BILL ANALYSIS �
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: AB 504 HEARING: 6/29/11
AUTHOR: Williams FISCAL: No
VERSION: 6/21/11 TAX LEVY: No
CONSULTANT: Grinnell
SCHOOL DISTRICTS COUNTY OF SANTA BARBARA
SPECIAL TAXES
Allows a school district consolidating with another to
continue its parcel tax, and levy another within its former
boundaries.
Background and Existing Law
I. Qualified Special Taxes . 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 2/3 vote (Article XIII A, XIII
B, and XIII C). Proposition 13 (1978) required a 2/3 vote
of each house of the Legislature for state tax increases,
and 2/3 vote of local voters for local special taxes.
Proposition 62 (1986) prohibited local agencies from
imposing general taxes without majority approval of local
voters, and a 2/3 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).
Current law additionally allows school districts and
community college districts to levy qualified special taxes
that are uniform as applied to all taxpayers with 2/3 vote
of the electorate; however, school districts may exempt
persons over the age of 65 or those receiving Supplemental
Security Income (SSI) from the tax. County offices of
education have no direct taxing authority, but receive a
AB 504 -- 6/21/11 -- Page 2
share of the property tax, and counties may fund programs
delivered by the education offices. The district may
implement these taxes, for as long as it wants, spend the
proceeds for any purpose, and apply any tax rate it
chooses. To date, local agencies have only assessed parcel
taxes under this section. Existing law is silent regarding
previously assessed parcel taxes when school districts
reorganize or merge, and does not currently allow a
jurisdiction to apply a tax to a part of itself.
II. School District Formation . The 1849 California
Constitution authorized the creation of school districts,
and by 1935-36, California had 2,735 Elementary School
Districts, 295 High School Districts, and no unified school
districts according to the California Department of
Education. In 1964, the Legislature comprehensively recast
school district formation laws, and increased by $15 per
average daily attendance the funding level for unified
school districts as one part of a series of reforms to the
school district formation law (AB 145, Unruh). The reforms
and funding enhancement led to a significant movement
toward consolidation of single-purpose school districts
into unified ones: between 1964 and 1974, the total number
of elementary and high school districts in the state
decreased from 1,048 to 529, and the total number of
unified districts increased from 164 to 253. California
today has slightly more than half of the school districts
it did in 1932 despite its economic and population growth.
In 1994, the Legislature allowed for non-coterminous
unifications, where districts unify without affecting all
of the feeder elementary school districts (SB 1537,
Thompson). Under the bill, elementary school districts can
exist within the boundaries of a unified school district
with approval of the State Board of Education.
School district reorganizations can be initiated by the
district's governing board, landowners, or voter petition,
and must follow a very extensive process, requiring
approval by the County Committee on School District
Organization and usually the voters of the affected area.
As part of any reorganization, the county committee must
describe as part of the petition the effect on the
individual school district's revenue limits and bonded
indebtedness. After reorganization, funds from previously
AB 504 -- 6/21/11 -- Page 3
issued school bonds may be used only in that part of the
former district or for such use in that same district,
unless the new district accepts and assumes the former
district's bonded indebtedness, in which case the new
district may use the funds anywhere in the new district for
the same purpose voters approved. Additionally, in a
school district merger, the new district assumes all
outstanding bonded indebtedness of the previous districts.
In either case, the county board of supervisors must
recalculate the property tax rate necessary for repayment
of bonds. Existing law is silent regarding previously
assessed parcel taxes when school districts reorganize or
merge.
III. Santa Barbara County Schools . The Santa Barbara
County High School District serves students from grades 7
through 12 in the Cities of Goleta and Santa Barbara in
Santa Barbara County, where elementary school students are
served by the Cold Spring, Goleta Union, Hope, Montecito
Union, and Santa Barbara Elementary School Districts. The
Santa Barbara County High School District and the Santa
Barbara Elementary School Districts have the same governing
board and a single administration, but exist as separate
districts. Due to recent cuts, the Board of Education that
governs both approved a resolution to reorganize as a
unified district and submitted a petition for approval to
the County Committee. The other elementary school
districts have requested to be excluded from the
reorganization. The districts estimate that the proposal
results in $6 million in additional state funding, largely
derived from boosting the combined districts' revenue
limit, thereby removing the elementary school district's
status as a "basic aid" district, meaning that its existing
local property tax revenues are sufficient to meet
Constitutional funding requirements.
In 2008, voters in the high school district approved a $23
parcel tax to pay for services within its boundaries, and
voters within the elementary school district enacted
another $27 parcel tax. However, current law does not
expressly authorize them to continue to impose the taxes if
the districts consolidate. The Districts want to clarify
the law to state that they can continue to impose the tax
after the reorganization.
AB 504 -- 6/21/11 -- Page 4
Proposed Law
Assembly Bill 504 provides that any qualified special tax
imposed by a district that reorganizes may continue to be
imposed, provided that the revenues derived remain
segregated on a geographical basis conforming to the school
district's prior boundaries.
AB 504 also allows the Santa Barbara Unified School
District to impose a special tax that is a parcel tax
within the boundaries of the former Santa Barbara
Elementary School District upon approval by the required
vote of the voters within the boundaries of the former
district.
