I guess it’s housing morning, so I’m going to talk about one thing that’s not often discussed: the relationship between home values and school and city taxes. If things turn out the way this guys forecasts, that relationship is about to turn toxic:
“There is no iron law that real estate must appreciate,” said Stan Humphries, chief economist for the real estate site Zillow. “All those theories advanced during the boom about why housing is special — that more people are choosing to spend more on housing, that more people are moving to the coasts, that we were running out of usable land — didn’t hold up.”
Instead, Mr. Humphries and other economists say, housing values will only keep up with inflation. A home will return the money an owner puts in each month, but will not multiply the investment.
I live in a district where parents bitch about middle schools that don’t teach Mandarin along with French and Spanish — in other words, there’s constant pressure for the schools to do more. But politicians are also afraid of raising taxes. The solution to this dilemma has been for the town assessor to aggressively raise home valuations. Since taxes are a percentage of home valuation, the total amount collected through taxation grows faster than inflation, while tax rates stay the same. Politicians can claim that they haven’t raised taxes, yet taxes go up. It’s like magic, but it’s a trick that won’t work if home prices are flat or declining.
Joe Buck
That trick isn’t legal in California, or in other states that have copied California’s Proposition 13. The assessment on a home can’t increase by more than 2% per year, even if inflation is more than that. It can go up more if the home is sold, but then the price the new buyer paid constrains the assessment.
BR
It may hit that point – where house prices just move with inflation – but it seems quite possible we’re in for another serious downleg over the next 5 years before that happens.
Here’s a great talk on that:
http://sheffield.indymedia.org.uk/2010/06/453356.html
Yes, the first 15 minutes are about energy, but it’s worth getting through to hear about the housing stuff. Also, I should add that the speaker has a very good track record of being prescient – here are her projections from Aug. 2007 – projections that describe almost everything we now know went wrong in late 2008:
http://canada.theoildrum.com/node/2871
Face
This is a relationship I’ve pondered a lot lately, due to the teatards’ demands of “no taxes”. To bitch about DC tax rates, and the effect of less Fed revenue, is easy, cuz it’s all somewhat esoteric and easy to demonize. But do these morans really want shitty schools, pot-holed roads, and no police officers in their neighborhood?
IOW, how do they defend the “no taxes!” shit on a local level, when all someone has to do is point to roads, schools, and crime as the reason for said taxes? Are they really that devoid of the relationship between tax rates and shit they really must have to live?
El Cid
I’m really tired of ignorant jackasses — many of whom I know, live beside, work with, am related to — who want more and better services and don’t want to pay for them. And of course who believe in fairy ponies paying for everything by cutting ‘waste’ in whatever, welfare, medicare, etc.
R-Jud
@Face:
My mom’s a county commissioner. The answer to your question is, “Yes, they really fucking are.”
slag
Speaking of Zillow, I just discovered that they were including WalkScore in their listings. I hope that signifies the beginning of a cultural shift that values walkable neighborhoods more highly.
At the very least, it indicates that the group of eco and computer geeks that conspired to create WalkScore is good at getting their product out there, which is a plus.
But that’s beside the point, I guess.
Keith G
@Face:
Many are into the last 1/4 of their life and infrastructure investment (be it physical or social) does not move them.
Daddy-O
@Face: There is no defense for it.
They scream “No taxes!” because they have no idea what they’re screaming about, really.
They really ARE that devoid of any knowledge of the relationship between tax rates and their standard of living. It’s much, much easier than actually thinking or coming up with an alternative solution. Screaming has always been the easiest answer.
Chyron HR
@Face:
They say, “Our roads still have potholes, our schools still aren’t turning out little geniuses, and our police still aren’t preventing every crime. Obviously we’re still paying too much taxes.”
This is not a hypothetical answer.
