The Daily Signal - Deannexing: Keeping California's Tax Dollars Local | Elaine Culotti

Episode Date: February 18, 2026

California’s unfunded mandates “are exactly what they sound like:” a mandate “with no money behind it.”   A solution like deannexation, however, could really “change the culture of what Sacramento” has been been doing of forcing cities to follow mandates and pay for them, explains Elaine Culotti, The Daily Signal’s California contributor.   “It starts to direct tax dollars directly back to the cities in which have been deannexed. It’s an interesting business model, and for a state like California, is really important.” Learn more about your ad choices. Visit megaphone.fm/adchoices

Unfunded mandates in California are exactly what they sound like. It is a mandate to do something with no money behind it. And if you don't do it, Sacramento will do it for you and you will have to pay back the state that money if it's over the amount. And the state will have to reimburse you the money if you spend the money. Something like de-annexation really starts to change the culture of what Sacramento aims to do. Because it starts to direct tax dollars directly back to the cities in which have been de-annexed. It's an interesting business model, and for a state like California, is really important. Hi, my name is Elaine Collotti, and I am the West Coast correspondent for the Daily Signal,

and I've been gone for a week because I went to D.C., and I also did a lot of homework on my topic today. I've been doing a lot of homework on this topic because I really don't see another way to solve some of the big problems we have in California. So my topic today, once again, is deanexing, seceding, and home rule. These are all the three ways that you can split off a city from another city or you can put a map around it by zip code and call it its own city. Some people call them charter cities. Sometimes they're unincorporated cities, but whatever it is, we need to start thinking about it. What has happened over the last six months is I've been traveling from Sacramento and San Diego and Los Angeles, actually from Humboldt County all the way down to Chula Vista. and I visited with a lot of mayors in California.

And mayors are in such an interesting position because for the most part, we have strong and weak mayors, 52 primary mayors, and then hundreds of mayors throughout the state that are in charge of really small municipalities as well as big municipalities. So they have a lot of voters.

Like a small city would be, say, 40 to 50,000 people. And a normal-sized city is about 250 to 350,000 people. And then you have monster cities like Los Angeles and Sacramento, San Diego, San Francisco. And of course, don't forget, you have all of these little tiny connector cities. So in a town like L.A., you have Burbank, Sherman Oaks, you have Chino, you have Brea, you have all these little towns that are around it. So everything that happens creates a chain reaction. I'm going to give you the best example to start, which actually was a really great, well-watched interview on Daily Signal, and that was on SB 7-9.

So in a nutshell, SB 7-9 is trying to convert primary single-family residential into high-density, you know, low-income housing and so on. This whole bill was put forth by Sacramento. And then what happens is when it passes, and it passes by Democrats because Democrats want to do things that are nice for people that don't have anything. So they said it was going to be in transit districts, but it really is not about that. It's about stealing property, and let's be clear that's what it's about. So then they implement this thing in all these cities I'm talking about, like, you know, Chino or Brea or whatever.

It doesn't matter. And the little city councils have to tell the people that are in that town, yes, we're putting an apartment building in a single family residential neighborhood because later and after the fact, Sacramento made a transit district there. Well, that creates a war. And then all of a sudden, you have all the mayors of California warring against Sacramento on these crazy bills, which are called unfunded mandates. Unfunded mandates. So how can you stop it? I mean, you really can't. It's so rampant.

