in-time count showed 25% of the 181,399 people experiencing homelessness in California had a severe mental illness and 24% had a substance use disorder. However, while there is likely overlap between these individuals, the full extent is not reported.

Access to mental health care and substance use disorder treatment can be challenging for Californians who are unhoused. A recent statewide study found that nearly 4 in 5 unhoused Californians surveyed reported experiencing a serious mental health condition at some point in life, and those with current mental health conditions reported limited access to treatment. Additionally, 1 in 5 unhoused Californians who reported regular substance use and wanted treatment were not able to receive it.

These challenges are compounded by California’s shortage of adult psychiatric and community residential beds, which prevents Californians with serious behavioral health conditions from accessing critical behavioral health services.

What Is the Mental Health Services Act?

In 2004, California voters approved the Mental Health Services Act (Prop. 63), which created a 1% surtax on personal incomes above $1 million to provide increased funding for mental health services. Its passage signified a commitment to improving mental health outcomes for Californians, with a focus on prevention, early intervention, and community-based care. This tax supports about one-third of the state’s public mental health system.

The Mental Health Services Act has five main goals:

How Are Mental Health Services Act Funds Used Today?

The majority of MHSA funding (95%) goes directly to counties, which have some flexibility in how to use these funds.

Under current law, a small percentage of MHSA dollars (5%) is reserved for state-level administration.

How Would Prop. 1 Change Mental Health Services Act Spending?

Prop. 1 proposes significant revisions to the Mental Health Services Act (MHSA). These include:

  • Changing its name to the Behavioral Health Services Act (BHSA),
  • Expanding its scope to encompass treatment for substance use disorders.

Additionally, it would modify how MHSA funds are allocated, and introduce changes related to oversight, accountability, and the community planning process. This overview will focus on outlining the new funding structure under Prop. 1.

Under Prop. 1, counties would continue to receive the bulk of BHSA funds (90%). However, the allocation across different spending categories would change, without an increase in revenues. Counties would allocate their BHSA funds as follows:

Prop. 1 could provide some exemptions for counties with a population of less than 200,000. In addition, during the first two years of implementation, counties might have the flexibility to transfer up to 14% of their funding between these categories, with a limit of 7% per category. However, this flexibility is still pending state approval and has not been confirmed.

Another notable change is that Prop. 1 would shift a small percentage of dollars from counties to the state (from about 5% of total MHSA funding to about 10%). This would result in about $140 million annually redirected to the state budget. However, this amount could be higher or lower depending on the total amount of revenue collected from the tax.

Prop. 1 would also revise the allocation of state-level funds:

  • At least 3% to the Department of Health Care Access and Information to implement a statewide behavioral health workforce initiative.
  • At least 4% to the California Department of Public Health for population-based mental health and substance use disorder prevention programs. A minimum of 51% of these funds must be used for programs serving Californians who are 25 years or younger.

It’s worth noting that Prop. 1 would not change the tax on people with incomes over $1 million per year. This means counties would be expected to expand their scope of services without an increase in revenue. In fact, county leaders have repeatedly raised concerns about the disruption that Prop. 1 could cause. Specifically, the MHSA restructuring could result in significantly less funding for core services, which could lead to counties:

  • Canceling contracts with community-based organizations. 
  • Closing programs that are currently serving Californians.
  • Reducing county staffing.

If passed, the exact impact of Prop. 1 will vary by county and depend on how much revenue is collected in any given year. It’s important to keep in mind that the MHSA funds services for Californians of all ages for a range of conditions — mild to moderate to severe. The restructuring of MHSA funding would target a subset of this population. Therefore, programs and services for prevention and early intervention in some counties, for instance, could experience disruptions due to the new prioritization of funding.

What Can We Expect from the Behavioral Health Infrastructure Bond?

The Behavioral Health Infrastructure Bond would create a $6.38 billion general obligation bond for:

  • Infrastructure development of treatment and residential care facilities,
  • Supportive housing units for veterans and other Californians with serious mental health conditions and substance use disorders.

These funds are estimated to create up to 4,350 housing units, with 2,350 set aside for veterans, and 6,800 mental health and substance use treatment places for an approximate total of 11,150 new behavioral health and supportive housing units statewide. An estimated 26,700 outpatient treatment slots will also be created that may serve thousands of Californians annually.

Projects funded by the Behavioral Health Infrastructure Bond will be eligible for local streamlined review processes if they meet select criteria. The bond funds will be allocated as follows:

First Look: Understanding the governor’s 2024-25 state budget proposal

Learn about the key pieces of the 2024-25 California budget proposal, and explore how the governor prioritized spending and determined cuts amid a sizable projected state budget shortfall.

Read Report

What Would the Infrastructure Bond Mean for the State Budget?

Under Prop. 1, the state would issue up to $6.38 billion in general obligation (GO) bonds, with the funds going toward:

  • Grants or loans for vital treatment and residential care facilities,
  • Supportive housing units.

California voters have a record of funding large infrastructure projects through bonds as it does allow the state to access impactful funding amounts that are designed to serve public interests at large over many years.

In issuing bonds, the state must repay the bond debt service (which is the principal bond amount plus interest) through General Fund dollars. The most recent cost estimate assumes a 30-year debt service resulting in projected payments of roughly $310 million per year. Under this estimate, it would cost the state approximately $9.3 billion to repay the total bond debt, not including the cost of inflation. California currently spends roughly 2.5% of the state budget on repaying various bond obligations voters have decided on in the past.

While there are ways to equitably reform the state budget’s revenue streams, policymakers must balance the yearly limited discretionary flexible dollars in the General Fund. GO bonds in essence prioritize increased debt-service payments to be drawn from the General Fund over potential ongoing or one-time funding. Repaying the bond portion of Prop. 1 is a trade-off that will slightly reduce the flexible dollars left for other vital public services that may already serve Californians with behavioral health conditions and those at risk of or experiencing homelessness. It also challenges the state’s capacity to fund future voter-approved bonds since California has limitations on financing bond measures.

Another consideration is the ongoing operating costs that will be needed to adequately sustain the facilities produced through Prop. 1. As explained above, the MHSA restructuring does designate 30% to housing interventions which includes rental and operating subsidies. The funds can presumably help sustain facilities that are projected to be secured through the bond funding. However, it is uncertain whether these funds and those from other sources will be sufficient and accessed efficiently to ensure adequate upkeep, staffing, and proper care for the Californians receiving housing and services through these projects.

The infrastructure projects funded under the bond would build on existing state programs that received one-time funding through previous budget allocations or voter-approved bonds which are close to being depleted.

How Might Californians Be Impacted by Prop. 1?

The proposal presents various promising aspects. First of all, the expansion of services to substance use disorder treatment is positive. This broadened scope recognizes that mental health challenges and substance use disorders sometimes occur together. In fact, more than 1 in 4 adults living with a serious mental illness also have a substance use disorder. This underscores the importance of providing treatment for both conditions.

