In California and Beyond, Voters Say Yes to Higher Taxes, Better Services

In California and Beyond, Voters Say Yes to Higher Taxes, Better Services

In California and Beyond, Voters Say Yes to Higher Taxes, Better Services

Local and state governments are gaining the ability to restore basic services and infrastructure.


On November 6, a solid majority of California voters supported Proposition 30. The ballot initiative, which temporarily raises the sales tax and increases income taxes for the wealthy, will generate an estimated $6 billion per year to help stabilize the state’s dismal finances. The vote was a landmark event in California, the state that launched a national anti-tax revolt by passing Proposition 13 in 1978. And for Governor Jerry Brown—who was serving as a much younger governor back then—the triumph was particularly sweet.

In many ways, Brown was seeking redress for the crisis unleashed by Prop 13. That initiative—which capped the property tax rate that communities can impose and established a two-thirds majority requirement for any legislative effort to increase state or local revenues—torpedoed public finances in California for a generation. Prop 30 is by no means a cure-all, but it does offer a salve for the state’s ailing public sector. California had already cut tens of billions of dollars from education spending in recent years. If Prop 30 had failed, Brown would likely have had to cut many billions more, and his latest tenure as governor would no doubt have been written off as an abysmal failure. By persuading the electorate to back his tax plan, Brown has paved the way for a much more favorable reading of his legacy.

The significance of Prop 30 resonates beyond California, of course. Thirty-four years after the passage of Prop 13, voters across the country have decided that the strategy behind it doesn’t work. That doesn’t mean they’ve become overnight converts to notions of “big government.” But it does mean that the “starve the beast” approach of Americans for Tax Reform president Grover Norquist—who once famously declared he wanted to shrink government until it was small enough to drown in the bathtub, and has compelled nearly every aspiring Republican to sign his “no new taxes” pledge—is no longer dominant. And the injection of nuance into the national discourse on taxes and spending is already making a huge difference.

Slowly but surely, local and state governments are gaining the ability to restore basic services and rebuild infrastructure that has corroded over decades. That can only be bad news for Norquist (who did not return calls relating to this article). After all, the appeal of his message relies on the assumption that government always delivers lemons. Improve the caliber of public service, allow schools and other parts of the public sector to deliver once more, and the talismanic power of his “no new taxes” slogan dissipates.

Norquist and his acolytes had a terrible day on November 6. First there was the presidential election, fought, at least in part, around the issue of raising taxes on the wealthy. Then there were the Senate races, in which liberals like Elizabeth Warren won and Tea Party–backed candidates like Richard Mourdock lost. (A month after the election, South Carolina Senator Jim DeMint, a Tea Party kingpin, resigned to head up the Heritage Foundation, his strident views no longer quite so seductive on the Hill.) The GOP retained its majority in the House, but as Republicans struggled to come to terms with the debacle, Speaker John Boehner replaced a number of conservative committee members with more moderate appointees. Finally, there were the initiatives—not just in California but also in Florida, where voters shot down a proposal to restrict property taxes severely, and in Michigan, where voters rejected a constitutional amendment that would have required supermajority votes to pass any tax increases. Across the country, voters looked at proposals to eliminate taxes and said no, or they looked at proposals to increase taxes and said yes. Several anti-tax initiatives did pass—including a supermajority requirement in Washington. But no state ballot measure was as high-profile, or as significant to the national debate, as Prop 30.

Norquist’s power hasn’t vanished, but the 2012 election shows that he has lost the ability to bend government to his whim automatically. During the “fiscal cliff” negotiations, dozens of prominent House and Senate Republicans went on record saying they’d be willing to renege on their pledges to him in order to achieve a workable compromise. It’s true, as The Washington Post’s Ezra Klein pointed out in late November, that the Norquist pledge has “worked” in the sense that Democrats must wage a fierce fight for even the smallest tax increases. But there are clear signs that Norquist’s star is on the wane, and nowhere is this more evident than in California—a state with a long history of leading the way on social and political change.

