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California State University, Sacramento

Posted: November 23, 1999

Study: Recession, State Tax Grab
Tougher on Some Counties than Others

Sacramento County was among 12 with least fiscal stress

Full Study

While all of California's counties struggled during the severe recession of the early 1990s, some fared worse than others, according to a recently released study by California State University, Sacramento professor Robert Wassmer.

The study shows some counties were forced to rely on higher fees, spend less on services or carry more debt than comparable counties. The disparities, Wassmer says, are due both to outdated state policy and decisions made by local boards of supervisors.

"It is widely accepted that the loss of local property tax revenue due to Proposition 13, and the state-imposed shift of local property tax revenue from counties to school districts in the early 1990s, generated fiscal stress in all of the state's counties," Wassmer says. "What I wanted to determine was if the degree of stress induced by these shocks differed by county. It clearly does."

County governments in California are responsible for providing local government services to unincorporated areas and providing health, welfare and recreation services for most county residents.

Wassmer's study, "County Fiscal Stress: Cause and Consequence in California after Proposition 13," examines each county's per-person spending; per-person fees, charges and discretionary taxes; and per-person long-term budget balances for each fiscal year between 1990 and 1995 (San Francisco was not considered because of its unique position in the state as a joint city-county).

Using statistical methods, the study compares these items to a hypothetical "average" comparable county in California with similar characteristics. If a county's expenditures were below average, or if it was asking its residents and businesses to pay more in fees, charges or discretionary local taxes than the comparable average, then the county was considered to be under fiscal stress. A county also was considered to be under fiscal stress if it ran a long-term budget deficit over the six-year period.

Wassmer classified each of California's 57 stand-alone counties as having experienced "high" or "extreme" fiscal stress if at least two of the possible three measures indicated stress. Ten of the 57 counties in the study fell under these classifications, while 35 counties experienced "some" relative fiscal stress - they had at least one of the measures of fiscal stress.

Sacramento County had no relative fiscal stress in the early 1990s - its expenditures per resident were exactly the comparable average, its fees were 2 percent lower and it had an average budget surplus of $35.12 per resident.

The "extreme" case of relative fiscal stress was Lake County. Its total average expenditure per resident was just 88 percent of the comparable average and it asked its citizens and businesses to pay 5 percent more in fees. At the same time, it ran an average yearly budget deficit of $37.88 per person.

Butte County, which at one time blamed Proposition 13 and other state actions for its pending bankruptcy, had an average long-term budget surplus of $4.43 per resident and it raised only 85 percent of the fees of the comparable average. Its expenditures were 95 percent of the comparable average.

At the other extreme in Wassmer's study are counties such as Mariposa County. Mariposa spent 16 percent above the comparable average and raised only 60 percent of the fees. The county had an average budget surplus of $31.39 per resident. There were 12 California counties in this enviable position of having no relative fiscal stress during the last recession.

Though Wassmer believes California should change the way local property taxes are distributed, his study also suggests the state demand a better effort from some counties to get their fiscal situation in order before making such changes.

"Counties need to accept the hand that the California voter and state has dealt to them and look to self-help measures to make things better. Before a county complains too loudly about its fiscal situation, it needs to look at what it has done to try and make it better," Wassmer says.

With California's recession well over, Wassmer says, California counties as a whole are now in much better shape.

But he warns, "Without significant changes in the way that local property tax revenue is distributed throughout the state, and help in financing the state-mandated programs in human services that counties must provide, the next recession will lead to another round of county fiscal stress." As the study shows, the pain will likely not be felt equally among California's counties.

Wassmer, who has recently testified before the California Legislature on this topic, hopes his work will have some influence on the various proposals on local fiscal reform now being discussed in Sacramento.

Wassmer is a professor of public policy and economics at CSUS. The study was completed with graduate student Charles Anders, and was partially funded through an Extramural Research Project contract from the Public Policy Institute of California, which is based in San Francisco.

More information, including county-by-county statistics and rankings, the full paper and contact information for Wassmer, is available by contacting the CSUS public affairs office at (916) 278-6156.


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