And now we had the fires. And so I came up with this idea very early on. I was like, why don't we separate the palisades from Los Angeles and see if L.A. would accept that. because financially it makes sense when everything's burned down and see if the Pacific Palisades could rebuild itself as a pilot project. You know, patient zero. It gets to rebuild itself with its own money the way that the Palisades wants to rebuild itself. And it was a really good idea. How do I know it was a really good idea? The same way you always know something is a really good idea. Opposition. When there's a lot of opposition, you start rattling some big

cages. You know it. And I rattled big cages when I did this. And now, of course, like a dog with a bone, I'm like, why is everybody so opposed? Well, the reason that people are opposed is because it kind of screws up SB 7-9, because now you're really up against it. You're not going to get a transit district in the Wolfgang Puck-Frank-Gurie development in the Palisades. They will fight it. You're not going to be able to just put in low-income housing everywhere because they will fight it. You're not going to be able to charge mansion tax because it would go away if you separated the palisades from L.A. City. And people will love that. But the revenue gets taken out of Sacramento. So what I've learned is good ideas will be met with combative resistance if they are taking away dollars from Sacramento.

not necessarily from the mayors across the state. Remember that the mayors across the state, love them or hate them, it does not matter. They are fighting for the people that voted them into office, and they have such a close connection because they're their every day. Sacramento does not have a close connection. Sacramento is using the mayors of the state and the cities and the voters to pay the coffers of the Sacramento General Fund. That is their job.

Wholeheartedly their job is to collect as much tax as they can, put it into the general fund, spend it any way that they want to at the cost of other cities all around them and all throughout the state, not having enough dollars to even clean their streets. Imagine that. Certainly not enough dollars to remove homelessness from the front of businesses. Certainly not enough dollars to do all of the things that their tax dollars would do if they were returned to those cities. Sacramento's single focused job is to keep the general fund for their own initiatives. So with that, something like de-annexation, really starts to change the culture of what Sacramento aims to do because it starts to direct tax dollars directly back to the cities in which have been de-annexed. It's an interesting business

model and for a state like California is really important. As governor, for example, you cannot bankrupt a state. I don't know if everybody knows that, but I looked into this because I thought, what happens when we're broke? And you can't. States are sovereign, but cities can file chapter 9. That's not unheard of. And when a city files chapter 9, you can reorganize the funds that are being spent. And what you can do is carefully, and I mean very carefully, remove the money that's being wasted in the city budget. And remember, a lot of the money that's being wasted in the city budget, the money that comes in

comes from Sacramento's unfunded mandates. In other words, they say to the city, you need to spend money you do not have on high-density housing in single-family residential neighborhoods, and if you don't, we are going to do it for you. Full stop. Well, what does that really look like? I can tell you, I've looked into it. Unfunded mandates in California are exactly what they sound like. It is a mandate to do something with no money behind it, and if you don't do it, Sacramento will do it for you, and you will have to pay back the state, that money if it's over the amount and the state will have to reimburse you the money if you spend the money. Okay? So if you follow the mandate and spend the money, the state would reimburse you.

If you don't, the state will do it and they will charge you. Two exactly polar ideas. One, the state will pay you back the money. Two, you will have to pay the state back the money. But it's a mandate. And here's the real bummer about it. The state has a backlog of paying back the city's unfunded mandate money over a billion dollars and 15 years of waiting. And there's no interest that is paid to the cities that don't get reimbursed. This is catastrophic. And the reason it's set up like this is because our cities that are really, really big need every penny to solve the problems of the people in the cities that are underprivileged and are on services. So there's no money left over for the cities that need infrastructure and infrastructure repair. And this is when

de-annexing or seceding or home rule really comes into play. If a larger city cannot manage a smaller section of their city, then it can be taken away from them. The problem is you have to do that under force, and we should not be in a position where we have to do that to fight for our lives in the Pacific Palisades, Malibu, or Altadena. This should be something that Sacramento not only fosters, but leads the charge in. Instead, they won't let go. Sacramento has continued and will always be the monkey with its hand in the jar holding on to the very last peanut. And while the rest of the state is leaving, the monkey is sitting there holding an empty jar. with one peanut. And the fist is just too big to get it out. My name is Elaine Kalati and thank you for

listening. This is the Daily Signal. Please like, smash the like button, smash the subscribe button. And if you have any questions about policy, please put it in writing to me. I am so eager to read an answer. Thank you.