Latest / Groundwork Policy / 2026 California Props 40, 3, and 1: What They Actually Do

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2026 California Props 40, 3, and 1: What They Actually Do · Groundwork Policy

• Sean Bhardwaj: Today we're talking about attacks on billionaires that could pass and still never take effect. James Joyce III: Why a measure that won't change anyone's taxes until 2031 has 40 eight million dollars behind it. Sean Bhardwaj: And an $11 billion housing bond that no one has filed a single argument against. This is Groundwork, the podcast where we take what's being decided at the local, regional, and state levels and tell you what it actually does to you, your business, and your community. And most importantly, what you can do about it. I'm Sean Bhardwaj. I work with business owners and leaders, so I read every policy the way they would. What will this do to my organization? James Joyce III: And I'm James Joyce. I was a trained journalist and I've worked inside government for more than a decade, so I know some of the players and how the game gets played. We do the homework and follow the money, so you see what each choice gets you and will each tell you where we land. Where you land is your call. Sean Bhardwaj: Okay, so the ballots are in the mail, and today we're gonna continue on our rundown by taking on three measures that come down to who pays. Props 40 3 and 1 Let's start with Proposition 40. A one-time tax on California's billionaires, about 200 people. The wealth tax, as it's called, is 5% of everything they own paid over five years. And what would we do with all this money? Well, 90% of it would go to healthcare services for the public, and the rest would go to education, food assistance, and running the actual tax program. But it's got bigger implications, and that's in the nickname. James, for everyone who's only been taxed on a paycheck, what is a wealth tax? James Joyce III: Well, a wealth tax is on the assets that you own, your stocks, your company, even your art, whether you've sold any of it or not. an income tax is on your actual dollars that you've made that year. And so it matters here because most of a billionaire's fortune is in stock. They've never sold. So it's never shown up as income on their statements. that's why you might have heard some CEOs getting paid one dollar. Because they're in instead of compensation, they're getting paid in company stock with that's worth sometimes hundreds of thousands of dollars, if not millions of dollars. most Americans only have these kinds of assets as part of their 401k retirement accounts or some other investment accounts, if they have a savings. Sean Bhardwaj: Well, paying for healthcare by only spending the, dimes of 200 people sounds like an easy sell. So where's the pushback coming from? James Joyce III: Yes, Sean. Well, on this one, the yes side says that federal cuts are pulling healthcare money out of California, and the richest Californians who pay a little bit of tax on what they own outside of property should chip in to fill the gap, to keep hospitals open, help keep clinics open. the no side, the governor included on this one. Calls it a flawed one time tax scheme that could drive away the state's biggest taxpayers and costs more than it raises. But Sean, what I think this one's really about is an attempt to fill the gap left by last year's federal budget law. Both sides agree the federal cuts to California are real, and nobody against it argues that the healthcare money isn't needed. The split is whether money that comes one time can fill a gap that at least at this rate comes back every year. But for me, a question that still remains is who would get this tax bill? Sean Bhardwaj: So moving doesn't get anyone out of being part of this tax bill. It's owed by anyone who's lived in California on January first of this year, that has more than a billion dollars in assets counted on everything they own anywhere in the world. So even though we've heard of some high profile folks leaving, if they had a residence here at the beginning of the year, they would still be on the hook for this. The way to think about it is if you've ever owned a condo or been a part of an association, this is kind of like a special assessment, right? Let's say all the roofs need fixing. And so this would be the board billing the owners once. and in this instance, it's only the penthouses who would get the bill, and it's based on what each one is worth at the end of the year. James Joyce III: Okay, so that's somebody that has a billion dollars. I don't know if I know many of those folks, but what about a founder whose money is all up in her company? Sean Bhardwaj: That's a great question. Let's say we have a founder of a startup who is worth $1.2 billion on paper, but doesn't have any shares in the company they can sell. She'd be getting a $60 million bill. And the backers of this say, well, this can be put off until she sells the stock or the company pays out. But it's not quite certain how this is going to be enforced. Homes that people own are directly left out. and so are pensions and retirement accounts, which is really interesting because that is certainly a point of contention on certainly some of the other measures that we'll be looking at here in the next week or two. James Joyce III: if paying it off can be put off, how can anyone accurately estimate what the tax will raise? Sean Bhardwaj: Yeah, I don't think anyone can quite pin it down, the backers of the bill say this