Another positive aspect of this proposal is the prioritization of treatment facilities and supportive housing infrastructure for Californians at risk of or experiencing homelessness with behavioral health conditions. Due to racism, ableism, and other forms of discrimination, some Californians are more likely to experience the devastating effects of homelessness at some point in their lifetime. This disparity is particularly stark for Black, Indigenous and Pacific Islander Californians, adults without children, older adults, and transgender and other LGBTQ+ individuals.

Notably, the new investments and prioritization of funds under Prop. 1 target a small but important share of the unhoused population. The majority of unhoused Californians face short-term homelessness (61%), for which deeply affordable permanent housing is needed. For those who are chronically homeless (39%) and may have behavioral health challenges, the increased supportive housing units are crucial if they are appropriately sustained with wraparound supportive services.

One concern about Prop. 1 is the restructuring of funding under the Mental Health Services Act (MHSA). While the exact consequences of this change are not entirely clear for each county, it could have adverse effects. The MHSA has been instrumental in providing innovative, community-based services for historically underserved communities, including people of color and LGBTQ+ communities. Given that county leaders have expressed that this initiative could result in less funding for core services, Prop. 1 could negatively impact services for Californians of color and LGBTQ+ communities that are currently supported by MHSA funding.

A key flaw of this initiative is that it expands the scope of the MHSA and prioritizes funding for people who are or at risk of experiencing homelessness without increasing the tax or providing new revenue to support existing county behavioral health programs. This approach is concerning, as it redirects funds originally allocated for a specific purpose to address a different need.

What Are Supporters and Opponents Saying?

supporters

Supporters claim that Prop. 1 would prioritize existing funds and generate new funds for Californians with the most severe behavioral health needs and those living in encampments. Other supporters assert that the proposition is a beneficial component in advancing the variety of interventions needed to address California’s housing and homelessness challenges. Supporters of Prop. 1 include California Big City Mayors as well as some behavioral health and housing advocates.

opponents

Opponents, including disability rights advocates and peer support advocates, argue that Prop. 1 represents a significant regression in the treatment of mental illness and substance use disorders, likening its impact to a 50-year setback. This perspective stems from allowing funding to be used for involuntary or forced treatment facilities. Opponents also claim that Prop. 1 could result in reduced mental health services for Black, Indigenous, and other people of color and LGBTQ+ Californians.

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As one of the most complicated measures on the November 2020 state ballot, Proposition 19 would make significant changes to California’s residential property tax system. The proposition would expand a property tax loophole for older, mostly wealthier homeowners, while covering the cost by narrowing another special tax rule for inherited properties – and would then require state and local governments to track how much their tax revenues change as a result, requiring new administrative infrastructure. Altogether Prop. 19 would likely result in increased state and local revenues on net – but not for all counties – while most of the newly available state dollars would be restricted to a new special fund limited to use for supporting fire response. Prop. 19 includes some elements that policymakers could consider as part of more comprehensive tax reform, but its central proposal to expand tax breaks for older, mostly white, mostly economically advantaged homeowners would make California’s tax system less equitable. The complicated proposal would also do little or nothing to help the Californians most severely affected by the state’s housing affordability crisis, including renters, families with low incomes, and most Black and Latinx residents. This proposition was initiated by the California Association of Realtors and modified in negotiations with the Legislature.

Prop. 19 Expands Tax Breaks for Older, Mostly White Homeowners Who Tend to Be Economically Secure Already, Reducing the Equity of California’s Tax System

California already has special rules that allow homeowners who are age 55 or older or who are severely disabled to avoid paying higher property taxes if they sell their home and move to a new home under certain circumstances – and Prop. 19 would expand the special tax breaks for these same homeowners. About 4 million homeowners age 55 or older would be eligible to benefit from these new property tax breaks under Prop. 19, as well as a much smaller number of younger homeowners with disabilities, according to Budget Center analysis. Similar existing special rules apply to individuals whose homes have been damaged or destroyed by fire or other natural disasters, and these tax breaks would also be expanded, though homeowners affected by disasters who are not also eligible due to age or disability make up a tiny share – well under 1% – of the total number of homeowners eligible to benefit from Prop. 19, according to Budget Center analysis.

Generally, the homeowners who would be eligible to benefit from these new special property tax breaks under Proposition 19:

  • have higher incomes and are more economically secure than California household heads overall; 
  • have much higher incomes and are much less likely to be living in poverty than similarly-aged older renter household heads;
  • are long-term homeowners, many with access to substantial home equity, with more than half owning homes worth a half-million dollars or more, according to Budget Center analysis.

By expanding tax breaks for this economically advantaged group, Prop. 19 would make California’s tax system less progressive and more inequitable.

California Proposition 19 Eligible Homeowners Are Much Less Likely to Live in Poverty Than Older Renters of Californians Overall

Prop. 19-eligible homeowners are also substantially more likely to be white and much less likely to be Latinx or Black than the heads of California households overall, according to Budget Center analyses. Housing policy and tax policy have historically benefited white households most, including through policies with explicitly racist design and implementation that have blocked Black and brown Californians from homeownership opportunities. By directing additional tax benefits largely to white homeowners, Prop. 19 reinforces racial inequity within California’s tax system.

More Than 6 in 10 Proposition 18 Eligible Homeowners Are White, Versus Less Than Half of California Household Heads Overall

Prop. 19 Would Attempt to Pay for Expanding One Property Tax Break By Limiting Another – California’s Property Tax Inheritance Loophole

Prop. 19 would narrow California’s property tax inheritance loophole, which offers Californians who inherit certain properties a significant tax break by allowing them to pay property taxes based on the property’s value when it was originally purchased rather than its value upon inheritance. As outlined in an analysis by the Legislative Analyst’s Office (LAO), this loophole is costly, inequitable, and may exacerbate the state’s housing crisis. And since wealthy, white individuals are more likely to receive inheritances, this loophole likely exacerbates the racial wealth gap.

Prop. 19 would narrow California’s inheritance loophole by 1) requiring the inherited property be used as the child’s primary residence or as a family farm to qualify for the tax break and 2) limiting the tax savings for properties where the market value is at least $1 million higher than the taxable value prior to the transfer. These changes would lessen the inequities in California’s current property tax system and raise property tax revenue to support local services, but a more sound and less complicated policy would be to limit the inheritance loophole without linking it to the expansion of another inequitable tax break.

Prop. 19 Would Result in a Net Increase in Local and State Tax Revenues, While Narrowly Restricting Most State Revenue Gains to Use for Fire Response

The property tax changes proposed in Prop. 19 would likely raise local property tax revenues to support community services, but these gains are limited by the expansion of the special rules for certain homeowners and would vary significantly by county and year. Some counties may lose revenue in some years, though the measure would require that local agencies be at least partially reimbursed for the losses. In some years, most school districts would see no net gains in funding, as state funding for education would decrease to offset the property tax revenue gains.

The measure is also expected to result in some increased income tax revenue to the state due to increased home sales, as well as state budget savings due to a reduction in the state’s share of education funding under the Proposition 98 minimum funding guarantee. The majority of this additional revenue and savings – 75% of the net gains – would be earmarked for state and local fire suppression activities. While the state clearly has an urgent need for fire response resources, restricting funds to specific purposes compromises the state’s flexibility and ability to respond to changing circumstances.

