April 20, 2011
War by initiative
DURING JERRY BROWN’S first term in the 1970s his hair was still full and dark. His voice was not yet gravelly. Unlike his back-slapping father, he still bore traces of the Jesuit seminary where he had once studied to become a priest. He meditated on Zen koans. He declined the governor’s mansion and slept on a mattress in a rented flat. He dreamed of large things whose time had not yet come, such as green energy. And yet, or perhaps because of all this, Jerry Brown failed to notice the anger boiling over in his state.
Californians were angry about property taxes. These local taxes were the main revenue source for school districts, cities, counties and California’s many specialised municipal jurisdictions. And they had been rising. A homeowner’s property tax was determined by two factors. One was the tax rate, the other the assessed value of the house to which the rate was applied. These assessments were soaring: between 1972 and 1977 home prices in southern California more than doubled, thus doubling homeowners’ tax bills. Mr Brown and the legislature fiddled with relief measures, but their bills were half-hearted and the taxpayers were angry.
Into that anger stepped a man named Howard Jarvis. In personality he was the antithesis of Jerry Brown, which made for a photogenic contrast. He was a Utah newspaper publisher who had moved to California, attempted and failed to become a senator, tried his luck in Hollywood and now ran an association of property owners. He, too, was livid. “I’m Mad as Hell”, he later screamed in the title of his autobiography. Some posters showed him with a raised fist.
Jarvis decided to circumvent the legislature and take the matter directly to voters. In this sense, property taxes became the analogue to what the Southern Pacific Railroad had once been: the focus of popular anger, the obvious target on the next ballot, indeed a quintessential example of why the initiative process was necessary at all.
Proposition 13 changed political culture. Up to this point, the initiative process had been described as a “safety valve”. Now it became an industry and a circus
With a partner, Jarvis sponsored an initiative that would become known as Proposition 13. It cut the property-tax rate from an average of 2.6% to 1% in every county. It also capped the increase in assessed values to at most 2% a year, unless the property was sold. To prevent the resulting revenue loss from being made up with other charges, Proposition 13 also required two-thirds supermajorities in the legislature for any tax hike.
The opposition, which included much of the state’s elite in both parties, stood little chance. Mr Brown tried to make a cerebral case for an alternative initiative, but hardly anybody paid attention. On June 6th 1978 Californians went to the polls and, by a margin of almost two to one, approved Proposition 13.
The first and immediate consequence was relief for homeowners and a corresponding emergency for local governments as revenue from property taxes dropped by more than half. Almost overnight, it seemed as though cities would have to close parks and counties would have to deny their residents medical and welfare services. Schools would have to lay off teachers and eliminate summer programmes and advanced classes.
Mr Brown, meanwhile, performed a stunning U-turn. Having campaigned against Proposition 13, he suddenly decided to implement it zealously. Jarvis was so pleased that he endorsed Mr Brown, who was re-elected five months after Proposition 13 passed. The governor’s new nickname was “Jerry Jarvis”.
But cities, counties and schools were not going bust after all. The state had a budget surplus and decided to bail out local governments by passing to them roughly the amounts they had lost in property-tax revenues. The following year that one-off transfer turned into a permanent financing mechanism. Even the remaining property-tax revenues would henceforth be allocated by the legislature in Sacramento.
In effect, cities, counties and school districts thus lost their funding independence. Instead of local governments setting their own taxes, they became tentacles of the state octopus. The resulting flow of payments is notoriously opaque—and also ironic, given that Mr Jarvis and his supporters thought of themselves as small-government conservatives. A central tenet of American conservatism is to decentralise power. But one unintended consequence of Proposition 13 was “the centralisation of virtually all finance in Sacramento”, says Lenny Goldberg, director of the California Tax Reform Association.
Today this centralisation is one of the biggest differences between California and other states. Bruce Cain, at the University of California, Berkeley, and Roger Noll, at Stanford University, identify it as the “distinctively dysfunctional element”. California transfers about 71% of its state revenue to local governments. Because the money comes from the state, local administrators no longer have much incentive to spend it efficiently.
But Proposition 13 cast its shadow far beyond finance. It changed political culture. Up to this point, the initiative process had been described as a “safety valve”. Now it became an industry and a circus. Proposition 13 had made Mr Jarvis a celebrity. He graced magazine covers and made a cameo appearance in “Airplane”, a 1980 film. Hollywood types, Silicon Valley tycoons and other big egos took note and started their own initiatives.