would be about a hundred billion dollars in new tax revenue. the legislative analyst says tens of billions of dollars over several years, but even they call it hard to predict. And that's where it starts to get tricky, who decides, James, what a billionaire's company is worth? James Joyce III: Yeah, that's a good question, Sean. the franchise tax board, the state's income tax agency, they're the ones who run that decision. for a private company, the owner can use the formula detailed within the measure, or they can bring a certified appraisal and the state can bring its own. So with that, just think about valuation of a company, a la Shark Tank. But passing isn't the same as taking effect. There's a Zelda trap on this one, isn't there? Sean Bhardwaj: There is, James. two other measures on this ballot, propositions 41 and 42 can cancel it. So if either one of those gets more yes votes than 40 the legislative analyst says 40 could be stopped from becoming law even if it gets yes votes from a majority of voters. James Joyce III: Hmm. So I'm thinking of this one kind of like a a hole in a piece of drywall, and California's healthcare budget is the that hole in the drywall in this case. You try to patch it up with a one-time blast of plaster, but the plaster is too wet. So it covers the hole temporarily, but eventually eats away at the edges of the original hole. Sean Bhardwaj: I think that's a good way to put it. So let's do our box score, which is something we do with every measure. We give it a number from one to ten, one being not at all, and ten being a perfect match for whether the label matches what's inside. It's not about whether this is the right tool for the job, we'll get to that later. But James, does prop 40 do what it says on the box? James Joyce III: Sure. but for me, it kind of leaves out a bit of the how, how to establish a valid and reliable process to assess the vastness of billionaires' wealth, the subjectivity of va valuing art, the extensive lengths that many billionaires go through currently to avoid taxes. It gets a five for me, maybe for those reasons. and it's it's more aimful than actual in my mind. How about you? What's your box score on this one? Sean Bhardwaj: Yeah, so as written, I'm actually going to give this one a nine. it does exactly what it says on the box. It's a tax on the wealth of billionaires, and there's no hidden mechanics behind it. It it seems pretty straightforward. but I think the question both of us are wrestling with here is is this going to be the best way to go about it? And so let's look at who's spending because it's a safe bet that the billionaires who are affected are obviously gonna be putting some money down. But who else is lining up on either side? James Joyce III: Well, you know, like I like to say, let's follow the money. as of October 1st, the yes side has about 32 million, nearly all of it from SEIU United Healthcare Workers West. that's the union that's also behind Prop 44 from our last episode. The main no committee has about seventy four million dollars, nearly all of it coming from the fund set up to fight this tax. the fund that has put about $148 million more into Prop 41 and 42 the two that can cancel out. This one. Are we dizzy yet? Sean Bhardwaj: Yeah, interestingly enough, counting 41 and 42, if we tally up the dollars behind it, The no side is spending seven dollars against proposition 40 for every one dollar that says yes. James Joyce III: Hmm. So this one creates a few odd bedfellows, right? The doctors and the clinics association are against a tax that pays for health care alongside the state's business chamber and the teachers union. I generally assume positive intent, so take the health groups at their word. nobody consulted them and that nothing in it lowers the cost of health care. Sean Bhardwaj: Yeah, and I can understand the doctors, the clinics, and businesses saying no, as some of their members might be impacted. but the strange one is the teachers union, as I don't know of any teachers who have made billions of dollars. any thoughts on why they're in the no camp? James Joyce III: Well, their stated reason is that Prop 40 goes around the school funding guarantee. Schools get about 40 percent of Prop 3's money and only part of the 10% here. My read is their bigger interest is Prop 3. We'll talk about that one next. That's the one with which they're sponsoring and paying for more than anyone else. And There may be a balance of resources and alliances that they're managing So Sean, what would the business impacts be if this one passes? Sean Bhardwaj: The first money arrives in 2027. And if you're one of the organizations that relies on state healthcare funding, like hospitals, clinics, and nursing homes, this would help relieve some of the federal cuts to that from recent years. And those cuts run about 30 billion a year, estimated. And as we talked about, this could bring in tens of billions of dollars once, but it would be spread out over several years. And so it's not going to fully relieve the need to make those cuts, but it would offset some. James Joyce III: Okay, so what about businesses that aren't in healthcare? Sean Bhardwaj: So if we think about businesses where their workers may rely on Medi-Cal, which is the state's health coverage for people with low incomes, losing that money potentially costs you twice, People are going to skip care and get sicker if they're not eligible for it. And then they'll end up somewhere that can't turn them away, like a hospital. And