The San Francisco Chronicle has published an odd piece on the effect of both Proposition 13 and the collapse of the housing market on local government revenues. Under Prop. 13, property taxes are essentially frozen in place as equal to the value of the home at the time it was bought. Now that tens of thousands of homes are being foreclosed and resold at bargain-basement prices, Prop. 13 will lock in place the taxes prorated to those prices, and local government, which depends on those taxes to pay for schools, buses, county sheriffs, etc., will be hammered by the drop. Reporter Carolyn Said estimates that $37.7 billion in taxes has vanished as a result of the 250,000 homes seized by banks last year. But Said's analysis is only half right. It's only a loss in revenue if you look at it in the very short term. In fact, the housing market was vastly overheated, and it's correcting back to 2001-02 values or so. It's not that local governments are losing taxes, merely that their revenues are returning to the amounts they would have received if the housing bubble had never happened. In some ways, cities and counties couldn't plan for inevitable moment when the bubble popped; many expenses were bound to rise with the artificially inflated economy. But some, like the ridiculously excessive police and firefighter pension plans, were completely unnecessary, and should be reversed.