BILL ANALYSIS ------------------------------------------------------------ |SENATE RULES COMMITTEE | SCA 6| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ THIRD READING Bill No: SCA 6 Author: Simitian (D), et al Amended: 6/8/09 Vote: 27 SENATE REVENUE & TAXATION COMMITTEE : 5-3, 5/13/09 AYES: Wolk, Alquist, Florez, Padilla, Wiggins NOES: Walters, Ashburn, Runner SENATE ELEC., REAP. & CONST. AMEND. COMM. : 3-1, 6/11/09 AYES: Hancock, DeSaulnier, Liu NOES: Strickland NO VOTE RECORDED: Walters SUBJECT : Taxation: educational entities: parcel tax SOURCE : Author DIGEST : This constitutional amendment lowers from two-thirds to 55 percent the threshold of voter approval necessary for school districts to enact parcel taxes. ANALYSIS : Existing law, under the 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 two-thirds vote. Proposition 13 (1978) required two-thirds vote of each house of the Legislature for state tax increases, and two-thirds vote of local voters for local special taxes. Proposition 62 (1986) prohibited local agencies from CONTINUED SCA 6 Page 2 imposing general taxes without majority approval of local voters and two-thirds vote for special taxes. Proposition 218 (1996) extended those vote thresholds to charter cities, and limited local agencies powers to levy new assessments, fees, and taxes. Local agencies generally propose to increase taxes by adopting an ordinance or a resolution at a public hearing. The Constitution further bars school districts from imposing general taxes, but allows school districts, community college districts, and county offices of education to issue bonded indebtedness for school facilities with 55 percent approval [Proposition 39 (2000)]. Existing law allows a school district to levy a special tax that is uniform as applied to all taxpayers, except the district may exempt persons over the age of 65, with two-thirds 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 constitutional amendment authorizes school districts, community college districts, or county offices of education to impose a parcel tax on real property by a 55 percent vote of the voters in the district or county. This constitutional amendment defines "parcel tax" as a special tax imposed upon real property at a rate determined without regard to the property's value. This constitutional amendment also makes technical changes to the Constitution. Background Parcel taxes are flexible ways of raising revenues at the local level, but are subject to certain requirements. Parcel tax elections must be held on "established election dates," which means in March, April, or November of an even-numbered year, or March, June, or November in an odd-numbered year. Parcel taxes do not have a cap. According to EdSource, between 1983 and 2006, voters approved 211 of 414 parcel tax elections, with another 166 reaching majority vote but falling short of the required SCA 6 Page 3 two-thirds. One in five California school districts have tried to enact a parcel tax. Parcel tax proposals voted on in 2003 varied from $30 per parcel to $385 per parcel, with terms as short as two years, and some being permanent. All property must be taxed, except that a district may exclude individuals 65 years old and older from paying the tax. School districts in some areas of the state seek to levy parcel taxes more so than other areas. Parcel taxes are different in many ways from property taxes and general obligation bonds. First, parcel taxes are not ad valorem, or assessed based on the value of a property; instead they are a flat rate assessed per parcel, regardless of its size. Essentially, parcel taxes are a flat tax on property ownership. Secondly, the proceeds of general obligation bonds must be spent on the acquisition and improvement of property, or on school construction. Parcel taxes give the imposing authority considerably more flexibility to spend as they see fit. Revenues may be used for ongoing expenses, programs, or buildings at the local agency's discretion. Special taxes such as parcel taxes are subject to additional accountability. Local agencies must (1) issue a statement indicating the specific purpose of the tax and a requirement that the proceeds be used only for that purpose, (2) create an account in which to deposit proceeds, and (3) issue an annual report that includes the amount of funds collected and expended, along with the status of any project required or authorized by the tax measure. FISCAL EFFECT : Appropriation: No Fiscal Com.: No Local: No SUPPORT : (Verified 6/15/09) Antioch Unified School District Association of California School Administrators Association of Low Wealth Schools Buena Park School District California Association of School Business Officials California Association of Suburban School Districts California Communities United Institute California Community College League SCA 6 Page 4 California County Boards of Education California Federation of Teachers California School Boards Association California School Employees' Association California State PTA California Tax Reform Association California Taxpayers' Association California Teachers Association Children Now Davis Joint Unified School District Eureka Union School District FIRST 5 Santa Clara County Fremont Union High School District Irvine Unified School District Jefferson Elementary School District Las Lomitas Elementary School District League of Women Voters of California Long Beach City College Los Altos School District Los Angeles Unified School District Los Gatos - Saratoga Joint Union High School District Milpitas Unified School District Mountain View Whisman School District Newport - Mesa Unified School District Palo Alto Unified School District Riverside County Schools Advocacy Association San Carlos School District San Diego Unified School District San Francisco Unified School District San Mateo - Foster City School District San Rafael City Schools Scotts Valley Unified School District Superintendent of Public Instruction OPPOSITION : (Verified 6/15/09) California Association of Realtors California Taxpayers' Association Howard Jarvis Taxpayers Association ARGUMENTS IN SUPPORT : According to the author: "SCA 6 would allow local school districts, community college districts, and county offices of education to SCA 6 Page 5 approve a local parcel tax with a 55 percent vote by the public, rather than the two-thirds majority currently required. California voters have consistently designated education as a chief priority, and in 2000 passed an initiative lowering to 55 percent the threshold for passing education facilities bonds; this measure conforms the parcel tax threshold to that same level. SCA 6 does not raise taxes; it simply provides for local choice and control. The measure would remedy several conditions faced by educational institutions: "Current state budget practices under-fund educational programs in relation to the resources needed to achieve the state's education goals for students. This measure would enhance access to a revenue source that would allow local communities to augment the resources available for direct education and support programs. "The current two-thirds requirement allows a small minority of voters to prevent a community from having the kind of school system that a sizable majority of the community envisions. There are numerous historic instances of local parcel taxes failing the two-thirds requirement despite having support from more than 55 percent of the voters. In the past twenty or so years, 68 percent of the local parcel tax elections that failed received at least a 55 percent vote. "Current state budget practices undermine local control and distance the electorate from their education leaders, since those leaders have little influence over how resources are spent. Significant portions of education funding are earmarked for specific purposes, with little spending discretion remaining for local boards. This measure would allow educational leaders to solicit community support for dedicated revenue to apply to specified priorities; if local voters support that agenda, they subsequently can hold district or county officials directly accountable for using the resources as intended and for expected results." ARGUMENTS IN OPPOSITION : The California Association of Realtors opposes this constitutional amendment because "parcel taxes are not limited to faulty construction, can SCA 6 Page 6 be imposed indefinitely, and are a 'flat' fee parcel tax that may place an additional burden on homeowners least able to afford it." DLW:mw 6/15/09 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END ****