California voters will make many important decisions on the November 3, 2020 ballot. Besides electing state and congressional representatives and determining community leadership and local measures, voters will decide the fate of twelve statewide propositions. Nine of these measures, if approved, will have financial and policy impacts on local government revenues and operations in the following areas: property taxes, criminal justice reform, voting eligibility, rent control, affirmative action and the “gig” economy. Below is a quick guide to these nine propositions, organized by policy areas, with a brief summary, background on the politics and implementation issues. The remaining three measures are also listed at the end.
Property Tax Revenue
Propositions 15 and 19 propose changes to Proposition 13 of 1978 that would substantially increase local property tax revenues, but they address different aspects of property tax laws and are technically complex. When it comes to politics, Prop. 15 is a more controversial measure with over $100 million anticipated to be spent in television advertising and direct mailers by supporters and opponents. Prop. 19, however, is less controversial and reflects a compromise placed by the Legislature on the ballot with bipartisan votes.
Brief Summary: Prop. 15, The California Schools and Local Communities Funding Act of 2020, would require periodic property tax reassessments on commercial and industrial properties of more than $3 million in value. Single-family and rental housing, as well as real property used for commercial agricultural production and commodities, are exempt. The measure also exempts small businesses, as defined, from property taxation on personal property and provides a $500,000 exemption to all other business for their equipment and fixtures. The proceeds of the additional property tax revenues derived from this measure, estimated by the Legislative Analyst’s Office to range between $6.5 to $11.5 billion annually, are allocated, consistent with existing property tax allocations, to schools, cities, counties and special districts.
The Politics: This is a long-anticipated political battle over a proposed property tax “split roll,” which would tax large commercial businesses based on current market values while preserving Prop. 13’s protections for residential property, small business and agricultural lands. Should it be approved, local agencies would receive the largest ongoing revenue boost in memory. Major supporters include public employee unions, local officials and the Governor; opponents are large business groups and anti-tax organizations.
Implementation: Assessments would begin commencing with the FY 2022-23 lien date. The Legislature is required to adopt, by statute, a phase-in over two more lien dates and fiscal years to implement this requirement. Implementation legislation will also address other aspects of this measure, including the details of an appeals process, the application of this measure to mixed use properties and treatment of properties more than 50 percent occupied by small businesses.
Brief Summary: Prop. 19, the Home Protection for Seniors, Severely Disabled, Families, and Victims of Wildfires and Natural Disasters Act, would make the following changes associated with selling and inheriting homes and family farms: (i) allows homeowners over 55 years old, victims of wildfires and natural disasters, and the severely disabled to transfer all, or a portion, of their home’s taxable value to a another residence anywhere in the state; (ii) removes an existing property tax exemption for inherited property valued at less than $1 million by children and grandchildren and requires children and grandchildren who inherit a home or family farm to live on the property and claim the homeowner’s tax exemption to avoid a property tax reassessment of the property; and (iii) provides more limited tax benefits for properties assessed at over $1 million above its taxable value. The Legislative Analyst estimates local governments and schools would benefit by several hundred million dollars per year.
Revenue for fire protection and to offset negative fiscal impacts to individual local governments is also provided. Prop. 19 requires state officials to calculate the revenue benefit to the state’s General Fund and then allocate it as follows:
- 75 percent for fire protection. Of this amount, 20 percent shall be allocated to the Department of Forestry and Fire Protection, with the remaining 80 percent to local fire districts. These funds are required to be appropriated annually by the Legislature to expand fire suppression staffing and to supplement, not supplant, existing state or local funds used for those purposes.
- 15 percent into the County Revenue Protection Fund, a special fund created to offset negative fiscal impacts experienced by cities, counties and other local agencies.