Prop. 19’s Complex Scheme of Tax Break Tradeoffs and Funding Restrictions Misses the Mark for Equitable and Effective Public Policy

As California seeks to make equitable policy choices and advance budget decisions for people and their communities, the state cannot achieve those goals with complex schemes that needlessly combine efforts to increase state and local revenues – to address critical community needs – with substantial tax breaks for mostly wealthier California homeowners. A more just approach to reforming California’s tax system would keep the elements of Prop. 19 that increase revenues equitably without linking this change to expanded benefits for individuals who mostly have little need for additional tax cuts. A more effective policy design would also allow more flexible use of increased revenues – which could allow the opportunity to use funds to address the needs of Californians most affected by the state’s housing affordability crisis, such as those who rent their homes, those with lower incomes, and Black and brown Californians who have been blocked from homeownership opportunities and hit hardest by unaffordable housing costs. Overall, Prop. 19’s tax break giveaways and complexity limit its potential to make the state’s tax system more equitable and to effectively address Californians’ most urgent needs.

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Local tax revenue reflects a community’s shared effort to support vital public services that all Californians need to live in our cities and counties, such as education for students in K-12 schools and community colleges, housing, health care, public parks, and libraries. When tax breaks provide advantages to some taxpayers over others, it not only creates inequities but can also lead to revenue losses that compromise the ability of schools and local communities to provide essential services for Californians. This is the case with commercial and industrial property taxes across California, and why voters will be asked in fall 2020 to vote on Proposition 15, an amendment to the state Constitution that would change how commercial and industrial properties are taxed to provide more revenue for schools and communities. 

Under Prop. 15, commercial and industrial properties would be taxed based on their market value rather than their purchase price. By moving from a property tax system based on purchase value to one based on market value, Prop. 15 would raise an estimated $6.5 billion to $11.5 billion annually in property tax revenues for K-12 schools and community colleges, counties, cities, and special districts, according to the Legislative Analyst’s Office.

Guide to Understanding Proposition 15

FAQ: Understanding Commercial Property Tax & Revenue in California

How Are Commercial and Industrial Properties Taxed Today? 
The general property tax rate for California commercial and industrial properties has been capped at 1% of assessed value since voters approved Prop. 13 in 1978. Counties determine the assessed value of commercial and industrial properties based on the property’s purchase price plus an annual adjustment for inflation not to exceed 2%. Counties collect property taxes and are generally only allowed to reassess properties to their market value when they undergo a change in ownership or new construction.

How Is Revenue From Commercial and Industrial Property Taxes Distributed Across California?
Revenue received from the taxes paid by commercial and industrial property owners is distributed to counties, cities, K-12 schools and community colleges, and special districts (such as public utility districts and fire protection districts) for services provided to Californians, based on complex state laws. The share of countywide property tax revenue going to each local entity is largely based on the distribution of these revenues dating back to the mid-1970s – before Prop. 13 was enacted and each local entity was able to set its own property tax rates. This means that there is wide variation among counties in the share of revenue going to – and the level of services provided by – each type of local government.

Why Are Commercial and Industrial Property Taxes Inequitable for Californians and in Need of Reform?
The property assessment limits set by Prop. 13 mean that an owner that purchased a commercial or industrial property several decades ago pays far lower taxes than an owner that recently purchased a similar property – leading to inequity among local businesses and a significant loss of revenue at the expense of schools and local community services. Schools and local communities are losing significant revenues every year as properties that have not changed ownership in many years are assessed at values much lower than their market values. Additionally, when a property changes hands, commercial and industrial property owners can more easily avoid reassessment than residential property owners due to the laws defining ownership changes and the complexity of business property ownership.

Report: Raising Revenue for Schools and Local Communities, Changing California’s Inequitable Taxing of Commercial Properties, and Understanding Proposition 15

Local tax revenue reflects a community’s shared effort to support vital public services that all Californians need to thrive in our cities and counties. This ranges from education for students in K-12 schools and community colleges to access to housing, health care, public parks, and libraries. These vital public services are supported by tax revenues from commercial and industrial properties – many of which are still taxed based on purchase prices that are more than four decades old. California voters will be asked in fall 2020 to vote on a measure known as Proposition 15, an amendment to the state Constitution that would change how commercial and industrial properties are taxed and provide more revenue for schools and local communities to support services Californians rely upon.

 

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Infographic: California’s Inequitable Tax System Hurts Schools & Local Communities

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Across California and the United States, the push for bail reform has gained momentum with increasing awareness and research showing the disproportionate impact the money bail system has on people of color and low-income households. In California, it’s estimated over two-thirds of people detained in jails – around 47,000 – have not been sentenced for a crime, a number that includes both those who cannot afford bail and those who are awaiting sentencing post-conviction (Fig. 1).1These numbers reflect the unsentenced adult daily population in all California jails. Counties are not asked to report the number of unsentenced defendants who remain in custody because they cannot afford to post bail . Board of State and Community Corrections, Jail Population Survey. Data reflect the average daily jail population as of March 2020. https://public.tableau.com/profile/kstevens#!/vizhome/ACJROctober2013/About Los Angeles County alone is the largest jail system in the US and houses over 1 in 5 of adults who have not been sentenced for an alleged crime in California.

Enter Proposition 25 that will appear on the November 3, 2020 statewide ballot and asks California voters to decide whether a 2018 state law that effectively ends money bail should take effect. If voters approve Prop. 25, judges will be able to utilize risk-based assessment tools – examining population links between rearrest or reconviction and individual factors such as age, gender, or criminal record – to determine if individuals detained for certain crimes can be released before a court appearance rather than posting money bail.

how does money bail work in california?

Bail is the process of securing release for an arrested person who a judge has decided may be released from jail pending any court hearings. While some people are released without financial conditions, many others will only go free if they pay either the courts or a bail bond agent first. This payment is referred to as money bail.

Efforts to reform California’s bail system also aim to address the wide racial disparities seen in the criminal justice system. In part, these disparities stem from structural racism that exacerbate the disproportionate level of policing and arrests faced by communities of color. Black Californians currently face higher arrest rates than white Californians in most counties throughout the state, with the wealthiest counties having the largest gaps.2Magnus Lofstrom et al., Racial Disparities in California Arrests (Public Policy Institute of California: October 2019). Nationally, Black and Latinx defendants are also more likely to be held in pretrial custody and have bail set at a higher amount than white defendants.3Wendy Sawyer, How Race Impacts Who is Detained Pretrial (Prison Policy Initiative: October 19, 2019).  With the state’s median bail amount ($50,000) five times higher than the rest of the country (less than $10,000), money bail is particularly costly for Californians compared to residents in other states.4Soyna Tafoya, Pretrial Detention and Jail Capacity in California (Public Policy Institute of California: July 2015), p.4. Additional racial, economic, and gender disparities embedded in the money bail system are discussed in this report.

Types of Money BailDescriptionFinancial Liability
Commercial bail bondThe defendant pays the bail bond agent a fee, which is usually 10% of the value of the bond. Bail agents may also require collateral. Family and friends may co-sign the bond and pay on behalf of the defendant.

