BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
SB 171 (Wolk)
Hearing Date: 05/26/2011 Amended: As Introduced
Consultant: Mark McKenzie Policy Vote: G&F 6-2
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BILL SUMMARY: SB 171, an urgency measure, would reduce future
property tax revenue shifts from the Cordelia Fire Protection
District (Cordelia FPD) to the Educational Revenue Augmentation
Fund (ERAF) in Solano County.
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Fiscal Impact (in thousands)
Major Provisions 2011-12 2012-13 2013-14 Fund
ERAF shift correction $62* $67* $71* General
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*based on average historical property tax growth rate in Solano
County of 7% per year
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STAFF COMMENTS: SUSPENSE FILE.
In response to state budget deficits in the early 1990s, the
Legislature reduced state General Fund spending on education by
shifting property taxes from counties, cities, and special
districts to an ERAF in each county to support schools. The
statutory formula for the 1992-93 ERAF shifts required special
districts to shift up to 40% of total property tax revenues, but
not more than 10% of total district revenues. Some districts
were exempted, while others, including fire districts, were
granted exceptions to the formulas. In the 1993-94 ERAF shifts,
most fire districts were effectively exempted because the
formulas allowed them to credit other funds they receive against
their ERAF contribution.
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
recent years, the amount of property tax revenues received by
the Cordelia FPD has decreased dramatically. The largest loss
of revenues followed a correction in the District's allocation
in 2001 after it was discovered that nearly half of its annual
property tax revenues were coming from areas that had been
annexed into nearby cities and were no longer served by the
District. The State Controller (SCO) has determined that the
District received approximately 50% more property tax revenues
than it should have from 1980 until Solano County corrected
SB 171 (Wolk)
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allocations in 2001. While the District's ERAF payments are
based upon tax revenues it was receiving erroneously, the SCO
has reviewed the county's calculations and concluded that both
the current revenues received by the District, and its ERAF
contribution, appear to be correct.
SB 171 would prospectively reduce Cordelia FPD's ERAF payments
by specifying that the amount of property tax deemed allocated
to ERAF by the district in 2010-11 would be decreased by
$58,310. This adjustment would be reflected in future
allocations of property tax revenues, beginning in 2011-12. SB
171 would also ensure that other special districts would not
absorb the adjustment.
Staff notes that any shifts of property tax revenues from ERAF
or directly from school districts must be backfilled by the
General Fund to satisfy the requirements of Proposition 98 under
Test 2 and 3. The adjustment to Cordelia FPD's property tax
allocations for the 2010-11 fiscal year would result in a
2011-12 General Fund cost of $58,310, plus a growth factor.
This amount would be compounded annually by the property tax
growth rate. Based on information in the State Controller's
"Assessed Valuation Annual Report," the average annual property
tax growth rate in Solano County from fiscal year 1998-99
through 2009-10 is approximately 7 percent.