The Politics: Prop. 19 was placed on the ballot by the Legislature with the passage of ACA 11 (Mullin). It represents the latest effort led by the California Association of Realtors to address what they consider a disincentive in the law that limits the interest or ability of longtime homeowners to move from their homes. The Association’s previous proposal was Prop. 5, an initiative on the November 2018 ballot. Prop. 5 was opposed by the California Professional Firefighters and other groups based on concerns of property tax losses, with a disproportionately negative impact on fire districts and rural areas, and failed with 60 percent of voters opposing the measure. The Realtors drafted another proposed initiative but abandoned that effort in exchange for the Legislature’s approval of ACA 11, which also addressed inheritance issues to enhance revenues and provide fire protection funding.
Implementation: Provisions affecting home transfers would take effect on and after April 1, 2021, and provisions relating to inherited properties would apply to transfers on or after February 16, 2021. Implementation legislation is expected in 2021 to commence allocating revenue for fire protection and offset negative local fiscal impacts.
Criminal Justice Reform
Propositions 20 and 25 represent conflicting viewpoints on criminal justice reforms. Over the last decade, a combination of legislative actions and voter approved measures have made major changes to California’s criminal justice policies. Collectively, these changes shifted the state’s approach from aggressive prosecution and incarceration to a rehabilitation focus accompanied by reduced penalties and sentences and early release. Law enforcement organizations and grocery stores, concerned about increasing crime and accountability, sponsored Prop. 20 to “roll back” some recent changes in criminal justice policies. Conversely, Prop. 25 is a referendum on a 2018 state law that offers voters a decision on whether the state’s criminal justice bail system should be eliminated.
Brief Summary: Prop. 20, the Reducing Crime and Keeping California Safe Act of 2018, would make numerous changes to state criminal justice laws that are summarized by the Legislative Analyst as follows: (i) changes state law to increase criminal penalties for some theft-related crimes; (ii) changes how people released from state prison are supervised in the community; (iii) makes various changes to the process created by Prop. 57 (2016) for considering the release of inmates from prison; and (iv) requires state and local law enforcement to collect DNA from adults convicted of certain crimes.
The Politics: Law enforcement organizations and California grocers are concerned over increased crime and lack of accountability that they believe are the result of criminal justice reforms from the Legislature and state ballot measures over the last decade. Collectively, these reforms, led by Governor Jerry Brown, reflected a philosophical policy shift toward promoting reduced sentencing, rehabilitation and redemption. Prop. 20 was qualified following failed attempts by the sponsors to address concerns through the Legislature; it was originally intended for the November 2018 ballot but was shifted to 2020 due to delayed signature counting. Governor Brown still remains a major player in this battle. Upon leaving office, he retained control of a $15 million “war chest” that is helping fund the opposition effort.
Implementation: The sponsors inserted stringent provisions in Prop. 20 to prohibit legislative amendments unless they are determined to further the measure’s purposes. Changes must be approved by three-quarters of each house of the Legislature, or by a statute that is placed on the ballot and approved by voters.
Brief Summary: Prop. 25 is a referendum that asks voters whether they approve of SB 10 (Hertzberg), which passed the Legislature in 2018 and would eliminate California’s pre-trail bail system and replace it with a risk assessment process approved by courts.
The Politics: SB 10 continues the trend of California’s criminal justice reforms over the last decade. Supporters argue that the bail system results in unequal treatment of accused individuals based solely upon income. Those who can afford bail are freed; those who cannot sit in jail. Besides the bail industry, opponents to the bill in the Legislature include the American Civil Liberties Union, which raised concerns that the bill’s risk assessment process undercut the presumption of innocence and could actually result in more individuals being held in jail pre-trial. This referendum on SB 10 is now on the ballot as Prop. 25 after a coalition of groups led by the bail industry gathered sufficient signatures.
Implementation: If the voters approve Prop. 25, SB 10 of 2018 takes effect. However, if the voters reject it, their vote only applies to that bill. The Legislature could still enact a similar law in the future, and the debate would start anew.
Both Propositions 17 and 18 were placed on the ballot by the Legislature to expand voting rights for specific categories of individuals. Prop. 17 would provide the right to vote to convicted state and federal felons who are on parole; Prop. 18 would allow 17-year-olds, who will be 18 at the time of the next general election, to vote in primaries and special elections.
