BILL NUMBER: ABX5 9 CHAPTERED 12/12/03 CHAPTER 2 FILED WITH SECRETARY OF STATE DECEMBER 12, 2003 APPROVED BY GOVERNOR DECEMBER 12, 2003 PASSED THE SENATE DECEMBER 12, 2003 PASSED THE ASSEMBLY DECEMBER 11, 2003 AMENDED IN ASSEMBLY DECEMBER 11, 2003 AMENDED IN ASSEMBLY DECEMBER 5, 2003 INTRODUCED BY Assembly Member Oropeza DECEMBER 3, 2003 An act to amend Sections 99006 and 99008 of, to add Title 18 (commencing with Section 99050) to, and to repeal and add Section 29530 of, the Government Code, and to repeal and add Sections 97.68, 6051.5, 6201.5, 7202, 7203, and 7203.1 of the Revenue and Taxation Code, relating to fiscal recovery financing, by providing the funds necessary therefor through the issuance and sale of bonds of the State of California and by providing for the handling and disposition of those funds, and declaring the urgency thereof, to take effect immediately. LEGISLATIVE COUNSEL'S DIGEST AB 9, Oropeza. Economic recovery bonds. (1) Existing provisions of the California Constitution prohibit the creation by the Legislature of debts in excess of $300,000 except for a single object or work specified in a law creating the debt, which is approved by a 2/3 vote of the members of each house of the Legislature and approved by the people by a majority of the votes cast at a general or direct primary election. This bill would enact the Economic Recovery Bond Act, which, if adopted, would authorize the issuance, pursuant to the State General Obligation Bond Law, of bonds in an amount not to exceed $15,000,000,000 for purposes of financing the accumulated state budget deficit, as defined. The bill would also provide that the bonds shall be secured by a pledge of revenues in the Fiscal Recovery Fund from designated sales and use tax revenues. (2) The Sales and Use Tax Law imposes a tax on the gross receipts from the sale in this state of, or the storage, use, or other consumption in this state of, tangible personal property. This bill would, from July 1, 2004, and in addition to any other sales and use tax rates imposed by law, impose a state sales and use tax at the rate of 0.25% for a specified period. (3) The Bradley-Burns Uniform Local Sales and Use Tax Law (Bradley-Burns Law) authorizes a county to impose a local sales and use tax at a rate of 1.25%, and similarly authorizes a city, located within a county imposing such a tax rate, to impose a local sales tax rate of 1% that is credited against the county rate. Existing law requires a city, county, or city and county imposing a local sales and use tax pursuant to the Bradley-Burns Law to contract with the State Board of Equalization to administer the local sales and use tax. Existing law exempts from the taxes imposed under the Bradley-Burns Law 80% of specified purchases and uses of tangible personal property by aircraft common carriers. This bill would, from July 1, 2004, until a specified date after the Director of Finance makes a specified notification to the State Board of Equalization, prohibit a city or a county from imposing a rate under the Bradley-Burns Law that exceeds a specified percentage. This bill would, during this same period, also reduce the exemption under the Bradley-Burns Law for specified tangible personal property purchases and uses by aircraft common carriers to 75% of these purchases and uses, but establish an additional exemption for these purchases and uses, during this same period, from a specified rate imposed under the Sales and Use Tax Law. (4) Existing property tax law requires the county auditor, in each fiscal year, to allocate property tax revenue to local jurisdictions in accordance with specified formulas and procedures, and generally requires that each jurisdiction be allocated an amount equal to the total of the amount of revenue allocated to that jurisdiction in the prior fiscal year, subject to certain modifications, and that jurisdiction's portion of the annual tax increment, as defined. Existing property tax law also reduces the amounts of ad valorem property tax revenue that would otherwise be annually allocated to the county, cities, and special districts pursuant to these general allocation requirements by requiring, for purposes of determining property tax revenue allocations in each county for the 1992-93 and 1993-94 fiscal years, that the amounts of property tax revenue deemed allocated in the prior fiscal year to the county, cities, and special districts be reduced in accordance with certain formulas. It requires that the revenues not allocated to the county, cities, and special districts as a result of these reductions be transferred to the Educational Revenue Augmentation Fund in that county for allocation to school districts, community college districts, and the county office of education. This bill would, for the fiscal adjustment period, as defined, decrease the amount of ad valorem property tax revenue allocated to a county's Educational Revenue Augmentation Fund by the countywide adjustment amount, as defined, and require this amount to be allocated instead to the Sales and Use Tax Compensation Fund, which this bill would create in each county. This bill would, during this same period, also require the county auditor to allocate moneys from the Sales and Use Tax Compensation Fund to cities and counties to reimburse these entities for local tax revenue losses resulting from a specified statute, as provided. (5) The bill would provide for submission of the bond act to the voters at the March 2, 2004, statewide primary election. The provisions of the bill described above would become operative only if a specified constitutional amendment is submitted to and approved by the voters at the March 2, 2004, statewide primary election. (6) The bill would declare that it is to take effect immediately as an urgency statute. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. Section 29530 of the Government Code is repealed: SEC. 1.25. Section 29530 is added to the Government Code, to read: 29530. (a) If the board of supervisors so agrees by contract with the State Board of Equalization, the board of supervisors shall establish a local transportation fund in the county treasury and shall deposit in the fund all revenues transmitted to the county by the State Board of Equalization under Section 7204 of the Revenue and Taxation Code, which are derived from that portion of the taxes imposed by the county at a rate in excess of 1 percent, and on and after July 1, 2004, until the rate modifications in subdivision (a) of Section 7203.1 of the Revenue and Taxation Code cease to apply, at a rate in excess of three-quarters of 1 percent, pursuant to Part 1.5 (commencing with Section 7200) of Division 2 of that code, less an allocation of the cost of the services of the State Board of Equalization in administering the sales and use tax ordinance related to the rate in excess of 1 percent, and on and after July 1, 2004, until the rate modifications in subdivision (a) of Section 7203.1 of the Revenue and Taxation Code cease to apply, to the rate in excess of three-quarters of 1 percent, and of the Director of Transportation and the Controller in administering the responsibilities assigned to him or her in Chapter 4 (commencing with Section 99200) of Part 11 of Division 10 of the Public Utilities Code. (b) Any interest or other income earned by investment or otherwise of the local transportation fund shall accrue to and be a part of the fund. SEC. 1.5. Section 99006 of the Government Code is amended to read: 99006. (a) The Director of Finance shall, as chairperson of the authority, take all actions necessary to have included in the annual Governor's Budget for each fiscal year in which the Fiscal Recovery Fund is in existence and any bonds or ancillary obligations remain outstanding, an appropriation of the special sales tax revenues received in that fiscal year to pay those obligations. The director shall further use his or her best efforts to have included in the annual Budget Bill or another bill separate from the annual Budget Bill, for each fiscal year in which the Fiscal Recovery Fund is in existence and any bonds or ancillary obligations remain outstanding, an appropriation of the special sales tax revenues received in that fiscal year for the purposes of this title. The director shall notify the trustee and, if the trustee is not the Treasurer, notify the Treasurer, in each applicable year of the actions taken pursuant to this subdivision, including providing copies of the Governor's Budget and either the annual Budget Bill or other bill proposing an appropriation of the special sales tax revenue. (b) The Director of Finance shall notify the Treasurer, the trustee, and the board when, in each case, (1) and (2) of the following events have occurred: (1) Any of the following has occurred: (A) All bonds issued pursuant to this title and all related ancillary obligations have been paid or retired. (B) Payment of the principal of and interest on all bonds issued pursuant to this title and ancillary obligations have been irrevocably provided for pursuant to the indenture and no bonds are deemed "outstanding" pursuant to the indenture. (C) The Fiscal Recovery Fund holds sufficient funds to pay the principal of, and interest to final maturity on, all bonds issued pursuant to this title that are outstanding and to pay all ancillary obligations, if those funds were appropriated for that purpose by the Legislature. (D) No bonds were issued pursuant to this title and the Director of Finance, as chairperson of the authority, announces that no bonds will be issued pursuant to this title. (2) Any of the following has occurred: (A) All bonds issued pursuant to Title 18 (commencing with Section 99050) and all ancillary obligations relating thereto have been paid or retired. (B) Payment of the principal of and interest on all of those bonds and the payment of ancillary obligations identified in subparagraph (A) has been irrevocably provided for pursuant to the related resolution and no bonds or ancillary obligations are deemed "outstanding" pursuant to that resolution. (C) The Fiscal Recovery Fund holds sufficient funds to pay the principal of, and interest to final maturity on, all of the bonds and to pay ancillary obligations identified in subparagraph (A) that are outstanding. (D) The Economic Recovery Bond Act was not approved by the voters. (c) Notwithstanding any other provision of law, Section 5924 shall not apply to payment of any fees or costs of any ancillary obligations entered into by the authority or the Treasurer in connection with any bonds issued pursuant to this title. (d) For purposes of subdivision (d) of Section 6051.5, and subdivision (d) of Section 6201.5, of the Revenue and Taxation Code, and Section 99010 of this code, notification pursuant to subdivision (b) shall be deemed to be given by the Director of Finance only when the notifications described in both paragraph (1) and paragraph (2) of subdivision (b) have been given. SEC. 2. Section 99008 of the Government Code is amended to read: 99008. (a) The Fiscal Recovery Fund is hereby created as a special fund in the State Treasury. (b) Moneys in the Fiscal Recovery Fund shall be invested in the Surplus Money Investment Fund, except as otherwise provided in a resolution adopted pursuant to Title 18 (commencing with Section 99050), and any income from that investment shall be credited to the Fiscal Recovery Fund. (c) (1) Except for funds appropriated pursuant to subdivision (d), amounts in the Fiscal Recovery Fund, together with earnings thereon, shall be available solely for the purposes set forth in subdivision (c) of Section 99002 upon appropriation by the Legislature in each fiscal year. Upon an appropriation, if any, by the Legislature for the purposes specified in subdivision (c) of Section 99002 in a fiscal year, for the balance of that fiscal year all appropriated moneys then held or to be received in the Fiscal Recovery Fund for that purpose shall constitute available revenues and shall be disbursed to the trustee not less frequently than once per month. Available revenues shall belong to the authority, absolutely and unconditionally, and without any right of setoff, recoupment, or counterclaim. (2) Paragraph (1) and subdivision (d) shall become inoperative on the date on which all bonds and ancillary obligations issued pursuant to this title are not outstanding, as certified by the Director of Finance pursuant to paragraph (1) of subdivision (b) of Section 99006. On and after the date on which paragraph (1) and subdivision (d) become inoperative, the Fiscal Recovery Fund shall be used solely for the purpose set forth in Section 99072 and, as provided in Section 99072, shall be continuously appropriated for that purpose. (d) Notwithstanding Section 13340, an amount not to exceed one million dollars ($1,000,000) per fiscal year is hereby continuously appropriated from the Fiscal Recovery Fund to the authority, without regard to fiscal years, sufficient to pay administrative costs as approved by the Director of Finance. SEC. 3. Title 18 (commencing with Section 99050) is added to the Government Code, to read: TITLE 18. THE ECONOMIC RECOVERY BOND ACT CHAPTER 1. GENERAL PROVISIONS 99050. (a) This title shall be known and may be cited as the Economic Recovery Bond Act. (b) The Legislature finds and declares that it is essential to the public welfare that an efficient, equitable, and alternative source of funding be established in order to preserve public education and critical health and safety programs that otherwise could not be funded in light of the accumulated state budget deficit, and that securing the availability of the proceeds of the bonds proposed to be issued and sold pursuant to this title is the most efficient, equitable, and economical means available. 