California’s $20 Billion Tax Gambit Is a Lit Match in a Fiscal Tinderbox

CA Homeowners Ages 60+ Exempt From Paying Property Taxes Under New Proposal | Across California, CA Patch

A Silicon Valley gadfly’s ballot initiative to exempt seniors from property taxes invokes the founding myth of Prop. 13 — while ignoring the structural deficits, pension crisis, insurance collapse, and housing bubble that make its passage a path to fiscal catastrophe.

Special Report

SAN DIEGO, Feb. 25, 2026

WHAT YOU NEED TO KNOW

A ballot initiative filed Dec. 1, 2025 would exempt all homeowners 60+ from California property taxes, costing local governments $12–$20 billion annually.

• California already faces structural deficits projected at $35 billion per year by 2027–28 and $265 billion in unfunded pension obligations.
• The insurance market’s retreat from wildfire-exposed communities is already suppressing transactions and resetting assessed values downward, attacking the property tax base from a second direction.
• The Prop. 13 “protect seniors” founding myth obscures the measure’s real beneficiaries: commercial real estate and large landlords.
• The initiative’s proponent lost a county assessor race by a landslide weeks before filing it, has raised no money for the signature drive, and may be running for assessor again in 2026.
• Even if it fails — likely — it signals how disconnected California’s property tax politics has become from the multiple systemic risks converging on the state’s fiscal foundations.

THE PROPOSAL

When Rishi Kumar lost the Santa Clara County Assessor’s race by a landslide on December 30, 2025, he did not go quietly. Within days, the Silicon Valley tech executive converted his signature campaign promise into a statewide constitutional amendment: eliminate property taxes entirely for every California homeowner aged 60 or older. He calls it “Proposition 13 Part Two.” Sacramento calls it, less charitably, a $20 billion hole in an already sinking ship.

The measure — formally titled the “60+ Property Tax Exemption Act of 2026” and filed with the California Attorney General on December 1, 2025 — was cleared for signature gathering by Secretary of State Shirley Weber on February 5. Kumar must collect 874,641 valid voter signatures by August 4 to place the initiative on the November 2026 ballot. He has not yet reported raising a single dollar toward the effort, in a state where the least expensive successful California ballot signature drive in the 2024 election cycle cost $7.4 million.

The measure’s mechanics are straightforward. It would amend the California Constitution to exempt any principal residence from ad valorem property taxes if the homeowner or their spouse is 60 or older and has lived in the home for five consecutive years, or anywhere in California for 10 years. Voter-approved special taxes, bonds, and assessments would still apply. But the base 1% property tax — the revenue engine that funds counties, cities, schools, and fire departments — would be zeroed out. A billionaire in a $50 million Malibu estate who turns 60 receives the same complete exemption as a retired nurse in a modest Fresno bungalow.

“We can’t keep taxing seniors into the street. This is one giant leap forward for California seniors.”

— Rishi Kumar, initiative proponent

THE FISCAL CONTEXT: A STATE ALREADY ON FIRE

Kumar’s initiative arrives at a moment of extraordinary fiscal fragility for California — a fact that makes its $12–$20 billion annual revenue cost not merely inconvenient but potentially catastrophic.

The state has been forced to address budget deficits for three consecutive years: a $27 billion shortfall in 2023–24, a $55 billion gap in 2024–25, and a $15 billion deficit in 2025–26. The Legislative Analyst’s Office now projects the structural deficit — the gap between what California spends and what it collects, independent of one-time fixes — will reach approximately $35 billion annually by 2027–28. Compounding the problem, the state has largely exhausted the emergency financial tools — reserve drawdowns, borrowing, one-time deferrals — that papered over prior shortfalls. A fourth consecutive year of budget crisis looms for 2026–27, with the LAO forecasting an $18 billion deficit even after $11 billion in better-than-expected revenues, because constitutional spending requirements for schools and debt repayment absorb virtually all revenue gains.

