Description: California’s expansive use of redevelopment has engendered significant controversy. Program advocates contend that it is a much needed tool to promote economic development in blighted areas. Program critics counter that it diverts property tax revenues from core government services and increases state education costs. The Governor’s budget includes a plan for dissolving redevelopment agencies and distributing their funds (above the amounts necessary to pay outstanding debt) to other local agencies. We find that the administration’s proposal has merit, but suggest recognizing all the redevelopment revenues as property taxes.Note: In a letter dated February 16th, 2011 we responded to questions regarding our analysis of the California Redevelopment Association’s study of the economic effects of redevelopment included in this report.