Will Federal Assistance to California Be Affected by Proposition 13?

In June 1978, California taxpayers overwhelmingly approved a constitutional amendment to limit state and local taxation. Proposition 13 limits realty taxes to 1 percent of market value after July 1, l978, limits assessment increases to 2-percent annually, and bases current property values on assessments as of March 1, 1975. Property tax revenues of local governments will decline by an estimated $7 billion annually as a result of Proposition 13. To offset this revenue loss, the State will distribute $4.1 billion from its accumulated surplus during the fiscal year beginning July 1, 1978. Passage of Proposition 13 aroused concern that California may lose federal grant funds due to the effect of state and local spending reductions on compliance with matching and maintenance of effort requirements.