Daddy-O
@Face: Looks like you’ve hit a nerve, Face. Good for you…!
aimai
Money for schools has always been a lightning rod–especially in the older suburbs and recent exurbs. The young families that moved out there looking for “good schools” have run right into the elderly assholes who took advantage of those good schools when they had kids, and now don’t want to pay for upgrades and new tech for “someone else’s kids.” When those oldsters were selling out/cashing out to retire they were ok with local policies that increased spending on schools because they could see it kept their own housing prices up. Now that housing prices are flat, or falling, and seniors are experiencing house-lock/inability to cash out they will be less inclined to pay for any improvements that go to children/new families. In all white suburbs this has nothing to do with race and everything to do with generational warfare. In the cities, of course, it has to do with both.
aimai
Alwhite
You want to see what the end of that looks like? California passed a constitutional amendment that limited mill rate increases and froze valuation until sale. There are commercial developments in CA that are paying the already limited mill rates on values set in the 1980’s. Its a large part of why CA is in such crappy condition.
In this case values will not be limited by law but by market but the net will be the same. few teachers, more crumbling schools, fewer services, programs and activities. OH and of course more people demanding the government do more and cut taxes.
duck-billed placelot
@Alwhite: But so many shiny prisons!
Brachiator
This also sounds like the kind of thing that ultimately sparked California’s Proposition 13 anti-property tax revolt. After a while, for some people, especially those on fixed incomes, increasing property taxes made it impossible for some people to keep their homes. The state legislature refused to do anything to remedy the situation, and ultimately an overly stringent ballot proposition passed which lowered property taxes not only for individuals but also for commercial property and made in impossible for tax increases to be imposed without a 2/3 vote of the state legislature.
HRA
So now I know why I received a letter describing my home and property from the town assessor a few weeks ago.
Maybe I’ll let him believe I don’t have a full cellar.
liberal
Exactly the same as income and sales taxes. (Except insofar as sales might trend with inflation, whereas income trends above, at least to the extent that real estate does.)
liberal
@Brachiator:
And how is that any different from people who can’t keep their homes when they can’t pay rent or their mortgage?
liberal
@Alwhite:
It’s entirely why CA is in such crappy condition.
You can’t hand landowners that much money in exchange for absolutely nothing and not expect it to damage your economy.
Holden Pattern
People keep saying this, but I have yet to see any contemporaneous reporting on “fixed-income” retirees actually losing their homes because they couldn’t pay their property taxes — certainly not in any statistically significant numbers. Prop 13 was pushed by Howard Jarvis, an anti-tax nut-job front-man for commercial and residential landlords, who are the true beneficiaries.
It didn’t hurt the Prop 13 campaign that just a few years prior, the CA Supremes had ruled that school funding couldn’t depend just on local property taxes — the resulting inequities were a violation of the state constitution’s equal protection guarantees. A lot of well-off white suburbanites found their property taxes helping to fund majority-minority urban school districts, instead of funding their nice public schools. Can’t be having that. So now the school funding is choked off, urban school teachers’ unions are the official enemy, and well-off suburbanites either send their kids to private school or fundraise privately to supplement the school spending in their districts — so there’s still a multi-tier school system in CA, but the revenue flows slightly differently.
PurpleGirl
A few decades ago (circa 1970s) I had a friend whose family lived in Wantagh (LI, NY). He took me home one time to meet his parents and see his sister who was home from college. I was shocked by how run-down the exterior of the house looked as he had told me stories of all the improvements they had done inside. Their RE tax was based on how the exterior of the house looked, not the interior.
duck-billed placelot
@PurpleGirl: Ha! In some parts of France, there are lots of houses with windows/doors bricked up – with the facings still very much in evidence – because of a tax on wall openings from the 1800s-early 1900s. Plus ca change…
ThatLeftTurnInABQ
@Holden Pattern:
This.
One can’t understand the politics of school funding in CA without parsing the impact of the three cases collectively known as the Serrano decision, something which most pundits have never heard of.
Ironically one of the results of Prop 13 was to concentrate power by shifting control over school budgets from local districts to Sacramento (where the money was to be found once local property tax revenues dried up), the opposite of a small-c conservative result.
BenA
@Face:
You really have to look at the demo for your average tea-tard… You’re talking older white male, most likely semi-rural…. who’s kids are already out of the schools… who doesn’t drive anywhere except maybe to the post office to pick up his social security disability check… and who lives in a low crime area.
