EXHIBIT B
Implications of the Gann Appropriations Limit
In November 1979, California voters followed up the tax limitations of 1978’s Proposition 13 with an amendment to the State Constitution to limit the growth of government spending. A voter initiative, Proposition 4, was passed into law in 1979 and later amended by Proposition 111 in 1990. This spending limit, commonly known as the “Gann Limit,” was named after Proposition 4’s sponsor Paul Gann, appears in the state Constitution as Article XIIIB. The Gann Limit creates a restriction on the amount of tax proceeds that a government agency may receive and appropriate in any one year.
The limit is based on actual appropriations from the 1986-87 base year. Increases to the limit are allowed each year based on specified growth factors. Inflationary adjustments are based on changes in California per capita personal income or the change in nonresidential assessed valuation. Population adjustments are based on changes in the population of the City or Los Angeles County.
Since 1980, San Marino voters have approved a public safety parcel tax for public safety services and, at the same time, have approved an override of the City’s appropriations limit for this parcel tax revenue, to increase the limit by the amount of the annual parcel tax levy.
The City of San Marino’s FY 2026-27 Appropriations Limit was adopted by resolution on May 29, 2026 as required by the California Government Code. The City’s FY 2026-27 appropriations limit is $38,477,321 and its appropriations subject to limitation is $31,390,055. The appropriations margin, the difference between the limit and the appropriations subject to limitation, is therefore $7,087,266, and appropriations subject to limitation are 82% of the limit.
For the past five fiscal years, appropriations subject to limitation have ranged between 66% and 83% of the legal limit. The FY 2026-27 limit is within this same range, indicating that the legal limit has been increasing at a pace roughly in line with the growth in appropriations subject to limitation.
For four of the past six years, the population factor for the City has been negative. In years where there are negative population factors, the limit each year will grow by less than the annual inflation rate, which may result in a decrease in the City’s appropriations margin in future years.