SACRAMENTO — A November ballot initiative to raise property taxes on big-business owners in California is drawing unconventional political support from health care power players and public health leaders.
They see Proposition 15 as a potential savior for chronically underfunded local health departments struggling to respond to the worst public health crisis in more than a century. The initiative would change California’s property tax system to tax some commercial properties higher than residential properties, which backers say could generate billions to help local governments pay for critical public health infrastructure and staffing.
Without such additional state or federal funding, local governments could be forced to make deeper budget cuts in health and other departments next year as the COVID-19 pandemic continues to strain city and county finances.
“When you’re talking about health care, you’re talking about money,” said Anthony Wright, executive director of Health Access California, a Sacramento-based consumer advocacy group. “This is the major revenue measure on the ballot this year, and it’s an opportunity to fund public health at the place where the main responsibility for public health lies — at the county level.”
At least that’s how health care advocates are casting the tax hike. But there’s no guarantee that if the measure passes counties would use new revenue to address COVID-19 or other health care needs. And some rural counties fear they would lose money if the ballot measure passes, which could undercut public health efforts.
Support within the health care and local government worlds is not unanimous. The powerful California Hospital Association opposes the measure because it would result in higher taxes on private and investor-owned hospitals, said spokesperson Jan Emerson-Shea. Nonprofit hospitals, including those run by Sutter Health, Kaiser Permanente and Dignity Health, are exempt from paying property taxes despite their regular high revenue. They would remain exempt under the initiative. (KHN, which produces California Healthline, is not affiliated with Kaiser Permanente.)
“This new tax will mean millions of dollars will be taken away from patient care, in perpetuity,” Emerson-Shea said.
Proposition 15 would amend California’s landmark 1978 property tax initiative, Proposition 13, which capped commercial and residential property tax rates at 1% of assessed value at the time of purchase, and limited annual increases thereafter to 2%. The drop in property taxes as a result of the initiative decimated a major revenue source for public schools and social welfare programs, leaving many underfunded.
Voters are now being asked to allow higher taxes for business owners with commercial holdings valued at more than $3 million. If passed, the measure could generate up to $11.5 billion a year, according to the nonpartisan state Legislative Analyst’s Office. It would not apply to residential properties.
Forty percent of annual revenue would be distributed to K-12 schools and community colleges, with 60% sent to cities and counties. Nothing in the measure would require new local revenue to be spent on health care, but supporters say it’s their best hope after losing $134 million in state public health money this year as one-time funding for specific programs expired. At the same time, slammed by a projected $54 billion deficit, Gov. Gavin Newsom and state lawmakers declined this year to increase funding for local health departments to combat COVID-19 and rebuild public health infrastructure.
Sponsors of Proposition 15, including the California Teachers Association and the Service Employees International Union California, argue it’s an overdue change that would tax wealthier enterprises in exchange for funding vital school and health care programs. They point out that the initiative, supported by Newsom and Democratic presidential nominee Joe Biden, would require schools and local governments to disclose all new revenue they receive and how money is spent.
If passed, money from the measure would begin flowing to schools and counties in 2022 at the earliest.
Opponents of the measure, including the California Chamber of Commerce, the California Republican Party and the Howard Jarvis Taxpayers Association, say hiking taxes on commercial property owners would harm struggling businesses hit hard by COVID-related closures.
“This is being pushed as a panacea cure-all, but at the end of the day, there is no accountability for where these funds go,” said Michael Bustamante, a spokesperson for the “No on Prop 15” campaign. “There are, without question, an infinite number of needs, but there is no specificity with what it can or can’t be spent on.”
Kat DeBurgh, executive director of the Health Officers Association of California, which represents the state’s 61 local health officers and has not taken a position on the initiative, said ongoing, unrestricted revenue could actually benefit counties by allowing them to spearhead public health programs that address local needs.
At present, counties are limited in what they can do with their public health dollars, she said. Most additional funding in recent years has largely been earmarked for specific programs or diseases, such as hepatitis C and HIV, and counties are not allowed to spend it on their COVID-19 response or other public health activities.
“Maybe your community’s highest priority is not something easily funded by one of these grants. Many rural areas in our state don’t have access to clean drinking water, for example,” DeBurgh said. “And our greatest demand — more public health workers — can’t be funded with grants or one-time money.”
Health care leaders also argue the initiative could help support community clinics and public hospitals that provide care for uninsured people, who have also suffered financially during the pandemic.
“What we’re really trying to avoid is having to balance the budget on the backs of people who need services,” said Jodi Hicks, president and CEO of Planned Parenthood Affiliates of California. “Our public health system has clear inequities that we need to address, and additional funding can help fill in the gaps at the county level.”
Hicks said Planned Parenthood, which provides sex education in California public schools, is supporting the initiative not only to improve public health, but also because she worries programs like sex education will be on the chopping block as the state experiences unprecedented job and economic losses.
“Those types of programs are the first to get cut when there’s not enough funding,” she said.
Small, rural counties could also lose funding, county assessors said.
While the initiative would likely raise taxes on large commercial property owners who have seen their land and property appreciate in value over the years, it would eliminate property taxes for other business assets, such as machinery and equipment, for the first $500,000 in value.
Counties that haven’t seen land values climb as high as those in coastal regions like the Bay Area may not collect more property taxes while also losing revenue from the tax cut on other business assets.
Chuck Leonhardt, the elected assessor for rural Plumas County, projects that his county could be one of the losers.
“This would take $90 million in assessed value from our tax roll at the beginning, and then I’d have to reassess 2,000 commercial properties,” he said. “Many of us rural counties don’t feel we’ll benefit from doing these reappraisals and my expectation is we could lose some money.”
Even among supporters in public health, some fear that any potential windfall for counties would be allocated based on the whims of local politics.
“Even though I support it, I am skeptical that this money will go to the public health programs and basic infrastructure we so desperately need because public health has no constituency,” said Bruce Pomer, a public health expert and chief lobbyist for the California Association of Public Health Laboratory Directors.
He pointed to Sacramento County, where the sheriff’s department received a larger share of the $181 million in federal COVID-19 relief money than the county public health department.
“I’m worried we’ll see the same thing we saw with Sacramento County,” Pomer said.
This story was produced by KFF Health News, which publishes California Healthline, an editorially independent service of the California Health Care Foundation.