California came up against the spending limit for the first time in 1987, which led to rebates to California taxpayers. The chief area of enduring controversy about Proposition 13 concerns its effect on city and county government. Whether the sky has fallen on local government, as the Chicken Littles predicted, is still in dispute. An analysis of city and county budgets reveals that their budgets have continued to grow steadily since Proposition 13. The loss of property-tax revenue has been made up through a number of means.
State aid continues to be the single largest source of revenue for cities and counties.
Second, cities and counties moved to increase the use of fees and other special assessments to maintain service levels. What Proposition 13 did was force city and county governments to run much more efficiently. In the city of Los Angeles alone, the payroll today is 4,000 paychecks smaller than in 1978. But understand that with state financing comes state control. Liberals had long wanted the state to assume greater authority for local government because liberals have greater influence with state government than with the hundreds of local government units.