BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 267
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          CONCURRENCE IN SENATE AMENDMENTS
          AB 267 (Torlakson)
          As Amended September 1, 2009
          Majority vote
           
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          |ASSEMBLY:  |46-30|(June 3, 2009)  |SENATE: |24-14|(September 3,  |
          |           |     |                |        |     |2009)          |
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           Original Committee Reference:   REV. & TAX.  

           SUMMARY  :  Authorizes an education finance district, as defined,  
          to impose a qualified special tax, as defined, within the  
          district.  

           The Senate amendments:

           1)Expand the requirement that a low-income school district, as  
            defined in Health and Safety Code (H&SC) Section 50079.5 or  
            Section 50105, may not be denied participation in an education  
            finance district, if the low-income school district otherwise  
            qualifies for the participation, by providing that this  
            requirement applies to an education finance district formed,  
            pursuant to this bill, by  any  school districts allowed to  
            create an education finance district, and not just three or  
            more contiguous school districts located partially or wholly  
            within the same county.

          2)Specify that three or more school districts that are  
            contiguous or have boundaries that are totally within another  
            participating district (and each district is wholly or  
            partially located within the same county) may also establish  
            an education finance district, if all of the pertinent  
            requirements are satisfied. 

          3)Make a technical, non-substantive change.

           AS PASSED BY THE ASSEMBLY  , this bill:  

          1)Provided 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)Authorized the following school districts to create an  








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            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 contained only one school district, that  
               school district may form an education finance district with  
               two or more contiguous school districts in adjoining  
               counties. 

          3)Required the governing bodies of each school district that  
            participated in establishing an education finance district to  
            do both of the following:

             a)   Adopt a resolution to participate in the education  
               finance district; and,

             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)Specified that three or more contiguous school districts that  
            decided 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 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. 

           FISCAL EFFECT  :  None

           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  
          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."









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          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  
            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.  








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          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  
            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  








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            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  
            finance district would still be able to impose those taxes but  
            with a two-thirds vote of the electorate.  ACA 10 is currently  
            pending on the Assembly Floor. 

          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  








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            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 

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