This is the primary way of paying money bail to secure a defendant’s release.5Pretrial Detention Reform Workgroup, Pretrial Detention Reform: Recommendations to the Chief Justice (October 2017), p. 29.		If defendants fail to appear, the bond agent may forfeit the full bail amount, which agents can seek to reclaim from the defendant’s family and friends.6In reality, due to forfeiture laws, bail bond agents rarely forfeit the full bail amount if a defendant fails to appear. See Pretrial Detention Reform Workgroup, Pretrial Detention Reform: Recommendations to the Chief Justice (October 2017), p. 37.

The fee is nonrefundable, even if the defendant makes all of their required court appearances and no matter what happens with the case.
CashDefendants, their family, and/or friends pay bail directly to the court, either with cash or its equivalent, such as a check or money order.If defendants fail to appear, they are liable for the full bail amount.

If a defendant is convicted, some or all of the cash bond is put toward restitution costs. Otherwise, the cash bond is refunded to the defendant at the conclusion.7The defendant receives the full amount of the cash bond less any additional fines, fees, or processing costs the court may charge. However, if the defendant is convicted, the value of the cash bond may go toward restitution. See Pretrial Detention Reform Workgroup, Pretrial Detention Reform: Recommendations to the Chief Justice (October 2017), p. 30.
Property bondDefendants, their family and/or friends, may post real property as collateral instead of a cash deposit.8The property can be accepted as bail if the court determines that the equity in the property is twice the value of the bail amount. See Pretrial Detention Reform Workgroup, Pretrial Detention Reform: Recommendations to the Chief Justice (October 2017), p. 31.If defendants fail to appear, they, or their family and friends, must forfeit the property.

What is California’s Bail Reform Law and Why is it on the 2020 Ballot?

In 2018, state legislators passed a bail reform law called Senate Bill 10 (SB 10), which former Governor Jerry Brown signed.9SB 10 (Hertzberg, Chapter 244 of 2018). SB 10 was the culmination of various efforts to replace money bail in California with a non-monetary pretrial system. The primary purpose of the law is to eliminate the money bail system and ensure that if a Californian is awaiting hearings or trial, they are not held in jail because they cannot afford to pay bail (or to pay a bail bond agent’s fee).10Under the law, if someone were accused of committing a misdemeanor, they would be automatically released, though there are some exceptions, including violations of protective orders, among others. See SB 10 (Hertzberg, Chapter 244 of 2018). To determine who should still be detained, courts would use risk assessment tools, which are intended to predict the chance that someone might not appear for a hearing date or might be rearrested before trial.11Risk-based assessments are typically generated by statistically analyzing large data sets to identify links between rearrest or reconviction and other factors such as age, gender, or criminal record. See Megan T. Stevenson, “Assessing Risk Assessment in Action,” Minnesota Law Review 103:1 (2018), p. 304.

Shortly after the law passed, the American Bail Coalition spearheaded a challenge through a veto referendum petition to place the law on the ballot. 

Under Prop. 25, California voters are asked to decide in November 2020 if they want to uphold the bail reform law or if they want to repeal it. A YES vote on Prop. 25 would allow SB 10 to take effect, effectively ending the state’s money bail system. A NO vote on Prop. 25 would repeal SB 10 and keep the current money bail system in place.

Equity and Safety Concerns about Money Bail

As California, local jurisdictions, and many states examine public safety priorities, and in light of Black and brown communities calling for justice from police and sheriff departments along with courts, many questions are raised about the economic, racial and gender implications of money bail. This also leads to questions about the role money bail plays in deterring criminal activity and accountability for individuals.

Is money bail unfair to low-income Californians?

Requiring people pay bail to secure their freedom before trial disproportionately impacts Californians with low incomes. In 2009, the most recent year for which data are available, the median bail amount in California was $50,000.12Sonya Tafoya, Pretrial Detention and Jail Capacity in California, (Public Policy Institute of California: July 2015). Considering median annual household income in 2010 was about $57,700, bail was – and continues to be – set higher than many Californians can afford.13US Census Bureau, American Community Survey, 2010 1-Year Estimates. Table S1903: Median Income in the Past 12 Months (In 2010 Inflation-Adjusted Dollars), downloaded from https://data.census.gov/cedsci/table?t=Income%20%28Households,%20Families,%20Individuals%29&g=0400000US06&y=2010&tid=ACSST1Y2010.S1903&hidePreview=true on August 24, 2020.Though the Eighth Amendment protects against “excessive” bail, the Supreme Court has ruled that bail may only be considered excessive if it is more than necessary to achieve the court’s goals, not if bail is more than a person can pay.  The court found that “[t]he plain meaning of ‘excessive bail’ does not require that it be beyond one’s means, only that it be greater than necessary to achieve the purposes for which bail is imposed.” See Pretrial Detention Reform Workgroup, Pretrial Detention Reform: Recommendations to the Chief Justice (October 2017), p. 73. In the majority of cases, Californians must contract with a commercial bail bond agent who posts bail for them.14In Los Angeles County, San Francisco County, and Santa Clara County, commercial bail bonds were the primary means of posting bail. In one year, cash bonds were used in less than 2% of total cases, followed by property bonds (less than 1%).  See Pretrial Detention Reform Workgroup, Pretrial Detention Reform: Recommendations to the Chief Justice (October 2017), p. 31. Additionally, in 2017, 99.9% of people who posted bail in the city of Los Angeles did so through a commercial bail bond agent. See Isaac Bryan, et. al, The Price of Freedom: Bail in the City of Los Angeles (UCLA Bunche Center for African-American Studies and Million Dollar Hoods: May 2018). In turn, the person has to pay a premium (often 10% of the total bail amount) that is nonrefundable, even if the prosecutor never files charges or if the person is ultimately acquitted.15The defendant (or their family members and friends) may also face extra costs, such as late payment fees and interest on the premium. See The UCLA School of Law Criminal Justice Reform Clinic, The Devil is in the Details: Bail Bond Contracts in California (May 2017), p. 15. Moreover, as just under 4 in 10 Americans (37%) cannot easily cover an unexpected expense of $400, even this fee could be out of reach of many.16Board of Governors of the Federal Reserve System, Report on the Economic Well-Beingof U.S. Households in 2019, Featuring Supplemental Data from April 2020 (May 2020). For example, in 2018 in Los Angeles County, assuming everyone eligible for bail turned to a commercial bail bond agent, 95% of people would have had to pay fees ranging from $2,501 to $100,000 (Fig. 2).17Los Angeles County Sheriff’s Department, Custody Division Population Year End Review, p. 30. With this money bail system, many may simply be unable to pay. In 2017, the majority of bail (81.6%) levied in the city of Los Angeles actually went unpaid and people stayed in jail, either because they could not pay or chose not to.18Isaac Bryan, et. al, The Price of Freedom: Bail in the City of Los Angeles (UCLA Bunche Center for African-American Studies and Million Dollar Hoods: May 2018).

Does money bail reflect and exacerbate racial and gender inequities?

