Reimagining Revenue Measures by Centering Community Voices

Introduction

California’s convoluted system for raising revenue is not transparent, and confusing to the general public. Unless they closely follow wonky budgeting and legislative news, most people typically don’t learn about upcoming revenue measures until they receive the ballot on which they are asked to approve or reject a new tax or bond measure. By that point, the proposal has already undergone months or years of planning and refining behind closed doors, usually without any meaningful input from community-based organizations. This process inevitably leads to revenue measures that are inequitable in how they distribute burdens and benefits.

Revenue measures, such as an infrastructure bond or sales tax increase, are rare injections of investment into public goods. They usually take the form of “hard” infrastructure investments like roads, parks, and our energy system, though sometimes the money may be used to invest in “soft” — or community-based — infrastructure such as libraries or schools. They create jobs, increase access to opportunities, may radically change the look and feel of a neighborhood, and overall, impact the livability of our state. And as the impacts of the climate crisis become more severe, requiring expensive efforts to adapt and build resilience, revenue measures will be critical to our ability to cope.

Public infrastructure projects carry a long history of creating and reinforcing racial segregation in the United States. One of the clearest examples is the bulldozing of primarily Black neighborhoods to construct freeways around the country in the 1950s and ‘60s, which physically cut off communities from economic opportunity and accelerated white flight to the suburbs. The infrastructure projects are different now — these days, the proposal is more likely to be a new bike lane or a park than a highway — but the legacy of harmful public infrastructure makes it imperative that we center community voices in these investments.

“The legacy of harmful public infrastructure makes it imperative that we center community voices in these investments.”

 

Why does it matter to have community-based organizations involved in the early planning of revenue measures? First, these measures need voters and community buy-in. To win, revenue measures need to resonate with the public, and one way to do that is by demonstrating that they were created with community needs in mind, so that the money goes where it will do real good. Second, to have the greatest impact, revenue measures must be designed in a way that prioritizes the people and places that investment has historically bypassed — namely, the low-income communities of color who have borne the brunt of extraction and disinvestment in our state, and who will continue to suffer at the frontlines of the climate crisis unless we reimagine the revenue process. Part of the reimagining of revenue will mean shifting away from flat, regressive approaches to progressive measures that acknowledge the unfairness of our current system. Setting equity standards for revenue generation ensures that these policies benefit the communities with the greatest need.

In this paper, I will argue that community-based organizations and racial justice advocates must be involved in the early planning stages of revenue measures in order to make equity a reality in our state. The most widely-used approaches to revenue generation inherently tip the scales towards those who already possess power and privilege, and revolutionizing the process will require community voices to be at the forefront. I will also share an applied framework for equity called the Community Investment Standards that is designed to shift the process at a structural level. For the purposes of this paper, I will primarily refer to state and local bonds and taxes, rather than other types of revenue.

Background: The Equity Gap in Revenue

Revenue generation and fiscal policy may seem wonky and academic, but together these issues are actually at the root of the racial wealth gap in California.1 In 1978, voters approved Proposition 13, a deeply regressive piece of legislation that tied property taxes to a property’s purchase price and capped tax rates on residential and commercial properties at one percent.2 It also altered California’s tax system permanently, requiring that two-thirds of voters approve any new special taxes. With Prop. 13, California essentially created an enormous subsidy for wealthy (and mostly white) homeowners, along with their children and grandchildren who stand to inherit their generational wealth. Prop. 13 severely limited funding available to state and local governments, leading to more than forty years of underinvestment in public services and education, and continued barriers to homeownership for people of color.

As a result, the state is forced to rely on a piecemeal approach to revenue generation in order to make up the gaps caused by Prop. 13. Unfortunately, the options are limited. Personal income tax and a high sales tax make up the majority of California’s revenue; however, these leave us vulnerable to economic booms and busts without a steady revenue stream to pay for public services and infrastructure.3 People with the highest wealth may not necessarily have high incomes, but these revenue measures do not take wealth into account. Sales taxes are also inherently regressive, as low-income people spend a higher percentage of their income on goods and services than the wealthy. Redevelopment agencies made up some of the revenue gap for affordable housing, but Governor Brown dissolved them in 2012. Bonds are typically used for hard infrastructure projects, making it challenging to include and fund equity elements like community engagement. And progressive tax reform efforts in recent years have failed, both at the ballot box and in the legislature.

