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A new analysis of the enduring impact of Proposition 13, the 1978 initiative that voters passed as a backlash against rising property taxes, concluded it has contributed to a widening wealth gap, a severe housing shortage and, for decades, inadequate funding for public schools.
“Proposition 13 is just one example of what happens when a purported progressive state allows a privileged few to hoard opportunities and resources at the expense of the greater good,” concluded the report “Unjust Legacy” by the Opportunity Institute and Pivot Learning, released on Wednesday. The institute is a nonprofit advocating for equitable outcomes for Californians. Pivot Learning is a consulting organization that works with schools in California and other states on improving achievement.
The 45-page report did not recommend a particular fix for Prop. 13, although it presented several scenarios that could result in billions of dollars of additional K-12 funding. The remedy would depend on which goal you’re trying to address, it said: Generate more revenue or increase revenue stability? Increase tax fairness? Expand access to homeownership? Increase local control over taxation or give the state Legislature more control? The report’s aim was to provide a broader understanding of Prop. 13’s legacy for policymakers and researchers to explore angles in depth.
Inspired by Howard Jarvis, a Republican businessman and unsuccessful politician, Prop. 13 received 65% of the vote. Among its features, Prop. 13:
Prop. 13 coincided with fast-rising government spending, double-digit inflation and soaring housing prices that, in turn, caused higher property assessments and bigger property tax bills. Senior citizens on fixed incomes and workers whose raises couldn’t keep up with inflation complained they were being taxed out of their homes and priced out of California.
But the report suggests a darker motive, too. The ’70s was a decade of sizable immigration of Latinos and Asians with children in schools, and the state’s mix of population, then two-thirds white, was changing. There was talk for the first time of an eventual majority-minority California.
“Proposition 13 was also just one in a contemporaneous wave of state referendums that had xenophobic and racist overtones,” the report states, referencing several studies.
Prop. 13 was preceded by a series of court rulings, known as the Serrano decisions, in which the California Supreme Court ruled that funding schools based on property values violated the rights of children in school districts with a low tax base. The court didn’t rule out funding schools through property taxes; it said the revenue had to be distributed more fairly. And that’s what the Legislature proceeded to do with legislation pushed by Gov. Jerry Brown in 1976, said Michael Kirst, an emeritus Stanford University professor who was Brown’s president of the State Board of Education and adviser at the time. But then Prop. 13 passed, pre-empting its enactment, he said.
The result was a hollowing of school funding, with California falling from the fifth in per-student funding to 47th in the nation in the next two decades. In 1988, voters approved Proposition 98, guaranteeing a portion of the state’s general fund — about 40% — would be allotted to K-12 schools and community colleges. Prop. 98 supporters envisioned legislators would treat the requirement as a minimum level of school funding, but in most years it has served as the ceiling, not the floor.
Those districts whose property values generate per-student school funding beyond what the state funds — primarily high-income communities — are exempt from Prop. 98. Today they make up about 15% of districts serving about 5% of students, according to the report. High-income communities have supplemented state funding with parcel taxes, which required a two-thirds majority approval because of Prop. 13 — a big barrier contributing to disparities.
But Prop. 98 funding levels for schools have soared since the end of the Great Recession (2007-09), amplified by an income tax surcharge on top income earners that voters made permanent in 2016. The top 1% of earners now fund half of the state’s income taxes.
As the report noted, in 2019-20, California’s per-student funding, unadjusted for regional costs, reached the national average. And the Legislature is poised to pass a state budget in which per-student funding will likely well exceed the national average — with funding for low-income districts that receive extra money under the state’s Local Control Funding Formula even higher.
At least for 2022-23. But the flip side of tax progressivity is volatility; a state tax structure dependent on revenue from capital gains follows stock market gyrations. During the Great Recession, state funding for schools fell $7 billion or about $1,200 per student.
“It’s a reminder that the boom and bust cycle is real. Property taxes are a piece of the puzzle to smooth out volatility,” said Carrie Hahnel, senior director of policy and strategy with the Opportunity Institute.
If a recession were to happen this year, as some forecasters predict, school districts are better poised than a decade ago to weather it, but the impact of a sizable recession would still be jarring. Revenue from property taxes has been more stable and predictable — and still could be, depending on how a Prop. 13 reform were structured.
