BILL ANALYSIS
SENATE REVENUE & TAXATION COMMITTEE
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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COMMENTS:
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
(13%)."
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
ownership.
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
expectations?
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
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Consultant: Colin Grinnell