Layered beneath the annual deficit sits a deeper and more intractable threat: California’s catastrophic unfunded pension obligations. The state’s public pension systems carry the largest pension debt of any state in the nation. CalPERS, the nation’s largest public pension fund, reported a net pension liability of $47.77 billion as of June 30, 2024, with a funded status of approximately 75% — well below the 90% threshold considered the minimum for fiscal resilience. CalSTRS carries an additional $39 billion in unfunded liabilities. Combined with local and county systems, California’s total reported unfunded pension liability exceeds $265 billion. Under standard financial accounting principles rather than the optimistic actuarial assumptions the funds themselves use, the total obligation has been estimated at $769 billion — more than $60,000 per California household.

These pension obligations are constitutionally protected. They cannot be reduced, restructured, or deferred without triggering litigation the state would lose. They are mandatory expenditures that must be funded regardless of what happens to revenues. Cities like Los Angeles and San Jose already devote more than 10% of their general fund revenues to pension contributions, with CalPERS charging smaller cities north of 15% of their general fund. The pension burden is not a future problem — it is an accelerating present one, consuming an ever-larger share of the local government revenues that Kumar’s proposal would eliminate.

The demographic irony is sharp. The same aging population that strains pension solvency — more retirees drawing benefits, fewer active workers contributing — is the population Kumar proposes to remove from the property tax base entirely.

THE PROPERTY TAX ENGINE — AND HOW IT GETS BROKEN

A widespread misconception about Proposition 13 holds that it froze California’s property tax base. It did not. Prop. 13 limited annual increases in assessed values to 2%, but it preserved a critical revenue refresh mechanism: every time a property changes hands, the assessed value resets to the current purchase price. This transaction-driven reassessment is how California’s property tax revenues have grown substantially over the decades since 1978 despite the cap. The system depends on a continuous churn of sales at rising prices to refresh assessed values upward.

Kumar’s initiative attacks that engine directly. Seniors 60 and older — the cohort most likely to own long-held properties assessed at decades-old values far below current market prices — would face zero carrying cost from property taxes. The financial incentive to sell, already suppressed by Prop. 13’s lock-in effect, would disappear entirely. Transaction volume in the affected cohort would likely fall, reducing the reassessment events that refresh the tax base. Meanwhile, those who do sell would trigger reassessments at current market prices — but in a market whose prices, for reasons discussed below, are increasingly unreliable indicators of sustainable value.

Proposition 8, the 1978 companion to Prop. 13, adds another dimension of vulnerability. It requires county assessors to temporarily reduce assessed values when market values fall below a property’s Prop. 13 factored base year value. In the 2008–2012 housing correction, California assessors processed hundreds of thousands of Prop. 8 reduction claims, significantly compressing property tax revenues at precisely the moment local governments needed them most. A new correction would trigger the same dynamic — but this time with a structural dimension, as discussed below, that may prevent the recovery that followed 2008.

THE INSURANCE WILDCARD: THE PIN THAT MAY POP THE BUBBLE

California’s housing market is exhibiting the characteristics of a late-stage bubble sustained by factors that are visibly eroding: a tech sector whose valuations the LAO itself has flagged as potentially overheated, a demographic outmigration that removed California from population growth for the first time in its modern history, and an employer exodus that has seen Oracle, Tesla, Hewlett Packard Enterprise, Charles Schwab, and dozens of other major corporations relocate headquarters to Texas and other states. Against that backdrop, the private insurance market has delivered a verdict on California real estate that property prices have not yet fully absorbed.

State Farm stopped accepting new homeowner insurance applications in California in May 2023. Allstate had already quietly withdrawn. Farmers curtailed its exposure. AIG, Chubb, and others followed. The California FAIR Plan — the state’s insurer of last resort, designed as a temporary backstop for properties that cannot obtain private coverage — has seen its policy count explode, with total insured exposure exceeding $300 billion against a capital base wholly inadequate to absorb a major loss event.

The January 2025 Los Angeles wildfires destroyed or damaged tens of thousands of structures in Pacific Palisades, Altadena, and surrounding communities — areas many residents had not mentally categorized as high wildfire risk. The insurance implications are still reverberating. The carriers making these exit decisions are not primarily motivated by regulatory frustration, though that is a real factor. They are responding to the global reinsurance market — Munich Re, Swiss Re, Hannover Re — which has been systematically reducing California catastrophic exposure and raising prices for coverage it does provide. Reinsurers are not subject to California regulatory pressure. They model physical risk with the most sophisticated tools available, and their consistent signal for several years has been unambiguous: California wildfire risk is underpriced relative to historical premiums, the trend is worsening, and the price of transferring that risk is rising faster than the political system can absorb.