“I’ve always said school funding should be a three-legged stool, with local, federal and state participation for stable and growing funding,” said Kirst. “We need to get local districts back in a way that transcends parcel taxes and developers’ fees.”
One way, briefly mentioned by the report, could be to phase out the 1% limit on taxing property or 2% limit on reassessing property values annually, and to share a portion of the revenue to supplement income-poor districts’ tax increases, perhaps in the same region or county. Not equalizing the revenue could revive Serrano-type lawsuits and court intervention.
Apart from education funding, the report documents other inequalities from Prop. 13. The limit on property tax increases encouraged homeowners to hold on to their properties longer than in other states, resulting in fewer houses on the market. Owners were able to factor in market scarcity in setting the price of a home and, until recently, were able to pass on the house at the same assessed value to children and grandchildren, as an inheritance.
Because of redlining, exclusionary zoning and racism, Black, Asian and Latino Americans for decades were unable to obtain mortgages or buy into many neighborhoods where they could build the same kind of intergenerational wealth that high-income white families have been able to achieve, in part through Prop. 13, the report said.
As the report noted, many factors — large-lot zoning, high land costs, government fees — contribute to the high cost of housing. By limiting property taxes, Prop. 13’s contribution was to encourage cities and counties to zone land for retail and manufacturing rather than housing, in order to get sales tax and business revenues. Cities fought each other for big-box stores and ignored housing needs.
“Proposition 13 will continue to prevent us from having more equitable resources for housing and local government; it relates to how well we support families and children,” Hahnel said. “That’s why we are calling for another look at the effects of Prop. 13.”
Prop. 13 has remained popular in polls — and viewed as politically untouchable for decades. But in 2020, a statewide initiative to reassess commercial properties at market value to produce additional state funding came close to passing, with 47% in favor, and another initiative did pass. Proposition 19 requires that heirs of an inherited, low-assessed property live in the house, not make money by renting it.
In a statement Tuesday, the anti-tax Howard Jarvis Taxpayers Association, named after the father of Prop. 13, dismissed the Legacy report as “a thoughtless assault on California property owners.”
“Out-of-touch researchers are wasting their time and yours by issuing yet another report on how much more money the government could collect if only it was allowed to take it,” it said.
Kirst acknowledged it could be a hard sell to convince voters to raise property taxes for more state revenue, but praised the report as “a first of a kind analysis with a focus on equity that had not been well analyzed.”
“It is a major contribution to school finance in California,” he said.
The system has enrolled more in-state residents, but not enough to meet targets set by the state.
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Fresno City College professor Tom Boroujeni is unable to fulfill his duties as academic senate president while on leave, the latest update reads.
This is a continuing EdSource series on proven innovations in higher education that relate to the problems facing California’s higher education systems.
Comments (23)
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Frank McGuirk 7 months ago7 months ago
I’m sure I could find a lot of funds earmarked for a pet project that can be redirected back to education. Let's not forget Cal. Lottery - sold to voters as supplemental funds - but has become the primary source for education funding. Could fix that as well. As for people of color not able to secure loans – that has nothing to do with prop 13. Racist-leading practices need to be uncovered and eliminated. And there … Read More
I’m sure I could find a lot of funds earmarked for a pet project that can be redirected back to education.
Let’s not forget Cal. Lottery – sold to voters as supplemental funds – but has become the primary source for education funding. Could fix that as well.
As for people of color not able to secure loans – that has nothing to do with prop 13. Racist-leading practices need to be uncovered and eliminated.
And there are pay discrepancies in many of CA School districts that need to be balanced out. School superintendents and other key management pay needs to be balanced against the teaching staff and another job within the organization. We are talking about public service jobs.
Also, public service job holders should never be allowed to unionize – pay should reflect the person’s education, years of work and within those boundaries reflect on the performance of the educator – meets basic level, meets advance level, exceeds expectation in all category.
If this was a letter grade top down A, B, C, and require remediate training to continue to teach.
Beth 7 months ago7 months ago
In addition, I am not one of those neighbors who have left the neighborhood and rented out my home to “reap the benefits” as mentioned here by one of the comments here. And because a commentator pays ten times more than another person, does that mean the state should tax homeowners out of their homes?
Beth 7 months ago7 months ago
Why do you say that Prop. 13 benefits the rich? What income level is considered rich? Am I rich because I own a home? How much tax would you like me to pay to satisfy the state? I am already paying over $1,000 in local school bonds. Will you tax me out of my home? This article is definitely dishonest.
