BILL ANALYSIS Ó REVISED SENATE GOVERNANCE & FINANCE COMMITTEE Senator Lois Wolk, Chair BILL NO: AB 233 HEARING: 7/3/12 AUTHOR: Hall FISCAL: Yes VERSION: 6/29/11 TAX LEVY: No CONSULTANT: Miller YMCA VOLUNTARY CONTRIBUTIONS Creates the California YMCA Youth and Government Fund (income tax check off). Background and Existing Law Existing state law allows taxpayers to contribute money to one or more of 15 voluntary contribution funds (VCFs or check-offs) by checking a box on their state income tax return. California law requires contributions made through check-offs to be made from taxpayers' own resources and not from their tax liability, as is possible on federal tax returns. Check-off amounts may be claimed as charitable contributions on taxpayers' tax returns during the subsequent year. The Franchise Tax Board (FTB) designs tax returns to provide for the designation of contributions to specified funds either on the return itself or on a separate schedule that must be attached to the return. With a few exceptions, VCFs remain on the return until they are either repealed or fail to meet their minimum contribution amount. The minimum contribution amounts are adjusted annually for inflation. For most VCFs, the minimum contribution amount is $250,000 in the fund's second year. By September 1st of each year, the FTB must determine the minimum contribution amount required for each fund to remain on the form for the following calendar year and whether estimated contributions to each fund will be less than the minimum contribution amount for that calendar year. If the FTB estimates that a fund will fail to meet the minimum contribution amount, that fund is repealed effective for taxable years beginning on or after January 1st of the following calendar year. AB 233 -- 6/29/11 -- Page 2 Except for the California Senior Legislature (which is fully funded by the check off and operates in concert with the Legislature), the proceeds from the check-offs either go to quasi-government organizations or to non-profits as a competitive grant. The following list provides the current information on all the check offs as well as how many groups are eligible to receive the funds. ------------------------------------------------------------ |Check Off |Amount |Number of Groups that | | |Earned |receive funds | |---------------------+------------+-------------------------| |ALS/Lou Gehrig's |Initial Tax |As many as apply and | |Disease Research |Return 2011 |receive grants that are | |Fund | |provided for by the | | | |monies contributed. | |---------------------+------------+-------------------------| |Alzheimer's |$462,357 |As many as contract or | |Disease/Related | |receive grants provided | |Disorders Fund | |by the monies | | | |contributed. | |---------------------+------------+-------------------------| |Arts Council Fund |$164,298 |As many as apply and | | | |receive grants provided | | | |by the monies | | | |contributed. | |---------------------+------------+-------------------------| |CA Breast Cancer |$459,694 |As many as apply and | |Research Fund | |receive grants provided | | | |from the monies | | | |contributed. | |---------------------+------------+-------------------------| |CA Cancer Research |$451,042 |As many as apply and | |Fund | |receive grants provided | | | |from the monies | | | |contributed | |---------------------+------------+-------------------------| |CA Firefighters' |$157,166 |1 Group: California Fire | |Memorial Fund | |Foundation | |---------------------+------------+-------------------------| |CA Fund for Senior |$308,763 |1 Group: California | |Citizens | |Senior Legislature | |---------------------+------------+-------------------------| |CA Peace Officer |$137,782 |1 Group: California | |Memorial Foundation | |Peace Officer Memorial | AB 233 -- 6/29/11 -- Page 3 |Fund | |Commission | |---------------------+------------+-------------------------| |CA Police Activities |$69,431 |The state CALPAL and | |League (CALPAL) Fund | |county CALPAL chapters | |---------------------+------------+-------------------------| |CA Sea Otter Fund |$359,699 |Department of Fish and | | | |Game, and as many that | | | |apply for grants and | | | |contracts provided for | | | |by 50% of the monies | | | |contributed. | |---------------------+------------+-------------------------| |CA Seniors Special |$53,813 |The first $80K to the | |Fund | |Area Agency on Aging | | | |Advisory Council of | | | |California and the rest | | | |to as many area agencies | | | |that the California | | | |Department of Aging | | | |allocates available | | | |contributed monies to. | |---------------------+------------+-------------------------| |CA Veterans Homes |$211,089 |The number of | |Fund | |established veteran's | | | |homes (I think 6 or 7). | |---------------------+------------+-------------------------| |Child Victims of |Initial Tax |As many counseling and | |Human Trafficking |Return 2011 |prevention centers that | |Fund | |apply and receive grants | | | |provided from monies | | | |contributed. | |---------------------+------------+-------------------------| |Emergency Food for |$598,157 |1 group: Department of | |Families Fund | |social services for the | | | |Emergency Food | | | |Assistance Program. | |---------------------+------------+-------------------------| |Municipal Shelter |Initial tax |As many shelters as | |Spay-Neuter Fund |Return 2011 |apply and receive grants | | | |provided from the monies | | | |contributed. | |---------------------+------------+-------------------------| |Rare & Endangered |$605,220 |1 group: Department of | |Species Preservation | |Fish and Game endangered | |Program | |conservation programs. | |---------------------+------------+-------------------------| AB 233 -- 6/29/11 -- Page 4 |Safely Surrendered |$184,866 |1 group: Department of | |Baby Fund | |Social Services for | | | |Safely Surrender Baby | | | |Law awareness programs. | |---------------------+------------+-------------------------| |State Children's |$409,043 |1 group: Department of | |Trust for the | |Social Services for | |Prevention of Child | |prevention and | |Abuse | |intervention programs. | ------------------------------------------------------------ Proposed Law Assembly Bill 233 creates the California YMCA Youth and Government Fund. The fund will be added to the personal income tax form when another VCF is removed and remain on the form until January 1st of the 5th taxable year following its first appearance or on January 1st of an earlier year if the FTB estimates the fund will not meet the annually required minimum contribution amount. All monies transferred to the fund are allocated to the FTB and Controller for reimbursement of their costs and the balance goes to the State Department of Education for distribution to the California YMCA Youth and Government Program (YMCA Y&GP) for its ongoing activities on behalf of youth. AB 233 stipulates that if the fund collects less than $300,000 in donations, all available monies are distributed to the YMCA Y&GP. If donations exceed $300,000, the balance of the fund is distributed to provide annual grants of $10,000 each to the African American Leaders for Tomorrow Project, the Asian Pacific Youth Leadership Project, and the Chicano Latino Youth Leadership Project. The YMCA Y&GP Board of Directors may award additional non-profit civic youth organizations a grant of up to $10,000 each in order to operate civic education and mock legislative programs. All remaining funds are distributed to the YMCA Y&GP. State Revenue Impact The FTB estimates this bill will result in a revenue loss of $15,000 each fiscal year the fund is in place. AB 233 -- 6/29/11 -- Page 5 Comments 1. Purpose of the bill . The author states, "The California YMCA Youth & Government Program is a statewide youth educational program annually involving more than 2200 high school students in a yearlong "hands on" civic experience. Since its inception 63 years ago, the program has successfully used a variety of activities to encourage high school youth become involved, responsible and respected citizens. As part of the YMCA Y&GP, regional student delegations discuss public policy issues facing the state as well as ways to implement their solutions through the legislative and judicial processes. Teen delegates draft legislation, prepare issue briefs, select governmental positions to role-play, attend statewide training and election conferences and run for various offices and leadership positions. The program concludes with a Model Legislature each February at the State Capitol. Unfortunately, in recent years, costs to operate this program and participant demand for financial assistance has greatly increased making it difficult to maintain and expand this important program for California youth. AB 233 would allow state taxpayers to voluntarily contribute to the California YMCA Youth & Government Fund through a tax check-off donation on their state tax return. Donations would be used to help finance the YMCA Youth & Government Program and its ongoing activities on behalf of youth. Consistent with current efforts to support the California Senior Legislature, this measure will allow California taxpayers to empower young people through an important program that motivates and inspires youth to become active citizens in our state". 2. One isn't enough . The Committee on Governance & Finance has expressed concerns over a single non-profit entity receiving funds from a check off. As noted in the background section of this analysis, check off funds that are dedicated to a single entity are generally quasi-government entities such as the police. AB 233 provides the YMCA with the first $300,000 from the check off and then gives subsequent funds to three other groups; given the recent returns on check offs, this bill focuses AB 233 -- 6/29/11 -- Page 6 on one organization (the YMCA) and then specifically lays out three others for the funds. In order to mitigate concerns about a single non-profit entity receiving these funds, the Committee may wish to consider amendments that create a competitive grant program for "the youth leadership and government fund" for non-profits throughout the state that provide services for youth and government programs.. 