BILL ANALYSIS AB 267 Page 1 ASSEMBLY THIRD READING AB 267 (Torlakson) As Amended May 20, 2009 Majority vote REVENUE & TAXATION 6-3 ----------------------------------------------------------------- |Ayes:|Charles Calderon, Beall, | | | | |Coto, Ma, Portantino, | | | | |Saldana | | | | | | | | |-----+--------------------------+-----+--------------------------| |Nays:|DeVore, Harkey, Nielsen | | | | | | | | ----------------------------------------------------------------- SUMMARY : Authorizes an education finance district, as defined, to impose a qualified special tax, as defined, within the district. Specifically, this bill : 1)Provides that, subject to Section 4 of Article XIII A of the California Constitution, an education finance district may impose qualified special taxes within the district. 2)Authorizes the following school districts to create an education finance district: a) Three or more contiguous school districts located wholly or partially within the same county; b) Two school districts within a county containing only two school districts; or, c) If a county contains only one school district, that school district may form an education finance district with two or more contiguous school districts in adjoining counties. 3)Requires the governing bodies of each school district that participates in establishing an education finance district to do both of the following: a) Adopt a resolution to participate in the education finance district; and, AB 267 Page 2 b) Enter into a mutual agreement with the other school districts participating in the education finance district regarding the division and expenditure of the revenue raised by a qualified special tax. 4)Specifies that three or more contiguous school districts that decide to form an education finance district may not deny participation in the education finance district to a school district with a population of pupils 70% or greater from "lower income households", as defined in Health and Safety Code (H&SC) Section 50079.5, or "very low income households", as defined in H&SC Section 50105, provided that that school district meets all of the applicable requirements. EXISTING LAW : 1)Authorizes cities, counties, and special districts to impose a general tax for general governmental purposes with the approval of a majority of the voters. Prohibits special purpose districts and agencies, including schools districts, from levying a general tax. 2)Authorizes cities, counties, and special districts to impose a special tax for specified purposes with the approval of two-thirds of the voters. Does not allow cities, counties, or special districts to impose an ad valorem tax on real property, or a transactions tax or sales tax on the sale of real property within that city, county, or special district. 3)Authorizes school districts to impose qualified special taxes, in accordance with specified procedures, including the approval of two-thirds of the voters in the district. Provides that "qualified special taxes" must apply uniformly to all taxpayers or all real property within the school district and do not include special taxes imposed on a particular class of property or taxpayers. FISCAL EFFECT : Unknown COMMENTS : The author states that, "California's budget crisis must be resolved without breaking the state's commitment to education. Local revenue generation and local control for our schools must be a component to how we get ourselves out of this AB 267 Page 3 budget mess. The lower school bond threshold has been instrumental in reviving California's school facilities. A majority vote for local education finance districts promises to similarly rebuild the education of our children." The proponents argue that local communities should be able to explore local resources to meet local priorities and should be able to tax themselves, if needed, to invest in education. The proponents assert that the percentage of school district revenues coming from the state has increased significantly over the last 30 years, eroding local control over resources and priorities. As state funding is being reduced, school districts have very few options to cope with the loss of funding. The proponents believe that AB 267, in partnership with ACA 10 (Torlakson) of 2009, would give education finance districts the tools necessary to navigate these uncertain economic times, by addressing their needs at the local level and relying less on the timely passage of a State Budget. The opponents argue that expanding the tax authority to education finance districts could cause duplicative and/or increased taxation and overburdening of taxpayers who already live and operate in an enormously high-tax state. Committee staff notes all of the following: 1)Prior to 1970, the state's K-12 schools largely relied on local property taxes levied at different rates and yielding different amounts per pupil in more than 1,000 schools districts in this state. State court rulings in the Serrano v. Priest equalization cases forced the state to revise basic school finance and established the revenue limit system. [Serrano v. Priest (1971) 5 Cal.3d 584; Serrano v. Priest (1976) 18 Cal.3d 728; Serrano v. Priest (1977) 20 Cal. 3d 25)]. In order to conform to the court's decision and reduce the differences in per-pupil amounts, the state created the revenue limit system that combines local property tax revenues with state general aid and allows the state to control the two revenue sources on a per pupil basis. The state does not fund basic aid districts, where local property taxes met or exceeded the revenue limit. In 1978, Proposition 13 limited both the tax rates and assessments, thus significantly reducing property tax revenues, eliminating the ability of school districts to levy an incremental ad valorem tax on real AB 267 Page 4 property and forcing the state to replace the lost revenues in district revenue limits. School districts still have limited authority to generate local revenues from qualified special taxes, but most school funding is either received from the state or federal governments, or controlled by the state through revenue limits required to equalize per-pupil funding. 2)Under existing law, a school district may impose a qualified special tax within that district; however, the special tax must apply uniformly to all taxpayers (other than persons over the age of 65) or real property within the district and must be approved by a two-thirds vote of the qualified electors of the district. While Proposition 13 did not define the term "special tax", the courts, over time, have opined that a tax is a "special tax" whenever expenditure of its revenues is limited to specific purposes, i.e. the proceeds of the tax are earmarked or dedicated in some manner to a specific project or projects. In contrast, a tax is a "general tax" only when its revenues are placed into the General Fund and are available for expenditure for any and all governmental purposes. [Bay Area Cellular Telephone Co. v. City of Union City (2008) 162 Cal. App.4th 686; Howard Jarvis Taxpayers Assn. v. City of Roseville (2003) 106 Cal.App.4th 1178]. School districts and special districts are prohibited from imposing general taxes (Proposition 218) and thus, by definition, any tax levied by a school district or community school district is considered to be a special tax subject to a two-thirds voter approval. Furthermore, school districts are not allowed to impose a special tax that is imposed on a particular class of property or taxpayers. Therefore, thus far, school districts have only imposed "qualified special taxes", under Government Code Section 50079, in the form of a parcel tax. 3)A parcel tax is a flat fee imposed by a city, county, or special district on each parcel, residential as well as commercial, rather than on the assessed value of property, located within the local entity's jurisdiction. Because the same dollar amount of tax is assessed on each parcel of property, whether the parcel is one acre or 100 acres, parcel taxes are generally regressive, which means owners of smaller parcels of land pay a larger percentage of tax compared to owners of larger parcels of land. Existing law does not limit how the special tax proceeds may be spent and, therefore, a AB 267 Page 5 local school board can specify in the ballot measure how the funds will be used. Generally, local parcel taxes provide secure funding for teacher salaries, books, materials and supplies, computers, and art, music and sports programs. 4)According to EdSource, only 178 school districts out of nearly 1,000 have attempted to pass a parcel tax at any time since 1983, and about 90% of those elections were held in districts that served a lower than average proportion of low-income students. A common explanation for this situation is that wealthier communities are either better able or more willing to tax themselves to improve their schools. The author believes that AB 267 would encourage partnerships among school districts in various communities as well as "economy of scale" decisions on a wide variety of programmatic and operational costs. It is worth noting that 55% of California's districts serve fewer than 2,500 students, and many of these districts are located in rural areas. Not many small school districts have attempted to impose a parcel tax simply because of the costs and efforts involved in placing a measure on the ballot. This bill would provide rural school districts with a real possibility of raising much-needed funds by imposing one parcel tax within the education finance district's jurisdiction. It may also allow small school districts to reduce their operational costs by using the funds from the imposition of the tax to create joint programs (e.g., workforce development program, after-school program, magnet schools, etc.). It is less clear, however, as to how much of an impact this bill would have on eradicating the persistent inequality between school districts in wealthier communities and those in lower-income communities. Despite the uncertainty, AB 267 provides an opportunity for residents in various communities to make decisions about education of their students and, if willing, to address the problem of inequality. 5)ACA 10 reduces the vote threshold for special taxes levied by education finance districts from two-thirds to a majority vote of the electorate. If both this bill and ACA 10 are enacted, then an education finance district would be able to levy qualified special taxes with only a majority vote of its electorate. If only AB 267 is enacted, then an education AB 267 Page 6 finance district would still be able to impose those taxes but with a two-thirds vote of the electorate. 6)SB 1430 (Torlakson) as amended on April 10, 2008, was identical to this bill. Its companion measure, SCA 18 (Torlakson) of 2008, would have reduced the vote threshold for special taxes levied by an education finance district from two-thirds to a majority of the electorate. Both SB 1430 and SCA 18 died in the Senate. Analysis Prepared by : Oksana G. Jaffe / REV. & TAX. / (916) 319-2098 FN: 0000842