ultimately those costs shift to businesses and everyone else If we can't turn folks away, the healthcare spending is what the healthcare spending is. And so to balance the state budget and the county budget, Either other services or programs have to be cut to balance that, or taxes have to go up to fix the offset. In terms of executive compensation, also has interesting implications because it might mean that non-cash compensation might be less valuable in the future as this sets a precedent for taxing that. But, James, how do you see this playing out for individuals and communities? James Joyce III: Well, I mean, what's clear to me is this is essentially a reaction to fill a funding hole, not add new services. So this would offset things like in Santa Barbara County, for instance. there's been a move to have to close its pharmacies in Santa Maria and the city of Santa Barbara to save about eight million dollars a year to offset the federal cuts that are already in place. If you used either of those, you're now looking for new. possibly less convenient and even more expensive places to fill your your prescriptions. Sean Bhardwaj: Is a one time five percent tax on billionaires a good way to replace the healthcare money that California is losing to federal cuts? James Joyce III: like I said with my box score, this one is more aimful than actual. To be fair, last year's federal budget law cuts taxes, the biggest gains going to the highest earners. And its healthcare cuts covered part of that cost. So asking billionaires to fill the gap makes sense, but it still isn't the right tool. Sean, what did you decide? Sean Bhardwaj: Where I get stuck isn't necessarily how we're going to measure the wealth of these billionaires that is spread out all over the world. But the fact that this is a one-time tax as opposed to something that's recurring. When it's one time, to me it seems like a penalty. And I assume the expectation is that this is a stopgap measure until things maybe change at the federal level. But if we're going to do the work to figure out how to tax these folks and look at the real wealth and all of their holdings, then that seems like something that should be incorporated into our tax structure. For all wealth above a certain point rather than just as a one-off. And it might set either a precedent or provide a we did our part type of defense that stops more effective and long-term measures If the goal is replacing the healthcare money that's gone now every year, why not tax billionaires when they do things like borrow money against stock they haven't sold? And make it recurring so that the money comes in every year when the bills do, James Joyce III: Yeah, Sean, that's a great recommendation. And actually, that's the structure that our governor has pointed to as a national billionaires tax instead of Prop 40. presumably it's easier for a state to see what residents own at the end of a year than the loans that they take out against it throughout the year. according to local news reports, the governor spent months trying to get this measure pulled before the deadline. the union offered a two percent version as kind of a compromise. He turned that down and this proposal, the one that's before voters now, is the one that stayed My read is the union had one shot and went with a bigger number, the five percent. Sean Bhardwaj: Bottom lining it, a yes means that the state would collect a one-time tax from billionaires equal to 5% of their wealth, no matter where it's located 90% of it goes to healthcare, the rest to schools and food assistance. If Prop 41 or 42 get more yes votes, 40 could be stopped anyway. A no means the state would not collect the tax. Say it passes, how can people engage with it? James Joyce III: Well, with this, the franchise tax board gets six months to build a way to value what billionaires own. tell your assembly member, your state senator now which clinics and hospitals around here should be first in line to get this funding. Sean Bhardwaj: And if it doesn't pass. James Joyce III: Well, if it doesn't pass, the gap goes to the state budget, which by constitutional law requires to be passed by mid-June every year. And so that's your assembly member and your state senator. You want to go talk to them before that date and make sure that this money is preserved. around here, your county supervisor votes on what the health system cuts. like those two pharmacies at the county's next budget hearing might be a place to really make sure that your voice is heard on this Sean Bhardwaj: That covers prop 40. Next proposition 3 Prop 3 makes permanent the higher state income taxes California's top earners have paid since 2012. If this measure doesn't get approved, that expires in 2031. Now, these additional income tax rates for the state start at $371,000 of income for a single filer and about double that for a couple. So this is the top 2% of taxpayers. That 2% pays about half the state's income tax. These rates bring in anywhere from $5 billion to $15 billion a year. And that wide swing is actually because of the stock market. Roughly 40% goes to schools and community colleges. And in years where there's money left over, some of it goes to Medi-Cal. Nobody's bill is going to change for years, but the people behind this have still put $48 million. To support it. The school share runs through an older measure, Prop 98 James, can you tell us a little bit more about that and why it's connected here? James Joyce III: Sure. Prop 98 is the rule in