3. Is there a better way ? Countless worthy causes may be funded by tax check-offs. The current system remains subjective and is limited to those organizations that can convince the Legislature to include them on the form. These check-offs give the state a role in collecting money for charity. The Committee may wish to consider whether the state should use the tax code to encourage contributions to certain charitable organizations. The Committee may further wish to consider a different tax check-off system all together. For example, any group that would like the opportunity for check off proceeds and any group currently on the form could apply to the FTB and be listed in the pages of the FTB tax booklet with an associated number. The tax form could include 10 lines for taxpayers to indicate the number from the form and then those groups would receive the funds. For example, if the YMCA was number 1234 in the booklet, the taxpayer would indicate that he or she wanted $10 to go to "1234" on the form. This way, the Legislature would no longer have to choose groups for the form and all non-profits and quasi-government organizations would be similarly situated for a tax check off. 4. Rerun . This bill is similar to two bills that were previously vetoed: AB 2017 (Hall, 2010) and SB 516 (DeSaulnier, 2010). The two bills were contingent on one another's passage and established the California Youth Leadership Fund to provide equal funding for the California YMCA Youth and Government Program and the California Youth Legislature. AB 2017 also provided grants to the African-American Youth Leadership Program, the Asian-Pacific Youth Leadership Project, and the Chicano-Latino Youth Leadership Project if the amount of monies received by the fund exceeded $250,000. In his veto message of AB 2017 (Hall, 2010), the Governor stated, "This bill is contingent on the enactment of Senate AB 233 -- 6/29/11 -- Page 7 Bill 516, which I cannot support. I would ask that the authors of these bills reconcile their efforts to support greater youth involvement in public policy without creating additional organizations when there are numerous organizations and entities already dedicate to working with youth from all backgrounds." In his veto message of SB 516 (DeSaulnier, 2010), Governor Schwarzenegger stated, "This bill is similar to a measure I vetoed in 2008. I still encourage California youth to engage in the public policy issues that directly impact their lives such as education, employment, foster care, homelessness, and more. However, as most parents and adults can attest, I would also argue that youth do not need statutory authorization to have their voices and opinions heard. There are numerous organizations, entities and communications in which youth can be engaged in our legislative process." AB 233 is similar to AB 2017 while SB 803 (DeSaulnier) creates the California Youth Leadership Fund for the California Youth Leadership Project which the bill creates under the Department of Education to fund civic engagement for the state's youth. SB 803 is set for hearing in the Assembly Revenue & Taxation Committee on July 2nd. 5. Where does the money go ? This bill gives broad authority to the California YMCA Youth and Government Board of Directors to develop criteria, evaluate applications, and award and administer grants to eligible organizations. The funds will be used to support program participation by underserved students and for direct program-related expenses. The Committee may wish to amend AB 233 so that (1) the State Board of Education has more responsibilities to determine the uses for the funds and (2) ensure funds are not used for administrative costs. 6. Taxpayer Funds . The opposition expressed concerns that this bill will result in codifying a program sponsored by the YMCA, a religious-based organization and using publicly-funded tax returns to facilitate contributions. A Legislative Counsel opinion that specifically states that this bill does not violate the separation of church and state because the money used is from individual tax payers. 7. Technical amendment . Currently, there is space on the AB 233 -- 6/29/11 -- Page 8 tax return for additional check-offs. However, as written, if this bill is enacted the California YMCA Youth and Government Fund would be added when another VCF is removed. The Committee staff suggests the following amendments to expedite the addition of the VCF to the tax return in the event the bill is enacted: On page 3, line 7, delete "not". On page 3, line 7, replace "until" with "when". On page 3, line 8, after "removed" add "or as soon as space is available". Assembly Actions Assembly Revenue and Taxation Committee: 9-0 Assembly Appropriations Committee:17-0 Assembly Floor: 78-1 Support and Opposition (7/2/12) Support : American Federation of State, County and Municipal Employees, AFL-CIO; California State Alliance of YMCAs; California YMCA Youth & Government; Channel Islands YMCA; Corona Norco Family YMCA; Envision Schools; Magdalena Ecke Family YMCA; Miller Family YMCA; Montecito Family YMCA; Santa Monica Family YMCA; Simi Valley Family YMCA; South Valley YMCA Family Delegation; YMCA of Burbank California; YMCA of Orange County; YMCA of Superior California; fifteen members of the Magdalena Ecke Family YMCA Youth and Government Delegation; thirty-two individuals. Opposition : Unknown.