The State Board of Equalization found the assessed value of all taxable property in California fell by $107 billion from year ago. It's the first drop since the middle of the Great Depression.
Homeowners like Jennifer Haag can't wait to see their new tax bill because it could be smaller this year.
"I'm a stay-at-home mom. I'm the one in charge of the money, and I have to squeeze every dollar as much as possible. So my immediate reaction was: 'Right on! you know," said Haag.
In the Bay Area, Contra Costa County was hit especially hard, with assessed values down seven percent. Alameda County suffered a 2.5 percent loss, the South Bay and Peninsula fared better, with almost no change and San Francisco is actually up seven percent -- the only big city with a significant increase.
While lower assessed values are good for the wallet, they mean more misery for local governments because things like public safety and other services won't get as much money.
"It means they're to have to do further cutbacks in their staff, more furloughs, more reductions in hours of libraries and recreation centers. Not maintain public buildings, not maintain streets," said Chris McKenzie from the League of California Cities.
Public schools will also receive less funding. One-third of their budget comes from property taxes, with the state making up any loss.
"There's an obligation, normally, to backfill the loss of any property taxes, but in this budget dynamic, the state doesn't have any money. They're broke," said public schools lobbyist Kevin Gordon.
Proposition 13 limits how much an assessed value can go up each year to two percent, so it will take years for local governments and schools to see funding levels go back to normal.
"If the real market doesn't return quickly, then property taxes won't return quickly; and those cutbacks are going to have to be sustained even longer," said McKenzie.
California's slight increase in housing sales this summer will not boost help tax revenue, because prices are much lower.