Brief Summary: Prop. 17, placed on the ballot by the Legislature with ACA 6 (McCarty), would allow a convicted felon to be able to vote, and in some cases run for elected office, while on parole following completion of their federal or state prison term.
The Politics: The arguments in favor of this measure connect with state’s recent trend toward redemption and rehabilitation in state criminal justice policies, emphazing that enabling approximately 50,000 felons on parole to vote would help them reconnect to society and reduce recidivism. Arguments against this policy focus on the crimes these individuals have committed and how allowing them to vote while on parole minimizes the impact of their crimes on their victims and society.
Implementation: The Legislative Analyst identifies minimal costs to counties associated with delivering materials to parolees who choose to register. Because those who are eligible to vote are also eligible to run for office, this measure, in effect, would also permit a parolee to run for state or local office unless they had been convicted of a disqualifying crime such as bribery or perjury.
Brief Summary: Prop. 18, placed on the ballot by the Legislature with ACA 4 (Mullin), would allow an individual 17 years of age that will turn 18 by the date of the next general election to vote in any primary or special election that occurs before the next general election. Because those who are eligible to vote are also eligible to run for office, this measure, in effect, would also permit a 17-year old to run for state or local office.
The Politics:The justifications provided in favor of this measure for this measure point to policies in other states which allow 17-year-olds to vote in primary elections, and how some cities like San Francisco already allow individuals age 16 and 17 to vote in municipal elections. Proponents also argue that this policy establishes good civic habits and ensures that younger voters have a voice. Opponents argue that 17-year-olds are still in high school, not yet adults and lack sufficient experience and maturity to vote.
Implementation: For local governments, the most significant effects of this measure would likely be at the local level, where high school students could form a new voting constituency to support candidates and issues in local municipal primary and special elections.
Over the last several years there has been a major policy debate in the Legislature over housing. Key policy concerns include efforts to increase the supply of new residential units, to fund the construction of subsidized units for low income households and to address escalating rents in high-wage coastal regions. One heavily-debated policy is rent control. Local governments have been prohibited from enacting new rent control measures since 1995 with the passage of the Costa-Hawkins Act, but with rents continuing to spike the debate has resumed over whether such policies should be adopted.
Brief Summary: Prop. 21, the Rental Affordability Act, would restore authority for cities and counties to enact local rent control ordinances, which have been prohibited under state law since the passage of the state Costa-Hawkins Act in 1995. The ordinances may establish initial and subsequent rents for residential units that are older than 15 years. While the Act states owners are entitled to a “fair rate of return,” the measure also limits a landlord’s ability to increase rents for a vacant unit no more than 15 percent over the prior rent during the first three years after a new renter moves in, unless a greater amount is permitted by local ordinance. Two or fewer single-family homes owned by a “natural person” (as opposed to a corporation) are exempt.
The Politics:Over the last several years major legislative battles between affordable housing advocates and landlord organizations over rent control have occurred in the Legislature. Supporters of rent control believe renters need protection from excessive rents, while opponents argue that landlords face increasing ownership and maintenance costs and have a right to a return on their investment, and that such policies discourage new rental housing construction. In 2018, both a legislative bill and a ballot measure (Prop. 10) proposing to repeal the Costa-Hawkins prohibitions on local rent control were defeated. Ultimately, in 2019, the Legislature passed AB 1482 (Chiu), which capped rent increases statewide by no more than 5 percent plus inflation in a year, or 10 percent, whichever is lower. But under this law a landlord is free to raise the rent to market levels when a tenant moves out. AB 1482 applies to most housing more than 15 years old and lasts until January 1, 2030. Los Angeles-based affordable housing advocates, the sponsors of Prop. 21 who also sponsored Prop. 10 in 2018, don’t think the state’s solution in AB 1482 went far enough. Gavin Newsom, who signed AB 1482, is now in opposition to Prop. 21.
Implementation: Should Prop. 21 be approved, expect a fresh round of policy debate over rent control and how it may affect new housing construction. The drafters of Prop. 21 have also limited the Legislature’s ability to amend it and require two-thirds votes and ratification by the voters for any change that limits local agency authority under its provisions.
