BILL ANALYSIS
AB 551
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Date of Hearing: April 27, 2009
ASSEMBLY COMMITTEE ON HIGHER EDUCATION
Anthony Portantino, Chair
AB 551 (Furutani) - As Amended: April 23, 2009
SUBJECT : Community Colleges: property tax revenues.
SUMMARY : Reduces California Community College (CCC) district
reliance on property tax revenues to achieve base revenues.
Specifically, this bill :
1)Provides that commencing with the 2009-10 fiscal year the
amount of property tax revenue allocated to each CCC district
shall not exceed 75% of the amount allocated in the 2008-09
fiscal year, except for those CCC districts that in 2008-09
met the definition of an "excess tax school entity" (Basic Aid
CCC district).
2)Requires, by December 12, 2009, a Basic Aid CCC district to
notify the Department of Finance (DOF) in writing that the
Basic Aid CCC district will either:
a) Continue to retain its current distribution of property
tax revenues for the 2009-10 fiscal year and each year
thereafter, or,
b) Agree to the distribution of property taxes as described
in (1) for the 2009-10 fiscal year and each year
thereafter.
3)Provides that the amount of property tax revenues that are not
allocated to a CCC district as a result of this bill shall be
deposited in the county Education Revenue Augmentation Fund
(ERAF) and allocated to K-12 school districts and county
offices of education.
4)Provides that this bill shall not be construed to increase any
allocations of excess, additional, or remaining funds that
would otherwise have been allocated to cities, counties,
cities and counties, or special districts.
5)Provides that no funds deposited into the county ERAF pursuant
to subdivision (a) shall be distributed to a CCC district.
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FISCAL EFFECT : Unknown
COMMENTS : Background : In developing the annual CCC budget, the
state estimates how much local property tax revenue will be
available to CCC. For any individual CCC district, General Fund
revenues will be adjusted upward or downward from the budgeted
level to compensate for any surplus or shortfall in actual tax
receipts. However, if the systemwide level of local property
tax revenue turns out to be lower than budgeted, this shortfall
will be proportionally spread across all CCC districts. In some
years, legislation has been passed to augment General Fund
support to CCCs in order to make up for this shortfall. In
other years, CCCs were required to absorb the shortfall.
Purpose of this bill : CCC districts (except Basic Aid CCC
districts, discussed below) receive their base revenues through
local property taxes, student fees, and state apportionments.
Under the existing process, when actual property tax revenues
fall below the estimates used in the annual budget, legislation
appropriating funding is the means to backfill the shortfall.
The author argues that under this current process, CCC relies
heavily on property tax revenue projections that are rarely
accurate, and the lack of an automatic adjustment mechanism when
property tax revenues fall short creates budget uncertainty that
severely cripples the ability of a CCC district to plan
accordingly to meet the educational needs of the community.
This bill reduces CCC reliance on property tax revenues and
shifts that reliance to K-12 districts, which receive an
automatic backfill (further discussed below).
How would this work ? Under this bill, CCC districts would be
due 75% of the property tax revenues they received in the
2008-09 Budget Act, thereby, providing funding certainty in
place of the current estimates determined in the annual budget
act. This would eliminate the need for an annual CCC property
tax backfill and the associated funding uncertainty for CCC,
allowing CCC districts to appropriately plan for student
services.
K-12 districts property tax backfill : As a result of
legislation that responded to the court ruling in Serrano v.
Priest, K-12 school districts receive property tax revenues
through the revenue limit mechanism. Revenue limits work so
that K-12 districts are automatically compensated with state
funding when property tax revenues fall short of expectations
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relied upon for the annual state budget act. The revenue limit
process also reduces state aid to K-12 districts when property
tax revenues exceed expectations. By directing property tax
revenues above 75% of the CCC 2008-09 allocations to K-12
districts, this bill will increase K-12 district reliance on
local property tax revenues. However, should actual property
tax revenues fall below the estimates used in the annual budget,
the revenue limit mechanism would ensure that K-12 districts are
automatically compensated (or backfilled) for the shortfall.
Basic Aid CCC districts : For Basic Aid CCC districts (defined
as an "excess tax school entity" in this bill), state
apportionments are not received because the revenues from local
property taxes and student fees provide more than the CCC
district would receive under state funding formulas. Currently
there are three CCC Basic Aid districts: Marin, South Orange,
and Mira Costa. This bill would reduce the amount of property
tax funding directed toward CCC districts, thus reducing the
property taxes received by Basic Aid districts. Therefore,
these CCC districts are provided a choice: the CCC district may
either continue to retain its current distribution of property
tax revenues, or can agree to the new property tax funding
formula established by this bill. The CCC district is required
to notify the DOF by December 12, 2009, in writing of their
decision. This bill only provides this choice to CCC districts
that are currently Basic Aid; CCC districts that are approaching
Basic Aid would not be provided with this choice.
Previous legislation : In general, legislation has been
introduced every year to directly appropriate funds to CCC for
un-received property taxes. In addition, several bills have
been introduced to establish a statutory CCC property tax
backfill, as follows:
1)AB 2277 (Eng) of 2008, which was held in the Assembly
Appropriations Committee, would have provided for the one-time
transfer of funds to compensate for un-received property tax
revenues.
2)AB 1402 (Blakeslee) of 2005, which was subsequently amended to
address a different subject, would have provided for an annual
transfer of funds to compensate for un-received property tax
revenues.
3)AB 1417 (Pacheco) of 2004, which was held in this form in the
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Senate Appropriations Committee, and subsequently amended to
require a study of CCC funding, was substantially similar to
AB 1402.
4)SB 990 (McPherson) of 2000, which was held in the Senate
Appropriations Committee, was also substantially similar to AB
1402.
REGISTERED SUPPORT / OPPOSITION :
Support
None on file
Opposition
None on file
Analysis Prepared by : Laura Metune / HIGHER ED. / (916)
319-3960