Regressive Revenue Sourcing by Local Governments

With limits on revenue sources, such as property taxes and intergovernmental transfers, localities are increasingly turning to regressive and discriminatory non tax alternatives such as fines, fees, and forfeitures to fill their revenue gaps. This article assesses the extent to which municipalities in California are more dependent on these revenue sources, and if increased reliance is correlated with the cities’ ​​racial and ethnic composition. Using data from the California State Controller Office’s Cities Annual Reports from 2002 to 2016, results suggest revenue sourcing that perpetuates racial inequality and poverty. 

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Key Findings: 

• The average California city’s reliance on fines, fees, and forfeitures declined prior to the beginning of the Great Recession, but saw a sharp increase from 2008 to 2010.
• Cities with a relatively higher population of Black, Asian Pacific Islander or Latinx/Hispanic residents consistently saw higher reliance on revenue from fines, fees, and forfeitures. 
• The size of local sales taxes is statistically and positively associated with a city’s reliance on regressive fines, fees, and forfeitures.
• Localities with baseline low levels of Latinx/Hispanic residents disproportionately increased their reliance on fines, fees, and forfeitures compared to cities with already large Latinx/Hispanic populations.