Legislative Analyst's Office, December 1998

1998 Cal Facts
California's Fiscal Structure

California's State and Local Revenue Sources--No One Predominates

Share of Total Revenues by Source

California's Governments Rely on a Variety of Taxes

State Taxes Current Rate Comments/Description
Personal Income Marginal rates of 1% to 9.3% (7% AMTa) Married couples with gross incomes of $21,246 or less need not file. The top rate applies to married couples' income in excess of $67,346.
Sales and Use 6%b Applies to final purchase price of tangible items, with exemptions for food and certain other items.
Bank and Corporation General Corporations Financial Corporations
(6.65% AMT) 10.84%
(6.65% AMT plus adjustment factor)
Applies to net income earned by corporations doing business in California. For financial corporations, a portion of the tax is in lieu of certain local taxes.
Vehicle Fuel 18˘ per gallon of gasoline or diesel fuel Tax is collected from fuel distributors or wholesalers with equivalent taxes levied on other types of vehicle fuels.
Alcohol and Cigarette
Wine and beer

Sparkling wine

$3.30/ gallon
Tax is collected from manufactures or distributors. Similar taxes are collected on sale of other tobacco products.
Estated 0.8% to 16% The estate tax is a "pick-up" tax to take advantage of the maximum state credit allowed against the federal estate tax, at no net cost to taxpayers.
State Taxes Current Rate Comments/Description
Horse Racing License Fees 0.4% to 2% Fees/taxes are levied on amounts wagered. Rate is dependent on type of racing and bet, and where the wager is placed.
Insurance 2.35% Insurers are subject to the gross premiums tax in lieu of all other taxes except property taxes and business license fees.
Local Taxes Current Rate Comments/Description
Property 1% (plus any rate necessary to cover voter-approved debt) Tax is levied on assessed value (usually based on purchase price plus the value of improvements and a maximum annual inflation factor of 2%) of most real estate and various personal and business property.
Local Sales and Transaction 1.25% to 2.5% Collected with state sales and use tax. Revenues go to cities, counties and special districts.
Vehicle License Fees 1.5% Tax is applied to depreciated purchase price. It is collected by the state and distributed to cities and counties.
Other Local Varies by jurisdiction Types of taxes and rates vary by jurisdiction. Includes utility users tax, business license tax, and transient occupancy taxes.
a Alternative Minimum Tax.
b Includes rates levied for state-local program realignment and local public safety.
c A 1.5 percent rate is levied on net income of Subchapter S corporations.
d Inheritance and gift taxes have been repealed but still apply to gifts and deaths prior to 1982.

California's Revenue Burden Is Average Compared to Other States

Amounts Per $100 of Personal Income

Real Per Capita Revenues and Taxes-- Also Not Much Change Recently

1977-78 Dollars

Initiative Measures Limit State and Local Fiscal Flexibility

Measure/ Election

Major Provisions

Proposition 13/
June 1978
  • Limits general property tax rates to 1 percent. Limits increases in assessed value after a property is bought or constructed.
  • Makes Legislature responsible for dividing property tax among local entities.
  • Requires two-thirds vote for Legislature to increase taxes, and two-thirds voter approval of new local special taxes.
Proposition 4/
November 1979
  • Generally limits spending by the state and local entities to prior-year amount, adjusted for population growth and inflation (now per capita personal income growth).
  • Requires state to reimburse local entities for mandated costs.
Proposition 6/
June 1982
  • Prohibits state gift and inheritance taxes except for "pickup" tax qualifying for federal tax credit.
Proposition 7/
June 1982
  • Requires indexing of state personal income tax brackets for inflation.
Proposition 37/
November 1984
  • Establishes state lottery and dedicates revenue to education.
  • Places prohibition of casino gambling in State Constitution.
Proposition 62/
November 1986
  • Requires approval of new local general taxes by two-thirds of the governing body and a majority of local voters (excludes charter cities).
Measure/ Election Major Provisions
Proposition 98/ November 1988
  • Establishes minimum state fund guarantee for K-12 schools and community colleges.
Proposition 99/ November 1988
  • Imposes a $ .25 per pack surtax on cigarettes and a comparable surtax on other tobacco products.
  • Limits use of surtax revenue, primarily to augment health-related programs.
Proposition 162/ November 1992
  • Limits the Legislature's authority over PERS and other public retirement systems, including their administrative costs and actuarial assumptions.
Proposition 163/ November 1992
  • Repealed "snack tax" and prohibits any future sales tax on food items, including candy, snacks, and bottled water.
Proposition 172/ November 1992
  • Imposes half-cent sales tax and dedicates the revenue to local public safety programs.
Proposition 218/ November 1996
  • Limits authority of local governments to impose taxes and property-related assessments, fees, and charges.
  • Requires majority of voters to approve increases in all general taxes, and reiterates that two-thirds must approve special taxes.
Proposition 10/ November 1998
  • Imposes a $ .50 per pack surtax on cigarettes, and higher surtax on other tobacco products.
  • Limits use of revenues, primarily to augment early childhood development programs.

