BILL ANALYSIS �
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: SB 171 HEARING: 4/6/11
AUTHOR: Wolk FISCAL: Yes
VERSION: 2/3/11 TAX LEVY: No
CONSULTANT: Weinberger
CORDELIA FIRE PROTECTION DISTRICT'S
PROPERTY TAX ALLOCATION (URGENCY)
Reduces the amount of property tax revenues shifted from
the Cordelia Fire Protection District to the Educational
Revenue Augmentation Fund (ERAF).
Background and Existing Law
Proposition 13 (1978) reduced local property tax revenues
by 57%. The Legislature responded by bailing out local
governments with $858 million in block grants; $125 million
went to special districts (SB 154, Rodda, 1978).
In 1979, the Legislature permanently restructured the
allocation of property taxes (AB 8, L. Greene, 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. Cities and
counties got their "AB 8 shift" directly and in proportion
to the amount of their bailout. However, instead of
allocating the "AB 8 shift" directly to special districts,
the Legislature created a Special District Augmentation
Fund (SDAF) in each county. Each special district
"contributed" to the SDAF in proportion to the amount of
bailout aid it received after Proposition 13. County
supervisors had discretion in allocating the SDAF money to
special districts in their county.
To balance the State Budget in 1992-93 and then again in
1993-94, the Legislature permanently shifted property tax
revenues from local governments to each county's
Educational Revenue Augmentation Fund (ERAF) to benefit
schools --- and the State General Fund. The Legislature
used different formulas in each of those years to determine
the amount of money that each agency shifted to ERAF.
SB 171 -- 2/3/11 -- Page 2
Under the 1992-93 ERAF shift, special districts had to give
up 40% of the property tax revenues, capped at 10% of their
total revenues. Some local agencies were exempt from the
ERAF shift. Others, including fire districts, were granted
exceptions to the formulas.
In 1993-94, the state ordered a second round of ERAF
shifts. Under this shift, the Legislature allowed
districts engaged in fire protection activities to credit
any funds received through the SDAF against their ERAF
contribution. Because most fire districts received money
from the SDAF, this action effectively exempted most fire
districts from the 1993-94 shift.
The Cordelia Fire Protection District provides fire
protection and emergency medical services to approximately
5,000 residents within 56 square miles of unincorporated
Solano County.
In 2001, Solano County officials discovered that the
District was receiving nearly half of its annual allocation
of property taxes from areas that had been annexed into
nearby cities and were no longer served by the District.
After officials corrected the tax rate areas, the
District's property tax revenues dropped by over $156,000
in 2002, a 46% decrease from the prior year's revenues. At
the same time, the District lost more revenue when the City
of Fairfield cancelled its contract with the District to
provide fire protection within part of the City. Solano
County and Cordelia Fire District officials want the
Legislature to reduce the District's annual ERAF shifts
because of these revenue losses.
Proposed Law
Senate Bill 171 provides that, for 2011-12, the amount of
ad valorem property tax revenues deemed allocated by the
Solano County Auditor to the Educational Revenue
Augmentation Fund for the Cordelia Fire Protection District
in 2010-11 shall be decreased by $58,310.
SB 171 requires that this adjustment be reflected in the
District's allocation of property tax revenues in future
years.
SB 171 -- 2/3/11 -- Page 3
The bill specifies that the reductions in the amount of
allocations from Solano County's ERAF under the bill's
provisions apply only to school districts and county
offices of education, and not to community college
districts.
SB 171 requires the State Director of Finance, for 2011-12
and all future fiscal years, to ensure that the adjustments
required by the bill do not result in a net increase in the
amount of any special district's required ERAF
contribution.
State Revenue Impact
No estimate.
Comments
1. Purpose of the bill . Unlike most fire protection
districts, which were not subject to the 1993-94 ERAF
shift, the Cordelia Fire Protection District's ERAF
contributions increased because of property tax revenues
which were allocated to it erroneously, and which it no
longer receives. It is unfair to ask the District to
continue to sacrifice funding for vital public safety
services to fulfill an ERAF obligation that is based on a
mistake. Unlike the tragic end that befell its namesake at
the end of Shakespeare's King Lear, the Cordelia Fire
Protection District's story can have a happy ending. SB
171 will enhance fire protection for thousands of Solano
County residents by preventing the District from suffering
any more losses from excessive ERAF shifts in future years.
2. Picking up the tab . Every dollar that local
governments don't contribute to ERAF must be backfilled by
the State General Fund. While ERAF's effect on the
Cordelia Fire Protection District may be substantial, many
other special districts confront severe financial
challenges because of ERAF. Many of them would undoubtedly
welcome the opportunity to revise how their ERAF
contributions were calculated. The Senate Local Government
Committee defeated previous bills to help other districts
SB 171 -- 2/3/11 -- Page 4
with their ERAF computations: the McFarland Recreation and
Park district (AB 677, Parra, 2006) and the Stallion
Springs Community Services District (SB 732, Ashburn,
2005). An earlier bill to help the Cordelia Fire
Protection District died in the Senate Appropriations
Committee (SB 277, Wiggins, 2009). If the Legislature
rewrites fiscal history to help Cordelia, the Committee
should expect other special districts to seek similar
treatment. The Committee may wish to consider whether it
wants to open this fiscal door.
3. Get it in writing . In 2007, the Legislature approved
the Fresno Metropolitan Flood Control District's request to
decrease its future ERAF shifts after the State
Controller's office (SCO) provided written confirmation of
many of the District's claims (AB 263, Arambula, 2007).
The SCO reviewed the revenues that were used to calculate
the Fresno District's ERAF shift, confirmed that its
revenues were overstated, and recalculated the ERAF shift
amount. By contrast, after reviewing the Cordelia Fire
Protection District's claims, the SCO concluded that the
District's current revenues and ERAF contribution "appear
to be correct." Legislators may wish to consider whether
it should approve SB 171's ERAF reductions without the
SCO's written confirmation of the District's claims.
4. Mandate . Legislative Counsel says that SB 171 creates
a new state mandated local program by changing the manner
in which property tax revenues are allocated by Solano
County officials. SB 171 requires the state to reimburse
local agencies if the Commission on State Mandates
determines that SB 171 contains a reimbursable state
mandate.
5. Special legislation . The California Constitution
prohibits special legislation when a general law can apply
(Article IV, �16). SB 171 contains findings and
declarations explaining the need for legislation that
applies only to the Cordelia Fire Protection District.
6. Urgency clause . Regular statutes take effect on the
January 1 following their enactment; bills passed in 2011
take effect on January 1, 2012. The California
Constitution allows bills with urgency clauses to take
effect immediately if they're needed for the public peace,
health, and safety. SB 171 contains an urgency clause to
SB 171 -- 2/3/11 -- Page 5
provide immediate financial relief to the Cordelia Fire
Protection District.
Support and Opposition (3/31/11)
Support : Solano County and Cordelia Fire Protection
District.
Opposition : Unknown.