BILL ANALYSIS
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UNFINISHED BUSINESS
Bill No: SB 85
Author: Cogdill, et al
Amended: 10/26/09
Vote: 21
PRIOR SENATE VOTES NOT RELEVANT
ASSEMBLY FLOOR : 71-0, 1/27/10 - See last page for vote
SUBJECT : Local Government Finance
SOURCE : Author
DIGEST : Assembly Amendments delete the Senate version
expressing the intent of the Legislature to enact statutory
changes relating to the Budget Act of 2009. The bill now
provides limited property tax relief to seven counties.
ANALYSIS :
Existing law
1. Limits the maximum amount of ad valorem tax on real
property to one percent of the full cash value of the
property with counties collecting the tax revenues and
then apportioning it to cities, the county, special
districts, redevelopment, and school districts in the
county.
2. Requires the county auditor in each fiscal year to
CONTINUED
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allocate property tax revenues to local jurisdictions in
accordance with specified formulas and procedures, and
generally requires each jurisdiction be allocated an
amount equal to the total amount of revenue allocated to
that jurisdiction in the prior fiscal year, subject to
certain modifications and that jurisdiction's portion of
the annual tax increment.
This bill provides limited property tax relief to seven
counties. Specifically, this bill:
1. Requires, for purposes of property tax revenue
allocations, the county auditor of a "negative sum"
county, in reducing the amount of property tax that
otherwise would be allocated to the county, to apply a
reduction amount according to the following:
A. For fiscal years (FYs) 2011-12, a reduction
amount that is equal to the lesser of either of the
following:
(1) The reduction amount that was
determined for FY 2010-11.
(2) The reduction amount that is determined
for FY 2011-12.
B. For FY 2012-13, a reduction amount that is equal
to the lesser of either of the following:
(1) The reduction amount that was
determined for FY 2011-12.
(2) The reduction amount that is determined
for FY 2012-13.
C. For FY 2013-14 and each FY thereafter, a
reduction amount that is determined on the basis of
the reduction amount applied for the immediately
preceding FY.
2. Increases the countywide property tax allocation (and
reduces school districts' allocation) by $100,000 in
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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
tax shares as of 2006-07.
3. Declares that no reimbursement is required under the
provisions of this bill because it provides for
offsetting savings to local agencies or school districts
that result in no net costs to the local agencies or
school district.
Background
This bill provides limited property tax relief to seven
counties in California. One section of this bill caps the
amount of property tax reduction for six counties in
California on a going-forward basis, with specified caps
for specified fiscal years. These six counties, dubbed the
"negative bailout" counties (Alpine, Lassen, Mariposa,
Plumas, Stanislaus, and Trinity), are in a unique situation
stemming from the passage of Proposition 13 in 1978, and
subsequent legislation relating to local government
finance. Because Proposition 13 reduced revenues received
by local governments from property taxes, the Legislature
responded by bailing out local governments with $858
million in block grants. Of this amount, $436 million went
to counties. This bill contains provisions that increases
the countywide property tax 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 county-wide property tax shares
as of 2006-07, provisions that would specifically affect
Yolo County.
In 1979, the Legislature permanently restructured the
allocation of property taxes (AB 8 [L. Greene], Chapter
282, Statutes of 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 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.
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This three-part package was intended to provide
proportionate bailout to all counties, but, under the
provisions of AB 8, the six counties were not awarded
additional property tax revenues.
For the six "negative bailout" 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.
In 1982, the Department of Finance discovered the six
counties had not been shifting their "negative bailout"
amounts to schools. The Legislature forgave the past $5.5
million in miscalculations, clarified some counties would
receive a "negative bailout" amount, and required counties
to shift their "negative bailout" amounts in future years
(AB 2162 [Condit], Statutes 1983).
Since 1983, Stanislaus County has transferred more than $52
million in "negative bailout" to the schools. Its
"negative bailout" increases annually, just as property tax
revenues grow. Stanislaus County officials argue the
"negative bailout" payments are an unintended consequence
of AB 8 because the Legislature wanted to relieve the
fiscal pressures on counties, not increase them.
In future years, the six counties will benefit from the
growth in property tax revenues, meaning the schools in
those counties will no longer benefit from that property
tax growth. As a result, the state's General Fund will
take a hit because the state must backfill the property tax
revenues that the schools will no longer receive.