State Revenue Impact
No estimate
Comments
1. Purpose of the bill . According to the Author,
"Assembly Bill 504 is clarifying, district legislation that
allows Santa Barbara School Districts to maintain existing
parcel tax revenue allotments once their elementary and
high school districts unify. Santa Barbara School
Districts (SBSD) is one of a handful of districts statewide
comprised of a no coterminous elementary and high school
district, the Santa Barbara Elementary School District and
the Santa Barbara High School District. With the exception
that their funding remains separate, the smaller elementary
district and the surrounding high school district are
jointly governed by a single board of education and a
common administration. In 2008, Santa Barbara voters
overwhelmingly approved Measure H and Measure I. Measure H
is a parcel tax assessed for the Santa Barbara High School
District and Measure I is a parcel tax assessed for the
Elementary School District. SBSD is moving forward with a
plan to unify their elementary and high school district
because they will receive additional state revenue.
Without clarifying legislation, unification of these
districts could result in the nullification of their local,
voter-approved parcel taxes."
AB 504 -- 6/21/11 -- Page 5
2. Balkanization ? In the Serrano series of cases, the
California Supreme Court held that California's former
method of funding public education, "fails to meet the
requirements of the equal protection clause of the
Fourteenth Amendment of the United States Constitution and
the California Constitution," because of district to
district disparities. Parcel taxes largely exacerbate
funding disparities because districts with high tax bases
derive more money from them than districts with lower ones.
According to EdSource, districts that successfully enact
parcel taxes generally serve fewer low-income students than
the typical California school district, and are also
disproportionately small, with 66 (80%) of them serving
fewer than 10,000 students.
While AB 504 currently affects only schools in Santa
Barbara, the bill allows one school district to ask the
voters to approve a tax in only one part of its
jurisdiction, and pay for services only in that area. As
such, the bill may be a precedent for future bills to allow
districts to slice and dice themselves in the way most
conducive for winning parcel tax elections, further
balkanizing education services. The precedent created by
AB 504 would be for differences within a district, not
among districts which concerned the Court in Serrano, but
if a sufficiently large district set up separate taxing
entities similar to AB 504 to maximize its chances of
approving parcel taxes at the ballot, would it lead to the
same kind of disparities that gave rise to Serrano? On
the other hand, the Committee approved SB 653 (Steinberg)
earlier this year, which allowed local agencies to levy a
host of taxes pending voter approval, despite opponents'
argument that the measure would create vast shortcomings in
public service funding among jurisdictions. Proponents
also cite precedents that allow specified local agencies
such as park districts, cemetery districts, and vector
control districts, among others, to levy taxes in some part
of their jurisdictions, but not others. The Committee may
wish to consider the precedent AB 504 may have on school
district funding equity.
3. Of distinctions and differences . The City of Santa
Barbara's Charter initially established the Santa Barbara
County High School District and the Santa Barbara
Elementary School Districts are separate entities. Since
the charter was amended to state that the districts should
AB 504 -- 6/21/11 -- Page 6
be governed according to state law, the distinction exists
mostly in name only; the two districts have a common
governing board and administration, operating together but
for individually calculating their revenue limits and
separately holding title to property. While formal
consolidation is primarily motivated by maximizing state
funding, it makes little sense for the tax levied before
the consolidation not to be carried over to the new,
reorganized district. Without AB 504, the district could
not deliver the services the district's voters agreed to
pay for.
4. One size does not fit all . AB 504 blesses only those
taxes levied by the Santa Barbara Unified School District,
and contains specific language stating that the special law
is necessary and a general law cannot be made applicable.
However, given that the continuing trend is for elementary
and secondary to school districts to reorganize as unified
ones, is the special purpose language truly accurate?
Future consolidations among districts that previously
approved parcel taxes wouldn't have to return to the
Legislature for individual bills, and removing the hurdle
could help districts consolidate. The Committee may wish
to consider whether to apply AB 504's provisions to all
districts, not only those in Santa Barbara County.
5. Amendment needed . The measure doesn't specify that the
proceeds of any tax levied within the borders of the former
Santa Barbara Unified School District be segregated and
solely spent on programs within that district, although the
ordinance authorizing the measure would have to specify as
such. The Committee should amend Section Three of the bill
to read:
"Notwithstanding any other law, the Santa Barbara Unified
School District may impose a special tax in compliance with
Article 3.5 (commencing with Section 50075) within the
boundaries of the former Santa Barbara Elementary School
District upon approval of the voters within the boundaries
of the former Santa Barbara Elementary School District.
The District shall segregate revenues from any tax levied
under this section into a separate account, and shall use
revenues from that account solely for specific purposes
within the boundaries of the former Santa Barbara
Elementary School District."
Assembly Actions
AB 504 -- 6/21/11 -- Page 7
Assembly Revenue and Taxation 9-0
Assembly Appropriations 17-0
Assembly Floor 75-0
Support and Opposition (6/23/11)
Support : City of Santa Barbara; Cold Spring School;
District Goleta Union School District; Montecito Union
School District; Santa Barbara School Districts; Dan
Hooperman, Superintendent of Hope School District.
Opposition : Unknown.