99051. As used in this title, the following terms have the following meanings: (a) (1) "Accumulated state budget deficit" has the same meaning as in Section 1.3 of Article XVI of the California Constitution. (2) The amount referred to in paragraph (1) shall be as certified by the Director of Finance. (b) "Ancillary obligation" means an obligation of the state entered into in connection with any bonds issued under this title, including the following: (1) A credit enhancement or liquidity agreement, including any credit enhancement or liquidity agreement in the form of bond insurance, letter of credit, standby bond purchase agreement, reimbursement agreement, liquidity facility, or other similar arrangement. (2) A remarketing agreement. (3) An auction agent agreement. (4) A broker-dealer agreement or other agreement relating to the marketing of the bonds. (5) An interest rate or other type of swap or hedging contract. (6) An investment agreement, forward purchase agreement, or similar structured investment contract. (c) "Committee" means the Economic Recovery Financing Committee created pursuant to Section 99055. (d) "Fund" means the Economic Recovery Fund created pursuant to Section 99060. (e) "Resolution" means any resolution, trust agreement, indenture, certificate, or other instrument authorizing the issuance of bonds pursuant to this title and providing for their security and repayment. (f) "Trustee" means the Treasurer or a bank or trust company within or without the state acting as trustee for any issue of bonds under this title and, if there is more than one issue of bonds, the term means the trustee for each issue of bonds, respectively. If there are cotrustees for an issue of bonds, "trustee" means those cotrustees collectively. CHAPTER 2. ECONOMIC RECOVERY FINANCING COMMITTEE 99055. (a) Solely for the purpose of authorizing the issuance and sale pursuant to the State General Obligation Bond Law of the bonds authorized by this title and the making of those determinations and the taking of other actions as are authorized by this title, the Economic Recovery Financing Committee is hereby created. For purposes of this title, the Economic Recovery Financing Committee is "the committee" as that term is used in the State General Obligation Bond Law (Chapter 4 (commencing with Section 16720) of Part 3 of Division 4 of Title 2). (b) The committee consists of all of the following members: (1) The Governor or his or her designee. (2) The Director of Finance. (3) The Treasurer. (4) The Controller. (5) The Secretary of Business, Transportation and Housing. (6) The Director of General Services. (7) The Director of Transportation. (c) Notwithstanding any other provision of law, any member may designate a deputy to act as that member in his or her place and stead for all purposes, as though the member were personally present. (d) The Legislature finds and declares that each member of the committee has previously acted as a member of a similar finance committee. (e) A majority of the members of the committee shall constitute a quorum of the committee and may act for the committee. (f) The Director of Finance shall serve as chairperson of the committee. CHAPTER 3. ECONOMIC RECOVERY FUND 99060. (a) The proceeds of bonds issued and sold pursuant to this title shall be deposited in the Economic Recovery Fund, which is hereby established in the State Treasury. (b) Moneys in the fund shall be invested in the Surplus Money Investment Fund, and any income from that investment shall be credited to the fund. (c) Except for amounts necessary to pay costs of issuance, administrative costs, and any other costs payable in connection with the bonds, and to retire or refund bonds issued and sold pursuant to this title or bonds issued and sold under Title 17 (commencing with Section 99000), the remaining balance of the fund, as determined by the committee, shall be transferred to the General Fund to fund the purposes set forth in this title. 99062. Out of the first money realized from the sale of bonds as provided in this chapter, there shall be redeposited in the General Obligation Bond Expense Revolving Fund, established by Section 16724.5, the amount of all expenditures made for purposes specified in that section, and this money may be used for the same purpose and repaid in the same manner whenever additional bond sales are made. 99064. The proceeds of the bonds issued and sold pursuant to this chapter shall be available for the purpose of providing an efficient, equitable, and economical means of doing both of the following: (a) Funding the accumulated budget deficit, which may be accomplished in part by refunding or repaying bonds issued pursuant to Title 17 (commencing with Section 99000). (b) Paying costs relating to the issuance of bonds under this title, including, but not limited to, providing reserves, capitalized interest, and the costs of obtaining or entering into any ancillary obligation, costs associated with the repayment or refunding of the fiscal recovery bonds issued pursuant to Title 17 (commencing with Section 99000), and administrative and other costs associated with implementing the purposes of this title. CHAPTER 4. BOND PROVISIONS 99065. (a) Subject to subdivision (b), bonds in the total amount of fifteen billion dollars ($15,000,000,000), not including the amount of any refunding bonds issued in accordance with Section 99075, or so much thereof as is necessary, may be issued and sold to provide a fund to be used for carrying out the purposes expressed in this title and to reimburse the General Obligation Bond Expense Revolving Fund, pursuant to Section 16724.5. The bonds, when sold, shall be and constitute a valid and binding obligation of the State of California, and the full faith and credit of the State of California is hereby pledged for the punctual payment of both principal of, and interest on, the bonds as the principal and interest become due and payable. Additionally, the bonds, when sold, shall be secured by a pledge of revenues and any other amounts in the Fiscal Recovery Fund created pursuant to Section 99008. The bonds may be secured by different lien priorities on amounts in the Fiscal Recovery Fund. (b) The amount of bonds that may be issued and sold pursuant to subdivision (a) shall be reduced by the amount of bonds issued pursuant to Title 17 (commencing with Section 99000), and by the amount of bonds issued pursuant to the California Pension Obligation Financing Act (Chapter 7 (commencing with Section 16910) of Part 3 of Division 4 of Title 2), except to the extent those bonds will be retired, defeased, or redeemed with the proceeds of bonds authorized by this title. (c) Pursuant to this section, the Treasurer shall sell the bonds authorized by the committee. The bonds shall be sold upon the terms and conditions specified in a resolution to be adopted by the committee pursuant to Section 16731 and Section 99070. Whenever the committee deems it necessary for an effective sale of the bonds, the committee may authorize the Treasurer to sell any issue of bonds at less than their par value. Notwithstanding Section 16754.3, the discount with respect to any issue of the bonds shall not exceed 3 percent of the par value thereof, net of any premium. 