D. Purnell 9 months ago9 months ago
Your article titled "California Prop. 13’s 'unjust legacy' detailed in critical study" is one of the most intellectually dishonest pieces I've read this year. The true injustice is how a small group of wealthy people manipulate public opinion by funding studies with predictive outcomes, then socialize it in multiple outlets so it appears to be fact. I was a kid in California during the 70s and I know for a FACT that the majority of Prop-13 … Read More
Your article titled “California Prop. 13’s ‘unjust legacy’ detailed in critical study” is one of the most intellectually dishonest pieces I’ve read this year. The true injustice is how a small group of wealthy people manipulate public opinion by funding studies with predictive outcomes, then socialize it in multiple outlets so it appears to be fact.
I was a kid in California during the 70s and I know for a FACT that the majority of Prop-13 beneficiaries were not rich, not even close. The protection families enjoyed made living in California possible and those still enjoying benefits without outrageous taxing is fantastic. Advocating for “more taxation” in a state that is essentially a “runaway tax train” is insanity, or perhaps shilling for those that enjoy spending our tax money.
Yes John, you got it wrong publishing this one.
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Isaac 7 months ago7 months ago
(Source: Just trust me)
Produce your own study if you disagree.
Who’s richer: homeowners or renters? The study’s results are glaringly obvious to anyone who takes a moment to think. Obviously prop 13 benefits the rich. This is easily solvable in any number of ways, but for some reason people are just unable to think. Have to wait until 60% of California is homeless before any reform is passed, because people are unable to recognize suffering unless they experience it themselves.
Peter 1 year ago1 year ago
Cameron Graham below is correct. In my neighborhood, many of the homes are now rented out. The homeowners who long ago moved to a nicer, bigger house somewhere else are reaping the profits while not paying their fair share of taxes on properties they bought in the 1970's. I pay 10 times what my neighbors pay, and they don't live there. They rent out their home to a revolving door of … Read More
Cameron Graham below is correct. In my neighborhood, many of the homes are now rented out. The homeowners who long ago moved to a nicer, bigger house somewhere else are reaping the profits while not paying their fair share of taxes on properties they bought in the 1970’s. I pay 10 times what my neighbors pay, and they don’t live there. They rent out their home to a revolving door of miscreants. It’s crazy.
Cameron Graham 1 year ago1 year ago
Prop 13 should only apply to a homeowners primary residence. This way nobody can say a person can no longer afford to stay in their home only that if a person has a multitude of properties they will be taxed at fair market value, except the one they live in which will adjust at change of ownership including family members. End the use of land and unmaintained properties as a savings account.
OC Blauski 1 year ago1 year ago
What people are missing here is the fact that California administrators’ answer to everything is to spend more money. We have the lowest performing K-12 system per dollar spent, so why don’t we look at the systemic issues with California schools instead of demanding more money? That approach has clearly not worked.
Andrea de Lange 2 years ago2 years ago
My husband and I were in a gifted program in 6th, 7th, and 8th grades, in our Las Virgenes (L.A. County) school district. Proposition 13 caused MGM - Mentally Gifted Minors, to dissolve, once we entered 10th grade, in the fall of 1978. MGM was an outstanding program that encouraged gifted students with assignments and projects that fostered creativity and independent thinking skills. The orientation was far different than AP (Advanced Placement) classes, which became … Read More
My husband and I were in a gifted program in 6th, 7th, and 8th grades, in our Las Virgenes (L.A. County) school district. Proposition 13 caused MGM – Mentally Gifted Minors, to dissolve, once we entered 10th grade, in the fall of 1978. MGM was an outstanding program that encouraged gifted students with assignments and projects that fostered creativity and independent thinking skills. The orientation was far different than AP (Advanced Placement) classes, which became the remaining alternative. AP classes’ orientations were more about high achievement in GPAs, leading to placement in reputable colleges, than fostering creativity. It was a huge loss, and the differences between the two programs were numerous and palpable.
Thank you for your excellent article. As someone who was in a school program that was directly affected by Proposition 13, I appreciate you addressing this issue.
Don Cruser 2 years ago2 years ago
What people like about Prop 13 is that it keeps property taxes low so that elderly people can continue to live in their home in old age when income is low. Hawaii does the same thing by simply reducing taxes for home owners over 65. Chevron is not included.
