BILL ANALYSIS Ó SB 1571 Page 1 Date of Hearing: August 8, 2012 ASSEMBLY COMMITTEE ON APPROPRIATIONS Felipe Fuentes, Chair SB 1571 (DeSaulnier) - As Amended: May 25, 2012 Policy Committee: Revenue and Taxation Vote: 6-0 Urgency: No State Mandated Local Program: No Reimbursable: SUMMARY This bill authorizes the addition of the School Supplies for Homeless Children Fund check-off to the personal income tax (PIT) form upon the removal of another voluntary contribution fund (VCF) from the form. Specifically, this bill: 1)Provides that all money transferred to the School Supplies for Homeless Children Fund, upon appropriation by the Legislature, shall be used for the following purposes: a) To the Franchise Tax Board (FTB), the State Controller, and the State Department of Education (CDE) for reimbursement of all costs incurred in administering the check-off., b) To the CDE, for distribution of grants to school districts for assisting pupils in California under the federal McKinney-Vento Homeless Assistance Act by providing school supplies and health-related products to homeless children. 2)Requires the CDE to develop a formal grant process that includes application forms, deadlines, and audit procedures, subject to the specified requirements. 3)Provides for the automatic repeal of the check-off on January 1 of the fifth taxable year following the fund's first appearance on the PIT return or on an earlier date if the check-off fails to meet a minimum contribution amount initially set at $250,000 and adjusted for inflation annually thereafter. SB 1571 Page 2 FISCAL EFFECT 1)Based on past tax check-offs, annual revenues are expected to be in the $300,000-$800,000 range, although some check-offs have received less revenues. 2)FTB estimates this bill will cost the state about $20,000 per year in lost revenues. This estimate assumes the check-off is added in the 2012-13 fiscal year, donations meet the average amount for the other tax check-offs and taxpayers deduct these charitable donations. Revenue losses would be similar in subsequent years. 3)The Department of Education estimates that it will cost approximately $100,000-$150,000 to administer the program established by this bill. The costs for FTB and the State Controller are minor and absorbable. SB 1571 Page 3 COMMENTS 1)Purpose. The author states that California has the nation's largest population of homeless children. As of 2010, there were upwards of 300,000 homeless students attending California elementary, middle and high schools. The author notes, among many other problems, homeless students often lack basic school supplies like backpacks, binders and pencils or pens, as well as dental supplies essential to good oral health, leaving them at a critical disadvantage in school. The author states these students consistently test well below average in math and English, and only 25% graduate from high school. The author argues while it will not solve all of the problems that come with homelessness, SB 1571 will help by giving compassionate taxpayers the opportunity to cover the costs of basic school supplies and health services for homeless children. 2)Voluntary Contribution Funds. California taxpayers can make voluntary contributions to any of 15 funds listed on the state PIT return. The contributions are in addition to tax liabilities so they do not directly reduce the amount of state taxes in that tax year. As charitable contributions, the taxpayer may deduct the amount of the check-off on the subsequent year's income tax return, reducing state tax collections. These voluntary contributions support various purposes, including cancer research, endangered species preservation and emergency food assistance. Contributions have historically ranged from $300,000 to $800,000 per year. Except for the California Seniors Special Fund, all have sunset dates, and most must meet a minimum annual contribution to remain on the return. 3)Related legislation . SB 803 (DeSaulnier) establishes the California Youth Leadership Project (Project) under the State Department of Education (CDE) to promote youth civic engagement and authorizes the addition of the California Youth Leadership Fund (Fund) check-off to the PIT form. 4)Previous legislation . The following bills PIT check-offs were introduced in 2011. a) AB 233 (Hall), authorizes the addition of the California YMCA Youth and Government Fund check-off to the PIT form upon the removal of another VCF from the form. This bill is in the Senate Appropriations Committee. SB 1571 Page 4 b) AB 564 (Smyth), Chapter 549, Statutes of 2011, reauthorized the addition of the Municipal Shelter Spay-Neuter Fund check-off to the PIT return upon the removal of another VCF from the form. c) AB 764 (Swanson), Chapter 465, Statutes of 2011, authorized the addition of the Child Victims of Human Trafficking Fund check-off to the PIT return upon the removal of another VCF from the form. d) AB 971 (Monning), Chapter 209, Statutes of 2011, reauthorized the addition of the California Sea Otter Fund check-off to the PIT form beginning with the 2011 return. e) SB 164 (Simitian), Chapter 699, Statutes of 2011, extended, from January 1, 2013, to January 1, 2018, the sunset date for two VCFs currently on the PIT return the State Children's Trust Fund and the Rare and Endangered Species Preservation Program. f) SB 583 (Vargas), Chapter 711, Statutes of 2011, reauthorized the addition of the ALS/Lou Gehrig's Disease Research Fund check-off to the PIT return upon the removal of another VCF from the form. Analysis Prepared by : Roger Dunstan / APPR. / (916) 319-2081