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Paradise Lost: California's Experience, America's Future

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"Paradise Lost" is about California governance, but it has national implications and should not be dismissed as a regional book. The topic is governance by ballot initiative, and the impact of perhaps the most influential ballot initiative of them all, Proposition 13.

Prop 13 was enacted in 1979 ostensibly to cap property taxes in California. The campaign for its passage was bankrolled by some eccentric conservative millionaires, and California has been trying to cope ever since its passage. Schrag's book exposes how the seemingly good idea was packaged and sold to a gullible public, how education and human service have suffered ever since, and how the state's tax system has become a Frankenstein Monster favoring long-term wealthy residents and strip malls over more mobile Californians and manufacturing firms.

The strength of this book is its in-depth analysis of the history and impact of Prop 13. The focus on this one initiative is so great that the book is almost about it and not the mechanism by which it became law (the ballot initiative). But this approach is justified to illustrate Schrag's main point, that ballot initiatives are deceptive and make bad laws.

An excellent compliment to this book is David Broder's "Democracy Derailed," which focuses more on the degree to which the ballot initiative industry has become dominated by monied interests. Together, these books paint a bleak picture of states, especially California, where so-called "direct democracy" is a regular part of governance.

This particular form of governance is actually popular because it conveys the illusion of voter-control. Most Californians would never dream of eliminating the initiative option, despite the imposing cost of putting a measure on the ballot, the prohibitive length of ballots crammed with several (sometimes scores) of complicated, sometimes competing initiatives, or the confusing tactics by which individual measures are advocated or opposed. "Paradise Lost" will probably get more angry responses than converts from the Golden State, but it should serve as a cautionary tale for the rest of us.

The only flaw to this book is that the transition between the general discussion and the case of Prop 13 is clunky. More examples should have been explored in the general discussion, and the mechanisms of the procedure should have been better explained. The implication that the means are not justified by the ends would leave James Madison wanting for a more principled defense of the representative government alternative.

But on the whole, "Paradise Lost" is a strong contribution to a dialogue with few too participants.

Summary:
Because of cuts in property taxes and a reluctance by older, wealthier, white home owning Californians to pay for services they don't personally use; public services in California are underfunded. These public services are used by ethnic minorities whose population has mushroomed in the past thirty years. These minorities are not represented at the voting polls. The polls are dominated by the older, wealthier, white voters who strive to reduce their taxes. The split between the demographic profile of the voters and the users of services is a challenge to California's state finances.

Abstract:
The main themes:
1) Tax revolt;
2) Demographic forces behind tax revolt; and
3) Anti government Prop movement.

Tax Revolt.
The California public sector went from being the Nation's envy in the sixties to becoming among the sorriest in the nineties. In the sixties, California ranked among the top state in per capita spending on schools, universities, and infrastructure. Now, California ranks near the bottom on all counts. This shift was due to the tax revolt started in 1978 by Prop 13.

The passage of key propositions caused budget constraints. Prop 13 in 1978 reduced property taxes by 60%. It shrank cities revenues by 27%, counties by 40%, school districts by 46%. Prop 13 also limited the ability of local governments to raise funds. Any parcel tax to service new bond issuance to fund local services has to be approved by 2/3 of voters. Ever since California schools have been underfunded. The Gann's spending limit, Prop 4, passed in 1979 limited the growth in state and local spending to the % increase in population + inflation. But, school enrollment and inmate counts were rising faster than the general population. Prop 13 & 4 resulted in cuts in K-12 spending. Prop 98 passed in 1988, was to shore up school spending. It guarantees that K-14 spending be equal to 40% of the General Fund. But, a decade later school funding as a % of General Fund was lower than it was before Prop 98. Prop 98 became a cap for school funding.

These propositions caused a shift away from direct taxation towards fees. New fees have been raised on real estate development, business licenses, utility services. Fees on real estate development represent up to $60,000 per home! With the passage of Prop 218 in 1996, this access to local revenues was curtailed. Prop 218 dictates that no local tax, or fee will be imposed without a vote of the affected citizen.

Another impact of Prop 13 is the "fiscalization of land." Land zoning became driven towards shopping centers which generate sales tax. This fiscalization of land resulted in a slow growth of the housing stock.

Demographic factors behind Tax Revolt.
Demographic shifts have caused a disconnect between voters and the users of public services. Between the 70s and the 90s, whites decreased from 78% to 52% of the population. Meanwhile, non-Whites grew from 22% to 48% of the population due to migration from Mexico, Central America, and the Far East. The non-Whites are the users of public services. In the K-12, you have a growing multi-ethnic population. In the community colleges, Latinos dominate. In the UC system, Asians dominate. In prisons, Blacks dominate. Medicaid recipients are mainly Latinos. These non-Whites users of public services are young, low income, renters.