So did James Madison’s “minority factions”, the special interests. The teachers’ union attacked from the left. The prison guards’ union charged from the right. From environmentalists and potheads to evangelical Christians and Indian tribes, from insurers to oil and tobacco companies, the initiatives poured forth. Ballot measures have amended the constitution to prohibit gill nets and to regulate how fowl are to be kept in coops. They have authorised faster trains and new hospitals, mandated ever tougher sentencing laws and governed DNA sampling and stem-cell research.
As the numbers of initiatives surged, the qualification process changed beyond recognition. Hiram Johnson and his Progressives had envisioned idealistic volunteers petitioning citizens for signatures and debating causes they believed in. But after Proposition 13, signature-gathering became an industry and access was determined by money.
An entrepreneur named Ed Koupal is usually credited with setting the precedents that circulators of petitions follow today. With his wife, Joyce, he developed the “table method” of signature-gathering. A group of paid professionals put the paperwork on a folding table in a mall or public plaza and then roam around the table, approaching passers-by. They do their best to avoid discussing the subject of the petition, instead ushering people to the table, where another team member pressures them into signing in conveyor-belt fashion.
Another tactic is the “clipboard method”. A signature-gatherer finds a slow-moving queue at a bus stop or cinema, then “works the line”, from which people cannot easily escape. The record is apparently held by a circulator who once gathered 700 signatures in one day by going through a queue for the Tutankhamun exhibition at the Los Angeles County Museum of Art.
That circulator gathered signatures for Kimball Petition Management, founded by Fred Kimball and considered the seed of the industry as it exists today. Rather than wait passively for clients (ie, sponsors who need the signatures to qualify their initiatives for the ballot), Mr Kimball came up with his own ideas for initiatives, then sought out someone rich to sponsor them.
As his son, also called Fred Kimball, explained to The Economist, the pricing for signatures today is based purely on market conditions. The circulators are independent contractors who work for several petition-management firms at the same time and often have four or more petitions simultaneously on their folding tables. They “sell me their signatures”, says Mr Kimball, and he in turn charges the sponsor a mark-up.
Early in the 150-day collection period, prices might start at 10 or 20 cents per signature. As the deadline approaches, they rise, perhaps to several dollars. Some sponsors bid more than others, and a hard-working and determined circulator can earn up to $50 an hour. Since paid circulators, unlike volunteers, are interested only in volume, not the underlying cause, the quality of the signatures is low. Many are illegible, incorrect or fake (some people sign “Mickey Mouse”). Then a verification process gets going.
Several states, including Colorado, Idaho and Nebraska, have tried to ban paid circulation and return to volunteer petitioning. But America’s Supreme Court overturned these efforts in 1988, arguing that they would violate free speech. In California the result has been to push up the cost of qualifying an initiative into the millions.
But even that is small change compared with the cost of the media campaign that ensues once a measure is on the ballot. Before Proposition 13 spending on initiatives was about $9m per election. A decade after Proposition 13 it was $127m, as opponents in each campaign blanketed the airwaves and filled mail boxes across the huge state with propaganda. The upshot, as Karen Bass, a former Democratic speaker of the state assembly, puts it, is that “any billionaire can change the state constitution. All he has to do is spend money and lie to people.”
The initiative culture as it exists in California today may thus resemble James Madison’s worst nightmare. Passions are inflamed rather than cooled. Confrontation replaces compromise as minority factions battle one another with rival initiatives. In 2009 Ronald George, at the time California’s chief justice, worried publicly about the effect on liberty: “Has the voter initiative now become the tool of the very types of special interests it was intended to control, and an impediment to the effective functioning of a true democratic process?”
As though to provide a historical bookend, even the Southern Pacific Railroad got into the game. In 1990—by which time it was just another special interest—it financed a successful initiative to issue $2 billion in bonds for expanding rail transport. Few Californians appreciated the irony of their one-time bogeyman co-opting the process invented as a defence against it.
[Professor’s note: The spelling in this article is English, not American. The Economist is one of the most respected journals of political news and commentary.]
Questions: What flaws would James Madison see in the institutions of direct democracy? Explain why the flaws in Federalist 10 might have encouraged the Progressives to advocate direct democracy as a cure for what ailed California.