MEMO: Schools & Communities First Will Be Critical to California’s Recovery and Reinvestment
Updated: Aug 4, 2020
The state of California, along with local governments and school districts, face budget crises of historic proportions. Communities are now faced with the prospect of devastating cuts to essential workers, local services, and schools.
The Schools & Communities First initiative will be key to California’s recovery and reinvestment strategy, and the investments generated by this initiative represent vital resources that will go towards how California rebuilds after this crisis. Schools & Communities First will generate nearly $12 billion every year for local governments and schools by closing corporate tax loopholes benefitting a fraction of those at the top, not nickel and diming Californians. These are workers, programs, and services that will be essential to California’s recovery and reinvestment.
Here’s a sampling of what local leaders have had to say recently about the initiative:
Los Angeles Mayor Eric Garcetti: “This is a choice between perpetuating a tax break for the wealthiest corporations in our state or expanding the critical local services to reduce homelessness, reduce emergency wait times and improve our neighborhoods – at zero cost to residents.”
San Francisco Mayor London Breed: “Any local official will have a tough time explaining to their constituents why, in the midst of this crisis, they didn’t support closing corporate tax loopholes to bring more resources back locally for our schools and local communities.”
Stockton Mayor Michael Tubbs: “Post COVID-19, we’ll have children and families and communities and schools who we’ll need to make sure they’re not on the chopping block, and we have an opportunity to do that by closing corporate tax loopholes and ensuring that we’re investing in the things that will make our communities great.”
Los Angeles County Supervisor Sheila Kuehl: “We’ll be faced with really difficult decisions that will jeopardize people’s access to these critically needed services. … This initiative is needed more than ever, because we simply can’t afford these corporate tax loopholes that have gone on for decades.”
$12 billion every year for the critical local services and schools that will be key to California’s recovery and reinvestment – while protecting residents, small businesses, and agriculture
As soon as 2022, Schools & Communities First will begin reclaiming resources for local communities, with 60% of the revenue going towards cities, counties and special districts and 40% going to schools. The billions that would go towards counties, cities, and special districts would fund critical local services such as first responders, public hospitals, frontline health care workers, and more. The billions in education revenue would go towards the needs of K-12 schools and community colleges, such as reducing overcrowded classrooms.
According to a University of Southern California study, every single county in the state – big and small, urban and rural – would benefit substantially. Moreover, a Blue Sky Consulting Group study determined exactly where the local government revenue could go, showing billions going towards counties and cities on the frontlines of this crisis, emergency responders, public hospitals, and other essential local services.
Schools & Communities First protects residential property (homeowners, renters, seniors, etc.), commercial and industrial property owners whose property is worth $3 million or less, and agriculture from reassessment. The initiative maintains the current 1% state property tax rate across the board, meaning no commercial or industrial property will pay more than 1% of assessed value – ensuring businesses continue paying some of the lowest property tax rates in the entire country.
Economic benefits, job creation, and new small business tax relief
In addition to the new small business tax relief included in Schools & Communities First, multiple studies have shown that the initiative provides significant economic benefits – something that will be critical as California recovers from this crisis.
According to a UC Santa Cruz study, Schools & Communities First would boost the economy by generating new revenue, stimulating development, and diversifying industry. Specifically, the report shows that “paying taxes based on fair market value would also provide an incentive for companies to find ways to generate more revenue from the use of their land, including the development of vacant land and making better use of underutilized land.”
Even a recent partisan study commissioned by opponents of Schools & Communities First found that the initiative would result in a net gain of more than 20,000 new jobs.
Schools & Communities First would also implement new tax relief for businesses, eliminating the business personal property tax entirely for small businesses while all other businesses would enjoy exemptions up to $500,000. This ensures every single business in California would benefit as they recover from this crisis.
Only fraction of top corporations benefit from current system, while costs have shifted to homeowners
According to a study on the measure, only 10% of the most expensive commercial and industrial properties would generate 92% of the revenue – illustrating the fact that a fraction of top corporations have overwhelmingly benefited from the current system. Moreover, according to the UC Santa Cruz report referenced above, “economic efficiency benefits far outweigh the few costs, which are concentrated among only 8 percent of commercial parcels worth $5 million or more.”
For decades, the property tax burden has shifted from corporations to homeowners. According to the Los Angeles Times, “the burden of property taxation shifted decisively onto residential owners from commercial and industrial properties over the last four decades: In 1975, single-family residences accounted for 39.9% of assessed values in Los Angeles County, and commercial-industrial properties for 46.6%. By 2018, the ratio had more than reversed, with houses accounting for 57.6% and the commercial-industrial for 28.9%.”
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Schools & Communities First, the November ballot measure that submitted a historic 1.7 million signatures of support, would reclaim $12 billion every year for critical local services and schools by closing corporate property tax loopholes – all while protecting homeowners and renters, small businesses, and agriculture. Public polling recently showed a 7 point increase in support over the past few months for Schools & Communities First, while internal polling from January of the initiative’s ballot language that voters will see in November garnered 58% support from likely California voters.