99066. The bonds authorized by this title shall be prepared, executed, issued, sold, paid, and redeemed as provided in the State General Obligation Bond Law (Chapter 4 (commencing with Section 16720) of Part 3 of Division 4 of Title 2), and all of the provisions of that law, except subdivisions (a) and (b) of Section 16727 or any other provision in that law that is inconsistent with the terms of this title, apply to the bonds and to this title and are hereby incorporated in this title as though set forth in full in this title. 99067. For purposes of this title, the Department of Finance is designated the "board" as that term is used in the State General Obligation Bond Law. 99069. Notwithstanding any other provision of this title, or of the State General Obligation Bond Law, if the Treasurer sells bonds pursuant to this title that include a bond counsel opinion to the effect that the interest on the bonds is excluded from gross income for federal tax purposes subject to designated conditions, the Treasurer may maintain separate accounts for the bond proceeds invested and for the investment earnings on those proceeds, and may use or direct the use of those proceeds or earnings to pay any rebate, penalty, or other payment required under federal law or take any other action with respect to the investment and use of those bond proceeds that is required or desirable under federal law in order to maintain the tax-exempt status of those bonds and to obtain any other advantage under federal law on behalf of the funds of this state. 99070. (a) (1) The committee shall determine whether or not it is necessary or desirable to issue bonds authorized pursuant to this title in order to carry out the purposes of this title and, if so, the amount of bonds to be issued and sold, the times at which the proceeds of the bonds authorized by this title shall be required to be available, and those other terms and conditions for the bonds authorized by this title as it shall determine necessary or desirable. (2) In addition to all other powers specifically granted in this title and the State General Obligation Bond Law, the committee may do all things necessary or convenient to carry out the powers and purposes of this title, including the approval of any indenture and any ancillary obligation relating to those bonds, and the delegation of necessary duties to the chairperson, and to the Treasurer as agent for sale of the bonds. (3) The committee shall determine the amount of the bonds to be issued so that the net proceeds of the bonds issued to fund the accumulated budget deficit, when added to the net proceeds of any bonds issued pursuant to Title 17 (commencing with Section 99000) for that purpose, exclusive of bonds issued pursuant to this title for the purpose of refunding bonds issued pursuant to this title or Title 17 (commencing with Section 99000), will not exceed fifteen billion dollars ($15,000,000,000) in the aggregate. Nothing in this section shall be construed to limit the ability of the committee to authorize the issuance of any amount of bonds that it shall determine necessary or appropriate to accomplish the purposes of this title, including the refunding or redemption of the bonds issued pursuant to Title 17 (commencing with Section 99000), subject to the limit on the total amount of bonds set forth in Section 99065. (b) Successive issues of bonds may be authorized and sold to carry out those actions progressively, and it is not necessary that all of the bonds authorized to be issued be sold at any one time. In addition to all other powers specifically granted in this title and the State General Obligation Bond Law, the committee may do all things necessary or convenient, including the delegation of necessary duties to the chairperson and to the Treasurer as agent for sale of the bonds, to carry out the powers and purposes of this title. 99071. The principal of and interest on the bonds and the payment of any ancillary obligations shall be payable from and secured by a pledge of all state sales and use tax revenues in the Fiscal Recovery Fund established pursuant to Section 99008 and any earnings thereon. To the extent that moneys in the Fiscal Recovery Fund are deemed insufficient to make these payments, pursuant to an estimate certified by the Director of Finance and approved by the committee, there shall be collected each year and in the same manner and at the same time as other state revenue is collected, in addition to the ordinary revenues of the state, a sum in an amount required to pay the principal of, and interest on, the bonds and the payment of any ancillary obligations for which payment is authorized by this title and for which the full faith and credit of the state has been pledged. It is the duty of all officers charged by law with any duty in regard to the collection of the revenue to do and perform each and every act that is necessary to collect that additional sum. 99072. (a) Notwithstanding Section 13340, there is hereby continuously appropriated from the Fiscal Recovery Fund established pursuant to Section 99008 an amount that will equal the total of the following: (1) The sum annually necessary to pay the principal of, and interest on, bonds issued and sold as described in Section 99070, as the principal and interest become due and payable, together with any amount necessary to satisfy any reserve and coverage requirements in the resolution. (2) The sum necessary to pay any ancillary obligations entered into in connection with the bonds. (3) Any trustee and other administrative costs incurred in connection with servicing the bonds and ancillary obligations. (4) Redemption, retirement, defeasance or purchase of any bonds as authorized by the committee prior to their stated maturity dates. (b) Notwithstanding Section 13340, if the funds