Due to ongoing over-policing and discrimination, Black and Latinx Californians are disproportionately arrested and detained, and thus are more likely to have to pay bail.19Magnus Lofstrom, et. al., Racial Disparities in California Arrests (Public Policy Institute of California: October 2019) and Pranita Amatya, et. al., Bail Reform in California (UCLA Luskin School of Public Affairs: May 2017), p. 27. In Los Angeles, Latinx residents paid nearly half (48%) of all non-refundable bail bond deposits, and Black residents paid a quarter (25%).20Isaac Bryan, et. al, The Price of Freedom: Bail in the City of Los Angeles (UCLA Bunche Center for African-American Studies and Million Dollar Hoods: May 2018). Latinx and Black families are less likely to have the means to weather such financial setbacks, as they have less wealth.21Esi Hutchful, The Racial Wealth Gap: What California Can Do About a Long-Standing Obstacle to Shared Prosperity (California Budget & Policy Center: December 2018). Money bail may also particularly harm women, who tend to be less likely to afford bail themselves and who are most likely to bear the financial burden of bail and other fees when family members are incarcerated.22Ella Baker Center for Human Rights, Forward Together, and Research Action Design, Who Pays?: The True Cost of Incarceration on Families (September 2015) and Leon Digard and Elizabeth Swavola, Justice Denied: The Harmful and Lasting Effects of Pretrial Detention (Vera Institute of Justice: April 2019), p. 7. In San Francisco County, for example, most co-signers of commercial bail bonds are women.23Pretrial Detention Reform Workgroup, Pretrial Detention Reform: Recommendations to the Chief Justice (October 2017), p. 39.

Does money bail deter criminal activity?

One of the common justifications of bail is that it upholds public safety by keeping people who could be dangerous in jail or by discouraging a released person from committing a crime as they await their court hearings.24Judicial Council of California, Bail in California: Legal Framework (February 19, 2016). However, there is no evidence that money bail serves either purpose. Currently, people who are eligible for bail yet remain detained have already been deemed by a judge to be safe enough for release. They only remain in jail because they cannot or have not paid, not because they are a greater safety risk than those who managed to pay. Moreover, money bail may not provide a strong financial deterrent to future offenses. When a person is released on bail, they do not forfeit the total bail amount they paid if they are accused of committing a new offense; they only forfeit bail when they fail to appear for their hearing.25Curtis E. Karnow, “Setting Bail for Public Safety,” Berkeley Journal of Criminal Law 13:1 (2008), p. 20. As a result, there is not a direct link between a defendant allegedly committing a new crime and forfeiting bail.

Does money bail ensure court appearances?

The evidence suggests that the threat of bail forfeitures in the event of failure to appear does not effectively ensure appearances. For those who use a commercial bail bond to pay for their pretrial release, the fee they pay to the bail agency is nonrefundable whether they later show up to court or not. For those who pay their own bail, the threat of forfeiture is not the determining factor in if people appear. Research suggests failure to appear may be more indicative of  personal circumstances and, potentially, the length of pretrial detainment.26While a frequently cited study conducted in Kentucky found pretrial detention increased a defendant’s likelihood to fail to appear for court, these results have not been replicated. A growing body of evidence actually hints that pretrial detention reduces failure to appear rates. Léon Digard and Elizabeth Swavola, Justice Denied: The Harmful and Lasting Effects of Pretrial Detention (Vera Institute of Justice: April 2019), p.3. Generally, very few people released pretrial purposefully miss their court dates, and those who do miss them eventually appear for court on their own. If a person does fail to appear, it is often attributed to lack of child care, work, homelessness, disability due to a serious mental illness, negligence, or error.27Human Rights Watch, “Not in it for Justice:” How California’s Pretrial Detention and Bail System Unfairly Punishes Poor People (April 11, 2017), p.7.

Some suggest that because the bail bond agents are financially liable if a person does not show, they are encouraged to ensure an appearance. However, there is no strong evidence supporting the notion that bail bond agents in California directly ensure a defendant appears for court.28Pretrial Detention Reform Workgroup, Pretrial Detention Reform: Recommendations to the Chief Justice (October 2017), p. 36. Studies conducted in San Francisco and Santa Clara County found that although bail bond agents are responsible for a defendant, the responsibility often falls on the county to provide pretrial supervision and recover fugitives who are in custody.29Pretrial Detention Reform Workgroup, Pretrial Detention Reform: Recommendations to the Chief Justice (October 2017), pp. 39-41. Moreover, if a defendant does not appear for their hearing, it is rare for bail bond agents to pay the total remaining bail amount because of strict and costly forfeiture laws courts must follow to receive full payment.30Pretrial Detention Reform Workgroup, Pretrial Detention Reform: Recommendations to the Chief Justice (October 2017), p. 37.

Equity and Safety Concerns about Pretrial Detention

As the equity and public safety concerns are weighed about reforming bail in California, this option also brings up questions about pretrial detention, which Prop. 25 does not end. It is important to understand the economic and public safety aspects of pretrial detention for Californians held in jail, their families, and the larger community.

Does pretrial detention unfairly punish people and their families?

While someone is in jail, they lose their freedom, are unable to go to work, are unable to care for their children and other dependent family members, and risk losing their housing.31Shima Baradaran Baughman, “Costs of Pretrial Detention,” Boston University Law Review 97:1 (2017) p. 5. Detention can therefore be regarded as a way of punishing people who have not even had their day in court. Detention can also have further implications for a person’s case. Research indicates that when compared to similar defendants who are released, those who remain detained are more likely to plead guilty, to be convicted, and to receive harsher sentences.32United States Department of Justice, National Institute of Corrections, “Pretrial,” accessed at https://nicic.gov/pretrial on July 6, 2020 and Leon Digard and Elizabeth Swavola, Justice Denied: The Harmful and Lasting Effects of Pretrial Detention (Vera Institute of Justice: April 2019), pp. 3-5. Results of a study of one Texas county suggested that 17% of jailed residents who pleaded guilty would not have been convicted at all if they had been released pretrial, suggesting that they may have pleaded guilty just to secure their release.33Data reflect misdemeanor defendants. In the study, detention increased the likelihood of pleading guilty by 25%. Paul Heaton, Sandra G. Mayson, and Megan Stevenson, “The Downstream Consequences of Misdemeanor Pretrial Detention” Stanford Law Review 69:3 (2017), p. 771. Californians and their families–particularly those who are Black, Latinx, or who have low incomes– bear these costs irrespective of whether they are ultimately acquitted, convicted, or their charges are dismissed.

Does detention raise public safety concerns?