It’s basically: “I got mine already… who gives a fuck about everyone else.”
Xenos
@duck-billed placelot: Isn’t that also the origin of the Mansard roof? Attics were not taxed, so they bring the shingles right down to the to next floor below, and voila! Un etage, sans taux!
Brachiator
@liberal:
RE: Since taxes are a percentage of home valuation, the total amount collected through taxation grows faster than inflation, while tax rates stay the same.
No. A better example is the federal alternative minimum tax, which is not indexed for inflation. As a result, more people are exposed to this tax each year (which was only supposed to affect the extremely wealthy), and Congress has to authorize temporary patches each year to prevent more people from having to pay this tax.
RE: After a while, for some people, especially those on fixed incomes, increasing property taxes made it impossible for some people to keep their homes.
During the recent housing screw up, a number of homeowners could never really afford their homes in the first place. They got loans with artificially low interest rates which had to be refinanced at a higher rate later. Or, you had people doing the right thing who lost their job or had to take a pay cut, who now no longer are able to afford their mortgage.
Contrast this to a retired couple with a fixed income who are close to paying off their mortgage. Each year, their mortgage payment is lower than the year prior or more goes into principal instead of interest. Or they are lucky enough to have paid the mortgage off and are only paying property tax. Now the assessor comes along and doubles or trebles the property tax. They haven’t made any additions or improvements to the home to increase its value. They haven’t done anything to explicitly increase their debt load. But now, simply because their home is “worth more,” they have to come up with more scratch for the tax man.
And now, in California, where home values are decreasing, some assessors are fighting homeowners who are trying to get reduced property tax assessments, because the localities still need money.
@Holden Pattern:
RE: After a while, for some people, especially those on fixed incomes, increasing property taxes made it impossible for some people to keep their homes.
Prop 13 has been around since 1978. If you can’t find examples of people getting squeezed by pre-Prop 13 tax increases, you are just not doing your homework.
Howard Jarvis jumped on the Prop 13 bandwagon and took it too far, but the state legislature ignored pleas to deal with property tax problems because the system provided an easy way for localities to get extra revenue without “raising” taxes.
duck-billed placelot
@Xenos: I didn’t know that one! My French, at the time I learned the doors&windows anecdote, lacked that, je ne sais quoi, comprehension element. But that makes total sense. Oh, those wily French. Wikipedia tells me that the super-rich of the time would install fake doors and windows on structural walls as outward signs of how super-rich they were. (We don’t even NEED this door we’re paying tax on!) If only we could make ‘paying loads of taxes’ into conspicuous consumption…
Holden Pattern
You’re the one making the assertion here. Please provide a hard example, not of people being “squeezed”, but of poor “fixed-income” people losing their homes because of a high assessment. I hear this over and over again, but nobody ever provides a meaningful set of examples other than the hypothetical “imagine the fixed income retirees” example you provide. One also notes that it’s hard for people who have to buy (and pay taxes) at the massively increased home prices to have a lot of sympathy for people who are sitting on a goldmine created (like the dreaded assessment increase) through no activity of their own — just random luck.
Otherwise, I’m going with (a) people didn’t want to pay to educate poor brown kids, and (b) didn’t want to pay property taxes based on the actual asset value of the house they lived in. Well, hell, we’re all pretty selfish and tribal when it comes down to it, aren’t we?
Gus
Keep that in mind as Tim Pawlenty campaigns on his record of “not raising taxes” while governor of Minnesota. State aid to cities has been gutted, so my property taxes have doubled under his watch. Not to mention his calling a tax increase on cigarettes a “health impact fee.” Not that the weasel has a chance in hell of getting the nomination, but keep it in mind if he somehow manages to secure the VP slot.
Caren
This bullshit happened to me last year. Cook County didn’t raise the tax rate, but it reassessed every condo in my building at 600% higher. This despite the housing crash and that everyone’s mortgage is now underwater.
Yup. Raised my taxes 6x over while claming not to have raised taxes at all.