appropriated by subdivision (a) are estimated to be insufficient to meet the requirement specified in paragraphs (1) to (4), inclusive, of subdivision (a), as approved pursuant to Section 99071, there is hereby continuously appropriated from the General Fund, for the purposes of this chapter, an amount that will provide sufficient revenues to meet whatever requirements specified in paragraphs (1) to (4), inclusive, of subdivision (a) cannot be met from revenues appropriated from the Fiscal Recovery Fund. (c) The sales and use tax revenues received pursuant to Sections 6051.5 and 6201.5 of the Revenue and Taxation Code and deposited into the Fiscal Recovery Fund are hereby irrevocably pledged to the payment of principal and interest on the bonds issued pursuant to this title, to payment of any ancillary obligations, and to costs necessary for servicing and administering the bonds and ancillary obligations. The Legislature may elect to deposit additional revenues in the Fiscal Recovery Fund. The pledge of this subdivision shall vest automatically upon execution and delivery of any resolution or agreement relating to ancillary obligations, without the need for any notice or filing in any office or location. 99074. All money deposited in the Deficit Recovery Fund that is derived from accrued interest on bonds sold shall be reserved in that fund and shall be available for transfer to the Fiscal Recovery Fund as a credit to expenditures for bond interest. 99075. The bonds may be refunded in accordance with Article 6 (commencing with Section 16780) of Chapter 4 of Part 3 of Division 4 of Title 2, which is a part of the State General Obligation Bond Law. Approval by the electors of the state for the issuance of the bonds described in this title shall include approval of the issuance of any bonds issued to refund any bonds originally issued under this title or any previously issued refunding bonds. 99076. The Legislature hereby finds and declares that, inasmuch as the proceeds from the sale of bonds authorized by this title are not "proceeds of taxes" as that term is used in Article XIII B of the California Constitution, the disbursement of these proceeds is not subject to the limitations imposed by that article. 99077. The state hereby pledges and agrees with the holders of any bonds issued pursuant to this title that it will not reduce the rate of imposition of either of the taxes imposed pursuant to Sections 6051.5 and 6201.5 of the Revenue and Taxation Code, which generate the revenue deposited in the Fiscal Recovery Fund. SEC. 4. Section 97.68 of the Revenue and Taxation Code is repealed. SEC. 4.1. Section 97.68 is added to the Revenue and Taxation Code, to read: 97.68. Notwithstanding any other provision of law, in allocating ad valorem property tax revenue allocations for each fiscal year during the fiscal adjustment period, all of the following apply: (a) (1) The total amount of ad valorem property tax revenue otherwise required to be allocated to a county's Educational Revenue Augmentation Fund shall be reduced by the countywide adjustment amount. (2) The countywide adjustment amount shall be deposited in a Sales and Use Tax Compensation Fund that shall be established in the treasury of each county. (b) For purposes of this section, the following definitions apply: (1) "Fiscal adjustment period" means the period beginning with the 2004-05 fiscal year and continuing through the fiscal year in which the Director of Finance notifies the State Board of Equalization pursuant to subdivision (b) of Section 99006 of the Government Code. (2) "Countywide adjustment amount" means the combined total revenue loss of the county and each city in the county that is annually estimated by the Director of Finance, based on the taxable sales in that county in the prior fiscal year as determined by the State Board of Equalization and reported to the director on or before August 15 of each fiscal year during the fiscal adjustment period, to result for each of those fiscal years from the 0.25 percent reduction in local sales and use rate tax authority applied by Section 7203.1. (c) For each fiscal year during the fiscal adjustment period, moneys in the Sales and Use Tax Compensation Fund shall be allocated among the county and the cities in the county, and those allocations shall be subsequently adjusted, as follows: (1) The Director of Finance shall, on or before September 1 of each fiscal year during the fiscal adjustment period, notify each county auditor of that portion of the countywide adjustment amount for that fiscal year that is attributable to the county and to each city within that county. (2) The county auditor shall allocate revenues in the Sales and Use Tax Compensation Fund among the county and cities in the county in the amounts described in paragraph (1). The auditor shall allocate one-half of the amount described in paragraph (1) in each January during the fiscal adjustment period and shall allocate the balance of that amount in each May during the fiscal adjustment period. (3) After the end of each fiscal year during the fiscal adjustment period, other than a fiscal year subject to subdivision (d), the Director of Finance shall, based on the actual taxable sales for the prior fiscal year, recalculate each amount estimated under paragraph (1) and notify the county auditor of the recalculated amount. (4) If the amount recalculated under paragraph (3) for the county or any city in the county is greater than the amount allocated to that local agency under paragraph (2), the county auditor shall, in the fiscal year next following the fiscal year for which the allocation was made, transfer an amount of ad valorem property tax revenue equal to this difference from the Sales and Use Tax Compensation Fund to that local agency. (5) If the amount recalculated under paragraph (3) for the county or any city in the county is less than the amount allocated to that local agency under paragraph (2), the county auditor shall, in the fiscal year next following the fiscal year for which the allocation was made, reduce the total amount of ad valorem property tax revenue otherwise allocated to that city or county from the Sales and Use Tax Compensation Fund by an amount equal to this difference and instead allocate this difference to the county Educational Revenue Augmentation Fund. (6) If there is an insufficient amount of moneys in a county's Sales and Use Tax Compensation Fund to make the transfers required by paragraph (4), the county auditor shall transfer from the county Educational Revenue Augmentation Fund an amount sufficient to make the full amount of these transfers. (d) (1) If Section 7203.1 ceases to be operative during any calendar quarter that is not the calendar quarter in which the fiscal year begins, the excess amount, as defined in paragraph (2), of the county and each city in the county shall be reallocated from each of those local agencies to the Educational Revenue Augmentation Fund. (2) For purposes of this subdivision, "excess amount" means the product of both of the following: (A) The total amount of ad valorem property tax revenue allocated to that local agency pursuant to paragraph (2) of subdivision (c). (B) That percentage of the fiscal year in which Section 7203.1 is not operative. (e) For the 2005-06 fiscal year and each fiscal year thereafter, the amounts determined under subdivision (a) of Section 96.1, or any successor to that provision, may not reflect any portion of any property tax revenue allocation required by this section for a preceding fiscal year. (f) This section may not be construed to do any of the following: (1) Reduce any allocations of excess, additional, or remaining funds that would otherwise have been allocated to cities, counties, cities and counties, or special districts pursuant to clause (i) of subparagraph (B) of paragraph (4) of subdivision (d) of Section 97.2 and clause (i) of subparagraph (B) of paragraph (4) of subdivision (d) of Section 97.3, had this section not been enacted. The allocation made pursuant to subdivisions (a) and (c) shall be adjusted to comply with this paragraph. (2) Require an increased ad valorem property tax revenue allocation to a community redevelopment agency. (3) Alter the manner in which ad valorem property tax revenue growth from fiscal year to fiscal year is determined or allocated in a county. (g) Existing tax exchange or revenue sharing agreements, entered into prior to the operative date of this section, between local agencies or between local agencies and nonlocal agencies shall be deemed to be temporarily modified to account for the reduced sales and use tax revenues, resulting from the temporary reduction in the local sales and use tax rate, with those reduced revenues to be replaced in kind by property tax revenue from a Sales and Use Tax Compensation Fund or an Educational Revenue Augmentation Fund, on a temporary basis, as provided by this section. SEC. 4.11. Section 6051.5 of the Revenue and Taxation Code is repealed. SEC. 4.12. Section 6051.5 is added to the Revenue and Taxation Code, to read: 6051.5. (a) In addition to the taxes imposed by Section 6051 and any other provision of this part, for the privilege of selling tangible personal property at retail a tax is hereby imposed upon all retailers at the rate of one-quarter of 1 percent of the gross receipts of any retailer from the sale of all tangible personal property sold at retail in this state. (b) All revenues, net of refunds, received pursuant to this section shall be deposited in the State Treasury to the credit of the Fiscal Recovery Fund, as established pursuant to Section 99008 of the Government Code. (c) Revenues received pursuant to this section accruing to the Fiscal Recovery Fund shall not be considered to be "State General Fund proceeds of taxes appropriated pursuant to Article XIII B" within the meaning of either Section 8 of Article XVI of the California Constitution or Section 41202 of the Education Code. (d) This section shall become operative on July 1, 2004, and shall cease to be operative on the first day of the first calendar quarter commencing more than 90 days following a notification to the board by the Director of Finance pursuant to subdivision (b) of Section 99006 of the Government Code. SEC. 4.13. Section 6201.5 of the Revenue and Taxation Code is repealed. SEC. 4.14. Section 6201.5 is added to the Revenue and Taxation Code, to read: 6201.5. (a) In addition to the taxes imposed by Section 6201 and any other provision of this part, an excise tax is hereby imposed on the storage, use, or other consumption in this state of tangible personal property purchased from any retailer at the rate of one-quarter of 1 percent of the sales price of the property. (b) All revenues, net of refunds, received pursuant to this section shall be deposited in the State Treasury to the credit of the Fiscal Recovery Fund, as established pursuant to Section 99008 of the Government Code. (c) Revenues received pursuant to this section accruing to the Fiscal Recovery Fund shall not be considered to be "State General Fund proceeds of taxes appropriated pursuant to Article XIII B" within the meaning of either Section 8 of Article XVI of the California Constitution or Section 41202 of the Education Code. (d) This section shall become operative on July 1, 2004, and shall cease to be operative on the first day of the first calendar quarter commencing more than 90 days following a notification to the board by the Director of Finance pursuant to subdivision (b) of Section 99006 of the Government Code. SEC. 4.15. Section 7202 of the Revenue and Taxation Code is repealed. SEC. 4.16. Section 7202 is added to the Revenue and Taxation Code, to read: 7202. The sales tax portion of any sales and use tax ordinance adopted under this part shall be imposed for the privilege of selling tangible personal property at retail, and shall include provisions in substance as follows: (a) A provision imposing a tax for the privilege of selling tangible personal property at retail upon every retailer in the county at the rate of 11/4 percent of the gross receipts of the retailer from the sale of all tangible personal property sold by that person at retail in the county. (b) Provisions identical to those contained in Part 1 (commencing with Section 6001), insofar as they relate to sales taxes, except that the name of the county as the taxing agency shall be substituted for that of the state and that an additional seller's permit shall not be required if one has been or is issued to the seller under Section 6067. (c) A provision that all amendments subsequent to the effective date of the enactment of Part 1 (commencing with Section 6001) relating to sales tax and not inconsistent with this part, shall automatically become a part of the sales tax ordinance of the county. (d) A provision that the county shall contract prior to the effective date of the county sales and use tax ordinances with the State Board of Equalization to perform all functions incident to the administration or operation of the sales and use tax ordinance of the county. Any such contract shall contain a provision that the county agrees to comply with the provisions of Article 11 (commencing with Section 29530) of Chapter 2 of Division 3 of Title 3 of the Government Code. (e) A provision that the ordinance may be made inoperative not less than 60 days, but not earlier than the first day of the calendar quarter, following the county's lack of compliance with Article 11 (commencing with Section 29530) of Chapter 2 of Division 3 of Title 3 of the Government Code or following an increase by any city within the county of the rate of its sales or use tax above the rate in effect at the time the county ordinance was enacted. (f) A provision that the amount subject to tax shall not include the amount of any sales tax or use tax imposed by the State of California upon a retailer or consumer. (g) A provision that there is exempted from the sales tax 80 percent, and on and after July 1, 2004, until the rate modifications in subdivision (a) of Section 7203.1 cease to apply, 75 percent, of the gross receipts from the sale of tangible personal property, other than fuel or petroleum products, to operators of aircraft to be used or consumed principally outside the county in which the sale is made and directly and exclusively in the use of the aircraft as common carriers of persons or property under the authority of the laws of this state, the United States, or any foreign government. (h) A provision that any person subject to a sales and use tax under the county ordinance shall be entitled to credit against the payment of taxes due under that ordinance the amount of sales and use tax due to any city in the county; provided that the city sales and use tax is levied under an ordinance including provisions in substance as follows: (1) A provision imposing a tax for the privilege of selling tangible personal property at retail upon every retailer in the city at the rate of 1 percent or less of the gross receipts of the retailer from the sale of all tangible personal property sold by that person at retail in the city and a use tax of 1 percent or less of purchase price upon the storage, use or other consumption of tangible personal property purchased from a retailer for storage, use or consumption in the city. (2) Provisions identical to those contained in Part 1 (commencing with Section 6001), insofar as they relate to sales and use taxes, except that the name of the city as the taxing agency shall be substituted for that of the state (but the name of the city shall not be substituted for the word "state" in the phrase "retailer engaged in business in this state" in Section 6203 nor in the definition of that phrase in Section 6203) and that an additional seller's permit shall not be required if one has been or is issued to the seller under Section 6067. (3) A provision that all amendments subsequent to the effective date of the enactment of Part 1 (commencing with Section 6001) relating to sales and use tax and not inconsistent with this part, shall automatically become a part of the sales and use tax ordinance of the city. (4) A provision that the city shall contract prior to the effective date of the city sales and use tax ordinance with the State Board of Equalization to perform all functions incident to the administration or operation of the sales and use tax ordinance of the city which shall continue in effect so long as the county within which the city is located has an operative sales and use tax ordinance enacted pursuant to this part. (5) A provision that the storage, use or other consumption of tangible personal property, the gross receipts from the sale of which has been subject to sales tax under a sales and use tax ordinance enacted in accordance with this part by any city and county, county, or city in this state, shall be exempt from the tax due under this ordinance. (6) A provision that the amount subject to tax shall not include the amount of any sales tax or use tax imposed by the State of California upon a retailer or consumer. (7) A provision that there are exempted from the computation of the amount of the sales tax the gross receipts from the sale of tangible personal property to operators of aircraft to be used or consumed principally outside the city in which the sale is made and directly and exclusively in the use of the aircraft as common carriers of persons or property under the authority of the laws of this state, the United States, or any foreign government. (8) A provision that, in addition to the exemptions provided in Sections 6366 and 6366.1, the storage, use, or other consumption of tangible personal property purchased by operators of aircraft and used or consumed by the operators directly and exclusively in the use of the aircraft as common carriers of persons or property for hire or compensation under a certificate of public convenience and necessity issued pursuant to the laws of this state, the United States, or any foreign government is exempt from the use tax. SEC. 4.17. Section 7203 of the Revenue and Taxation Code is repealed. SEC. 4.18. Section 7203 is added to the Revenue and Taxation Code, to read: 7203. The use tax portion of any sales and use tax ordinance adopted under this part shall impose a complementary tax upon the storage, use or other consumption in the county of tangible personal property purchased from any retailer for storage, use or other consumption in the county. That tax shall be at the rate of 11/4 percent of the sales price of the property whose storage, use or other consumption is subject to the tax and shall include: (a) Provisions identical to the provisions contained in Part 1 (commencing with Section 6001), other than Section 6201 insofar as those provisions relate to the use tax, except that the name of the county as the taxing agency enacting the ordinance shall be substituted for that of the state (but the name of the county shall not be substituted for the word "state" in the phrase "retailer engaged in business in this state" in Section 6203 nor in the definition of that phrase in Section 6203). (b) A provision that all amendments subsequent to the date of such ordinance to the provisions of the Revenue and Taxation Code relating to the use tax and not inconsistent with this part shall automatically become a part of the ordinance. (c) A provision that the storage, use or other consumption of tangible personal property, the gross receipts from the sale of which has been subject to sales tax under a sales and use tax ordinance enacted in accordance with this part by any city and county, county, or city in this state, shall be exempt from the tax due under this ordinance. (d) A provision that the amount subject to tax shall not include the amount of any sales tax or use tax imposed by the State of California upon a retailer or consumer. (e) A provision that, in addition to the exemptions provided in Sections 6366 and 6366.1, the storage, use, or other consumption of tangible personal property, other than fuel or petroleum products, purchased by operators of aircraft and used or consumed by the operators directly and exclusively in the use of the aircraft as common carriers of persons or property for hire or compensation under a certificate of public convenience and necessity issued pursuant to the laws of this state, the United States or any foreign government is exempt from 80 percent of the use tax, and on and after July 1, 2004, until the rate modifications in subdivision (a) of Section 7203.1 cease to apply, exempt from 75 percent of the use tax. SEC. 4.19. Section 7203.1 of the Revenue and Taxation Code is repealed. SEC. 4.20. Section 7203.1 is added to the Revenue and Taxation Code, to read: 7203.1. (a) Notwithstanding any other provision of law, during the revenue exchange period only, the authority of a county or a city under this part to impose a tax rate as specified in an ordinance adopted pursuant to Sections 7202 and 7203 is suspended, and the tax rate to be applied instead during that period under any ordinance as so adopted is the applicable of the following: (1) In the case of a county, 1 percent. (2) In the case of a city, three-quarters of 1 percent. (b) For purposes of this section, "revenue exchange period" means the period on and after July 1, 2004, and before the first day of the first calendar quarter commencing more than 90 days following a notification to the board by the Director of Finance pursuant to subdivision (b) of Section 99006 of the Government Code. (c) Subdivision (a) is a self-executing provision that operates without regard to any decision or act on the part of any local government. A change in a local general tax rate resulting from either the rate limitations applied by subdivision (a) or the end of the revenue exchange period is not subject to voter approval under either statute or Article XIII C of the California Constitution. (d) Existing tax exchange or revenue sharing agreements, entered into prior to the operative date of this section, between local agencies or between local agencies and nonlocal agencies shall be deemed to be temporarily modified to account for the reduction in sales and use tax revenues resulting from this section, with those reduced revenues to be replaced as may otherwise be provided by law. SEC. 5. (a) Notwithstanding the requirements of Sections 9040, 9043, 9044, 9061, and 9082 of the Elections Code or any other provision of law, the Secretary of State shall submit Section 3 of this act to the voters at the March 2, 2004, statewide primary election. (b) Notwithstanding Section 13115 of the Elections Code, Section 3 of this act and any other measure placed on the ballot by the Legislature for the March 2, 2004, statewide primary election after the 131-day deadline set forth in Section 9040 of the Elections Code shall be placed on the ballot, following all other ballot measures, in the order in which they qualified as determined by chapter number. (c) Notwithstanding Section 13282 of the Elections Code, the public shall be permitted to examine the condensed statement of the ballot title for at least one day. Any voter may seek a writ of mandate for the purpose of requiring any statement of the ballot title, or portion thereof, to be amended or deleted only within that period. (d) Notwithstanding Section 9087 of the Elections Code or any other provision of law, the Legislative Analyst is not required to submit his or her analysis of a ballot measure that must appear in a supplemental ballot pamphlet for the March 2, 2004, primary election to a committee for review. (e) The Secretary of State shall include, in the ballot pamphlets mailed pursuant to Section 9094 of the Elections Code, the information specified in Section 9084 of the Elections Code regarding the bond act contained in Section 3 of this act. If that inclusion is not possible, the Secretary of State shall publish a supplemental ballot pamphlet regarding this act to be mailed with the ballot pamphlet. If the supplemental ballot pamphlet cannot be mailed with the ballot pamphlet, the supplemental ballot pamphlet shall be mailed separately. SEC. 6. (a) Notwithstanding any other provision of law, all ballots of the March 2, 2004, statewide primary election shall have printed thereon and in a square thereof, the words "The Economic Recovery Bond Act," and in the same square under those words, the following in 8-point type: "A one time Economic Recovery Bond of up to fifteen billion dollars ($15,000,000,000) to pay off the state's accumulated General Fund deficit as of June 30, 2004. The Economic Recovery Bond will only be issued if the California Balanced Budget Act is also approved by the voters. The bonds will be secured by existing tax revenues and by other revenues that could be deposited in a special fund." Opposite the square, there shall be left spaces in which the voters may place a cross in the manner required by law to indicate whether they vote for or against the act. (b) Notwithstanding Sections 9051, 13247, and 13281 of the Elections Code, the ballot label shall be: "One time bond of up to fifteen billion dollars ($15,000,000,000) to retire deficit." This shall be the only language included in the ballot label for the condensed statement of the ballot title, and the Attorney General shall not supplement, subtract from, or revise that language, except that the Attorney General may include the financial impact summary prepared pursuant to Section 9087 of the Elections Code and Section 88003 of the Government Code. The ballot label is the condensed statement of the ballot title and the financial impact summary. (c) Where voting in the election is done by means of voting machines used pursuant to law in a manner that carries out the intent of this section, the use of the voting machines and the expression of the voters' choice by means thereof are in compliance with this section. SEC. 7. If any provision of this act or application thereof is held to be invalid, that invalidity shall not affect other provisions or applications that can be given effect without the invalid provisions or applications, and to this end the provisions of this act are severable. SEC. 8. Sections 1 to 4.20, inclusive, of this act shall become operative only if both of the following occur: (a) ACA 5 of the 2003-04 Fifth Extraordinary Session is submitted to and approved by the voters at the March 2, 2004, statewide primary election. (b) The voters adopt the Economic Recovery Bond Act, as set forth in Section 3 of this act. SEC. 9. This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the Constitution and shall go into immediate effect. The facts constituting the necessity are: In order to provide funds necessary to reduce the accumulated budget deficit, it is necessary that this act take effect immediately.