SACRAMENTO, CA - JANUARY 10: California Governor Jerry Brown speaks to reporters as he announces his proposed budget at the California State Capitol on January 10, 2011 in Sacramento, California. Governor Brown announced a balanced state budget that cuts spending by $12.5 billion and includes an eight to ten percent cut in take home pay for state employees and proposes a "vast and historic" restructuring of government operations. (Photo by Justin Sullivan/Getty Images)
The boldest and best idea in Gov. Jerry Brown's budget is his plan to eliminate redevelopment agencies and instead give local governments more power to raise taxes to pay for local economic development. This is exactly the kind of structural reform California needs -- making government more rational, more accountable and simpler by giving local communities the power to spend money and the responsibility to raise revenues as they see fit. That's how most states -- particularly the ones who have less profound fiscal problems than California -- set up their fiscal systems.
Not coincidentally, this is the piece of Brown's budget that will be most difficult to enact.
That's because the people who would benefit from this style of reform most -- local governments -- are the ones rising to oppose it. They say they will fight this proposal in the legislature, on the ballot and in the courts. (Here is an interesting look at the constitutional problems that could face this kind of reform -- take careful note of the fact that it is voters themselves that created the main obstacles to reform).
Why do locals oppose something that would enhance their power and responsibility? Because they like free lunches. And redevelopment agencies are, in a narrow way, such a lunch. They provide an easy way for politicians -- with money from the state -- to grab land and hand it over to developers (who not coincidentally fund local political campaigns). A system in which politicians themselves had to both spend money and to make the case for tax increases to fund economic development would require more work.
The Brown proposal, if enacted, also would require more accountability than the redevelopment system. There is little evidence that redevelopment agencies produce real economic growth, in part because local governments have little incentive to be careful about the decisions they make. But if local officials were the ones who had to ask for the tax increases for economic development projects, it stands to reason they'd ask better questions about projects -- and only push forward projects for which the benefits were very clear.
Brown's approach to redevelopment agencies should be the standard approach to all local services and revenues. Make the local government that spends the money on a program find a way to pay for it by setting tax rates. Common sense reform in that direction should be a no brainer. The fact that Brown's attempt to dip his toe in this water has drawn such quick and strong opposition shows just how profound California's problems are, and just how hard real reform will be.