04 June 2006
The Should Be Another Tea Party in California
I am going to do something I thought I'd never do: I'm going to vote against three education revenue items on the June 6th Ballot. At the state level, the offending initiatives are Prop. 81 and 82. At the local level it is Measure B. How could I turn my back on public education and library services after supporting them consistently for 40 years at the ballot box? I object to the manner that these items appear in some form or another whenever there is an election. If I read the brief or longer analysis by the Legislative Analyst, I have no real sense of how these funds will be used other than by familiar topical names: education for our children, libraries and new technologies, rebuilding/refurbishing our 60-year old public school buildings, and raising teacher qualification standards with appropriate better compensation. Who could not be for these basic elements of our community's foundation? I definitely support them.
My journey into heresy began as I prepared my 2005 income tax forms for California and for the federal government. I rarely examine my property tax detail except at income tax time. This year I noticed that I was paying almost 25 percent more than my assessed rate, about $600 for separate bonds I'd voted for, tax initiatives I'd voted for and all for these lofty ideals of supporting and improving the education resources for our community. In essence, I have taxed myself extra amounts for each of these good ideas and plans.
Then along come Prop. 81 and Measure B. For Proposition 81, section 20042 of this law within the State's Education Code requires additional revenues (viz. taxes) to pay the annual principal and interest expense for the bonds this measure establishes. Section 20048 states that the debt service on the bonds is not the "proceeds of taxes" as defined by the state constitution. Clever. We pay more income taxes into a dedicated Prop. 81 fund but the fund only reimburses the General Fund for the amounts paid out of the General Funds to service this debt.
For those unfamiliar with fund accounting, will not see this reported as one expects a business to show debt service as an expense item deducted from income. This method of fund accounting for bond revenues and expense--a well-established standard of accounting for non-profit and governmental organizations--would not stand up in court if I paid Sally so that she could pay the same amount to someone to commit a crime on my behalf. "Sally" is the fund transfer between the tax revenues to the Library/Prop 81 Fund and the General Fund that disburses the money needed for debt service, principal and interest.
So, we voters are being asked to authorize the state to incur additional debt for which the General Fund will be reimbursed in equal amount by the Prop 81 Fund--that receives its revenues from state income taxes and sales taxes. So either something in the current budget gets dumped so the state can pay the debt service annually--estimated at $40 million per year--or the legislature will have to pass a law to increase income taxes. Any guesses which alternative is the "safe" one for politicians?
Well, enough on Prop 81's cost to be paid out the General Fund, I'll go to the next tax increase measures in separate posts. By the way, in case you hadn't noticed, 35 percent of total costs for Prop 81 projects must come from local resources: the cities and counties. In other words, if the state controls the project budget, then the state only has to pay 65% of $40 million or $26 million. Our local resources, who must have cash just waiting to be spent, must pony up the $14 million to the state's General Fund. This is not a one-time burden; this obligation is for 30 years. And no local control because the state has all the money.
Brrrh!
My journey into heresy began as I prepared my 2005 income tax forms for California and for the federal government. I rarely examine my property tax detail except at income tax time. This year I noticed that I was paying almost 25 percent more than my assessed rate, about $600 for separate bonds I'd voted for, tax initiatives I'd voted for and all for these lofty ideals of supporting and improving the education resources for our community. In essence, I have taxed myself extra amounts for each of these good ideas and plans.
Then along come Prop. 81 and Measure B. For Proposition 81, section 20042 of this law within the State's Education Code requires additional revenues (viz. taxes) to pay the annual principal and interest expense for the bonds this measure establishes. Section 20048 states that the debt service on the bonds is not the "proceeds of taxes" as defined by the state constitution. Clever. We pay more income taxes into a dedicated Prop. 81 fund but the fund only reimburses the General Fund for the amounts paid out of the General Funds to service this debt.
For those unfamiliar with fund accounting, will not see this reported as one expects a business to show debt service as an expense item deducted from income. This method of fund accounting for bond revenues and expense--a well-established standard of accounting for non-profit and governmental organizations--would not stand up in court if I paid Sally so that she could pay the same amount to someone to commit a crime on my behalf. "Sally" is the fund transfer between the tax revenues to the Library/Prop 81 Fund and the General Fund that disburses the money needed for debt service, principal and interest.
So, we voters are being asked to authorize the state to incur additional debt for which the General Fund will be reimbursed in equal amount by the Prop 81 Fund--that receives its revenues from state income taxes and sales taxes. So either something in the current budget gets dumped so the state can pay the debt service annually--estimated at $40 million per year--or the legislature will have to pass a law to increase income taxes. Any guesses which alternative is the "safe" one for politicians?
Well, enough on Prop 81's cost to be paid out the General Fund, I'll go to the next tax increase measures in separate posts. By the way, in case you hadn't noticed, 35 percent of total costs for Prop 81 projects must come from local resources: the cities and counties. In other words, if the state controls the project budget, then the state only has to pay 65% of $40 million or $26 million. Our local resources, who must have cash just waiting to be spent, must pony up the $14 million to the state's General Fund. This is not a one-time burden; this obligation is for 30 years. And no local control because the state has all the money.
Brrrh!
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