Almost every business on my street has gone out of business this year. Even the CURRENCY EXCHANGE moved.
Mark
Incidentally, I live in California. My house assessment in 2009 was about 12% lower than the Prop 13 assessment due to falling property values. This year, the assessor jacked up the assessment to the Prop 13 maximum, which was a 14% increase. Property values were flat or declining in my area over the course of the year, so I now have to go to court to dispute this.
IOW, there’s a massive loophole in Prop 13 these days, and it can hit people who bought their homes as long as 25 years ago.
Brachiator
@Holden Pattern:
To the contrary. You’re the one who said you keep hearing this over and over again, and yet you can’t take the time to verify it, and apparently have never tried to do so, perhaps because the facts might upend your unchallenged assumptions. Sometimes I do take the time to look for a link, but here google is your friend. Get searching. You could start with the Wikipedia entry on Prop 13 and also this link.
I know people who retired from aerospace jobs who had originally bought cheap homes in the Palos Verdes area, now an incredibly high value home area of Los Angeles. Even though they were “sitting on a goldmine” as you say, they didn’t have a ton of gold in their pockets. So just because you believe that you should benefit from these people’s “luck” doesn’t make them magically able to satisfy your desires.
Quite the contrary. It’s the people who are eager to spend other people’s money, hiding under some cloak of caring about the poor who get my goat. This is not the same thing as social responsibility or equity. I am also tiring of the condescension with which supposed liberals lump people into the category of “brown” kids. I know it’s supposed to be catchy shorthand, but it is both inaccurate and patronizing.
James E. Powell
@El Cid:
And don’t forget, the costs of invading and occupying countries are paid with magical dollars, so they have no impact on budget deficits.
James E. Powell
@BenA:
It’s basically: “I got mine already… who gives a fuck about everyone else.”
This, combined with fear & hatred of non-whites, non-white immigrants, gays & women, has been the core of Republican campaigns since Reagan.
Neither the Democrats, nor anyone else, has developed any counter-narrative.
techno
I have always been amused by the folks who believe in housing appreciation. For while the price may go up and there might be some reason for the location to get more valuable, the house itself is wearing out just as fast as the family car. It’s depreciating and in 50 years it will take BIG bucks to rehab it just to maintain its status as shelter.
The ONLY way housing prices will stabilize is IF incomes go up. And good luck with that!
Pug
Money for schools has always been a lightning rod—especially in the older suburbs and recent exurbs. The young families that moved out there looking for “good schools” have run right into the elderly assholes who took advantage of those good schools when they had kids…
Well, I’d say that description pretty much fits me but I won’t take it personally. One small, tiny little point I would like to make though.
In my school district in a Houston suburb, the schools now have parking garages, performing arts centers, separate baseball fields and football practice fields (the games are at the 20,000 seat stadium or 12,000 seat arena), beautiful tennis courts and it costs north of $80 million a shot to build a high school.
Since I pay better than $12,000 a year in property taxes on my home (valued well below $400,000) along with all the sales taxes, excise taxes and income taxes, I’m wondering how much is enough and just what the hell they do with all the money? I’m not disconnected and maybe I am an asshole, but if they keep raising the property tax even assholes like me will be broke one of these days. I can assure you, I’ve paid at least my share for schools over the years and I believe in education (and not just for my own kids) but it just escalates every year faster than the rate of inflation.
Tax Analyst
@Brachiator:
This is true. Actually, my father was hit by CA property taxes in the mid-to-late 60’s. The annual tax on a home valued at $50K at the time was over $1,500/yr. That may not sound like much now, but as a small business owner at the time he was lucky to hit $20K annual income in that period, and some years closer to $15K. So we sold the house and moved into an apartment.
This is also true. The legislature failed to deal with the property tax issue when they could have, which left the issue ripe and wide-open for a slick opportunist like Jarvis to glom onto. They really figured nobody would be able to do anything extreme like pass a crazy, over-simplified and regressive initiative that would lock us into some very poor public policies for a very long time and that would be pure political poison to campaign against.