the state constitution that voters approved in 1988. This rule sets the least the state has to spend on schools and community colleges each year. And when the state revenue goes up, that minimum goes up with it. That's why roughly 40% of this tax ends up in schools. Think of it as the school's floor in the state budget. A tax on top earners raises the state's revenue, and that raises the floor for every district around here, whether whether or not Anyone in town earns that much. Well, the the yes side says it isn't a new tax. It keeps the rates top earners already pay. They've been paying it for nearly 15 years. So schools and healthcare don't face billions in in cuts. The no side says voters were told twice that these taxes were temporary. And that California has a spending problem, not a revenue problem. My read on this one is it's really about that promise. Both sides agree on the numbers, nobody's rate changes now, and if it fails, the state loses billions a year from 2031 on. This would likely trigger cuts, and the split for this seems to be over what voters were promised when they called it temporary. And whether the state needs the money or needs to spend what it has better. So if nobody's tax bill moves for years, what does permanent actually mean in this? Sean Bhardwaj: Without Prop 3, the top rates all dropped down to 9.3%. Today, income over the line pays higher rates, and the top one is just over 12%. And these rates only hit the dollars above each line, not everything a person earns. The difference here is that we're going from a contract that has an end date to one that renews until someone cancels it. if this measure passed, canceling it would take another statewide vote. James Joyce III: So percentages, rates, that doesn't resonate real well with me. Put that in dollars for a business owner. Sean Bhardwaj: Let's say a couple owns a landscaping company and they do really well, they take home a million dollars a year through their personal tax return. If Prop 3 fails, they'd pay about $3,700 less in state tax after 2031. But let's say they do really, really well and their company made $2 million, it would be about $29,000 less. So it's not a material amount of money, but it's also not nothing. This is the flip side of where I got stuck on with Prop 40, because that only brought in the money once. This one does it every year, but the amount still swings really widely, from 5 billion to 15 billion. The reason from that is a lot of the income that would be taxed here is tied to the stock market. And so when it's a good year and the stock market's doing really well, there's more dollars to tax. But James, who gets to spend this and on what? James Joyce III: Yeah, good question, Sean. Let's go with the schools first. for schools, each school board, community college board, and charter school decides in a public meeting how that money gets spent. none of it can go to administrators' pay. It's audited every year, and the legislature can't redirect it. On healthcare, up to $2 billion a year of what's left over goes to Medi-Cal. It's the Formula Voters approved in 2016. For context here, the general fund runs nearly $250 billion a year for the state of California. About half of that goes to education, and then about a third to health and human services, that according to the LEO. One side calls this no new tax. The other side calls it the largest permanent income tax increase in the state's history. Who's right on that? Sean Bhardwaj: Depends on your point of view, right? Against what people pay today, nothing goes up. As the law is written, which ends those rates after 2030, it could keep up to 15 billion dollars a year that the state would otherwise lose. But if you consider that the tax in place is a temporary measure, then technically we are keeping a temporary increase in perpetuity. So both are right depending on where you start counting. James, does prop three do what it says on the box? James Joyce III: Sure, it does. And voters have already approved this tax as temporary twice since twenty twelve. for me, this one's a ten. it aims to make permanent a tax that voters have already approved and provides funding that vital services rely on, like education and healthcare. How about you? What's your number look like on this one? Sean Bhardwaj: To give this one a seven. And while I think it does do what it says on the box, because it is pretty straightforward, it's a tax, they're keeping it, all the mechanics are the same, it's well understood, it's been voted on twice. It is making permanent something that previously was billed as temporary. And that's a little bit of a shift in mechanics that I don't think people are fully connecting to. And it sets sort of an interesting precedent because it also means that. anything we vote on now that appears to be temporary or one time is actually maybe just setting a precedent for something that could be renewed in the future. I think switching things between those categories needs to be called out a little bit more, Let's look at who's paying for this one, and this is our callback to what we were talking about in Proposition 40 about the teachers union who seem to be gung ho. Who else is lining up to pay for this one? James Joyce III: For this one, as of October 1st, the yes side's biggest donors have put in at least $48 million. About $33 million of that is from the California Teachers Association, the CTA, the measure sponsor, and the same union that's against Prop 40. No committee against this