However, 78% of the voters are White. They are older, high income, homeowners. Also, parents with children in school decreased from 42% of the electorate in 1977 to only 21% in 1997. The different profile of voters and public service users is the demographic force fueling the tax revolt.

Anti government movement.
The Proposition movement has rendered the California government so much harder to run. Prop 140 in 1990 set term limits at the State level. Members of the Assembly are limited to three two year terms (six years total). State senators are limited to two four year terms (eight years total). Thus, legislators have little experience running a complex State government. Thus, power has shifted from legislators to bureaucrats and lobbyists not affected by term limits. Prop 223 passed in 1998 set term limits at the Federal level. Thus, California congressmen are limited to three to year terms (six years total), and California senators are limited to two six year terms (12 years total). This puts California at a disadvantage relative to other State regarding allocation of Federal funds.

California has increasingly more propositions on its ballots. And, more of them are deemed unconstitutional, and become stuck in courts. There is no review process insuring that props are legally sound before they go on ballots.

In the early nineties, the Constitution Revision Commission was an effort to render the state constitution functional again. It made excellent recommendations: extending term limits, eliminating the 2/3 majority to pass local bonds, and increase property tax on businesses. The legislature dismissed all recommendations.

My one rebuttal.
The author represents that California's overall tax burden is less than average. But, I compared the tax structure of the eight States with population greater than 10 millions. As of 2001, within this group, California had the highest individual income tax rate. It had the third highest corporate income tax rate and sales tax rate. It is only in property tax that it ranked below average at 6th among the eight. If we looked not at tax rates, but instead tax dollars, you'd have to bet that California's property tax would be closer to the top. This is because California homes are more expensive. A big surprise, California tax rates are much higher than in New York state in all categories. Also, all of the above does not include any comparisons of "fees" were California has to lead the nation.

In this book, Peter Schrag explores the forces that made California the "promised land" of the American postwar era, and the forces responsible for its decline. Schrag spends much time discussing the initiative process and is critical of these attempts to bypass legislative decision-making in favor of direct voting on proposals. While initiatives sound good in theory, they can have unintentional negative consequences. One of the initiatives Schrag spends much time on is the disastrous yet popular Proposition 13, passed in 1978. Schrag's discussion of the initiative, its backers Jarvis and Gann, and its unintended consequences are the best I've seen anywhere. It is a classic case of a proposal that seemed to be sincere (property tax reduction) in its aims, but it was utterly disastrous for the state. The education system was once one of the best, now it is one of the worst in the country. Libraries have closed because of lack of funding. California has now become "Mississippified" as a result of the lack of information and forethought of the voters.

This is an indispensable book and a warning to people in other states to avoid making the same mistakes California voters did.

Schrag's presentation goes far beyond an analysis of the dynamics of the initiative process, though his comments in that area are interesting enough. Schrag, however, points to deeper, and more ominous elements in the stew. One of his key points would be difficult to dispute: the voters in California (generally white, older) have a different make-up than the residents of California (increasingly people of color). Another of key points, that underlying the initiative process (and its concommitant erosion or avoidance of the republican form of government) is an incipient racist underpinning (see code word immigration) may be subject to question, but is certainly a welcome addition to the California discussion. One of the intriguing aspects of the book is its use of footnotes to carry the discussion. The real question isn't whether his discussion is well "documented," but rather how sound are the conclusions presented. A good read.

This book is an absolute Must anyone involved in any capacity who participates in developing or implementing public policy. It very much applies to California, but, there is certainly an abundance of "food for thought" for the rest of the Country as well . . .

Facinating compilation of facts and seemingly neutral analyis of same, very thought-provoking!

In the 1960's the Mamas and the Papas produced their biggest hit, "California Dreamin'," which talked of the sun, live-and-let-live attitude, and easy living of California. The state has since the late 1840's symbolized the possibilities of America being open to anyone. Think of the Gold Rush, Hollywood, and Silicon Valley...

But something happened. In the late 20th century California turned from a paradise to a purgatory, where people would spend some time before they could get out and go somewhere better. What changed? Peter Schrag has the answers: the state's easy plebiscite system (which allows for a form mob rule), a backward tax system, a full-time legislature (with term limits), and strong public employees unions have crippled the state and turned it from the paragon of the Land of Opportunity to a European-style crippled social state limping from one crisis to another.

Schrag explains in layman's terms how all this happened, with engaging prose and in depth (but not esoteric) analysis. Schrag isn't perfect in his analysis, however. He says, for example, that CA's state tax rates "aren't too high," without any support for the claim. (The hundreds of thousands of people who have moved out of CA within the past four years might beg to differ, as might businesses which have to deal with the highest costs of operating in the U.S.) But Schrag usually does analyses well enough, and his historical narrative is impeccable.

Whether you think California needs to hit the "reset" button, or whether you think the state is salvageable, you'll enjoy this book.

