BILL ANALYSIS
SB 85
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Date of Hearing: September 10, 2009
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Kevin De Leon, Chair
SB 85 (Cogdill) - As Amended: September 4, 2009
Policy Committee: NA Vote:NA
Urgency: No State Mandated Local Program:
Yes Reimbursable: No
SUMMARY
As proposed to be amended, this bill provides limited property
tax relief to seven counties. Specifically, the bill:
1)Freezes "negative sum" property tax allocations at the 2010-11
levels for two years - 2011-2012 and 2012-13 -- and then
allows the negative sum amounts to resume growth in line with
current law. The freeze applies to six counties (Alpine,
Lassen, Mariposa, Plumas, Stanislaus, and Trinity) that had a
portion of their property taxes shifted to school districts
under legislation passed following voter approval of
Proposition 13 in 1978.
2)Increases the countywide property tax allocation (and reduces
school districts' allocation) by $100,000 in 2011-12 and
$200,000 in 2012-13 and thereafter for the county with the
second lowest percentage share of combined county-wide and
less than countywide property taxes as of 2006-07. This
provision affects Yolo County.
FISCAL EFFECT
1)Reallocations of property tax revenues from school districts
to counties totaling about $290,000 in 2011-12 and $580,000 in
2012-13 and thereafter, consisting of:
a) About $190,000 in 2011-12 and $380,000 in 2012-13 and
thereafter due to provision freezing the "negative sum"
adjustment for two years.
b) About $100,000 in 2011-12 and $200,000 in 2012-13 and
thereafter due to the provision that raises the specified
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countywide property tax share.
2)Under Proposition 98, the state GF will be required to
backfill the loss in property taxes to schools.
COMMENTS
1)Rationale . The bill is intended to provide relief to specific
county governments that, according to the bill's proponents,
have been adversely affected by laws enacted subsequent to
voter approval of Proposition 13 in 1978 governing the
allocation of property taxes collected within each county.
2)Background - negative sum counties. Following voter approval
of Proposition 13, which cut local property taxes by more than
50%, the state responded with a one-time "bailout" of local
government. This included $858 million in block grants, of
which $436 million went to counties. The following year, the
Legislature adopted a longer term bailout, by permanently
restructuring the allocation of property taxes (AB 8, L.
Greene, 1979). AB 8 shifted some of the schools' property tax
revenues to local agencies and replaced the schools' losses
with increased subventions from the state General Fund.
The AB 8 formula specifically shifted additional property
taxes to counties in an amount equal to their 1978-79 block
grants, plus a portion of Aid to Families with Dependent
Children (AFDC) costs not covered by the state buyout, minus
the new state grants for county health services.
For six "negative sum" counties, the state grants for health
services exceeded their 1978-79 block grants plus the
adjustment for AFDC costs. Consequently, rather than shifting
additional property tax revenue from schools to these
counties, these counties shifted property tax revenue to
schools. In these six counties, property tax revenues were
reduced rather than augmented to balance the relatively larger
health and welfare payments.
2)Background - post Proposition 13 allocation of property
taxes . There are major differences in the percentages of
property taxes that are currently allocated to cities,
counties, special districts and school districts across within
counties across the state. As of 2006-07, the share of
property taxes that were allocated to county governments
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averaged 20% but ranged from 6.6% to over 60%. The county with
the lowest share of property taxes allocated to county
government in 2006-07 was Orange. The second lowest was Yolo,
with a county share of 9.6%.
Part of the difference is that a key element of the AB 8
formula was that the shift of property taxes from schools to
non-school local governments within each county was based
partly on each local government's share of property tax
collections before Proportion 13 was enacted. This in turn
reflected, among other things, varying pre-Proposition 13
property tax rates imposed by local jurisdictions. Other
factors include: (a) the value of homes and businesses in
various areas; (b) the percentage of population and businesses
located in cities versus non-incorporated county areas; (c)
how municipal services are divided among cities, counties, and
special districts; and (d) state laws that have been enacted
since Proposition 13 that govern the sharing of property taxes
upon incorporation of new cities.
Although differences in allocations are due to a variety of
complex factors, representatives of counties with
below-average allocations have long advocated for state
relief, normally involving a reallocation of property taxes
from schools to counties governments.
3)Proposed amendments . The amendments increase the countywide
property tax allocation to the county with the second lowest
percentage share of combined county-wide and
less-than-countywide property tax shares as of 2006-07.
4)Previous legislation . The provision of this bill that freezes
"negative sum" adjustments is the most recent in a long list
of proposals to cap these amounts in the six counties. SB 215
(Denham, 2007), SB 9 (Denham, 2006), SB 756 (Denham, 2003),
and AB 698 (Cannella, 1996) died in the Senate Appropriations
Committee, and AB 1069 (Cardoza, 1997) was held under
submission by this committee. Governor Wilson vetoed AB 472
(Cardoza, 1997), stating that that the counties received
additional fiscal relief when the state took over trial court
funding.
The provision of this bill raising the county government's
property tax allocation in the county with the second lowest
share in the state is similar in concept to a provision
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included in SB 3X 8 (Ducheny), Chapter 4/2009. That measure
increased the countywide allocation to the county with the
lowest share of countywide allocation or property taxes by $25
million in 2009-10 and $50 million in 2010-11 and thereafter.
Previously, several bills had been proposed to provide more
general relief to "low wealth" counties (generally defined as
counties in which the countywide share of property taxes is
below the statewide average.) For example, AB 2682 (Daucher)
of 2006 and AB 405 (Duvall) of 2007 would have required that
schools' shares of tax increment revenue available upon the
expiration of redevelopment areas be reallocated to counties.
SB 1909 (Machado), which was vetoed by the governor in 2004,
established an 11% floor for property taxes allocation to
county governments.
Analysis Prepared by : Brad Williams / APPR. / (916) 319-2081