measure has reached a million dollars. one report puts the no side at about $5,500, and nearly all of that came from a family business group. Sean Bhardwaj: James, what I can't get over is knowing that half of the California general fund, so a hundred and twenty five billion dollars, give or take, is for education related things. That seems massive. And what blows my mind even more is that that is more than we're spending on state healthcare. it's obvious that this is huge for schools because they get a lot of money for this. And because it's lasted so long, it's baked into their budgets, which is why they have more dollars behind this than anything else, And the people the union represents work in the schools that this money pays for. But why is no one spending against this? James Joyce III: Sure. The the state's business chamber took no position on three, and nobody's tax bill changes before twenty thirty one. So those may be some elements that that that contribute to that. What I see is the business group's money is going into Prop 40, 41, and 42. And this is the third time voters have seen these rates. Voters passed these rates as temporary back in 2012 as prop 30 then extended them in 2016 as prop 55 This time the teachers union. Gathered the signatures to make them a permanent tax. Sean, that family business money against this measure kind of caught my eye. What does this mean for a business owner around here? Sean Bhardwaj: Well, nothing changes until 2031, so there's time, but this vote is about the plan. And for most small business owners, your profits are gonna ultimately come through your personal return, which is true for most partnerships, S corporations, and LLCs. And this proposition decides whether those profits keep getting taxed at those higher rates we talked about. The no side says that rates like these push high earners and these types of businesses out of the state. But the researchers who studied the 2012 increase found that some top earners did leave, But economists still disagree on how many and what the total impact of this is. James Joyce III: And if you're nowhere near that income line? Sean Bhardwaj: This is about your customer's budget in that case. So the money goes down into our schools, and then they are going to spend it on a whole host of things. So if you are a vendor of said schools, whether that's for food or infrastructure or paper or supplies, all the different things that educational institutions use. This could affect your budget if it does not pass. The volatility of this also catches my eye because top earners' income relies a lot on the stock market and capital gains. When it's not so good or a down year, then there is less money that can be budgeted out of this. And so the districts and counties that are managing these schools have to make the cuts and try to manage that piece of it. From business standpoint, I like to look at predictability, and it's good that we're voting on something a few years in advance of any changes happening. What's interesting though is with the amount of variance baked into this, I'm not sure if organizations can effectively plan on its use or if they're just really hoping that this continues, because a five billion dollar shortfall is a non trivial amount of money. James, what would a family with kids in public school notice if this passed or if it failed to pass? James Joyce III: Sure, Sean. Let's just say your kids goes to school in Ventura. This past spring, the district cut more than 45 positions for next year. That's teachers, psychologists, custodians, all those cuts because there's fewer students or declining enrollment, the end of COVID money, rising costs, all these things are contributing to those cuts. This kind of thing challenges a district like Ventura Unified even more, considering they're also weighing closing schools because of this declining enrollment and various other pressures that we but mentioned just now. That happened with this tax in place. So if this tax ends after 2030, the state's schools minimum drops, The district's next budget starts from a smaller number. Sean Bhardwaj: Is making the top earners rates permanent a good way to give schools and maybe a little bit of healthcare funding that we're trying to replace? And is this something they can count on? James Joyce III: Well, this tax and funding source has been in place for almost fifteen years. My mind, if it ain't broken, don't fix it. As I see it, if I've been doing something for fifteen years already, it's not temporary. This measure just makes it officially permanent. Where does this leave you? Sean Bhardwaj: I think that is really the crux of it, right? It's taking something that was supposed to be temporary, ended up overstaying its welcome and and now becoming permanent. It's almost squatters' rights. it was allowed to to live rent-free and now now it's making a claim on the whole home. from a business standpoint, there is interesting considerations, Long term, it does benefit every business and every community to have a strong education system. Especially when we consider the industries of the future and where economic growth is coming from, it is high-skilled professions in lots of different fields, as well as the trades and a full stack economy. What I think is curious about this one is there is such volatility to the amount of funding. what I would question as the demographics of the state change is do we need to be spending the same amount or more on education, or do we need to be spending