The pathway from insurance unavailability to property value collapse runs directly through the mortgage market. Virtually all mortgage lending requires the borrower to maintain adequate homeowner insurance. When private insurance is unavailable and FAIR Plan coverage is unaffordable, the property effectively cannot be financed with a conventional mortgage. A property that cannot be conventionally financed has a buyer pool limited to cash purchasers — a fraction of the overall market — which directly suppresses its value. Real estate agents in fire-affected areas already report transactions collapsing at the financing stage. Properties in high-risk zones sit longer on the market and sell at discounts. Appraisers are beginning to incorporate insurance availability as a valuation factor.

This dynamic attacks the Prop. 13 transaction reset engine from an entirely new direction. When insurance-driven price declines push market values below existing assessed values — plausible for recently-sold properties assessed at recent peak prices — Prop. 8 requires reassessment downward. Instead of each sale refreshing the tax base upward, distressed sales reset assessments downward, permanently compressing the base from which future 2% increases will be calculated. Unlike 2008, where prices eventually recovered and assessments were restored, insurance-driven declines in wildfire interface zones may be structural, not cyclical.

“The insurance market is performing a risk reassessment of California real estate that the property market itself has not yet priced in.”

— Analysis

THE PROP. 13 MYTHOLOGY — AND THE COMMERCIAL WINDFALL IT CONCEALS

Kumar invokes Prop. 13’s founding narrative — protection for seniors taxed out of their homes — with genuine conviction. That narrative is real but incomplete, and understanding its gaps exposes the irony at the heart of his campaign.

Proposition 13 was passed in June 1978 by a 65–35 margin, driven by the explosive reassessment crisis of the mid-1970s when surging real estate values produced property tax bills that doubled or tripled in a few years. The senior protection story provided compelling human imagery. But the principal financial architect of the campaign was Howard Jarvis, whose prior career as executive director of the Apartment Association of Los Angeles County positioned him far closer to the landlord lobby than to the fixed-income retiree constituency the initiative claimed to champion. The coalition that funded and organized Prop. 13 was substantially composed of commercial property owners, landlords, and real estate investors whose stakes dwarfed those of elderly homeowners.

The results matched the coalition. A 2018 study by the California Budget & Policy Center found that commercial and industrial properties receive roughly 60% of Prop. 13’s total tax savings, with residential homeowners receiving the remaining 40%. A corporation that has owned an office building or shopping center since 1978 pays taxes on the 1978 assessed value adjusted by 2% annually, regardless of how dramatically market value has appreciated. This has produced situations where major commercial properties in prime California locations pay effective property tax rates of a fraction of a percent on current market value — a subsidy of enormous magnitude that has nothing to do with protecting seniors on fixed incomes.

Prop. 13 also created the senior mobility problem it purported to solve. By locking assessed values to the purchase price, it made long-term homeowners financially irrational sellers: a senior sitting on a home assessed at $80,000 but worth $1.5 million faces a massive tax shock the moment they sell and trigger reassessment on a replacement property. This lock-in effect is precisely why California needed Propositions 60 and 90 in 1986–88, and ultimately Proposition 19 in 2020 — each attempting to restore mobility for seniors that Prop. 13 itself had inadvertently removed. The problem Kumar claims to be solving was substantially created by the measure he venerates.

THE PROP. 19 COMPLICATION

Kumar’s initiative does not exist in a vacuum — it would land on top of Proposition 19, the 2020 constitutional amendment that remains the most significant change to California property tax law since Prop. 13 itself. Prop. 19 expanded the ability of homeowners 55 and older to transfer their lower assessed property tax base to a replacement residence anywhere in the state up to three times, while simultaneously tightening parent-to-child inheritance transfers to require children to use inherited homes as primary residences to avoid reassessment. It was engineered as a careful fiscal balance — senior mobility benefits funded in part by tighter inheritance reassessment — and passed narrowly, 51–49%, backed by $40 million from the California Association of Realtors, which anticipated increased transaction volume from liberated senior sellers.