DPirate
Why would you post this stuff? The premise of the article is to ignore what we know of the housing debacle of the 00s; that it was a “bubble”, driven by speculation – a scam, really.
“All those arguments…”, he says. No shit, Sherlock. Only because so much “money” (read: debt) was being funnelled into the price-tags (and subsequently skimmed by finance, I might add) that the so-called value of a home became nowhere near to the reality of what a home is worth to a human being. Perhaps this makes the editorial another case of technically true, but still wrong.
This is again technically true, but actually false. All of this as well was funded not by inherent home value, but by debt. Or by debt via home value, perhaps.
I’m not sure what his point is, in the end. If it is to say that home prices must continue to drop, then fine. But if it is to say that homes are not an inherently good investment, he is still wrong. It’s very simple to demonstrate this just by saying that with more people every second being born to share a basically stagnant pool of land resource, real estate value will absolutely rise over time.
The price of real estate in the USA recently (I’d venture 40 years, at least) has not been a function of inherent value, but a function of available debt.
Pug
The legislature failed to deal with the property tax issue when they could have, which left the issue ripe and wide-open for a slick opportunist like Jarvis to glom onto.
This is true. I lived in Cali in 1978 and the state was running a huge budget surplus . . I know, hard to believe. People were struggling to pay their property taxes and the state was taking in money and buying treasury bonds. Perfect set up for a California ballot initiative.
Brock
In Tennessee, that trick wouldn’t work. Entities that collect property taxes (counties, cities) are forbidden from reaping a windfall based on increasing property values. If the overall value of the property in the county/city increases, the property rate must decrease to compensate. (That doesn’t hold in the other direction, which has left a lot of counties and cities cash-strapped this year.)
Twisted_Colour
I live in a district where parents bitch about middle schools that don’t teach Mandarin along with French and Spanish—in other words, there’s constant pressure for the schools to do more.
It’s not pressure to do more, it’s pressure to get rid of the fairly useless language (French) and replace it with a language that is more relevant to their little ratbag’s future.
Phoenician in a time of Romans
Since I pay better than $12,000 a year in property taxes on my home (valued well below $400,000) along with all the sales taxes, excise taxes and income taxes, I’m wondering how much is enough and just what the hell they do with all the money? I’m not disconnected and maybe I am an asshole, but if they keep raising the property tax even assholes like me will be broke one of these days. I can assure you, I’ve paid at least my share for schools over the years and I believe in education (and not just for my own kids) but it just escalates every year faster than the rate of inflation.
Yes, but Pug – the fact that people like you pay for these things makes it possible for the very rich to have low marginal rates and pay less, thus working the magic of trickle-down economics. It’s the sacrifice of people like you that make it possible for Paris Hilton to party seven nights a week rather than just six.
Isn’t that important too?
mclaren
@liberal:
No, Proposition 13 explains 25% of why CA is in such such crappy condition. California collapsed primarily for other reasons.
Reason 1: CA for 40 years financed itself with a growth Ponzi scheme. It worked like this: people from other states stampeded into CA to live. They were mostly young people looking to start a family and get a job, and back in the day, with the aerospace industry booming and the housing market exploding and all the furniture stores and appliance stores growing like weeds and the new K-12 schools and universities sprouting up, jobs were plentiful in California.
So people moved to CA in droves and paid property taxes and sales taxes and income taxes but they didn’t take very many services. 40 years ago Mexico had a much lower population and relative to America, their economy was doing well. So there wasn’t a flood of illegal immigrants either.
Cities and towns in CA and the entire state got a bonanza. Constantly rising tax revenues with very low tax rates, simply because a giant tidal wave of people kept moving into CA and getting jobs and paying taxes but not using very many expensive services like medical or welfare or public transit. Gasoline was cheap, there was plenty of empty cheap land, life was good. People keep moving into CA in ever-increasing tidal waves, the state tax income kept going up and up and up but the state never had to put out much in outlays.
Then, after 30 years of people moving to CA in droves, eventually all the cheap land got bought up. The first arab oil embargo hit in 1973, then the second one in 1978. A combo of skyrocketing housing prices + sky-high gasoline prices suddenly hammered the California Dream. And people no longer moved into California in giant ever-increasing tidal waves.