more on healthcare or housing or a whole host of other things? And so this is really applying that revenue to one very specific area, which decreases optionality. But I can certainly see the argument of strengthening this core institution that we all rely on. James Joyce III: Well, Sean, you know how that saying goes, an ounce of prevention is worth a pound of of medicine. And so I know that a lot of the elected officials, really subscribe to that mindset of putting the money upfront in something preventive like education, creating that foundation to have longer term benefits down the line Sean Bhardwaj: If the goal is funding that schools can count on, though, why not just extend it for twelve more years the way that voters did it in 2016 so that schools get a longer runway and voters still get a check-in? James Joyce III: Sure, that seems logical. But within this, the measure itself answers part of that. It calls this money a foundational part of the state budget and the state's rainy day fund. a deadline makes every district plan around this potential for a cliff fall off as far as their budget. And every time they have to renew a measure like this, that's a whole nother campaign. Sean Bhardwaj: A yes on Prop 3 means higher income taxes on high earners that have been in place since 2012 will become permanent instead of expiring in 2031. Roughly 40% of that money goes to schools and community colleges. A no means those rates expire in 2031, And the state would collect five billion to fifteen billion dollars less each year from then on. Let's say this passes. Where can people weigh in, James? James Joyce III: Every year at your school board and your community college board in the public meeting, that's where they decide how this money is going to be spent. this replaces state aid inside the local control funding formula. That's what determines how much money is spent on each individual student. And so this is replacing that dollar for dollar. So school boards vote decides how the money they are already counting on gets spent. In Sacramento, the yearly budget. sets the school minimum. So your assembly member and your state senator, once again, are the same folks as in Prop 40. You want to go make sure that they they know who you are and they know where you stand on these issues. Sean Bhardwaj: What if voters let it expire? James Joyce III: Well, nothing in nothing on this changes until 2031 So the question moves to the next few state budget cycles and maybe another ballot measure. your school board would have to plan around a smaller number. So it's budget meetings are the room to be in. When the schools are talking about their budget, you wanna make sure that you're there listening and providing public comment. Sean Bhardwaj: That covers prop 3 Next up, prop 1 Prop 1 lets the state borrow $11.25 billion for housing. Most of it goes to low interest loans to build and fix up apartments for low income renters, which have to stay affordable for 55 years. The rest includes help for first-time buyers, home loans for veterans, and housing for farm workers and students. The state's main budget repays $10 billion of it, and veterans' own mortgage payments cover the rest. Ventura County looked at a housing bond of its own in 2024 and shelved it. Its polling fell short of the two-thirds a local bond needs. But a statewide bond needs a simple majority. James, what does it mean when the state borrows like this? James Joyce III: It's a loan the whole state takes out. What the ballot calls a general obligation bond, the state borrows the money now and pays it back with interest out of its main budget, the same budget that pays for schools and health care. On this one, the payment runs about twenty-five years. So nobody's taxes go up to pay for this. The payments compete with everything else in that budget instead. Sean Bhardwaj: Maybe that's why no one has even filed an argument against this one. Does it have any opponents at all? James Joyce III: Well, on this, the yes side says it builds homes for veterans, seniors, people with disabilities, and working families with strict accountability to no new taxes. The no side, a handful of state legislators and a taxpayer association, says the state shouldn't borrow and pay interest when it could spend from its own budget. That money doesn't fix why housing's why housing costs so much to build. And that calling it a veterans bond kind of oversells it. But my read is it's really about whether money is what's stuck. Everybody agrees California doesn't have enough housing that people can afford. The split is whether subsidy money is the bottleneck, or if the rules and costs that make each home so expensive, or whether to borrow to find out. Help me picture what $11 billion is. What does it actually do and where does it actually go? Sean Bhardwaj: About $7 billion of this is going to go to low-interest loans for affordable apartments through programs the state already runs. And a builder of those apartments would stack it up with other public money. So for projects waiting on that final funding, this is the last piece and not the whole thing, Let's say a nonprofit builder in Oxnard has 60 apartments approved. And most of their financing is in place, but they're still a few million dollars short. This would be the money that fills that last gap and gets it into a groundbreaking. James Joyce III: And so we're paying for that over twenty five years. What does that cost for us? Sean Bhardwaj: Well, it works like a mortgage. The