BILL ANALYSIS Ó
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: SCA 5 HEARING: 4/27/11
AUTHOR: Simitian FISCAL: No
VERSION: 12/6/10 TAX LEVY: No
CONSULTANT: Grinnell
TAXATION: EDUCATIONAL ENTITIES: PARCEL TAX
Lowers the Vote Threshold for School Districts, Community
College Districts and County Offices of Education to Levy
Parcel Taxes from 2/3 to 55%
Background and Existing Law
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
share of the property tax, and counties may fund programs
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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.
Proposed Law
SCA 5 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 under specified
circumstances, including:
The district governing board approves the
proposition by 2/3 vote.
The ballot proposition contains a specific list of
programs and purposes to be funded, and a requirement
that funds be spent solely for those programs and
purposes,
The ballot proposition includes a requirement for
annual independent audit of the amount of tax proceeds
collected and expended and the specified purposes and
programs funded
The ballot proposition requires the governing board
to create a citizens' oversight board to review all
expenditures of proceeds and financial audits, and
report its findings to the governing board and the
public.
The ballot proposition allows for an exemption from
the tax for parcels owned by persons over the age of
65 or those receiving SSI.
The measure also defines "parcel tax" as a special tax
imposed upon real property at a rate determined without
regard to the property's value, and caps the total amount
of parcel taxes imposed, increased, or extended by a
district to $250 per parcel per year adjusted for inflation
by the California Consumer Price Index. Tax proceeds may
not be used to fund administrative salaries. SCA 5 also
makes clarifying and conforming changes to the
SCA 5 - 12/6/10 -- Page 3
Constitution.
State Revenue Impact
No estimate.
Comments
1. Purpose of the bill. According to the Author, "Given
the state's on-going financial crisis, school districts are
now facing severe cutbacks in funding. Worse still, it is
unlikely that the state will be able to provide adequate
funds in the foreseeable future. Now more than ever,
school districts need to find ways to help them maintain
quality programs. SCA 5 provides school districts with
much-needed flexibility in raising local educational funds.
In addition to helping school districts raise revenues, SCA
5 will also give local districts more power to fund
programs that are important to them. Much of state funding
is earmarked for particular programs. When it comes to
raising money that school districts can control, there's
not much choice. A parcel tax is one of the very few ways
local school districts can raise discretionary revenue.
SCA 5 will increase local choice for local education needs,
while ensuring that every dollar generated goes to the
school district for locally identified purposes. In the
past, school districts have used parcel tax money to
enhance instructional programs, hire additional teachers,
and support libraries, music, and arts programs- all
reflecting local priorities in their local districts.
California still lags behind most states in per pupil
spending. Although the current financial crisis will lead
to reduced state spending on education, schools do not have
to languish as a result. Voters can take local action to
keep education strong, as they did when they approved a
similar proposition on local school construction bonds,
lowering the approval threshold from two-thirds to 55
percent. SCA 5 conforms the threshold required for parcel
taxes to the voter-approved threshold for school bonds."
2. "Don't tax me? Tax the guy behind the tree" posits an
old piece of tax policy wisdom. SCA 5 lowers the threshold
on parcel taxes, which are taxes on landowners. Therefore,
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resident non-landowners, like renters, are able to vote in
the election, but do not pay any of the taxes except as
passed through in rents. In the reverse, non-resident
landowners are not able to vote in the election, but must
pay the tax if the voters approve the measure. In
addition, districts may exempt taxpayers 65 years or older,
thereby creating another class of voters who do not bear
the incidence of the tax. The Committee may wish to
consider whether lowering the vote threshold for new parcel
taxes is equitable when many voters do not bear the cost,
and those who may bear the cost cannot vote.
3. Signed, sealed, delivered . California uniquely among
the states allows school districts to levy parcel taxes,
which 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 or per
square foot, 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.
Proceeds are not limited to certain uses; revenues may be
used for ongoing expenses, programs, or buildings at the
local agency's discretion, although parcel taxes imposed at
a lower voter approval rate under SCA 5 cannot be used for
administrative salaries, among other restrictions.
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; Parcel
tax proposals voted on in the last ten years varied from
$26 per parcel to $765 per parcel, with terms as short as
two years, and some being permanent.
According to EdSource, between 1983 through November 2010,
voters approved 289 parcel taxes in 542 elections, with 92%
of proposals receiving at least a majority vote from the
electorate during that time. Districts have increasingly
turned to parcel taxes in recent years as a result of
fiscal stress: in 2010, 38 districts placed parcel taxes on
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the ballot, compared to 31 in 2009, and 13 in 2006. The
median district levying a parcel tax had about 3,180
students of whom 15% qualified for free/reduced-price meals
and 9% were English learners. EdSource also discusses some
of the recent trends for districts imposing parcel taxes:
Although all districts can propose a parcel tax to
their community, they are relatively rare in most of
the state. Between 2001 and June 2009, out of roughly
980 California school districts, 132 conducted parcel
tax elections and 83 districts passed them. Only seven
of those districts were located in Southern
California, while 66 were within the nine-county San
Francisco Bay Area. The districts that had successful
elections generally serve fewer low-income students
than the typical California school district. They are
also disproportionately small, with 66 (80%) of them
serving fewer than 10,000 students. In 2008-09, those
districts that had parcel taxes reported total
revenues of about $250 million, according to Ed-Data
4. If at first you don't succeed . SCA 5 is substantially
similar to SCA 6 (Simitian, 2009), SCA 17 (Simitian, 2008),
SCA 8 (Simitian, 2005), and ACA 4 (Simitian, 2003), all of
which were not enacted. However, SCA 5 contains
accountability provisions identical to those included in
Proposition 39, which have previously only been included in
last year's attempt.