Suddenly the tax revenue Ponzi scheme broke down. And California now had a huge flood of illegal immigrants to deal with plus huge numbers of newly impoverished people who needed state services — impoverished because CA started building prisons instead of universities, and because its aerospace and other industries dried up and blew away. Offshoring destroyed those good jobs and there was no more cheap land left and no more cheap gas. By the early 2000s more people were leaving CA every year than were moving in.
That’s the main reason why California broke down. The state was built on endless growth fueled by a university/aerospace/hi-tech boom based on a freewar car culture built on $1-per-barrel oil in the 1950s.
When the university/aerospace/hi-tech went away or got outsourced and the freeway car culture became unsustainable, the endless growth stopped and the California tax revenue Ponzi scheme fell apart.
Where’s my proof?
My proof that Proposition 13 has little to do with CA’s collapse is simple — look at the other states in the American Southwest fueled by the same now-dead freeway-car-culture and tax revenue Ponzi scheme. The most prominent of these states is Nevada, which used exactly the same endless growth scheme to fuel itself with constantly rising state revenues but low expenses.
Nevada is in even worse fiscal shape than California. Yet Nevada has no Proposition 13.
The reason Nevada is collapsing is the same reason California is collapsing — both states ran tax revenue Ponzi schemes based on infinite growth forever, and that isn’t realistic. It took a long long time (50 years) but eventually the growth stopped. The cheap land got bought up, the commutes became unreasonably expensive, the gasoline stopped being cheap, the pollution and freeways and overpopulation made what had been a nice place to live a hellhole.
This touches on the other important reason why California has fallen apart. Reason 2: CA used to be a great place to live 40 years ago. Little congestion on the freeways, lots of nice beaches, relatively clean air, great universities. Today California’s beaches are horribly polluted and often closed by the public health department (and in HelL.A. gang patrol cops sweep the beaches for tourists and warn them if they’re wearing the wrong colors. If you wear the wrong colors, used by the crips or the bloods, it can get you shot. That wasn’t true 40 years ago). Today California’s freeways are impassably congested, the air isn’t as brown but there are so many more people that it’s much more toxic (now equivalent to smoking a pack of cigarettes a day in HelL. A.), and California has one of the worst school systems in the nation. When California turned itself into a giant penal colony with a nice ocean view, it stopped being a place everyone else in the United States wanted to move to. That’s an important part of why CA collapsed too.
Brachiator
@mclaren:
Huh? You intentionally omit not only the public school systems, but the University of California, Cal State and community college systems, and the roads and highway system (including public transit) and public health service infrastructure that California built up. To suggest that nobody used services or that services only exist for impoverished people is ridiculous.
Uh, Nevada, no state income tax. Exactly how does this relate to California?
You seem to imply that Californians should have known exactly when aerospace industry was going to fade away, and planned accordingly. And that we should have closed the borders and prevented any newcomers. But how would this created any kind of prosperity?
mclaren
@Brachiator:
My point is that Californians didn’t use a lot of state services that cumulatively drained money from the state coffers, rather than putting it in.
For example, the University California and Cal State and community college systems were able to cover a lot of their costs from tuition. Land to build new campus facilities on was cheap and professors were paid much less relative to the median income (corrected for inflation) than today and there were tons of students so the state college systems did well financially. There was also a huge knock-on effect from educated students without big debts who benefited the CA economy when they went to work for CA businesses. So while the Cal state university system cost money it made even more money for the CA economy with all the knock-on effects of an educated workforce. That’s shifted into reverse today.
Today, land is stupendously more expensive and building new college facilities costs astronomically more money than it did 50 years ago. CA colleges have also overbuilt, adding many more facilities than they actually need in order to attract students in the tuition arms race, and as a result tuitions have climbed 3x faster than inflation.
This is inarguable. Once upon a time, circa 1970, the tuition at Berkeley was extremely modest. It was low even compared ]with median per capita income in California ca, 1970. Today, tuitions at even the California state colleges are way out of line with median per capita income in California and they continue to rise. So California state colleges back in the day were much less expensive relatively speaking than they are today and also much less of drain on the state coffers than they are today.