state builds now and pays five hundred to six hundred million a year for it. After inflation, the legislative analyst says that this is gonna cost about fifteen percent more than if the state just paid for it up front out of the general fund. And here's sort of that interesting tie back to some of the other propositions, like Prop 3 Those payments are fixed for 25 years, and that is something that the state's gonna be on the hook for, no matter if it's a good year with a big budget or a bad year with a small budget. James, who picks which projects get the money? James Joyce III: Well, that falls mostly on the State Housing Department and the State Housing Finance Agency through programs that already exist. And they pr compete for those kind of projects. The main rental program gets about nine requests for every one that it can fund. The state's Veterans Department runs the veterans' loans, and the state has to publish every year a report on where that money went. So hearing all of that. And this is still billed as a veterans bond? What's that about? Sean Bhardwaj: Yeah, I think this is little bit tricky because veterans get about 11% of it, and that's the line that the opponents point to. That that piece pays for itself through the veterans' own loan payments, and the legislative analyst counts about 2,100 veterans among the home buyers it would help. With that, James, does prop 1 do what it says on the box? James Joyce III: Well, in the voters guide, it is a bond for quote housing affordability programs. I think that's accurate and what it aims to do. So I'd give this one an eight. Short of a ten, largely because of how the veterans' housing component is played up. Yes, veterans, but primarily working families and seniors. Over to you. What's your box score on this one? Sean Bhardwaj: I'm at a seven. What I like about this is that it really is focused on solving that last mile problem of projects that are stuck that already have momentum and just need a little bit more to get over the hump. I like how ambitious it is. I like that it's not raising taxes, and it's something that works as a straightforward mechanism where the state can budget and plan for it and repay it over a period of time. What I don't like is some of the marketing elements, as we just discussed. It does help veterans, but it's not just a veterans bond. And I think some of the deeper mechanics around which projects get chosen, how things are competitive, and if it actually is the sticking point that's preventing these things from getting across the finish line remains a little bit to be determined. So with no argument filed against it, I'm gonna bet that all of the money is on one side. Is that true? James Joyce III: For the most part, as of October 1 the the yes side has about six million The only opposition money anyone's reported is about seventy five hundred dollars. The biggest checks, one million dollars each, come from a short-term rental company, the Carpenters Union and the Fund Fighting the Billionaires tax. also on the list are the nonprofit and private builders who'd apply for this money. Sean Bhardwaj: That already sounds like some odd couples, James. Can you tell us a little bit more about em James Joyce III: yes, this one provides some odd coupling indeed. The Landlords Association is for it, alongside a civil rights group, and so is the state's business chamber for this. The builders and the carpenters who would get work out of this are also in favor of this measure. Sean Bhardwaj: So who put this one on the ballot? James Joyce III: The legislature did. The Senate passed it in January, and in June the Assembly passed it, the Senate agreed and the governor signed it, all by lopsided votes. The Senate's leader, whose district includes Santa Barbara and Ventura County, carried the final bill. In short, lawmakers wrote it and sent it to the voters for a decision. So Sean, if if that Oxnard building gets its last few million, what does an employer nearby get out of this? Sean Bhardwaj: First, the state has to sell the bonds and run funding rounds, and a project has to stack up different sources of money. And it takes nearly two years to get that funding lined up. But because it's working through agencies and programs already in place, there's a high likelihood we have a backlog of projects that we could just get through and working. The last housing bonds money took about five years to hand out. So I don't think anything is going to happen in 2027, but maybe it's possible that someone moves into one of these apartments that are funded by this in 2028. It's important to remember that these apartments are for lower income renters. So the workers who qualify are the lower wage staff, like hotel, restaurant, and care workers. If a building opens near the businesses that need that type of work the most, It's going to actually help with the affordability for folks to live there, work there, and people staying longer, being a part of that community and commuting a lot less, which I think has a lot of knock-on benefits to tax revenue and sales revenue and makes those businesses more viable. James Joyce III: Sean, help contextualize this for me a little bit. How many homes are we talking about? Sean Bhardwaj: Yeah, so the legislative analyst says up to 40,000 rental apartments, and it also helps up to 40,000 households buy a home. California builds about 100,000 homes in most years, mostly with private money, so this moves the affordable end far more than the market as a