Research shows that even short periods of pretrial detention will increase an individual’s risk of allegedly committing more crimes, not reduce it. A study conducted in Harris County, Texas, the fourth largest county in the US, found pretrial custody was associated with a 20% increase in new misdemeanor charges and a 30% increase in new felony charges 18 months after a defendant’s initial post-bail hearing.34Paul Heaton, Sandra G. Mayson, and Megan Stevenson, “The Downstream Consequences of Misdemeanor Pretrial Detention” Stanford Law Review 69:3 (2017), p. 718. In California, research found that large urban areas which heavily rely on pretrial detention experienced higher rates of failure to appear in court and higher levels of felony arrests during a defendant’s pretrial period, compared to other urban areas nationally which did not heavily rely on pretrial detention.35Sonya Tafoya et al., Pretrial Release in California (Public Policy Institute of California: May 2017), p. 5. These findings suggest that the use of money bail acts as a deterrent to public safety and ultimately contributes to outcomes that come at a greater cost to society and leads to more incarceration. And while opponents of bail reform also point to increasing levels of offenses in New York that implemented bail reform similar to risk-assessments, these statistics have been criticized because of the short analysis period and potential data manipulation.36The New York state legislature has since amended their bail reform law with a number of changes that took effect in July.  See Jamiles Lartey, New York Rolled Back Bail Reform. What Will the Rest of the Country Do? (The Marshall Project: April 23, 2020).

Equity and Safety Concerns about Risk Assessments

Providing a judge with more information about a Californian who has been arrested, assessing whether the individual is a risk to the community, and determining if the person should be freed without paying bail until the next decision in a case – this is the essence of risk assessment tools and Prop. 25. Risk assessment tools, as many parts of Californian’s vast criminal justice and public safety system, bring up concerns about racial, gender, and socioeconomic disparities.

Can risk assessment tools effectively predict criminal activity or likelihood to appear?

Under the existing cash bail system, when judges set a bail amount, they are intended to base their decision on the severity of the alleged offense, their estimate of a person’s probability to reoffend and flight risk. As California’s bail reform law eliminates bail, courts would have to focus more of their efforts on deciding who to detain. As written, the law specifically instructs courts to use “accurate and reliable” risk assessment tools to help make these decisions.37SB 10 (Hertzberg, Chapter 244 of 2018). Proponents of these tools argue that they will prevent judges from making subjective error-prone determinations.38Megan T. Stevenson, “Assessing Risk Assessment in Action,” Minnesota Law Review 103:1 (2018). p. 305. However, evidence of the effectiveness of pretrial risk assessments is unclear. While in theory such algorithm-based assessments could be effective at predicting who is likely to miss court appearances or to be rearrested, their impact depends highly on the design and underlying assumptions, as well as on how these tools are implemented.39Megan T. Stevenson, “Assessing Risk Assessment in Action,” Minnesota Law Review 103:1 (2018). pp. 306-307, 310-11, 327. Additionally, depending on the tool, the data it relies on, and the people interpreting it, pretrial risk assessments may have built-in racial and implicit biases.

Can risk-based assessments contribute to disparities in the criminal justice system?

Risk-based assessment tools could also exacerbate racial, gender, and socioeconomic disparities in the criminal justice system. This is because risk-based assessment algorithms incorporate existing criminal justice data, which reflect that communities of color are often overpoliced.  Therefore, defendants who reside in communities that have high levels of crime are more likely to be considered “high risk” because of where they live than those who live in more affluent neighborhoods. However, research also shows that defendants detained in jail while awaiting trial are more likely to plead guilty, be convicted, be sentenced to prison, and receive harsher sentences than similar defendants who are released during the pretrial period. Given that people of color and those with low incomes are the majority of individuals overpoliced and arrested, the current money-based pretrial detention system also drives these gaps.

A Brief History of Bail

Today, bail is commonly understood as the amount of money someone must pay to get out of jail.  However, originally bail simply meant “the right to release before trial.” This meaning has its roots in early England, where the courts differentiated between offenses that would allow for release before trial (bailable) and those that mandated detention until trial (non-bailable). If an accused person was released, a friend or family member would act as a “personal surety” and pledge to pay money if the accused did not appear in court. Critically, payment only occurred as a consequence for failure to appear and the personal surety was not allowed to profit.40Timothy R. Schnacke, “A Brief History of Bail,” The Judges’ Journal 57 (2018) and Timothy R. Schnacke, Money as a Criminal Justice Stakeholder: The Judge’s Decision to Release or Detain a Defendant Pretrial (National Institute of Corrections: September 2014).

Though these practices were carried over to the American colonies, in the 1800s this system underwent several key changes making money more important to release. As personal sureties became scarce, commercial bail emerged in the late 1800s, with bail bond agents acting as sureties who could profit if they paid the defendant’s behalf. With the exception of the Philippines, the United States stands alone in its widespread embrace of the practice of commercial bail.41Timothy R. Schnacke, Money as a Criminal Justice Stakeholder: The Judge’s Decision to Release or Detain a Defendant Pretrial (National Institute of Corrections: September 2014), p. 26. Bail thus became an upfront deposit as a condition of release, instead of a payment only as a consequence for failure to appear. These changes increased the chances that a defendant could be eligible for release and yet still remain detained due to inability to pay. 

Today, payment and release are so intertwined that “money bail” has become synonymous with release outright. In California, bail bonds are primarily posted through commercial bail agents, instead of directly by the arrested person.

