Research from Urban Institute: Prop. 15 could bring $12B to California schools and local governments each year

This November, voters will get an opportunity to vote on Proposition 15, the Schools and Communities First initiative, which – if approved by voters – would reform the property tax system in California to distinguish large commercial and industrial properties from residential properties. Under the measure, homeowners and small businesses would retain the protections afforded by Proposition 13, but large commercial and industrial properties would begin paying property tax rates consistent with their market value. If passed, the initiative could raise up to an additional $12 billion in annual revenue for local governments and public schools.

SVCF, Stupski Foundation and other philanthropic partners have commissioned independent, objective, nonpartisan research into the potential impacts of the Schools and Communities First initiative so voters can make an informed decision in November. We are excited to release the first three research briefs in the series, focusing on education, infrastructure and revenue. These issue briefs, based on research by Urban Institute, provide a sweeping look at how California compares to the national landscape, and the probable impacts of additional revenue in the respective areas.

The education brief highlights the volatility of school funding in California. California’s revenue system is subject to significant declines—more so than most states-- in down economic years such as the Great Recession and during the COVID-19 pandemic and recovery period. In the strongest years, California is roughly synchronized with national spending averages, before adjusting for cost of living. However, these fluctuations make it difficult for districts to retain good teachers and afford consistent investments in education.

The infrastructure brief notes that spending varies significantly by infrastructure type, and California is well below the national average in many areas. Additionally, the volatility expressed by the revenue model for California makes governments more reliant on bond financing, and as a result, California local governments spend one of every two infrastructure dollars on debt servicing. A stable funding source could significantly improve infrastructure such as rural storm drainage, roads and levees in some areas.

Finally, the revenue brief finds that the Schools and Communities First initiative (Proposition 15) could provide the stable funding to resolve the challenges we face due to California’s current volatile revenue model. The brief thoroughly summarizes the current structural and temporary challenges facing California’s budget, including the over-reliance on sales and income taxes, as well as COVID-19. Its clear conclusion is that “If California wants to find additional revenue during the COVID-19 crisis, plus make its revenue system more stable, it should consider collecting more revenue from its property tax.”

You can find the education brief, infrastructure brief and revenue brief on our Schools and Communities First landing page. Please continue to reference this page for the most up to date research. We look forward to releasing additional briefs in the coming months to provide California voters with objective information about Proposition 15, the Schools and Communities First initiative.