County Fiscal Stress: Cause and Consequence in California after Proposition 13

Proposition 13 requires that the state of California divide countywide property tax revenue among local governments. Until the early 1990s, the allocations that existed in the three years prior to the passage of the proposition largely determined these divisions. In the early 1990s the state responded to the dual pressure of a recession and its constitutional obligation to fund K-14 education by shifting a portion of the allocation of property tax revenue away from county governments and toward public schools. Observers claim that the post-Proposition 13 method of property tax disbursement, and the changes to it in the early 1990s, exacted a toll on the fiscal well being of many of California's counties. This study seeks evidence for or against this claim through the regression analysis of a panel of fiscal data from California's stand-alone counties. Due to Proposition 13 like reforms being adopted, or being considered by other states, interest in the results of this study should extend beyond California.