Approval Requirements for State and Local Revenues

State Level Legislative Approval Voter Approval
Taxes 2/3 None
General obligation bonds 2/3 Majority
Other debta Majority None
Fees Majority None
Local Level Governing Body Approval Voter Approval
City or county "general" taxes (revenues used for unrestricted purposes) 2/3
(Majority for charter cities)
City or county "special" taxes (revenues used for specific purposes) Majority 2/3
All school or special district taxes Majority 2/3
General obligation bonds Majority 2/3b
Other debta Majority None
Property assessments Majority Majority of affected property owners. Votes weighed by assessment liability
Property--Related fees Majority 2/3 of voters, or majority of affected property ownersc
Fees--All other Majority None
a Includes revenue and lease payments bonds and certificates of participation.
b Exception: Article XVI, Section 18 specifies that bonds used for repairing or replacing unsafe public school buildings can be approved by a majority of voters.
c No vote required for gas, electric, water, sewer, refuse, or developer fees.

Californians Are Served by Over 6,000 Local Entities

Counties 58
Cities 471
Special districts 4,816
K-12 school districts 999
Community college districts 71
Total 6,415

Property Taxes Are Distributed to Many Entities Within a County

Schools Receive More Than Half of Property Taxes

How Much Property Taxes Do Counties and Cities Receive?

Large Counties
Per Capita Property Taxes Large Cities
Per Capital Property Taxes
Los Angeles $126 Oakland $129
Contra Costa 99 Los Angeles 127
Alameda 99 Long Beach 122
Santa Clara 95 Sacramento 105
Sacramento 88 San Diego 94
San Diego 81 Fresno 81
San Bernardino 61 San Jose 61
Riverside 59 Anaheim 54
Orange 40 Santa Ana 49
Statewide County Average $106 Statewide City Average $78

Four factors explain the large differences among property tax receipts. Cities and counties tend to receive more property taxes if they:

An Overview of County Finance

Major County Programs--1998-99

Major Changes in the State-County Relationship During Past Decade

Year Description
Property Tax Shifts
1992 and 1993 Ongoing Revenue Shifts. State shifted property taxes from counties and other local entities to schools in order to reduce state education costs. Subsequently, these reduced county revenues have been substantially offset in the aggregate by various mechanisms, including funding for public safety (Proposition 172 sales tax revenues, COPS funding, and changes to trial court funding) and general assistance mandate relief.
Health and Social Services
1991 Realignment. Shifted authority from the state to counties, and increased counties' share of costs, for many health and social services programs. Provided new revenue sources to counties to offset increased county costs.
1997 Welfare Reform. Provided counties with more flexibility regarding (1) delivery of welfare-to-work services and (2) recipient participation requirements. Provided fiscal incentives for counties to assist recipients in getting jobs.
Trial Court Funding
1988 Brown-Presley Act. Increased state funding for county-operated trial courts, through the establishment of block grants.
1991 Realignment. Increased state funding of trial courts, as well as increased state revenues from court fines.
1997 Spending Cap. Placed cap on county expenditures for trial courts, resulting in future increases in state costs.
1998 Reduced County Share. Further reduced the required county contributions for trial court funding.

An Overview of City Finance

1995-96 Revenues (excluding San Francisco)

Continue to 1998 Cal Facts State Finances

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