BILL ANALYSIS Ó Senate Appropriations Committee Fiscal Summary Senator Christine Kehoe, Chair SB 1571 (DeSaulnier) - Income tax checkoff: School Supplies for Homeless Children Fund. Amended: May 1, 2012 Policy Vote: G&F 5-1 Urgency: No Mandate: No Hearing Date: May 21, 2012 Consultant: Mark McKenzie This bill does not meet the criteria for referral to the Suspense File. SB 1571 FAILED PASSAGE on May 14, 2012 on a vote of 2-3, RECONSIDERATION granted, 7-0. Bill Summary: SB 1571 would establish the School Supplies for Homeless Children Fund as a voluntary contribution fund (VCF) on the personal income tax form when another VCF is removed. Fiscal Impact: Annual estimated tax revenue loss of approximately $15,000 to $20,000 (General Fund) for up to five years beginning in 2013-14. (see staff comments) Estimated Department of Education (CDE) staffing costs of approximately $100,000 in 2013-14 to establish the grant program. Ongoing CDE administrative costs of approximately $50,000 annually for up to four additional years. All costs to CDE are covered by taxpayer contributions deposited into the School Supplies for Homeless Children Fund. Background: Existing law allows taxpayers to make voluntary contributions of their own funds to one or more of the 18 VCFs currently on the personal income tax return. As charitable contributions, the taxpayer may deduct the amount donated to VCF "checkoff" programs on the subsequent year's tax return. All but one of the existing VCFs has a sunset date and most require a minimum annual contribution amount of $250,000, adjusted annually for inflation, to ensure that a program has sufficient public support to warrant continued placement on the tax return. Proposed Law: SB 1571 would establish the School Supplies for Homeless Children Fund when another VCF is removed from the income tax return. The fund would stay on the tax return for five years, but would be repealed earlier if the checkoff does SB 1571 (DeSaulnier) Page 1 not maintain the minimum contribution amount of $250,000, adjusted for inflation, for each year after the second year that the checkoff appears on the tax return. Revenues generated by the checkoff would be allocated, upon appropriation by the Legislature, to FTB, the Controller, and CDE to cover administrative costs, and to CDE for allocation to tax-exempt nonprofit organizations that provide school supplies and health-related products to homeless children, as specified. The bill would authorize CDE to develop a grant process to administer the distribution of available funds, and would require grant applicants to: (1) match grant funds with 100 percent in-kind corporate donations; (2) distribute the school supplies and health-related products on a statewide basis; and (3) spend less than two percent of the grant funds for administrative purposes. Staff Comments: Using an average marginal tax rate of 6 percent, the revenue loss associated with taxpayer deductions of $250,000 would be approximately $15,000. FTB estimates a revenue loss of approximately $20,000, which is based upon the average contribution level of $330,000 for all VCFs for the 2009 taxable year. Actual losses would depend upon the total amount contributed to the School Supplies for Homeless Children Fund, and whether taxpayers claim the contributions as deductions. CDE indicates that it could incur annual costs in the range of $100,000 to $150,000 to establish and administer the grant program. Staff estimates, however, that although initial costs to establish the program could be in the range of $100,000, ongoing administrative costs are likely to be relatively minor, perhaps in the range of $50,000 annually. Staff notes that all CDE costs are covered by the voluntary contributions to the School Supplies for Homeless Children Fund.