Ballot Propositions
Justice System
  • 1
    These numbers reflect the unsentenced adult daily population in all California jails. Counties are not asked to report the number of unsentenced defendants who remain in custody because they cannot afford to post bail . Board of State and Community Corrections, Jail Population Survey. Data reflect the average daily jail population as of March 2020. https://public.tableau.com/profile/kstevens#!/vizhome/ACJROctober2013/About
  • 2
    Magnus Lofstrom et al., Racial Disparities in California Arrests (Public Policy Institute of California: October 2019).
  • 3
    Wendy Sawyer, How Race Impacts Who is Detained Pretrial (Prison Policy Initiative: October 19, 2019).
  • 4
    Soyna Tafoya, Pretrial Detention and Jail Capacity in California (Public Policy Institute of California: July 2015), p.4.
  • 5
    Pretrial Detention Reform Workgroup, Pretrial Detention Reform: Recommendations to the Chief Justice (October 2017), p. 29.
  • 6
    In reality, due to forfeiture laws, bail bond agents rarely forfeit the full bail amount if a defendant fails to appear. See Pretrial Detention Reform Workgroup, Pretrial Detention Reform: Recommendations to the Chief Justice (October 2017), p. 37.
  • 7
    The defendant receives the full amount of the cash bond less any additional fines, fees, or processing costs the court may charge. However, if the defendant is convicted, the value of the cash bond may go toward restitution. See Pretrial Detention Reform Workgroup, Pretrial Detention Reform: Recommendations to the Chief Justice (October 2017), p. 30.
  • 8
    The property can be accepted as bail if the court determines that the equity in the property is twice the value of the bail amount. See Pretrial Detention Reform Workgroup, Pretrial Detention Reform: Recommendations to the Chief Justice (October 2017), p. 31.
  • 9
    SB 10 (Hertzberg, Chapter 244 of 2018).
  • 10
    Under the law, if someone were accused of committing a misdemeanor, they would be automatically released, though there are some exceptions, including violations of protective orders, among others. See SB 10 (Hertzberg, Chapter 244 of 2018).
  • 11
    Risk-based assessments are typically generated by statistically analyzing large data sets to identify links between rearrest or reconviction and other factors such as age, gender, or criminal record. See Megan T. Stevenson, “Assessing Risk Assessment in Action,” Minnesota Law Review 103:1 (2018), p. 304.
  • 12
    Sonya Tafoya, Pretrial Detention and Jail Capacity in California, (Public Policy Institute of California: July 2015).
  • 13
    US Census Bureau, American Community Survey, 2010 1-Year Estimates. Table S1903: Median Income in the Past 12 Months (In 2010 Inflation-Adjusted Dollars), downloaded from https://data.census.gov/cedsci/table?t=Income%20%28Households,%20Families,%20Individuals%29&g=0400000US06&y=2010&tid=ACSST1Y2010.S1903&hidePreview=true on August 24, 2020.Though the Eighth Amendment protects against “excessive” bail, the Supreme Court has ruled that bail may only be considered excessive if it is more than necessary to achieve the court’s goals, not if bail is more than a person can pay.  The court found that “[t]he plain meaning of ‘excessive bail’ does not require that it be beyond one’s means, only that it be greater than necessary to achieve the purposes for which bail is imposed.” See Pretrial Detention Reform Workgroup, Pretrial Detention Reform: Recommendations to the Chief Justice (October 2017), p. 73.
  • 14
    In Los Angeles County, San Francisco County, and Santa Clara County, commercial bail bonds were the primary means of posting bail. In one year, cash bonds were used in less than 2% of total cases, followed by property bonds (less than 1%).  See Pretrial Detention Reform Workgroup, Pretrial Detention Reform: Recommendations to the Chief Justice (October 2017), p. 31. Additionally, in 2017, 99.9% of people who posted bail in the city of Los Angeles did so through a commercial bail bond agent. See Isaac Bryan, et. al, The Price of Freedom: Bail in the City of Los Angeles (UCLA Bunche Center for African-American Studies and Million Dollar Hoods: May 2018).
  • 15
    The defendant (or their family members and friends) may also face extra costs, such as late payment fees and interest on the premium. See The UCLA School of Law Criminal Justice Reform Clinic, The Devil is in the Details: Bail Bond Contracts in California (May 2017), p. 15.
  • 16
    Board of Governors of the Federal Reserve System, Report on the Economic Well-Beingof U.S. Households in 2019, Featuring Supplemental Data from April 2020 (May 2020).
  • 17
    Los Angeles County Sheriff’s Department, Custody Division Population Year End Review, p. 30.
  • 18
    Isaac Bryan, et. al, The Price of Freedom: Bail in the City of Los Angeles (UCLA Bunche Center for African-American Studies and Million Dollar Hoods: May 2018).
  • 19
    Magnus Lofstrom, et. al., Racial Disparities in California Arrests (Public Policy Institute of California: October 2019) and Pranita Amatya, et. al., Bail Reform in California (UCLA Luskin School of Public Affairs: May 2017), p. 27.
  • 20
    Isaac Bryan, et. al, The Price of Freedom: Bail in the City of Los Angeles (UCLA Bunche Center for African-American Studies and Million Dollar Hoods: May 2018).
  • 21
    Esi Hutchful, The Racial Wealth Gap: What California Can Do About a Long-Standing Obstacle to Shared Prosperity (California Budget & Policy Center: December 2018).
  • 22
    Ella Baker Center for Human Rights, Forward Together, and Research Action Design, Who Pays?: The True Cost of Incarceration on Families (September 2015) and Leon Digard and Elizabeth Swavola, Justice Denied: The Harmful and Lasting Effects of Pretrial Detention (Vera Institute of Justice: April 2019), p. 7.
  • 23
    Pretrial Detention Reform Workgroup, Pretrial Detention Reform: Recommendations to the Chief Justice (October 2017), p. 39.
  • 24
    Judicial Council of California, Bail in California: Legal Framework (February 19, 2016).
  • 25
    Curtis E. Karnow, “Setting Bail for Public Safety,” Berkeley Journal of Criminal Law 13:1 (2008), p. 20.
  • 26
    While a frequently cited study conducted in Kentucky found pretrial detention increased a defendant’s likelihood to fail to appear for court, these results have not been replicated. A growing body of evidence actually hints that pretrial detention reduces failure to appear rates. Léon Digard and Elizabeth Swavola, Justice Denied: The Harmful and Lasting Effects of Pretrial Detention (Vera Institute of Justice: April 2019), p.3.
  • 27
    Human Rights Watch, “Not in it for Justice:” How California’s Pretrial Detention and Bail System Unfairly Punishes Poor People (April 11, 2017), p.7.
  • 28
    Pretrial Detention Reform Workgroup, Pretrial Detention Reform: Recommendations to the Chief Justice (October 2017), p. 36.
  • 29
    Pretrial Detention Reform Workgroup, Pretrial Detention Reform: Recommendations to the Chief Justice (October 2017), pp. 39-41.
  • 30
    Pretrial Detention Reform Workgroup, Pretrial Detention Reform: Recommendations to the Chief Justice (October 2017), p. 37.
  • 31
    Shima Baradaran Baughman, “Costs of Pretrial Detention,” Boston University Law Review 97:1 (2017) p. 5.
  • 32
    United States Department of Justice, National Institute of Corrections, “Pretrial,” accessed at https://nicic.gov/pretrial on July 6, 2020 and Leon Digard and Elizabeth Swavola, Justice Denied: The Harmful and Lasting Effects of Pretrial Detention (Vera Institute of Justice: April 2019), pp. 3-5.
  • 33
    Data reflect misdemeanor defendants. In the study, detention increased the likelihood of pleading guilty by 25%. Paul Heaton, Sandra G. Mayson, and Megan Stevenson, “The Downstream Consequences of Misdemeanor Pretrial Detention” Stanford Law Review 69:3 (2017), p. 771.
  • 34
    Paul Heaton, Sandra G. Mayson, and Megan Stevenson, “The Downstream Consequences of Misdemeanor Pretrial Detention” Stanford Law Review 69:3 (2017), p. 718.
  • 35
    Sonya Tafoya et al., Pretrial Release in California (Public Policy Institute of California: May 2017), p. 5.
  • 36
    The New York state legislature has since amended their bail reform law with a number of changes that took effect in July.  See Jamiles Lartey, New York Rolled Back Bail Reform. What Will the Rest of the Country Do? (The Marshall Project: April 23, 2020).
  • 37
    SB 10 (Hertzberg, Chapter 244 of 2018).
  • 38
    Megan T. Stevenson, “Assessing Risk Assessment in Action,” Minnesota Law Review 103:1 (2018). p. 305.
  • 39
    Megan T. Stevenson, “Assessing Risk Assessment in Action,” Minnesota Law Review 103:1 (2018). pp. 306-307, 310-11, 327.
  • 40
    Timothy R. Schnacke, “A Brief History of Bail,” The Judges’ Journal 57 (2018) and Timothy R. Schnacke, Money as a Criminal Justice Stakeholder: The Judge’s Decision to Release or Detain a Defendant Pretrial (National Institute of Corrections: September 2014).
  • 41
    Timothy R. Schnacke, Money as a Criminal Justice Stakeholder: The Judge’s Decision to Release or Detain a Defendant Pretrial (National Institute of Corrections: September 2014), p. 26.

