BILL ANALYSIS Ó
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: SB 446 HEARING: 5/1/13
AUTHOR: Cannella FISCAL: Yes
VERSION: 4/18/13 TAX LEVY: No
CONSULTANT: Weinberger
SAN BENITO COUNTY'S PROPERTY TAX REVENUE ALLOCATIONS
Declares some erroneous property tax allocations in San
Benito County to be correct and allows the County to repay
remaining misallocated property tax revenues.
Background and Existing Law
County auditors allocate property tax revenues to cities,
counties, special districts, and schools. To check the
accuracy of the county auditors' work with these complex
formulas, the State Controller regularly audits property
tax allocations. Sometimes the State Controller discovers
that a county auditor has allocated too much property tax
revenue to some local governments while others haven't
received enough. Before 2001, when these errors came to
light, the Legislature forgave past mistakes in return for
prospective compliance.
In 2001, the Legislature created a standard approach to
fixing these errors, declaring the State Controller's
audits to be correct. If adjustments are needed, the law
requires repayments but caps them at 1% of the current
year's secured tax revenues, paid in equal increments over
the next three fiscal years. This approach applies only to
errors uncovered on or after July 1, 2001 (AB 169, Wiggins,
2001).
In response to state budget deficits in the early 1990s,
the Legislature reduced State General Fund spending on
education by permanently shifting property tax revenues
from local governments into an Educational Revenue
Augmentation Fund in each county to benefit schools (the
so-called ERAF shifts). The State Controller's 1998, 2005,
and 2009 audits of San Benito County's property tax
allocations found that the county incorrectly apportioned
property tax revenues to the County's ERAF from 1993
SB 446 -- 4/18/13 -- Page 2
through 2001. These errors resulted in ERAF receiving less
revenue than it should have received during that period.
SB 1096 (Senate Committee on Budget and Fiscal Review,
2004) forgave some of San Benito County's debt to ERAF.
Public officials in San Benito County want legislators to
forgive most of the county's remaining debt to ERAF and
allow the county to repay the rest under the terms enacted
by the 2001 Wiggins bill.
Proposed Law
Senate Bill 446 deems the property tax apportionment
factors applied in allocating property tax revenues in the
County of San Benito for each fiscal year through the
2000-01 fiscal year to be correct.
SB 446 requires the San Benito County Auditor to make the
property tax allocation adjustments identified in the State
Controller's audit for the 2001-02 fiscal year pursuant to
a specified statute that:
Limits the cumulative reallocation or adjustment to
no more than 1% of the total amount levied at a 1%
rate of the current year's secured property tax roll.
Requires the reallocation to be completed in equal
increments within the following three fiscal years, or
as negotiated with the Controller.
SB 446 requires that for the 2002-03 fiscal year and each
fiscal year thereafter, property tax apportionment factors
applied in allocating property tax revenues in the County
of San Benito must be determined on the basis of property
tax apportionment factors for prior fiscal years that have
been fully corrected and adjusted, pursuant to the review
and recommendation of the Controller.
State Revenue Impact
No estimate.
Comments
1. Purpose of the bill . Allocating property tax revenues
is an excruciatingly complex process involving technical
computations and statutory interpretations. San Benito
SB 446 -- 4/18/13 -- Page 3
County officials made mistakes when designing, in good
faith, a methodology to allocate certain property tax
revenues. After 2001, the County corrected its
allocations, but it can't easily reallocate money that
local officials have already spent. Like many local
governments, San Benito County is con-fronting significant
fiscal challenges. Forcing the county to repay more than
$3 million to ERAF will force the County to make cuts to
vital programs, like the county free library and safety net
services for some of the county's most vulnerable
residents. To avoid these painful budget cuts, the County
wants the Legislature to validate property tax allocations
it made through the 2000-01 fiscal year and allow it to
repay erroneous allocations it made during the 2001-02
fiscal year. This approach replicates the terms of both
the 2004 budget bill, which forgave some counties' pre-2001
property tax allocation debts, and the 2001 Wiggins bill,
which specified terms under which other counties were
allowed to repay erroneous allocations.
2. Forgiveness has a price tag . When county auditors
don't shift enough property tax revenue to ERAF, the State
General Fund must increase its apportionment payments to
schools. Between 1993 and 2001, San Benito County's
incorrect apportionment of property tax revenues into ERAF
cost the State General Fund nearly $4 million. The
Legislature has already forgiven more than $500,000 of the
amount the County owes to ERAF. The County estimates that
forgiving San Benito's County's pre-2001-02 debt would cost
the State General fund an additional $3.4 million.
3. Special legislation . The California Constitution
prohibits special legislation when a general law can apply
(Article IV, §16). SB 446 contains findings and
declarations explaining the need for legislation that
applies only to San Benito County.
Support and Opposition (4/25/13)
Support : San Benito County; California State Association
of Counties; California State Association of County
Auditors; Rural County Representatives of California.
Opposition : Unknown.
SB 446 -- 4/18/13 -- Page 4