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Another $1.5 billion will go toward paying for welfare, Medicaid and other programs borne by the state's 58 counties. Thus fears that poor people would suffer drastically may not materialize. The legislature did decree, however, that there be no increase in welfare payments unless public employees also get a pay hike. Brown has already asked for a freeze on state salaries. Since it would seem to be political suicide for lower-level officials to vote increases for themselves at a time when the taxpayers are screaming so loudly for less spending, welfare payments probably will be frozen.
Most of the remaining rescue money, about $1 billion, will be reserved for emergency loans to local governments with special problems. Many local units, for example, commonly borrow from banks while awaiting anticipated property tax revenue. But with the property tax knocked down by 57% as a result of Proposition 13, banks now are understandably unwilling to make such loans.
Clearly, the initial effect of Proposition 13 will not be as draconian as some bureaucrats had predicted. But that is only because state revenues have been high, a condition that could change quickly. The slightest business recession could make a similar state bailout of local governments impossible next year. On the other hand, by relieving taxpayers, Proposition 13 could well stimulate enough business growth to generate added tax revenues.
Apartment dwellers in three large complexes near San Francisco may reap a dividend from the tax cut: their landlords have promised to reduce rents. To pass along his tax savings, one apartment-house owner pledged to lower rents $30 a month for 1,000 tenants. San Jose Businessman Larry Whitaker, president of Halcyon Communications, Inc., said he would prorate his own $18,921 property tax cut among his 150 California employees. The Bank of San Pedro knocked ¼% off its consumer loan rate in a similar move to distribute its tax benefits.
Despite such calming gestures, a residue of bitterness persists in the wake of Proposition 13's passage. The city council in Livermore (pop. 54,400) has taken a defiant stand, vowing to spend $320,000 on new council chambers even while threatening to fire a fourth of the city's 207 employees. "There might never be that much money on hand again for years," explains Assistant City Manager Edward Shilling.
From their besieged bastions, public officials sometimes glowered out at the taxpayers. "The public is ugly, the citizens are mean," declared Los Angeles County Supervisor Kenneth Hahn. Despite the one-shot relief from the state, countless local officials remained fearful about the long-range effect. As Committee Chairman Rodda quipped, "Having rescued the state from chaos, the legislature can now proceed to address the problem of total confusion."