BILL ANALYSIS Ó SENATE GOVERNANCE & FINANCE COMMITTEE Senator Lois Wolk, Chair BILL NO: SB 874 HEARING: 1/11/12 AUTHOR: Hancock FISCAL: No VERSION: 1/4/12 TAX LEVY: No CONSULTANT: Grinnell QUALIFIED SPECIAL TAXES Expands Exemptions for Qualified Special Taxes Imposed by School and Community College Districts Background and Existing Law The California Constitution 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). However, state law allows school districts and community college districts to levy "qualified special taxes" with 2/3 vote of the electorate, so long as the tax is uniform as applied to all taxpayers. The districts may implement the tax 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 using this section. Under qualified special tax law, school districts may exempt persons over the age of 65 from the tax, as well as persons receiving Supplemental Security Income (SSI) regardless of age (AB 385, Lieber, 2006). However, school districts cannot exempt persons receiving Social Security Disability Insurance (SSDI) from the tax. Proposed Law SB 874 allows school districts to exempt persons receiving SSDI from qualified special taxes. State Revenue Impact SB 874 -- 03/21/11 -- Page 2 No estimate. Comments 1. Purpose of the bill . According to the Author, "This bill gives school and districts options when crafting local taxes measures by allowing them to exempt certain disabled property owners from a parcel tax. Individuals who are disabled and are receiving SSDI may not be able to pay the tax because their disability prevents or limits them from working." 2. What's the difference ? The Social Security Administration (SSA) administers both the SSI and SSDI programs. SSI is a federal income supplement program paid out of general federal revenues for persons aged, blind, disabled, and of limited income. SSDI is funded from federal payroll taxes and provides benefits to disabled persons because their disability serves as a barrier to employment, but unlike SSI, eligibility is not restricted by an individual's income, instead based on the nature of the disability. While SSDI recipients may be economically better off than SSI recipients, their disability can inhibit their ability to generate income. SB 874 provides parity for local parcel taxes by allowing school districts to exempt SSDI recipients from the tax. Support and Opposition (04/25/11) Support : Community College League of California. Opposition : California Taxpayers Association. SB 874 -- 03/21/11 -- Page 3