Bean 2 years ago2 years ago
Prop 13 is the root cause of all the misery and homelessness we see around us. It rewards unproductive land-squatting, penalizes productivity, induces sprawl, climate arson and eventual economic stagnation.
It needs to be phased out over say a decade and taxes on productivity needs to be reduced.
Grandmas squatting in their million dollar homes, using up all the services and leeching off the young and the middle-class families will do fine, just like that do in the other 49 states.
Frank F Noey 2 years ago2 years ago
Mr. Fensterwald, I grew up in a neighborhood that was home to blacks, whites, latinos and asians. We were all friends and our families socialized together. Everyone enjoyed the property tax break Prop 13 allowed. When I bought my first house, I paid a much higher property tax rate than my parents. As did my friends who left the neighborhood and purchased homes. We continue to pay high property taxes … Read More
Mr. Fensterwald, I grew up in a neighborhood that was home to blacks, whites, latinos and asians. We were all friends and our families socialized together. Everyone enjoyed the property tax break Prop 13 allowed. When I bought my first house, I paid a much higher property tax rate than my parents. As did my friends who left the neighborhood and purchased homes. We continue to pay high property taxes in the State of California. Do you ever get tired of throwing the blacks, latinos and women under the bus? I find it so offensive that you can make a particular race feel as though they have nothing going on for themselves.
Maybe schools should look at the monies spent and determine where the waste is. That will never happen, just continue to blame others for your perceived inequalities. I came from a lower middle class family, studied, worked and achieved success. If I had failed, it was no ones fault but my own. What a concept.
Your article really does not make much sense. You talk of the only folks who benefited from Prop 13 were white. I believe you simply throw out that statement to incite people, but in reality it is a slap in the face to minorities that have done very well for themselves, but then we get back to the personal responsibility issue that seems to have been tossed aside.
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Peter 1 year ago1 year ago
Frank, I have no issue with Prop. 13 for primary residences. But when folks move out and rent that house to folks who presumably can’t afford to buy – low income folks who are in many case of color – and keep raising the rent every year, while their property taxes remain the same, is not that exploitation?
Richard 2 years ago2 years ago
This report is full of ridiculous left wing nonsense. The report writers appear to have no understanding whatsoever of history. The authors ignore all the great programs we have put into place in California that encourage students to succeed. For example, if you do poorly in high school in California - that often happens because students goof off in high school - you can enroll in community college, take 60 units and go to … Read More
This report is full of ridiculous left wing nonsense. The report writers appear to have no understanding whatsoever of history. The authors ignore all the great programs we have put into place in California that encourage students to succeed. For example, if you do poorly in high school in California – that often happens because students goof off in high school – you can enroll in community college, take 60 units and go to Cal or UC. Community colleges have great tutoring programs if you are deficient in math or your writing skills are sub-par.
Community colleges, I should mention, have fabulous programs for blue collar workers, welding, auto-mechanics, health care programs (nursing and dental assisting). You can get the skills to succeed in the work force with a two year community college degree. If you are low income community colleges waive tuition. If you can’t afford books EOPS will pay for your books, if you are on Cal Works and you have kids the state will pay for your child care. Many community colleges have child care facilities now on campus.
Food stamps? 40 years ago college students could not get food stamps – now college students can get food stamps. Pell Grant? Pell Grants are high enough to the point you can just about cover your rent, (max grant $6,400). If you apply for a Cal Grant you get more money on top of that.
Additionally, community colleges, and state colleges will find you an on campus job – funded via the Cal Grant program . So the feds will pay your rent, feed you with food stamps, the state will pay your tuition to community college, pay for your books, and give you on on campus job.
I myself got Pell grants and I also worked for the building and grounds when I was going to community college – I made minimum wage working 20 hours a week.
The authors’ thesis in this ridiculous report is we are “underfunding” education in California, and that racism is built into our educational funding, that’s why some groups don’t do as well as others.
That’s a tired old tale from 50 years ago; it negates all of the wonderful programs we have now to help kids get ahead (see above) Another thesis is we need to pour billion more into K thru 12 – that this will lead to equitable outcomes for students. The author, apparently, believes if we spend all this extra money on K thru 12 the students who are lazy and never open a book will suddenly start doing well in the classroom!
In fact, if you pour all that extra money into K thru 12 the most likely outcome will be higher teacher salaries, you will also see more administrators at the schools. As most know, a high school diploma doesn’t get you much of a job anymore, you must train after high school, you need to go college, or get training in blue collar trades.