This bill is not the six counties' first attempt to cap
their "negative bailout payments." In 2009, SB 684
(Cogdill) was held in Assembly Appropriations Committee on
its suspense file. In 1996, AB 698 (Cannella), of 1996
died in Senate Appropriations Committee and AB 1069
(Cardoza), of 1997 died in Assembly Appropriations
Committee. In 1997, Governor Wilson vetoed AB 472
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(Cardoza), of 1997, arguing the counties received
additional fiscal relief when the state took over trial
court funding. Senate Local Government Committee passed SB
756 (Denham), of 2003, SB 9 (Denham), of 2006, and SB 215
(Denham), of 2007, but those bills died on the Senate
Appropriations Committee's suspense file.
This bill also contains provisions that will provide
property tax relief to Yolo County, the county with the
second lowest share of combined countywide and less than
countywide property tax shares as of 2006-07. In February
2009, as part of the state budget package, SB 8 X3
(Ducheny), Chapter 4, Statutes 2009-10 Third Extraordinary
Session, contained property tax relief provisions for
Orange County, the county with the lowest share of property
taxes allocated to county government in the 2006-07 year.
SB 8 X3 increases property tax revenue allocations to
Orange County by $35 million annually in 2009-12 and
2010-11 and by $50 million annually thereafter. The
additional funds for Orange County will be diverted from
property tax revenues currently allocated to local K-12
school districts and the County Office of Education in
Orange County.
There are major differences in the percentages of property
taxes that are currently allocated to cities, counties,
special districts and school districts within counties
across the state, for various reasons. Part of the
difference in percentages from jurisdiction to jurisdiction
can be explained by the determination of the AB 8 formula,
which was to some extent based on each local government's
share of property tax collections before Proposition 13 was
enacted. Although differences in allocation 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 county governments. Previously,
several bills have been proposed to provide 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, 2006)
and AB 405 (Duvall, 2007) would have required that schools'
share of tax increment revenue available upon the
expiration of redevelopment areas be reallocated to
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counties. SB 1909 (Machado, 2003) would have established
an 11% floor for property taxes allocated to county
governments, but the bill was vetoed by the Governor.
Amendments to this bill were adopted on October 26, 2009,
to revise the reduction amounts contained in Section 1 of
the bill to ensure that the six "negative bailout" counties
will not be harmed if property tax receipts in those
counties come in lower than expected during FYs 2011-12 and
2012-2013.
Related legislation
The provision of this bill were contained in SB 684
(Cogdill-R), which passed the Senate on Consent on 6/3/09,
39-0. Those provisions were deleted and placed into this
bill with minor changes.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
According to the Assembly Appropriations Committee,
reallocations of property tax revenues from school
districts to counties totaling $290,000 in 2011-12 and
$580,000 in 2012-13, consisting of: (1) about $190,000 in
2011-12 and $380,000 in 2012-13 and thereafter due to the
freezing of the "negative sum" adjustment for two years
[these estimates assume average property tax growth rates];
and (2) about $100,000 in 2011-12 and $200,000 in 2012-13
and thereafter due to the bill's provision that raises the
specified countywide property tax share.
Under Proposition 98, the state General Fund will be
required to backfill the loss in property taxes to schools.
ASSEMBLY FLOOR :
AYES: Adams, Ammiano, Anderson, Arambula, Beall, Bill
Berryhill, Tom Berryhill, Blakeslee, Block, Blumenfield,
Brownley, Buchanan, Caballero, Charles Calderon, Chesbro,
Conway, Cook, Coto, Davis, De La Torre, De Leon, DeVore,
Emmerson, Eng, Evans, Feuer, Fletcher, Fong, Fuentes,
Fuller, Furutani, Gaines, Galgiani, Garrick, Gilmore,
Hagman, Harkey, Hayashi, Hernandez, Hill, Huber, Huffman,
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Jeffries, Jones, Knight, Lieu, Logue, Bonnie Lowenthal,
Ma, Mendoza, Miller, Nava, Nestande, Niello, Nielsen,
John A. Perez, Portantino, Ruskin, Salas, Saldana, Silva,
Skinner, Smyth, Solorio, Audra Strickland, Swanson,
Torres, Torrico, Tran, Villines, Yamada
NO VOTE RECORDED: Bradford, Carter, Hall, Monning, V.
Manuel Perez, Torlakson, Bass
RJG:do 2/1/10 Senate Floor Analyses
SUPPORT/OPPOSITION: NONE RECEIVED
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