This book, written by Sacramento Bee columnist Peter Schrag, ends with the ascension of Gray Davis to the governorship of the state in 1998 and details the history of much of California's current political and social geography starting with the Progressive Era at the turn of the 20th Century to the Wilson Administration and the infamouse Proposition 187.

Schrag provides a cursory examination of California history leading up to WWII (Progressive Era excluded), but really gets going at the post World War II suburbanization of the state as ranch homes began plowing under the farmland in the San Fernando and San Gabriel Valleys of Southern California (according to Schrag, California gained 1,500 new residents a DAY in 1962).

This WWII boom, according to Schrag, lasted until the 1970's and came to a final end in 1978 with the passage of the notorious, and much maligned, Proposition 13. Up until this time, in a chapter titled "Golden Moment," California enjoyed the highest standard of living in the nation, with the best schools, smoothest highways, and affordable housing in comfortable suburban settings.

However, as the honeymoon came to an end, these same suburbanites woke up and found themselves faced with high property taxes and the burden of funding the social programs of an increasingly liberal federal and state government. What emerged was a genuine anti-government tax revolt that shook the halls of Sacramento as these suburbanites revolted and slashed property taxes and basically bankrupted local governments. The passage of Proposition 13 was a watershed event in California's history and is the portal from one era to another.

This slash in government revenue, and the subsequent retreat from the civic sphere, left California denuded and its government and public infrastructure in shambles. Schrag describes how school districts, highways and the environment suffered under the regimes of the Governors that these suburbanites sent to Sacramento (Deukmajian and Wilson), and how the California dream that greeted these newcomers in the heady days after WWII is about as real as the gold fields of El Dorado.

He devotes an entire chapter to Prop. 13 then the rest of the book to the decline of California. According to Schrag, who continuously writes his Sacramento Bee columns from a slanted liberal viewpoint, this decline is based, not on governments own inefficiency, but in its inability to spend more of its inhabitants money.

To his credit, this viewpoint is partially true. Prop. 13 effectively killed the discretionary spending powers of the state and local governents, and California is still trying to cope (recover is not the operative word because there is no cure to Prop. 13 in the near future) with the changes. Because it tilted the tax formulas in favor of sales tax, California has seens its beatiful countryside gobbled up by strip malls and big box retailers.

I encourage all Californians, and others interested in the destructive power of ballot initiatives, to read this book. If you are a liberal, you'll love it, if you are a conservative you'll need to grit your teeth and read this informative and thought provoking book. If you just want to learn more about California, then pick this book up. It provides the reader with a detailed and informative primer on why California looks and operates the way it does.

Clearly, the author's experience in covering Sacramento shines through in his comprehensive review of initiative politics. Unfortunately, the author has such an undying faith in elected officials, and such a disdain for direct democracy, that filtering his editorializing throughout the book becomes tiresome. The elitist theme of this book, essentially, is that ordinary citizens cannot be trusted with the power to legislate directly. Further, the author commits numerous slippery-slope fallacies, in which he attributes every ailment of California government to Prop. 13 and its legacy of populist initiatives. This may not be the author's fault completely, because, as an agent of the media for twenty years, he therefore has been an agent of the official government doctrine that Prop. 13, and not poor fiscal management, is the source of all money troubles. Of course, this is a loaded issue itself, because the author bases these arguments on the assumption that all state ! and local governments are on the edge of fiscal crisis. Thus, in order to accept the author's observations on initiative politics, we must first accept that 1) government doesn't have enough money, and 2) this is due to initiatives, when in fact the author offers little hard evidence to support either of these contentions. Throughout the book, anyone who uses the initiative process to effectuate a moderate-to-conservative cause, whether social or fiscal, is "against the government" or a racist, while other groups are fighting for worthy causes. Although the book provides some very valuable information and some insightful analysis, the bottom line is one of sour grapes. It seems that, if the intitiative process had been used to pass more liberal laws over the last twenty years, the author would be applauding---not lambasting---the initiative process.

I moved to Central California in the late 1990s and was particularly curious about the history of the latter half of the 20th century; i.e., the names and events that are still regularly tossed around as common knowledge by local commentators. Surprisingly, there are very few books giving a broad overview of California history and current events during this period. "Paradise Lost" happens to be one of these few books. Politically, I believe that I am largely in agreement with Schrag (that California built world-class infrastructure during the 1960s, and, because of the "tax revolt" of 1978 and subsequent political in-fighting, has allowed it to deteriorate to third-world status). However, as a practical matter, this book seems like 368 pages of quick dash-off. Since Schrag is a newspaper editor by training, his long, rambling, run-on sentences are surprising as well as frustrating to read. The book was of some value in familiarizing me with California's recent history/current events, but it is so poorly written and organized that it does a disservice both Schrag's thesis and his readers.