5. Dueling exemptions . SCA 5 requires that parcel taxes
enacted by 55% vote exclude persons over the age of 65 and
those receiving SSI from the tax, exemptions that are
permissive for local agencies seeking to enact the tax at
the 2/3 vote threshold. Such a requirement reduces local
flexibility, and reduces the tax base, causing the tax to
be higher, and all things equal. SCA 5 parcel taxes must
exclude persons with plenty of income and wealth by
exempting persons from the tax because the exemption is
based solely on the person's age. The Committee way wish
to consider whether this requirement is necessary given
districts' existing flexibility. Additionally, SB 874
(Hancock), also being heard by the Committee today, allows
additional exemptions for parcel taxes enacted by school
and community college districts. If both measures are
enacted, the Author may want to conform the exemptions to
ensure that allowing additional exemptions under SB 874
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doesn't affect a district's ability to use SCA 5's lower
vote threshold.
6. First time for everything . SCA 5 gives the power to
enact parcel taxes, to County Offices of Education, which
currently enjoy no taxing powers. School districts,
community college districts, and other specified special
districts may enact these taxes by statute, but never
before has the Legislature allowed these powers to branches
of county government. If SCA 5 is enacted, the Legislature
may need to specify statutory procedures for County Offices
of Education to levy parcel taxes.
Support and Opposition (04/25/11)
Support : California Teachers Association; Riverside
County School Superintendents' Association; Silicon
Valley Leadership Group; Torrance Unified School
District; California School Boards Association;
Association of Low Wealth Schools; California School
Employees Association; Association of California School
Administrators; California State PTA; California
Association of Suburban School Districts; Community
College League of California; American Federation of
State, County and Municipal Employees, AFL-CIO; Santa
Barbara School Districts; Pajaro Valley Unified School
District; Vallejo Unified School District; Blake School
District; Jefferson Elementary School District;
Manifee Union School District; Moraga School District;
Old Adobe Union School District; Compton Unified School
District; Newcastle Elementary School District; West
Contra Costa Unified School District; Lafayette School
District; Templeton Unified School District;
Winship-Robbins Elementary School District; Hermosa Beach
City School District; John Swett Unified School District;
Denair Unified School District; Tracy Unified School
District;
El Monte Union High School District; Goleta Union School
District; Gravenstein Union School District; Sonoma
County Office of Education; Bear Valley Unified School
District; Burlingame Elementary School District;
Placentia-Yorba Linda Unified School District; Cascade
Union Elementary School District; Blue Lake Union School
District; Sebastopol Union School District; Jacoby Creek
Charter School District; Merced Union High School
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District; Beverly Hills Unified School District;
Firebaugh-Las Deltas Unified School District; Carlsbad
Unified School District; Evergreen School District; Trona
Joint Unified School District; Carpinteria Unified School
District;
Oak Park Unified School District; Alpine County Office of
Education; Northern Humboldt Union High School District;
Newhall School District; Pleasant Ridge Union School
District; Orinda Union School District; Little Lake City
School District; Val Verde Unified School District;
Farmersville Unified School District; Salinas Elementary
School District; Arcata School District; Torrance Unified
School District; Pittsburg Unified School District; South
Bay Union School District; Etiwanda School District;
Campbell Union High School District; Soquel Union
Elementary School District; Bishop Unified School
District; San Mateo County Board of Education; Dry Creek
Joint Elementary School District; Woodside Elementary
School District; Pacifica School District;
Napa County Office of Education; Santa Monica-Malibu
Unified School District; Mountain View Whisman School
District; Albany Unified School District; Tamalpais Union
High School District; Loma Prieta Joint Union Elementary
School District; Calaveras Unified School District; Poway
Unified School District; Fremont Union High School
District; Los Altos School District; Sequoia Union High
School District; San Mateo-Foster City School District;
Alhambra Unified School District; Carmel Unified School
District;
Covina-Valley Unified School District; Simi Valley
Unified School District;
Laguna Beach Unified School District; Sunnyvale School
District; Chico Unified School District; Sausalito Marin
City School District; Freshwater School District; Folsom
Cordova Unified School District; Palm Springs Unified
School District; El Segundo Unified School District;
Snowline Joint Unified School District; Foothill - De
Anza Community College District; Hueneme Elementary
School District; Las Virgenes Unified School District;
San Rafael City Schools Joint District; Mill Valley
School District; Mt. Diablo Unified School District;
Walnut Creek School District; Moorpark Unified School
District; Scotts Valley Unified School District; Brisbane
School District; Los Gatos Union School District;
California Tax Reform Association; San Bernardino County
District Advocates for Better Schools; San Francisco
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Unified School District
Opposition : California Taxpayers Association