BILL ANALYSIS ------------------------------------------------------------ |8SENATE RULES COMMITTEE | AB 267| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ THIRD READING Bill No: AB 267 Author: Torlakson (D) et al Amended: 9/1/09 in Senate Vote: 21 SENATE REVENUE & TAXATION COMMITTEE : 5-3, 7/8/09 AYES: Wolk, Alquist, Florez, Padilla, Wiggins NOES: Walters, Ashburn, Runner SENATE EDUCATION COMMITTEE : 6-3, 7/8/09 AYES: Romero, Alquist, Hancock, Liu, Padilla, Simitian NOES: Huff, Maldonado, Wyland ASSEMBLY FLOOR : 46-30, 6/3/09 - See last page for vote SUBJECT : Education finance districts: taxes SOURCE : Author DIGEST : This bill authorizes an education finance district, as defined, to impose a qualified special tax, as defined, within the district. Senate Floor Amendments of 9/1/09 corrected subdivision references. Senate Floor Amendments of 8/24/09 clarified that school districts with 70 percent or more of their pupils in poverty, as defined, may not be excluded from an education finance district if the high poverty district meets all CONTINUED AB 267 Page 2 other qualifications. The amendments also clarified that elementary districts that have territory in another participating (high school or unified) district may still participate. ANALYSIS : Existing law 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, 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, and 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, and 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. 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. C. If a county contains only one school district, that school district may form an education finance district with two or more contiguous school AB 267 Page 3 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. 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 percent 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. Background Prior to 1970, the state's K-12 schools relied largely on local property taxes levied at different rates and yielding different amounts per pupil in the more than 1,000 school districts of the state. State court rulings in the Serrano v. Priest equalization lawsuit forced the state to revise basic school finance and established the revenue limit system that exists today. Revenue limits had the effect of making the level of local property taxes almost irrelevant to schools since each additional dollar of property tax within the revenue limit simply relieved the state of the obligation to provide that dollar. Similarly, if property tax revenues declined, the state was obligated to replace the dollar up to the district's revenue limit. Property taxes remained relevant to about 100 "basic aid" school districts who were fortunate enough to receive more property tax than required by their revenue limits, and all districts were still able to levy property tax increments AB 267 Page 4 outside of revenue limits, if the override was locally approved for a specific purpose. In 1978, Proposition 13 limited both tax rates and assessments thereby significantly reducing property tax revenues and forcing the state to replace the lost revenues in district revenue limits. However, Proposition 13's limit on tax rates ended the ability of school districts to levy incremental rates. Since that time, school districts have established some ability to generate limited local revenues from (non ad valorem) parcel taxes that must be approved by a 2/3 vote locally, 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. Prior/Related legislation . ACA 10 (Torlakson) of 2009, would, upon approval of a vote of the people statewide, amend the California Constitution to lower the constitutional vote requirement for approval of a special tax to be levied by an education finance district from two-thirds to a (50 percent+1) majority of the district voters. 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. FISCAL EFFECT : Appropriation: No Fiscal Com.: No Local: No SUPPORT : (Verified 9/1/09) California Association of School Business Officials California school Boards Association California School employees Association, AFL-CIO California Teachers Association Riverside County Schools Advocacy Association San Francisco Unifies School District Small School Districts' Association AB 267 Page 5 OPPOSITION : (Verified 9/1/09) California Taxpayers' Association Howard Jarvis Taxpayers Association ARGUMENTS IN SUPPORT : The author's office 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 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 this bill, 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. ARGUMENTS IN OPPOSITION : 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. ASSEMBLY FLOOR : AYES: Ammiano, Arambula, Beall, Blumenfield, Brownley, Buchanan, Caballero, Charles Calderon, Carter, Chesbro, Coto, Davis, De La Torre, De Leon, Eng, Evans, Feuer, Fong, Fuentes, Furutani, Hall, Hayashi, Hernandez, Hill, Huffman, Jones, Krekorian, Lieu, Bonnie Lowenthal, Ma, Mendoza, Nava, John A. Perez, V. Manuel Perez, AB 267 Page 6 Portantino, Price, Ruskin, Salas, Saldana, Skinner, Solorio, Swanson, Torlakson, Torres, Torrico, Bass NOES: Adams, Anderson, Bill Berryhill, Tom Berryhill, Blakeslee, Conway, Cook, DeVore, Duvall, Fletcher, Fuller, Gaines, Galgiani, Garrick, Gilmore, Hagman, Harkey, Huber, Jeffries, Knight, Logue, Miller, Nestande, Niello, Nielsen, Silva, Smyth, Audra Strickland, Tran, Villines NO VOTE RECORDED: Block, Emmerson, Monning, Yamada DLW:do 9/2/09 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END ****