Did Serrano Really Cause Proposition 13?

Abstract

In this article, we examine the relationship between Serrano v. Priest, the landmark school finance equalization decision of the California Supreme Court, and Proposition 13, the state's famous property tax revolt. As school finance litigation continues in several states, opponents of equalization schemes have argued that Serrano "caused" Proposition 13. Prior to Serrano, the argument goes, California's local public sector resembled a "Tiebout equilibrium" in that local property taxes approximated market prices. Serrano destroyed that equilibrium, giving voters new reason to oppose the property tax. This theory has been offered as an explanation for why voters swung from rejecting a property tax limitation in 1972 to embracing Prop 13 only six years later. We present new statistical and historical evidence challenging the connection between Serrano and Prop 13. Using multiple regression analysis, we demonstrate that Serrano had little actual effect on Prop 13 and that the swing from 1972 to 1978 is better explained by considering alternative explanatory variables. We also present original historical research regarding Serrano's effect on the legislature's ability to provide proprty tax relief. Our evidence casts doubt on the thesis that Serrano caused Prop 13 and reveals a more complicated story in which the institutional rigidities of the fiscal decisionmaking process precluded a rational response to the extraordinary housing inflation of the early 1970's.