Finally, the author of this paper is falling back on that old tired left wing mantra – America is racist, racist at its core. That’s not true anymore, not at all. The programs I have just written about, Pell Grants, Cal Grant’s, tuition free Community college, student loans, EOPS programs – these programs are open to all. The programs were created, in part, to deal with disparities in income in the US, they were designed to give everybody a chance to succeed, a chance to get a good job. Some, sadly, don’t take advantage of these opportunities.
Brenda Lebsack- Teacher 2 years ago2 years ago
13 billion dollars were given to California public schools through the American Rescue Plan and yet it’s still not enough?? There must be a hole in these school districts’ pockets. Maybe the lack of funds is not the real problem, maybe it’s the leaders squandering the unprecedented influx of money. Placing guilt trips of “racism” on taxpayers is unwarranted and will have the opposite effect when it comes to persuading voters.
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Richard Golfer 2 years ago2 years ago
At UC Berkley the average adminstrator supervises a whopping three workers, quite a bit of bloat in the UC system, not so at California Community Colleges.
Karen F Cull 2 years ago2 years ago
Another side effect of Prop 13 was that if local city governments wanted to increase their tax base they needed to focus on commercial property where they can gather sales tax rather than residential. Which is why we have so many empty malls and not enough homes.
W L Clark 2 years ago2 years ago
Never enough tax money for the black hole of California government. Why should CA homeowners be taxed out of their homes to pay for schooling for illegal aliens and foreigners imported by the US Government from Afghanistan and Ukraine? Prop 13 is a lifesaver for Califonria homeowners – no changes needed or wanted!
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CH 2 years ago2 years ago
I am a teacher. We upped the taxes in our city to help pay for schools. Did I see it trickle down to the students? No! A resounding no! Our superintendent is making a ton of money, though. Leave homeowners alone and shop elsewhere for money that the kids and teachers never see.
el 2 years ago2 years ago
Proposition 13 caused a lot of damage to schools in the 1980s. But, one of the things it did facilitate is a more equitable school funding mechanism that follows the student and funds schools at a decent minimum level regardless of where that student lives. Property taxes have stability but they are also fundamentally inequitable. And, as a method of school funding, it causes gating, where parents in other states have literally been sent to … Read More
Proposition 13 caused a lot of damage to schools in the 1980s. But, one of the things it did facilitate is a more equitable school funding mechanism that follows the student and funds schools at a decent minimum level regardless of where that student lives. Property taxes have stability but they are also fundamentally inequitable. And, as a method of school funding, it causes gating, where parents in other states have literally been sent to jail for “theft” because their students were enrolled in the “wrong” school district. Our funding mechanism makes interdistrict transfers relatively easy (when there’s room) and lets parents more easily take their student to any public school that is appropriate for them – whether that’s the school across the street or the one near grandma’s house so they can go there after school or a school near the parent’s workplace, etc.
Prop 98 isn’t perfect and sales and income taxes are more volatile. On the other hand, property taxes have no respect for cash flow, so they can be especially painful to people with lower incomes or people who experience financial setbacks.
Prop 13 is certainly inequitable and it especially favors corporations and people who own land as a business. It favors older owners (especially corporations that never die) over newer ones. But, I prefer the school finance we have now over a scenario where schools rely on their local property taxes to survive regardless of the number of students they serve.
Paul Muench 2 years ago2 years ago
California lost its first seat in the U.S. House of Representatives last year. The stability of remote work is yet to be seen. There’s much news of us being in a housing bubble. The U.S. is in a proxy war with Russia and to some extent China. I suspect we’re in a time when the past is not as good a predictor of the future as it used to be. I’m wondering what … Read More
California lost its first seat in the U.S. House of Representatives last year. The stability of remote work is yet to be seen. There’s much news of us being in a housing bubble. The U.S. is in a proxy war with Russia and to some extent China. I suspect we’re in a time when the past is not as good a predictor of the future as it used to be. I’m wondering what the new stable will look like. Maybe it’s time to think of something new rather than fighting old battles.
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el 2 years ago2 years ago
For clarity, California’s population still grew between 2010 and 2020 – it just didn’t grow as fast as some other states.
Paul Muench 2 years ago2 years ago
True, but all measurement is based on relative sizes.