“It’s a big deal,” says Marshall Ganz, a longtime community organizer and senior lecturer at Harvard’s Kennedy School of Government, who served as a field director for Brown during an earlier gubernatorial campaign in the late 1970s. “California’s got the opportunity now to really create some tax history. It’d be a wonderful end to the Prop 13 era if California said, ‘Been there, done that. It didn’t turn out so well. We destroyed our schools.’ It’s a huge opportunity for California to teach the rest of the country something.”

* * *

In recent years, Prop 13 and the makeup of the California legislature have made it very difficult for the state to get its fiscal house in order. The majority Democrats had enough votes to limit some of the worst spending cuts proposed by the Republicans. But the minority Republicans had enough votes to block revenue increases. When times were flush, the state could muddle through. It borrowed large amounts of money to fund its operations and juggled bills to help subsidize struggling localities. Even before the financial crisis of 2008, California was stretched thin. Education cuts began kicking in a few years before the crash. When the national crisis hit, California’s mess became a catastrophe; crippled by some of the country’s highest foreclosure and unemployment rates, the state’s tax revenues imploded. The public infrastructure was so badly hit, and the political process so calcified, many experts concluded that only a constitutional convention could set California on the right path. Leaders proposed one draconian cut after another, while voters reformed the primary process to try to bring more stability to the political system. Budget fixes brought temporary respite—but only until the next dire revenue prediction resulted in a new round of cuts.

Finally, Brown offered voters a choice: put up the money or accept the fact that the state would no longer be able to support the kind of public services necessary to nurture and sustain middle-class prosperity. In early 2012, his team wrote a proposition and began gathering signatures. Then they found themselves in negotiations with the California Tax Reform Association and other progressive groups pushing for a “millionaire’s tax.” A compromise in March led to a revised draft of the initiative. The new proposal temporarily raised the state’s sales tax rate by 0.25 percent and jacked up income taxes on individuals earning more than $250,000 per year. The money generated would, in the main, be used to shore up the state’s educational system. As a side benefit, Prop 30 would virtually eliminate the budget deficit, leading the state’s Legislative Analyst’s Office to predict that surpluses would be possible within a couple of years. The state might even be able to implement another of Brown’s ambitions: creating a durable rainy-day fund for California.

With the reworded initiative in hand, the Prop 30 campaign team enrolled public sector unions and other groups in a four-week scramble to qualify it for the ballot. At the height of the campaign, thousands of activists were spread out across the state. “We gathered an unprecedented number of signatures,” says Gale Kaufman, a campaign strategist who helped coordinate the effort. 

But that, it turned out, was the easy part. Next came the hard stuff: persuading a majority of California’s infamously cynical electorate to support a tax hike. Vote no on Prop 30, the governor warned, and the consequences would be immediate and severe. Even if the legislature could be persuaded to approve a tax increase, he suggested, he would veto it. In a game of bluff and counter-bluff, Brown repeatedly assured the voters that he meant what he said. Proposition 30 really was a do-or-die moment.

* * *

“Jerry Brown is involved in everything,” says Ace Smith, a political strategist whose San Francisco–based firm SCN Strategies has worked with Brown for many years. “Everything that is important in Jerry’s world, he is eyeball deep in.” Smith, balding with a ring of white hair around his pate, smiles gently as he recalls the hands-on approach Brown took to SCN’s most recent media campaign. In the weeks leading up to the election, Smith says, he and Brown would talk ten times a day, give or take, as they worked out a strategy to sell Prop 30 to an electorate long suspicious of Sacramento politics and taxation.

Despite the scale of the educational crisis, the Sacramento punditocracy was convinced for much of the summer and early autumn that the “No on 30” people, and the anti-tax lobby coalesced around the Howard Jarvis Taxpayers Association, would win. (The association didn’t return calls related to this article.) Conventional wisdom had it that any proposition relating to taxes for which the support even momentarily dipped below 50 percent was dead in the water come Election Day. In a Grover Norquist world, this theory suggested, momentum would always run against tax increases. Thus Prop 30 had to have at least a ten-point cushion going into the final weeks of the campaign in order to stand a chance. 