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Over many years, California lawmakers and voters adopted a series of harsh, one-size-fits-all sentencing laws that prioritized punishment over rehabilitation, led to severe overcrowding in state prisons, and disproportionately impacted Black and Latinx Californians – consequences that many families still feel today. California began reconsidering its “tough on crime” approach a little over a decade ago as prison overcrowding reached crisis proportions and the state faced lawsuits filed on behalf of incarcerated adults. Ultimately, a federal court in 2009 ordered California to reduce overcrowding to no more than 137.5% of the prison system’s capacity – an order that remains in effect today.1

State-level reforms – enacted into law through voter approval of ballot propositions as well as through legislative action – have focused on reducing incarceration, promoting more effective pathways to rehabilitation, and addressing the disparate impacts of criminal justice policies on people of color, particularly Black and Latinx communities.2 With these reforms, both the prison population and crime rates are down substantially, showing that California’s efforts to reduce mass incarceration, while far from complete, are working.

1. The Number of Adults Incarcerated by the State Has Declined Substantially

Adults who are incarcerated by the state fall under the jurisdiction of the California Department of Corrections and Rehabilitation (CDCR). Most of these adults – more than 9 in 10 – are held in 34 state-owned prisons. The remaining men and women are housed in other locations throughout California, including in public and private facilities under contract with CDCR. (Until recently, thousands of state prisoners were housed in out-of-state facilities.) The number of adults incarcerated by the state exceeded 173,000 in 2007, when state prisons were crowded to roughly double their capacity. By June 2020 – following years of criminal justice reforms and, more recently, new policies adopted in response to the COVID-19 pandemic – the number of adults incarcerated had dropped by more than one-third, to 113,403.3

2. With Declining Incarceration, California Ended the Use of Out-of-State Prisons and Has the Opportunity to Begin Closing State-Owned Prisons

In 2006, California began transferring incarcerated adults to facilities in other states to help reduce overcrowding in state prisons. State policymakers adopted this approach even though “out-of-state private prisons create significant barriers to rehabilitation and humane conditions of care.”4 The number of Californians moved out of state peaked at more than 10,000 in the early 2010s. However, as incarceration declined, California was able to gradually reduce its reliance on facilities in other states before finally terminating its last out-of-state contract in June 2019. Moreover, due to the ongoing decline in the prison population, California is on track to soon end the use of all in-state contract facilities for men, and the recently enacted 2020-21 budget package envisions closing two state-owned prisons in the coming years.5

3. California’s Incarceration Rate for Adults Has Fallen to a Level Last Seen in the Very Early 1990s

As California implemented criminal justice reforms, the incarceration rate – the number of adults incarcerated by the state for every 100,000 residents – has plummeted. California’s state-level incarceration rate dropped to 314 per 100,000 in June 2019, down by more than one-third (34%) from the recent peak of 476 per 100,000 in June 2006. Moreover, the June 2019 incarceration rate was slightly below the June 1990 level of 315. Still, incarceration of California men and women – disproportionately Black and Latinx Californians – remains high compared to earlier years. For example, in the late 1970s the state incarcerated fewer than 100 people for every 100,000 residents.

4. Meanwhile, California’s Property and Violent Crime Rates Remain at Historic Lows

California’s property crime rate – the number of property crimes per 100,000 residents – was 2,290 per 100,000 in 2019, far below the peak of 6,881 in 1980. The violent crime rate was 434 per 100,000 in 2019, less than half the peak of 1,104 in 1992. This latter rate is up modestly compared to the low of 393 per 100,000 in 2014, partly due to technical factors.6 Nonetheless, California’s violent crime rate resumed its decline after 2017 and is now below the 1969 rate (449 per 100,000).

5. California’s Incarceration Rate and Crime Rates Are All Down Substantially Since the Mid-2000s

Incarceration and crime rates are all down substantially compared to their levels in 2006 – shortly before state policymakers and the voters began enacting reforms to California’s criminal justice system. As noted above, the incarceration rate of adults dropped by more than one-third (34%) from June 2006 – the recent peak – to June 2019. During approximately the same period (2006 to 2019), California’s property crime rate fell by more than one-quarter (28%) and its violent crime rate declined by nearly one-fifth (19%). These statistics contradict the common, yet unsubstantiated, claim that reducing mass incarceration will cause crime rates to spike. In fact, California’s experience and a large body of research highlight the weak link between incarceration and crime.7

Conclusion

California’s experience with criminal justice reform provides further evidence that reducing mass incarceration of men and women can go hand-in-hand with lower crime rates. But California’s work is not done – policymakers can and should do more to decrease incarceration of Californians, particularly given the impact of the COVID-19 pandemic on incarcerated adults, prison staff, families, and surrounding communities. This is especially important for Black and Latinx men and women and their families, who are bearing the greatest burdens of COVID-19 in prisons and the broader community. In recent weeks, the state has been moving in the right direction: The prison population has fallen more rapidly than anticipated due to early releases and other policies advanced by Governor Newsom to slow the spread of the coronavirus behind prison walls. With these steps, the Governor has created an opportunity to plan for the closure of several state-owned prisons over the next several years – assuming, at a minimum, that current criminal justice reforms remain in place and that the state prison population does not again begin to rise. 

Downsizing California’s costly prison infrastructure would allow the state to reduce the size of the corrections footprint on the state budget. This, in turn, would free up resources that could be used for reentry assistance and other services that can help to promote rehabilitation, reduce poverty, and strengthen families and communities – particularly Black and Latinx communities, which have been disproportionately impacted by the pandemic and the deep recession that it triggered as well as by generations of discrimination at the hands of the criminal justice system.

Ballot Propositions
Justice System

1 The US Supreme Court upheld this order in 2011. California has been in compliance with this order since February 2015. See California Department of Corrections and Rehabilitation, Three-Judge Court Monthly Update (July 2020).

2 For an overview of key state-level reforms, see Scott Graves, State Corrections in the Wake of California’s Criminal Justice Reforms: Much Progress, More Work to Do (California Budget & Policy Center: October 2018), pp. 4-10.

3 CDCR’s in-custody population further declined to 103,169 as of August 12, 2020. This substantial ongoing decline reflects early releases and other policies adopted by the Newsom Administration that are intended to slow the spread of the coronavirus in state prisons. 

4 Randall G. Shelden and Selena Teji, Collateral Consequences of Interstate Transfer of Prisoners (Center on Criminal and Juvenile Justice: July 2012), p. 4.

5 Department of Finance, California State Budget 2020-21 (June 2020), p. 80.

6 Technical factors “related to crime classification and reporting” contributed to the slight – yet temporary – uptick in violent crime rates after 2014. Mia Bird, et al., The Impact of Proposition 47 on Crime and Recidivism (Public Policy Institute of California: June 2018).

7 Don Stemen, The Prison Paradox: More Incarceration Will Not Make Us Safer (Vera Institute of Justice: July 2017).

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