Much of that difference got financed from the tax revenue Ponzi scheme I mentioned. When that dried up, CA state colleges got much more expensive relative to median CA income and a vicious cycle set in where students couldn’t afford to go, CA got a worse educated population, businesses couldn’t prosper as much with a worse-educated workforce, tax revenue dropped. (Businesses who couldn’t find educated CA workers also had a new reason to offshore via the internet.)
As far as freeways and public transit are concerned, buses are not a big expense in Southern California. The really big expense is the freeways. There too you got a growth bonanza in the early years. I remember what the freeways in SoCal were like when they were brand new. They needed very little maintenance in the first decade after they were built. Then, as with all infrastructure, they started to crumble, and maintenance costs skyrocketed. Also, SoCal freeways were designed for ridiculously fewer cars than currently use ’em. The freeway engineers never imagined that as many people would eventually drive on SoCal freeways as have done. So you are getting exponential breakdown in the SoCal infrastructure because it’s being used by vastly more people than it was originally designed for. Some of the on ramps in HelL.A. are positively life-threatening because they were designed for cars in the 1930s when the top speed limit was 45 mph and those on ramps don’t give you enough time to accelerate to merge into today’s 70 mph HelL. A. traffic.
So the point is that in the first couple of decades of freeway use, repair costs were very low and usage was light. Costs skyrocketed exponentially as the freeways have aged and as orders of magnitude more people have used ’em than they were ever designed for.
This last point is a big issue with all SoCal infrastructure. SoCal’s freeways and housing tracts and water mains and sewage systems were never designed for a state of 39 million people. If you’d told the engineers in the 1930s and 1950s who designed this stuff there would ultimately be 39 million people living in SoCal, they’d have said you’re insane.
Overuse and gross abuse of inadequately designed infrastructure is a large part of the exponential costs that have exploded in CA over the last 30 decades. You can get away with that for 10 or 15 years, but after a while, it catches up with you and the tax outlays to keep the overburdened infrastructure working become enormous — much much larger than they were back in the 1950s or 1960s when those freeways and water mains were new.
The most expensive state services in CA however are Prop 98 funding for public schools and MediCal, by orders of magnitude. 34 billion and 12 billino respectively. CA didn’t need to fund public schools when CA had a growing population and a thriving economy, because as mentioned new income and property taxes from a flood of new people moving to CA offset the need to increase taxes on existing residents. Also, America’s health care system wasn’t nearly as far along the road to catastrophic unaffordability and total collapse as it is today, so MediCal just wasn’t a big cost. Today, those Prop 98 & MediCal outlays represent a huge drain on the CA economy — and it’s getting worse. Back in the 1950s and 1960s those state services just weren’t remotely as big a chunk of the CA state budget as they are today.
K-12 schools have gotten bloated. There are today twice as many administrators and auxiliary staff as there were in schools nationwide K-12 in 1970. That’s had a brutal impact on the cost of public schools in California, as elsewhere. Public school employment has risen 10 times faster than inflation, and in inflation-adjusted dollars K-12 schools cost the taxpayer twice as much today as they did 40 years ago. That’s a serious problem, so Prop 13 has had an impact, but it’s far from the entire answer. Just to give you one example, half of CA’s budget deficit would disappear if the MediCal outlays went away. Skyrocketing MediCal have nothing to do with Proposition 13. If CA K-12 schools cost per pupil what they cost back in 1970, current Prop 98 outlays would be 17 billion instead of 34 billion a year. Think about that. Nearly all of CA’s gargantuan 24-billion-dollar-a-year annual budget shortfall is due to the increase in K-12 costs over the past 40 years, doubling in real terms after accounting for inflation. CA would have only a 7 billion a year deficit instead of a whopping 24 billion dollar a year deficit if K-12 schools cost per capita what they cost back in 1970 correcting for inflation.
From those numbers, it seems clear that Proposition 13 has very little to do with the essential budget problems in California.