By contrast, private polling commissioned by SCN found that support was much more solid. SCN’s analysis suggested that voters—especially younger voters, Latinos, African-Americans and women—really did get the seriousness of the problem. In the office pool, SCN partner Sean Clegg bet that Prop 30 would ultimately get 54 percent of the vote. 

The “Yes on 30” strategists were clear-eyed about Califor-nians’ longstanding aversion to big government. But they were confident that residents weren’t going to tolerate further cuts to the besieged school and university systems. The state already ranked near the bottom for per-pupil expenditures. Schools had seen class sizes soar. Extracurricular activities and courses had been cut; libraries had been shuttered; school bus routes and summer school programs had been eliminated in many districts. There was simply no fat left to trim from the budget. 

College and university fees had been massively hiked in an effort to gain some ground, but the increases prompted a public outcry. Activists were voicing their outrage—in Sacramento, at local school board meetings, at city halls. University campuses around the state had witnessed roiling protests and extraordinarily violent police responses that ultimately put California’s plight in the international spotlight. In the fall of 2011, at Berkeley, activists were clubbed by riot police. A few days later, students at UC Davis were pepper-sprayed. Protests against the regents of the state university system also met with a violent response.

Teachers and support staff were under assault as well. “Our union has had 15,000 members laid off in the last several years,” explains Dave Low, executive director of the California School Employees Association. “We have had a decade of cuts,” he says. “It’s in the neighborhood of $20 billion.” 

As the parent of two school-age kids, I’ve seen the impact of these cuts firsthand. At my kids’ school, kindergarten class sizes have increased from around twenty-five students a few years ago to well over thirty. After funds were cut three years ago, the school library stayed open, though with reduced hours, only thanks to donations and parent volunteers. There is no longer a resident school nurse. When teachers want to set up after-school clubs, the district charges rent to keep the school building open. Earlier in the school year, the principal could be found cleaning the cafeteria and school grounds, and then raising the flag—duties she acquired after morning hours for janitors were cut. Parents volunteer as crossing guards when school lets out.

And that’s a good school in a relatively affluent part of Sacramento, a school in which a fair number of students have parents with government jobs and a pretty sophisticated understanding of how to leverage services. In poorer schools in less well-connected communities, the damage has been even greater. In September 2009, the Los Angeles Times reported that some class sizes in the city had risen to fifty students, with some kids sitting on the floor. In poorer neighborhoods in Oakland, ninth graders reported that they weren’t being offered science classes—even though such classes are a prerequisite for college.

* * *

As the Prop 30 campaign geared up, the state’s coffers were again running out, and California’s budget was once more spiraling into uncontrolled deficits. Absent passage of the ballot measure, parents were told, billions of dollars would be cut from K–12 funding; the academic year would be shortened by several weeks; and the community colleges, state university system and University of California campuses would forfeit hundreds of millions of dollars in revenues already promised by the state. 

“There was talk of turning away 20,000 fully qualified high-school graduates” from the state university system, says Lillian Taiz, professor of history at California State University, Los Angeles, and president of the California Faculty Association. “It really was going to take an already pretty terrible situation and make it worse. People have seen opportunities shrink and shrink and shrink and shrink, and have finally gotten their heads around the reality that we’re all going to have to take responsibility and pay up.” 

In the final weeks of the campaign, the momentum shifted toward the no vote when a massive influx of anonymous soft money from Arizona funded an $11 million ad campaign attacking Prop 30. The paper trail eventually suggested, though never conclusively proved, that the funder was a front for the Koch brothers. In a widely seen ad, a “mother” (in reality, a paid actress) claimed that the initiative would raise her gas taxes and complained that the money wouldn’t even go to the schools. SCN ran online tests and determined that the ad had the potential to sink the campaign. In a series of meetings and conference calls, Brown—flanked by his wife, Anne, and other top aides—crafted a rapid-fire response: a commercial featuring a genuine educator who announced, “I’m a teacher, not an actress,” and then set the facts straight. Teachers support Prop 30, she said, because it would inject billions of dollars into the state’s tottering education system.

