BILL ANALYSIS Ó ------------------------------------------------------------ |SENATE RULES COMMITTEE | SB 89| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ UNFINISHED BUSINESS Bill No: SB 89 Author: Senate Budget and Fiscal Review Committee Amended: 6/27/11 Vote: 21 PRIOR VOTES NOT RELEVANT SUBJECT : Budget Act of 2011: Vehicle License Fee and Registration Fee SOURCE : Author DIGEST : This bill recalculates the cost shares for Department of Motor Vehicles (DMV) administration funded from different fees and taxes collected on vehicles, and additionally directs existing local government revenue from the vehicle license fee (VLF) to support local public safety realignment. For DMV, the administrative costs paid by the VLF tax will be reduced, and the administrative costs paid from vehicle registration fees will be increased. As a result, the amount of VLF directed to local governments will increase by $300 million to support public safety realignment. Vehicle registration fees will be increased by $12 per vehicle to cover the new cost share from registration fees. Shifted local VLF funds will provide another $153 million for public safety realignment - for a total of $453 million. Assembly Amendments delete the prior version of the bill CONTINUED SB 89 Page 2 and insert statutory changes in the area of vehicle fees and tax collection in order to enact revisions to the 2011 Budget Act related to public safety realignment. ANALYSIS : Existing Law 1. Under current law, the VLF rate will fall from 1.15 percent of a vehicle's assessed value to 0.65 percent of the vehicle's assessed value on July 1, 2011. Section 15 of Article XI of the California Constitution specifies that revenue received from the 0.65 VLF rate be expended as follows: (1) the cost of collection at the DMV and the Franchise Tax Board, (2) allocated to cities and counties for 1991 realignment, and (3) to cities and counties as specified in statute. 2. Current law assigns cost shares for DMV's administrative costs based on the proportional amount of revenue collected from different fees and taxes. However, the cost share for the VLF is set in statute at what the tax revenue would otherwise be if the rate was still set at two percent of a vehicle's value. Instead, the permanent base rate for the VLF is now set at 0.65 percent. 3. The base rate for the vehicle registration fee is $31 annually per vehicle. The rate has not been increased since 2004. Other fees are applied on top of the base rate, for the Department of the California Highway Patrol and other purposes. 4. The California Constitution specifies in Section 3 of Article XIIIA that a charge imposed for the reasonable regulatory costs to the state incident to issuing licenses and permits and the administrative enforcement and adjudication thereof are defined as fees and not taxes. 5. SB 94 (Senate Budget and Fiscal Review Committee), Chapter 21, Statutes of 2011, permits the Administration to delay the mailing of vehicle registration notices while the levels of related fees and taxes are CONTINUED SB 89 Page 3 determined for the 2011-12 budget. This bill: 1. Sets the cost share of the VLF for DMV administration at $25 million in 2011-12 and directs the Department of Finance to work with the DMV to update the methodology for allocating costs. By reducing the share of administrative costs paid out of the VLF, this bill results in an additional $300 million in VLF revenue to allocate to cities and counties. This bill directs this $300 million into the Local Law Enforcement Services Account in the Local Revenue Fund 2011 to be used for Public Safety Realignment. 2. Increases the base motor vehicle registration fee by $12 per year. This fee increase will result in new annual fee revenue of about $300 million to cover the administration costs of the DMV that this bill is shifting to registration fees. 3. Clarifies that fee and tax payment on vehicles with a due date prior to July 1, 2011, shall be attributed to the 2010-11 fiscal year and allocated accordingly - even if the revenue is collected on or after July 1, 2011. This clarification is related to SB 94 (Senate Budget and Fiscal Review Committee) that delayed DMV billing for vehicle registration in May and June of 2011. 4. Shifts the portion of the 0.65 rate VLF that is allocated for general local government purposes, to the specific purpose of 2011 public-safety realignment. These changes provide a total of $153 million for realignment. Comments AB 22X1 (Blumenfield), was adopted by both houses of the Legislature on June 15, 2011, but has not been sent to the Governor as of June 27. AB 22X1 includes some similar provisions as this bill related to the VLF used for DMV administration. It is assumed AB 22X1 will not be enacted into law, and this bill will be the implementing legislation for changes in this CONTINUED SB 89 Page 4 area. This bill provides a total of approximately $453 million for public safety realignment. Other trailer bills in this budget package provide additional revenue and provide for the allocation of public-safety realignment revenues. By setting the administrative costs for DMV of collecting the VLF at $25 million, the costs or collection as a share of total VLF tax collected is approximately one percent. This is proportionally similar to the cost of collection for the Franchise Tax Board for the personal income tax and the corporate tax, and similar to the cost of collection for the Board of Equalization for the sales tax. Of the VLF revenue currently allocated to local governments for general purposes, a portion is directed to Orange County as relief for that county's financial crisis of the mid-1990s, and the remainder is allocated to cities. FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes Local: No DLW:do 6/28/11 Senate Floor Analyses SUPPORT/OPPOSITION: NONE RECEIVED **** END **** CONTINUED