California’s ballot measures can be more than a little confusing. Commonly referred to by their numbers, and sometimes referencing previous propositions, even knowledgeable voters can be forgiven for having trouble keeping track of which proposition does what. Take this year’s Prop. 15, for instance: it would roll back 1978’s Prop. 13, which limited property taxes, and which is unrelated to March 2020’s Prop. 13, which would have authorized the state to issue bonds for schools. Some propositions are quite obscure: this year’s Prop. 23 deals with regulations for kidney dialysis clinics, and – believe it or not – this is the second time in two years that California voters will decide on an initiative about that industry.
There are, however, several measures on the November ballot that have direct implications on the work we’re doing at the Cato Project on Poverty and Inequality in California. Specifically, some of the measures relate to our work on housing, criminal justice, and economic inclusion issues. California’s ballot measures provide a unique insight into how voters in the Golden State are thinking about policy issues. It is no exaggeration to say that California’s ballot measures sometimes set the agenda for nationwide debates, as Prop. 13 did for the nationwide tax revolt. With this in mind, we have compiled an overview here of a few initiatives that are of particular interest to Cato’s Project on Poverty and Inequality in California.
Proposition 15 requires many commercial properties to be taxed based on their market value. It aims to roll back 1978’s Proposition 13 (which capped yearly property tax increases at 2% and limited property taxes overall to 1% of a property’s purchase price) and introduce a “split roll” property tax system, which would split the treatment of commercial property from that of residential property for the purposes of tax reassessment. No matter how the numbers are calculated, Proposition 15 would be a significant tax increase for California businesses, with estimates between $7.5 billion and $12 billion. How much of the tax increase will be passed on to consumers is still up for debate. 40% of the increased tax revenues would go toward school districts and community colleges, hence supporters’ messaging touting the effect of increased school budgets. A notable point on this issue is that California’s recent school funding reform (the Local Control Funding Formula) shifted California’s schools farther than ever before from relying on property taxes for revenue.
Prop. 21 is in many ways the return of 2018’s Prop. 10. Prop. 10 would have repealed California’s Costa‐Hawkins Act, which limits local governments’ authority to enact rent control measures. Prop. 21 is more narrowly‐targeted than Prop. 10 was: it would continue to prevent rent control on newer housing units, and on housing units owned by individuals who own two or fewer units. Prop. 10 failed at the ballot box in a 65%-35% vote, but the legislature enacted AB 1482, which (among other provisions) capped yearly rent increases at 5% plus inflation or 10% overall, with a sunset of 2030. There are a number of reasons to be skeptical of rent control policies like AB 1482 and the laws that Prop. 21 would allow. Rent control is, like so many other policies, an example of concentrated benefits and diffuse costs: a study of San Francisco, for example, showed large benefits for covered renters but higher rents city‐wide. Rent control makes it harder to operate as a landlord, and therefore would restrict the supply of rental housing, despite Prop. 21’s exemption of new housing from rent control.
Perhaps the biggest bill to go through California’s legislature in 2019 was AB 5. AB 5 dramatically limited the situations in which workers can be freelancers, as opposed to employees requiring benefits and minimum wages. While AB 5 was publicized as primarily targeting app‐based rideshare workers, it has wide‐ranging effects on industries such as newspapers to yoga instruction. In a notably measurable effect of regulation on the price of consumer goods and services, the price of yoga classes from one LA‐area studio increased from $22 to $26. It’s notable, though, that Prop. 22 only affects app‐based drivers – not the myriad other workers reclassified by AB 5. There is clearly an argument for creating new regulatory flexibility for the numerous workers who appreciate the flexibility of app‐based or other freelance work, but Prop. 22 isn’t that far‐reaching reform, except for in the rideshare industry. Angeleños can expect to pay more for yoga classes whether Prop. 22 passes or not, but whether they can take Uber or Lyft there likely hangs on the outcome of Prop. 22. There has been some policy discussion – often including too many buzzwords and jargon – about “the future of work,” with Gov. Newsom starting a commission on the subject. Both sides of the AB 5 debate will probably try to claim their side is that future.
Cash bail has long been a target for criminal justice reformers. California passed a law in 2018 that would eliminate cash bail and replace it with a risk assessment system, but the bail bond industry immediately pushed for a referendum to overturn the law. That referendum has become Proposition 25. In general, this reform could reduce the number of people who are incarcerated. It is clear that being in jail – even for a short period – can put or keep individuals in poverty. There are numerous questions about how California’s risk assessment system will work in practice; however, it’s clear that the current system of cash bail is deeply flawed: whether California’s changes will be determined by the voters.