Kumar’s 60+ exemption would largely render Prop. 19’s senior transfer provisions moot — if you pay nothing in property taxes, the intricate mechanics of transferring an assessed value to a new home become irrelevant. But Prop. 19’s inheritance provisions would remain operative, continuing to generate the political and legal complexity of its intergenerational transfer rules without the revenue rationale that justified them. Local governments would carry the full cost of Kumar’s senior exemption with no new offsetting revenue mechanism. Because Kumar’s measure is a 2026 constitutional amendment, courts would generally apply it as the more recent expression of voter intent where the two conflict — but the full scope of that interaction would require years of litigation.

A BACKDOOR ATTACK ON PROP. 13?

A more sophisticated reading of Kumar’s initiative asks whether its fiscal consequences — if it somehow passed — could serve as the mechanism for what progressive tax reformers have long sought: the dismantling of Prop. 13’s protections for the broader property-owning population.

The logic is straightforward. A $12–20 billion annual revenue loss layered on top of California’s existing structural deficits and mandatory pension obligations would create an immediate, politically unbearable crisis. Schools would be gutted. County services would collapse. The political pressure to replace that revenue would be enormous — and the only base large enough to fill the hole would be property taxes on those not yet exempted. A subsequent initiative could propose modifying Prop. 13’s assessment caps for commercial property or younger homeowners, framed not as attacking Prop. 13 but as “restoring fairness” after the senior exemption. The 2020 split-roll effort embodied in Proposition 15 — which would have reassessed commercial and industrial property at market value while preserving residential Prop. 13 protections — failed 52–48. A fiscal emergency created by Kumar’s initiative could provide the political pretext for another attempt.

Kumar himself shows no signs of being a sophisticated long-game strategist on behalf of progressive tax reform. His background and financial resources suggest a local politician who found a popular issue and is riding it. But intentionality is irrelevant to consequence. The fiscal logic of his proposal leads to Prop. 13’s structural unraveling regardless of whether anyone planned it that way.

THE OPPOSITION — AND THE SILENCE THAT SPEAKS LOUDEST

Formal opposition has been measured but pointed. The California State Association of Counties, representing all 58 counties, has not yet taken an official position — it waits for ballot qualification — but CEO Graham Knaus has called the initiative “not a serious proposal.” School districts, facing a Prop. 98 funding requirement that has already been revised upward by nearly $21.7 billion compared to prior estimates, cannot absorb an additional $12–20 billion annual hit to their revenue base without consequences for classrooms.

The silence most telling to political observers is that of the Howard Jarvis Taxpayers Association — the patron organization of Prop. 13 orthodoxy and the natural spiritual home for any senior tax relief initiative. The Association has declined to embrace Kumar’s measure, with spokesman Scott Kaufman noting that Prop. 13 already gives homeowners “predictability and dependability” and that state law already provides seniors in genuine need with existing relief options. When the people who built the Prop. 13 shrine are not rallying to the cause, the proposal’s credentials as a serious continuation of that tradition have already collapsed.

The signature drive mathematics are equally discouraging for Kumar. He needs 874,641 valid signatures from registered voters by August 4. Professional signature gathering in California costs $6 to $12 per valid signature, meaning the drive alone will require $10 to $15 million — before spending a dollar on the actual campaign. As of publication, Kumar has reported zero fundraising. Political analyst Steve Swatt summarized the challenge bluntly: “I hope he has a sugar daddy, because it’s going to be expensive.”

THE ENDGAME: MULTIPLE PINS, ONE BALLOON

California’s property tax architecture was designed for a state that no longer fully exists — one of continuous population growth, rising employer investment, resilient real estate markets, and manageable public obligations. The state it confronts today involves sustained domestic outmigration, a corporate headquarters exodus to Texas and other states, a housing market inflated by a tech boom the LAO itself worries is driven by an overheated stock market, pension obligations that are constitutionally mandated and growing faster than any plausible revenue solution, and an insurance market that is quietly repricing California real estate downward in ways that property market valuations have not yet absorbed.