California’s widening inequality makes it more vital than ever to center equity in new revenue measures. Currently, there are very few standardized equity guardrails around how revenue is generated. Creating such guardrails will be critical for the future. 

The Greenlining Institute has worked for many years on improving equity in the Greenhouse Gas Reduction Fund (GGRF), which is funded by the state’s cap-and-trade auction program. The legislation that set the program in motion, the Global Warming Solutions Act of 2006, contained vague equity language but no concrete mechanism for producing equitable outcomes. This required advocates to go back to the legislature to build in concrete equity commitments through measures like SB 535 (De Leon, 2012) and AB 1550 (Gomez, 2016). Thanks to these efforts, the GGRF carves out 35 percent of its funds for communities disproportionately impacted by poverty and pollution, maintains high road equity guidelines, supports technical assistance and capacity building, and includes robust community engagement for some of its programs.4 As a result of those guardrails, GGRF programs have funded $4.5 billion in priority communities since its inception.5

“California’s widening inequality makes it more vital than ever to center equity in new revenue measures.”

While not perfect — and in need of improvement — the relative success of the GGRF programs has taken years of dedicated advocacy and partnership from equity organizations. It also remains precarious. It should be noted that GGRF money comes from a market-based mechanism that continues to allow corporate pollution in impacted communities; so, while the revenue has been used for good, its source remains problematic. Still, the GGRF is a critical funding source for climate equity, and we and our community-based partners take on annual budget fights to keep it alive. While the end result has been largely positive, building equity into the GGRF took a lot of work over many years. Imagine how much better off we would be if community-based organizations were at the table from the genesis of revenue programs like this one.

The Status Quo for Revenue Measures

It’s become increasingly clear that our needs, as a state and as a society, are changing. Wildfire season, which is now starting earlier and ending later, reminds us each year that the climate crisis is already happening. The COVID-19 pandemic pulled back the curtain on the extreme inequities disproportionately impacting low-income communities of color, from the racial wealth gap to the injustice of the service economy to the housing and eviction crisis. We desperately need new revenue to close the widening inequality in our economy.

Without community-based organizations at the table in the planning process, revenue measures tend to focus heavily on “hard” physical infrastructure rather than community-based, human priorities. On the federal stage, President Biden’s “Build Back Better” agenda has ignited a debate around what counts as infrastructure. We will need hard infrastructure like new transportation systems and a modernized energy grid to adapt to climate change. But we will also need investments into “soft” infrastructure like health care, affordable housing, education, and good jobs to remain resilient. Our understanding of infrastructure cannot be limited to physical assets if we want to seriously change our approach to community investment.

Large revenue sources like bonds or stimulus packages have enormous potential to enact transformative changes and projects, particularly for capital projects. However, they run a risk of exacerbating existing disparities or creating new ones because the funding is often untargeted, trickles down to communities, lacks accountability for communities that most need the investment, and may require approval from a voting bloc that doesn’t prioritize equity.

“We will need hard infrastructure like new transportation systems and a modernized energy grid to adapt to climate change. But we will also need investments into ‘soft’ infrastructure like health care, affordable housing, education, and good jobs to remain resilient.”

 

We watched this happen last year with SB 45 and AB 3256, two proposed bonds from 2020. If passed, the bonds would have generated as much as $6.9 billion for climate resilience projects. These measures tilted towards physical infrastructure and deep investments in natural resource protection, at the expense of important people-centered solutions that build community resilience. The proposed funding was deeply inequitable: an analysis of the bonds by the Gender Equity Policy Institute found that 92 percent of the jobs created would have gone to men, and the state’s whitest and most male regions would have received a disproportionate amount of funding compared to their share of the population.6  In contrast, the investments would have thrown urban and suburban areas under the bus, with an estimated 21 percent going to greater Los Angeles, where 45 percent of all Californians reside and where 67 percent of residents are people of color.