Billionaire attorney Molly Munger (heir to Berkshire Hathaway executive Charles Munger) complicated matters further when she poured millions of her own funds into an ad campaign for a separate tax-hike initiative. Proposition 38 had little chance of passing, but it threatened to split the vote of those who supported raising taxes. When Munger set aside $14 million to run attack ads against Prop 30 in the early autumn, Brown responded by urging every major newspaper board in the state to dissuade her from her slash-and-burn strategy. His tactic worked: faced with a barrage of criticism, Munger pulled her commercials with more than $7 million unspent. The “Yes on 30” campaign was also assisted by Brown’s appearance in a series of soothing infomercials touting the glories of the Californian dream and the sense of possibility that could be unleashed if the state’s schools were once again adequately funded. 

From then on, the polling stabilized in Prop 30’s favor. Brown and his campaign team became quietly confident that they had the vote in the bag.

* * *

SCN’s strategy and Brown’s gamble paid off on November 6, with great help from an extraordinary get-out-the-vote effort by public sector unions and activist groups. When the final numbers were tabulated, Prop 30 came in with approximately 55.3 percent support—1.5 percent more than Brown received when he won the governorship in 2010. It was a majority built largely of the same demographic components as those that secured President Obama his re-election. 

For campus leaders at the California State University and UC systems, the result was a great relief. They had pushed the envelope to educate (though not to lobby) the campus community about Prop 30, helping fund student voter registration efforts; giving press conferences alongside Governor Brown on the impact of education cuts; personally endorsing the measure, as individuals rather than as campus spokespeople; and encouraging the UC Board of Regents, which is allowed to take stances on propositions, to endorse Prop 30. 

“We’re on the cusp of an important new coalition,” explains University of California president Mark Yudof, “where we’re all pulling our oars in the same direction—to protect the greatest public university system in the world. We see a path forward. If California can move in this direction, maybe other states can as well.”

Yudof doesn’t see the vote as a rubber stamp for lavish new outlays. Rather, he sees it as part of a package of reforms intended to give a once-vaunted educational system enough oxygen to keep it alive while leaders negotiate additional ways to raise money.

“Taxes are not nearly as taboo as the forces of the right have made them out to be,” argues Nicholas Johnson, vice president for state fiscal policy at the Washington-based Center on Budget and Policy Priorities. “The election made clear some of the possibilities to tell a more hopeful story about the future.”

In the end, Prop 30 was just one of a handful of Election Day victories in California that will help set the state on a more prosperous and sustainable course. Proposition 39, which closed a number of corporate tax loopholes and will likely provide the state with an additional $500 million to $1 billion annually, also received majority support. Several large municipalities passed their own temporary tax increases to keep services such as public libraries functioning. And voters delivered supermajorities to the Democrats in both the State Assembly and Senate, an outcome few pundits predicted—and one that could allow the party’s legislators to increase taxes, if needed to preserve vital public services, without a single GOP vote.

All of which should make Jerry Brown happy, perhaps even self-congratulatory. But that’s not how California’s quixotic governor does things. Sitting in his war room at the Sheraton Grand Hotel in downtown Sacramento, where his team had gathered to monitor the results on Election Night, Brown realized shortly before 11 pm that Prop 30 had won. He barely cracked a smile. Instead, he turned to Smith and Clegg and said, “Success is ephemeral. On to the next thing.” Smith laughs as he recalls the moment: “Whatever the opposite of a touchdown dance is, that was it.” 

One day later, asked to comment on the Democrats’ new supermajority, the governor responded with a Zen mantra: “Desires are endless; I vow to cut them down.” Clearly, the floodgates haven’t been opened by Proposition 30. In all likelihood, voters came out in favor of it only because they trusted Brown not to go on a spending binge. But the endless cuts to education have stopped, at least for now. And whatever Brown may say, that achievement is hardly ephemeral.

In “The US Chamber of Commerce's Multimillion-Dollar Attack Plan” (Sept. 17), Sasha Abramsky reported on the attempt of the largest US business lobby to push the nation further to the right.

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