In 1996, state voters approved Prop. 209, which says that the “state” (defined to include cities, counties, UC and CSU universities, school districts, community colleges and special districts) cannot discriminate or grant preferential treatment based on race, sex, color, ethnicity, or national origin in public employment, education, or contracting. State legislators approved ACA 5 (Weber) which asks voters to repeal it.
Brief Summary: Prop. 16 proposes to repeal California’s constitutional ban against the state and all its political subdivisions from discriminating or granting preferential treatment based on race, sex, color, ethnicity or national origin in public employment, education or contracting.
The Politics: Supporters argue that repealing Prop. 209 will allow state and local leaders to address various inequities that have limited access and opportunities for minority groups and women. Opponents argue that reauthorizing discriminatory practices undermines equality.
Implementation: The passage of Prop. 209 in 1996 eliminated many affirmative action programs and priorities in effect at the time. Should Prop. 16 be approved, expect a vigorous policy discussion on these issues in 2021 at the state and local levels.
Business Practices: “Gig Economy”
California has long been celebrated for its entrepreneurial creativity, including new technological app-based solutions that have radically disrupted how society lives and works. One policy area is the widespread use by app-based corporations of independent contractors who provide transportation, delivery and other services. With Prop. 22 California voters are being asked to weigh in on this trend.
Brief Summary: Prop. 22, the Protect App-Based Drivers and Services Act, allows drivers for companies such as Lyft, Uber and Doordash that provide transportation and delivery services to be considered independent contractors rather than employees under recently passed AB 5 (Gonzalez) of 2018. Prop. 22 is a comprehensive measure which, besides reaffirming independent contractor status, also provides drivers with minimum benefits and safety criteria, including: a stipend for health care if they drive more than 15 hours per week; insurance to pay for medical costs and offset lost income for drivers hurt on the job; prohibiting driving more than 12 hours within a 24 hour period for a single company; and requiring companies to conduct background checks, safety training and establish sexual harassment policies. Local governments are prohibited from imposing additional conditions.
The Politics: In April 2018, the California Supreme Court issued a landmark ruling in Dynamex that called into question the previous legal parameters distinguishing between employees and independent contractors. The Court held that workers were presumed to be employees, unless employers determined they were independent contractors under a strenuous “ABC” test. Following the decision, legislators crafted AB 5 (Gonzalez) to “interpret” the decision, triggering a massive occupation-by-occupation debate as to which formerly independent contractors were now to be considered employees. A key focus of the AB 5 discussion was the “gig economy” and whether app-based transportation and delivery drivers were now employees. After unsuccessful attempts to secure legislative exemptions from AB 5, the app-based transportation and delivery companies have sponsored Prop. 22 to have voters decide the issue.
Implementation: The voters’ decision on Prop. 22 will have repercussions on the app-based “gig economy” occupations in California which have boomed in recent years. The drafters of Prop. 22 have endeavored to protect this measure from legislative efforts to amend by requiring amendments to be in print for at least 12 days and a seven-eighths vote. However, amendments that increase criminal penalties to further protect drivers and passengers may be approved by majority votes. Local governments are prohibited from enacting additional insurance, scheduling, compensation, licensing and driver contract rights, but may enforce local ordinances and regulations in effect on October 29, 2019.
Three Other Ballot Measures
California voters will also be asked to decide three other ballot measures. Each has its own policy implications but does not directly impact local governments:
- Proposition 14: Proposes a $5.5 billion general obligation bond to continue funding for stem cell and other medical research.
- Proposition 23: Would impose numerous requirements on the operation of community dialysis clinics.
- Proposition 24: Would make 34 pages of amendments in the Secretary of State’s voter guide to the California Consumer Privacy Act (CCPA). It would create a new state California Privacy Protection Agency to implement and enforce the CCPA to regulate the data and privacy practices of large private businesses. Existing state law already preempts local governments from regulating the collection and sale of consumers’ personal information by a business.
Should you have questions on these or any measures, please contact RPPG: