BILL ANALYSIS                                                                                                                                                                                                    


            Senator Lois Wolk, Chair

                                                  AB 267 - Torlakson

                                                  Amended: May 20, 2009


            Hearing: July 8, 2009                            Fiscal: No

            SUMMARY: Allows School Districts to Form "Education Finance  
                      Districts"; Permits Education Finance Districts  
                      to Levy Qualified Special Taxes.

                 EXISTING LAW (California Constitution) states that  
            taxes levied by local governments are either general taxes,  
            subject to majority approval of its voters, or special  
            taxes, subject to 2/3 vote.  Proposition 13 (1978) required  
            2/3 vote of each house of the Legislature for state tax  
            increases, and 2/3 vote of local voters for local special  
            taxes.  Proposition 62 (1986) prohibited local agencies  
            from imposing general taxes without majority approval of  
            local voters and 2/3 vote for special taxes.  Proposition  
            218 extended the requirements to charter cities, and  
            limited local agencies' powers to levy new assessments,  
            fees, and taxes. Local agencies generally levy and increase  
            fees and service charges by adopting an ordinance or a  
            resolution at a public hearing. State law requires local  
            agencies to hold noticed public hearings before levying or  
            raising a fee, but does not require voter approval. 

                 EXISTING LAW allows school districts to:

                             Create Community Facilities Districts by  
                      landowner vote which assess Mello-Roos Special  
                      Taxes for school facilities, maintenance services  
                      for elementary and secondary school sites and  
                      structures.   Schools must give priority  


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                      attendance access to students residing in  
                      community facilities districts.  
                             Impose a qualified special tax that is  
                      uniform as applied to all taxpayers, except the  
                      district may exempt persons over the age of 65,  
                      with 2/3 vote of the electorate.  The district  
                      may implement the tax for as long as it wants,  
                      spend the proceeds for any purpose, and apply any  
                      tax rate it chooses.  Local agencies have only  
                      assessed parcel taxes under this section.

                 THIS BILL allows an education finance district to levy  
            qualified special taxes, commonly known as parcel taxes.

                 THIS BILL defines an "education finance district" as  
            three or more contiguous school districts located wholly or  
            partially within the same county or two school districts  
            within a county with only two school districts, or only one  
            school district within a county containing only one school  
            district.  To form an education finance districts, school  
            districts must approve a resolution to participate in the  
            education finance district, and enter into a mutual  
            agreement with other school districts participating in the  
            education finance district regarding division and  
            expenditure of the tax.

                 THIS BILL further provides that a school district with  
            a population of pupils 70% or greater from very low or low  
            income households, according to definitions found in the  
            Health and Safety Code, shall not be denied participation  
            in an education finance district by school districts  
            forming a three-school district education finance district.

            FISCAL EFFECT: 

                 Committee Staff estimate possibly significant revenue  
            gains to local school districts, but uncertain and  
            significant costs to inform taxpayers, collect taxes, and  
            enforce tax collection.


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            A.   Purpose of the Bill

                 According to the Author, "Parcel taxes have not been  
            used successfully across the school district demographic  
            spectrum. About 90% of the parcel tax elections between  
            1983 and 2006 were held in districts that were below the  
            state average of 49% low-income students. According to  
            EdSource, a possible explanation for this is that wealthier  
            communities are either better able or more willing to tax  
            themselves to improve their schools. In order to encourage  
            better equity between wealthier communities and  
            lower-income communities, Education Finance Districts  
            (EFDs) will require school districts to band together in  
            order to levy a parcel tax with a majority vote. EFDs will  
            also encourage partnerships between school districts that  
            encourage "economy of scale" decisions on a wide variety of  
            programmatic and operational costs. For example, these  
            innovations could include joint career technical education  
            centers, workforce development programs, or magnet schools.  
             Local control enjoys strong support by the voters.  
            According to the latest PPIC survey: "When it comes to  
            deciding how money from the state government should be  
            spent in local public schools, about eight in 10 residents  
            believe decisions should be made locally (49% local school  
            districts, 33% local schools) rather than by the state  

            B.   Equity for School Financing

                 State and local agencies fund California schools with  
            a mix of state funding and local property tax revenues.   
            Traditionally, local property taxes funded schools -  
            students from wealthy districts with larger property tax  
            bases generally attended well-funded schools while poorer  
            districts were systemically under funded.  For example, in  


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            1968-69, Baldwin Park School District spent $577.49 for  
            each student, while Pasadena spent $840.19 and Beverly  
            Hills allocated $1231.72.  After  Serrano v. Priest  (1971)  
            (5 Cal.3d 584),  Serrano v. Priest  (1976) (18 Cal.3d 728),  
            and  Serrano v. Priest  (1977) (20 Cal.3d 25) the state  
            attempted to equalize school funding by establishing  
            revenue limits, causing the state to make up the   
            difference between local property taxes and the revenue  
            limit.  The state does not fund basic aid districts, where  
            local property taxes meet or exceed the revenue limit.   
            Proposition 13 (1978) reduced property tax revenues for  
            most school districts by limiting property taxes to one per  
            cent of assessed valuations, limited growth of assessed  
            valuation to 2% per year, and prohibited reassessment  
            unless the property was newly constructed or changed  

                 AB 267 grants tax powers to education finance  
            districts, collaborations of school districts.  However,  
            the specter of inequality that haunted California school  
            finance before the Serrano series of cases is present in  
            the debate over AB 267: will taxing more affluent residents  
            of well-to-do districts further exacerbate historic and  
            current inequalities?  School districts in economically  
            challenged communities serving ethnically diverse student  
            populations will have a much smaller tax base to draw from  
            than districts serving higher income neighborhoods.  While  
            AB 267 allows school districts to come together, proceeds  
            from the enhanced tax authority are largely contingent on  
            local economic realities.  Furthermore, because only the  
            mutual agreement between districts allocates education  
            finance district tax proceeds, no guarantee exists that the  
            tax benefits each student in the education finance district  
            equally - the mutual agreement distributes all tax  
            proceeds.  To its credit, AB 267 makes efforts to address  
            these equity issues by preventing districts forming an  
            education finance district of three school districts or  
            more from excluding a school district serving 70% or more  
            low or very low income households.


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            C.   New Kid on the Block 

                 AB 267 allows school districts to form education  
            finance districts, heretofore not allowed in California -  
            creating a new animal in the considerable menagerie of over  
            12,000 special districts currently in California.  By  
            allowing for these new creatures, the bill bypasses Local  
            Agency Formation Commissions, local commissions which  
            exercise the legislatively-designated powers of controlling  
            local agency boundaries, which typically consider forming  
            new special district.  The measure does not grant education  
            finance districts any of the typical powers that other  
            special districts or school districts possess either as  
            part of their principal acts or special acts; these new  
            districts are born when school districts pass a resolution,  
            neither are education finance districts joint powers  
            agreements created under the Government Code.    The  
            Committee may wish to consider whether creating a new  
            entity is the appropriate step for resolving a funding  
            shortfall, especially when cities could enact a parcel tax  
            and dedicate the proceeds to local school districts under  
            current law.

            D.   Postcards from the Edge

                 At the Committee's June 10th Informational Hearing  
            regarding authority for local revenue options, Professor  
            Darien Shanske of Hastings College of Law testified that  
            capital markets view California's governmental structure as  
            unsustainable.  Program finance, program delivery, and  
            program governance for public services in California are  
            dispersed across several agencies and levels of government,  
            leaving a tangled system so hopelessly disconnected that  
            some are considering a Constitutional Convention to attempt  
            to cut this Gordian Knot.  In education, local school  
            districts deliver most services to students, but are  
            overseen by the State Superintendent of Public Instruction  
            who heads the State Department of Education, the State  
            Board of Education, the Governor's Secretary for Education,  
            County Offices of Education, and local School District  


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            Superintendents and local school boards who lead school  
            districts.  Programs are financed by local property taxes,  
            with the state compensating for the difference between  
            local property taxes and Proposition 98 revenue limits with  
            general fund revenues (funded by state income taxes, sales  
            taxes, and bank and corporation taxes among others), then  
            overlaid with any local taxes like Mello-Roos or parcel  
            taxes.  With program oversight and program finance so  
            dispersed, who's accountable?  What level of government is  
            ultimately responsible for funding public education?  Who  
            should taxpayers call when services do not meet  

                 While AB 267 adds an option for local agencies and  
            taxpayers to choose to assess themselves more to fund  
            education in their communities, does creating one more  
            taxing jurisdiction make sense given the existing morass of  
            oversight, responsibility, and finance?  The Committee may  
            wish to consider whether AB 267's benefits of empowering  
            local agencies by allowing school districts to form  
            education finance districts are outweighed by its potential  
            to further complicate a fundamentally disconnected system.

            E.   Hit Me Baby One More Time

                 Last year, the Committee rejected SB 1430 (Torlakson),  
            a measure similar to AB 267, and held on its suspense file  
            SCA 18 (Torlakson), which reduced the vote threshold for  
            special taxes levied by education finance district from 2/3  
            to a majority of the electorate.  This year, ACA 10  
            (Torkason), identical to last year's SCA 18, is currently  
            on the Assembly Floor.

            Support and Opposition

                 Support:       AFSCME, Association of California  
                           School Administrators, California  
                           Association of School Business Officials  
                           (CASBO), California Federation of Teachers,  


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                           California School Boards Association,  
                           California School Employees Association  
                           (CSEA), California Tax Reform Association,  
                           California Teachers Association, Riverside  
                           County Schools Advocacy Association, San  
                           Francisco Unified School District, Small  
                           School Districts' Association; Los Angeles  
                           Unified School District

                 Oppose:   Howard Jarvis Taxpayers' Association


            Consultant: Colin Grinnell