Neither of these revenue measures are likely to show up on the ballot, given the legislature’s recent passage of a $3.7 billion climate resilience budget. We and our partners fought for months to get climate equity priorities into the budget as an alternative to the proposed bonds, and we were able to secure funding for many of them. However, this process was nontransparent, lacked accountability, and was extremely inaccessible to community groups unless they already knew how to navigate the opaque budget process. It is hard to imagine our communities turning out to support a revenue measure in the future that is unmistakably missing the input of frontline organizations and advocates, and that fails to fund urgent community needs. With community-based organizations and racial justice leaders at the table from the very beginning of revenue discussions, we could ensure that funding at this scale is created in a way that communities closest to the problem have their needs met. Those groups would then have a stake in campaigning to pass the proposal.

Compare the resilience bonds with Portland, Oregon’s Portland Clean Energy Community Benefits Fund (PCEF), a groundbreaking revenue measure that taxes the largest national retail corporations to generate funding for clean energy homes and jobs in underserved communities. The fund is expected to raise between $44 and $61 million annually, and has already awarded $8.6 million directly to community organizations in its first round of funding.7 The PCEF was conceptualized and led by a coalition of frontline organizations who spent three years building deep relationships and rooting the campaign in racial justice. Importantly, the fund has strong equity guardrails in place, including a set of justice-centered guiding principles, a Steering Committee of community leaders, and explicit targeting of priority communities. It also won in a landslide, passing with 65 percent of Portland residents supporting the measure and demonstrating that the inclusion of community priorities is a pathway to win.8

“Community engagement is a slow but critical component of equitable policy; without meaningful engagement, we run a great risk of simply repeating the status quo of exclusion, lack of trust in government, and top-down decision making.”

Following the lead of the PCEF process, shifting our approach will take dedicated time, funding, and a willingness to shift power to community leaders in the planning stages of revenue measures. This engagement could take many forms, such as funding capacity building activities, transferring decision making power to a community coalition, and/or co-designing the measure with local organizations to ensure it addresses their needs. Community engagement is a slow but critical component of equitable policy; without meaningful engagement, we run a great risk of simply repeating the status quo of exclusion, lack of trust in government, and top-down decision making. An inclusive plan for community engagement — and the time to carry it out — must be built into the process in order to create an equitable revenue measure and win political support for it.

Government isn’t equipped to undo racial injustice by itself, but it does have the power to generate important resources. Community needs are expansive and don’t fit neatly into established funding siloes; if revenue planning continues to happen behind closed doors with a narrow focus on physical infrastructure, the risk of exacerbating racial disparities will grow. And without genuine inclusion of community-based organizations, ambitious funding measures won’t get the political support needed to pass. 

Reimagining Revenue with Equity

We propose that we replicate the following aspects of the Portland model to shape better revenue measures in California. The Portland example shows us that it is indeed possible to create a revenue measure that wins on equity. With a strong coalition of community-based organizations in the lead, PCEF addresses the climate crisis, creates multiple direct benefits for low-income communities of color, builds leadership and capacity in frontline neighborhoods, redistributes corporate wealth to communities harmed by structural racism, and has widespread community support.

To replicate a revenue measure like Portland’s, it will be important to put equity guardrails in place. Last year, The Greenlining Institute published a report called the Greenlined Economy Guidebook and a set of guardrails that we call the Community Investment Standards to guide investment projects. We see these standards as minimums for equity, and the pathway to reimagining how we raise revenue. When applied to a revenue measure, these standards can change government practices and hold the system accountable when it comes to racial equity. In this section, I will share examples of how each standard might be applied to a revenue measure.
 
