While the legislature has the authority to repeal the VLF, virtually all VLF revenues go to local government. Unless the legislature backfills local governments loss, the state s gain is local governments pain. The VLF provides approximately 10 percent of cities tax revenues and 25 percent of counties tax revenues. The property tax shifts of 1992 and 1993 are a major reason why the state currently has a surplus. In the absence of these shifts, the state would still be in a deficit position.
Backfill revenues provide less security to local government.
In 1986, the voters passed Proposition 47, constitutionally dedicating VLF revenues to cities and counties. The legislature can modify the distribution between cities and counties, but cannot divert the VLF to the state, to schools, or for other purposes. Even if the state provides a backfill out of the current surplus, many local governments fear the state would take it back in the event of a future state shortfall, whereas VLF revenues must be distributed to cities and counties. Sending money to Washington . Taxpayers that itemize deductions can deduct VLF for federal income tax purposes.