whole. Having this money fixes one part of the problem. developing real estate is very complex, especially for projects that are required to look for this type of public funding. One project in Modesto actually went through 13 funding applications before it could build. Going through all of those rounds adds additional time and potentially cost to a given project. So while having more money in the system is good. It doesn't eliminate the need for us to look at the process as a whole, the regulations around it, and what's holding it up besides just the final bit of money to allow people to actually rent. But speaking of, what if you are one of the folks that is doing that renting? How would this affect you? James Joyce III: Let's just say you're working as a home health aid in Ventura or some position where you're paying half of your paycheck in rent. If a prop 1 building opens up near you, you can apply and the rent will be held down for those low income households. But with these kinds of programs, more people qualify than there are apartments available. So there's usually a wait list. And the first thing that you'll notice on any project like this is a sign on a construction fence, probably years from now Sean Bhardwaj: So what's good about this for local cities? James Joyce III: Well, one, it isn't a local tax. the state pays the bond back. So some of the money is set aside for local governments, like matching grants for a city's own housing fund. Santa Barbara City Council voted unanimously to support this measure. That was after the city's lobbyists told them that the city's housing trust could apply for these grants. Sean Bhardwaj: James, this seems like a really good tool. The ability to borrow eleven billion dollars to get more affordable homes built for veterans, seniors, and working families, and do it without passing a new tax. James Joyce III: Yeah, I mean it's it's very human. It's it's how I'd have to do it if I wanted to build the units. and so to see that the the state government is looking to utilize that same process of getting a loan to be able to do the things it wants to do makes sense to me. Sean Bhardwaj: I think this is a great solution, especially because it doesn't raise taxes and it does seem to fix a known last mile problem to get the funding over the edge and get things built, which is ultimately what we want to do. Where I think it falls short a little bit is it does create a burden in the general fund that we taxpayers have to foot at some point in time, and it relies on the existing machinery. So where I start to wonder is is the existing machinery and are the programs and the agencies administering this the most efficient they can be? And are there programs that stop local development that we need to figure out and work through before implementing something like this? If the goal is more affordable homes, you know, why not maybe put some more, I guess stick with the carrot? Why not require like every city that wants this money to maybe waive its own fees on those projects or fast track things so that each of these bond dollars would build more? James Joyce III: Well, a lot of that is logistics and technicalities, right? The cities use those fees to pay for the streets, pipes, parks, new buildings, different things of that nature. And so my read is a waiver comes directly out of those budgets. Sean Bhardwaj: So boiling it down, a yes means the state could borrow $11.25 billion for affordable housing and veterans home loans. The state budget would repay $10 billion of it, and veterans loan payments cover the rest. The payments are estimated between $500 and $600 million a year for 25 years. A no means the state could not borrow the money. Once it's approved, when's the window to have a say, James? James Joyce III: Before the money goes out. The State Housing Department writes the rules for each program, and your city council and your housing authority decide which programs to put it in. So ask them now which ones they'd submit. Sean Bhardwaj: And if it fails. James Joyce III: The last bond's money ran out in 2023. So the state's main affordable housing programs stay short. And the next bond has to go back through the legislature for a future ballot. That's the same assembly member and state senator that we've talked about in the past to make sure that you're knocking on their door Locally, it's your city council and its housing fund when the council sets its budget. Sean Bhardwaj: That covers prop 1 and that's our episode. James Joyce III: Next time, three measures about how we vote and who gets to raise taxes. Prop 39 would require ID to vote. Prop 5 changes who takes over when a statewide official gets recalled and Prop 43 makes it harder to pass local taxes. Sean Bhardwaj: Remember to subscribe wherever you're listening so the next one is in your feed as soon as it comes out. Groundwork is a podcast from Common Ground Policy and Public Affairs. The rest of the week, we do this work for businesses and organizations, telling them what's coming at the local, regional, and state levels, what it means, and helping them decide what to do about it and seeing it through with them. James Joyce III: If you like this, send it to someone you know who needs help filling out their ballot this year. Also, if you have different ideas, questions, or something we didn't get to, tell us in the comments. And if your organization needs support with policy and public affairs, reach out to us at hello at commonground PPA dot com and let's talk.