Each of these dynamics attacks the property tax base from a different angle. The demographic exodus reduces transaction volume, slowing the reassessment refresh that keeps the base growing. The insurance retreat suppresses transactions in fire-affected communities and resets assessments downward when distressed sales occur. The pension obligations consume an ever-larger share of the revenues that property taxes generate. The structural deficit means the state has no capacity to backfill local revenue losses. A tech sector correction — which the LAO has explicitly flagged as a meaningful risk — would hammer income tax revenues, pension fund returns, and housing demand simultaneously.

Kumar’s proposal is not the cause of any of this. It is a symptom — a remarkably clear window into how California’s political class has consistently prioritized the emotionally resonant over the structurally sound. The founding myth of Prop. 13 as senior protection, invoked by a candidate who lost a local race and may be positioning for another run, deployed against a fiscal backdrop that makes a $20 billion revenue reduction not just impractical but reckless.

The private insurance market does not vote. The global reinsurance market does not lobby. The actuarial tables governing California’s pension obligations do not respond to ballot initiatives. They simply price risk as they calculate it — and the price they are assigning to California’s fiscal and physical risk environment is rising steadily. Whether Kumar’s initiative fizzles in the signature drive, as it almost certainly will, or somehow reaches the ballot and fails there, the underlying convergence of risks it cheerfully ignores will not.

There are multiple pins. The balloon has been remarkably resilient. But resilience is not immunity, and each pin that connects does not need to pop the balloon entirely. It only needs to start the deflation that makes the next one more consequential than the last.

SOURCES

• 1. California Secretary of State, “Proposed Initiative Enters Circulation: Exempts Certain Homeowners Aged 60 Or Older From Property Taxes,” Feb. 5, 2026. sos.ca.gov
• 2. Rishi Kumar Campaign Website, “Exempt Seniors,” accessed Feb. 2026. rishikumar.com/seniors
• 3. Ballotpedia, “California Property Tax Exemption for Elderly Residents Initiative (2026).” ballotpedia.org
• 4. Mercury News, “A proposal to exempt homeowners ages 60 and older from property taxes could cost local governments billions,” Feb. 23, 2026. mercurynews.com
• 5. ABC10 Sacramento, “California ballot proposal would exempt seniors from paying property taxes,” Feb. 2026. abc10.com
• 6. Patch.com, “CA Homeowners Ages 60+ Exempt From Paying Property Taxes Under New Proposal,” Feb. 2026. patch.com
• 7. California Legislative Analyst’s Office, “The 2026–27 Budget: California’s Fiscal Outlook,” Nov. 2025. lao.ca.gov
• 8. California Legislative Analyst’s Office, “The 2026–27 Budget: Overview of the Governor’s Budget,” Jan. 2026. lao.ca.gov
• 9. CalMatters, “California is still in the red with another big budget deficit projected for next year,” Nov. 20, 2025. calmatters.org
• 10. CalMatters, “California budget: Why Newsom is facing an $18 billion deficit,” Dec. 31, 2025. calmatters.org
• 11. Reason Foundation, “California’s state and local pension plans have over $265 billion in debt,” Dec. 5, 2025. reason.org
• 12. Equable Institute, “Public Pensions in California — Financial Status 2024.” equable.org
• 13. Ridgeline Municipal Strategies, “How CalPERS’ 11.6% Return Impacts Your Unfunded Pension Liability in 2025.” ridgelinemuni.com
• 14. Hoover Institution, “Can California Save Itself From a Pension Disaster?” hoover.org
• 15. PPIC, “Public Pensions in California.” ppic.org
• 16. California State Board of Equalization, “Proposition 19 Overview,” updated June 2025. boe.ca.gov/prop19
• 17. California State Board of Equalization, “Proposition 19 Fact Sheet” (Pub. 801), June 2025. boe.ca.gov
• 18. Ballotpedia, “California Proposition 19, Property Tax Transfers, Exemptions, and Revenue for Wildfire Agencies and Counties Amendment (2020).” ballotpedia.org
• 19. California State Association of Counties, “LAO Publication: The 2026–27 Budget — California’s Fiscal Outlook,” Nov. 2025. counties.org
• 20. CalTax, “State Facing $18 Billion Deficit Despite $8.6 Billion in Unexpected Revenue,” Nov. 21, 2025. caltax.org