Under Greenlining’s Community Investment Standards, all revenue measures should:

1.  Emphasize anti-racist solutions. Whether explicit (redlining) or implicit (Prop. 13), the race-based policies at the root of today’s inequality are too deep to fix without addressing race. Revenue measures need to develop a specific and narrow definition of disadvantaged communities, as well as a high minimum of funds — at least half — reserved for those places. This means targeting communities that have suffered most from historical discrimination, and consulting community-based organizations to determine what type of funding will have the greatest impact.

2.  Prioritize multi-sectoral approaches. Public funding tends to be heavily siloed. The issues facing communities of color, however, are not. Inequity is systemic and intersectional — meaning that the impacts of things like climate change, redlining, displacement, and other policy failures cannot be neatly separated. In low-income communities of color, different forms of injustice overlap and reinforce each other. Revenue measures that recognize and design for co-benefits will help dismantle the funding siloes that reinforce inequity.

3.  Deliver intentional benefits to communities. Bonds and other large revenue approaches are, by definition, top-down. In implementation, agencies should strive to avoid trickle-down benefits, and distribute revenue to communities directly as much as possible. Benefits should be defined by priority populations and be targeted as community-driven investments in specific places, not as spillover benefits from other regions. Changing how revenue is distributed will also require creativity in how financing is structured; for example, green infrastructure requires fewer up-front hard costs and more ongoing maintenance costs, so investments need a different approach than a traditional bond. Following this standard will make sure that new revenue impacts the communities that are closest to the problem.

4.  Build community capacity. Capacity building and technical assistance are often omitted from or considered ineligible uses for revenue measures. Revenue measures should not be limited to short-term projects or physical infrastructure, but used to fund programs and projects that build long-term resilience, wealth, and capacity. This is particularly important for addressing the climate crisis, where the communities with the lowest capacity and political capital tend to face the worst impacts.

5.  Be community-driven at every stage. While this paper details the need to involve community in the planning and development stages of revenue measures, it doesn’t end there. Community-based organizations should have leadership roles and decision-making power throughout the implementation and evaluation phases as well.

6.  Establish paths toward wealth building. Wealth in the United States is inextricably tied to the subsidization of white homeownership. Using revenue measures to reinvest into formerly redlined communities would give more people, particularly low-income and people of color, opportunities to participate in our economic system. Wealth also protects individuals and families, helping them stay resilient in the face of physical or economic disaster. Could we rethink traditional revenue measures as a form of reparations for communities of color?

Building the Community Investment Standards into standing policy for revenue measures will ensure that these investments don’t exacerbate racial disparities. We already have some blueprints for how that might work. Last year, Greenlining worked with Controller Betty Yee to develop AB 1099, which, if passed, would attach a set of equity principles to future bond measures. At the federal level, the to-be-implemented Justice40 Initiative will mandate equity standards for agency spending (though it remains to be seen how powerful these standards will be or how they will ensure accountability).

Conclusion

Creating a norm of community-driven revenue measures will be challenging, but the interlocking crises of climate change, racial inequity, economic injustice, the housing crisis, and more demand that we take a new approach. The status quo will only reinforce patterns of excluding community-based organizations from catalytic investments and deepen distrust in government. Unless we change how we raise revenue, we will end up widening racial disparities and denying critical social needs from frontline communities.

It’s time to accelerate our shift to a different economic system, and changing the way we approach investments in our communities must be at the forefront. The issues that demand funding are deeply embedded in the needs and struggles of communities -- in particular communities of color, immigrants and low-income neighborhoods. To address those needs in a way that truly advances equity and moves us toward a more just society requires that we think carefully about both how we raise revenue and where the money goes, and that we base those decisions on the real needs of impacted communities. We can no longer shut the voices of those communities out of the process. Instead, we should create opportunities for them to lead.

Editor's note: This paper was commissioned by the Blueprint for Belonging project, a collaborative initiative led by the Othering & Belonging Institute, in partnership with more than 50 civic and community-based organizations across California. The views and proposals expressed in the paper are the author’s, and do not necessarily reflect those of the Othering & Belonging Institute or UC Berkeley.