BILL ANALYSIS Ó AB 1952 Page 1 Date of Hearing: May 4, 2016 ASSEMBLY COMMITTEE ON APPROPRIATIONS Lorena Gonzalez, Chair AB 1952 (Gordon) - As Introduced February 12, 2016 ----------------------------------------------------------------- |Policy |Local Government |Vote:|9 - 0 | |Committee: | | | | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | |Revenue and Taxation | |9 - 0 | | | | | | | | | | | ----------------------------------------------------------------- Urgency: No State Mandated Local Program: YesReimbursable: Yes SUMMARY: This bill modifies the Senior Citizens and Disabled Citizens Property Tax Postponement Program (PTP Program). Specifically, this bill: 1)Modifies the existing funding cap for the Senior Citizens and Disabled Citizens Property Tax Postponement Fund (PTP Fund) AB 1952 Page 2 so that on June 30, 2018, any money in excess of $20 million instead of the current $15 million, that is not otherwise needed to pay PTP Program claims must be transferred to the General Fund. 2)Requires the Department of Finance (DOF), up until January 1, 2019, to transfer from the General Fund to the PTP Fund an amount necessary to pay claims after providing written notice to the chairs of legislative committees, as specified. 3)Specifies the order with which a payment received shall be applied, as follows; a) To any interest due on the loan; b) To the principal property tax amount; c) The remaining balance, if any, to administrative fees. 1)Requires, upon receipt of the electronic fund transfer by the State Controller's Office (SCO), the tax collector to enter the fact that taxes on the property have been postponed in the appropriate columns on the roll. Provides, in the case of the secured roll, that this information may be entered in that portion of the roll which has been designated for tax default information, as specified. FISCAL EFFECT: An estimated transfer in the range of $2 million to $6 million from the General Fund to the PTP Fund in FY 2018-19. Current AB 1952 Page 3 projections of the PTP Fund balance, based on the last five years of data, show that in FY 2017-2018, between 1,000 and 3,000 applicants will be rejected because of insufficient funds. This bill will require DOF to transfer an amount from General Fund necessary to support these claims. COMMENTS: 1)Background. The PTP Program was originally enacted by Chapter 1242 of 1977 to provide property tax relief to eligible senior citizens, and was later expanded to include blind and disabled persons. Eligible persons could defer payment of property taxes by requesting that the SCO pay the amount deferred to the county. The SCO recovers payment by securing a lien on the property, ensuring repayment of deferred property taxes with accrued interest upon sale of the home, when the title changed hands, or when the homeowner died or moved. The PTP Program was funded by an annual General Fund allocation of $12.7 million appropriated to the SCO to pay the face amount of all certificates of eligibility. The PTP Program was permanently suspended in FY 2008-9 to address severe General Fund shortfalls during the recession. 2)PTP reinstated. AB 2231 (Gordon), Chapter 703,2014, re-enacted the PTP Program, with modifications that were intended to improve the solvency over the long-term and better protect the state's interests. For instance, the PTP Program now requires applicants to have a 40 percent equity stake in their homes, rather than 20 percent, and requires a loan to be due and payable when the taxpayer refinances the home or enters into a reverse mortgage. AB 2231 also established the PTP Fund, transferring any outstanding loan repayment amounts to the PTP Fund and continuously appropriating revenues to the SCO to fund the program, including administrative costs and property tax postponement disbursements. The PTP Fund has a cap of $20 AB 1952 Page 4 million in 2016-17, which is lowered to $15 million in 2017-18 and each year thereafter. Any amounts that exceed this cap are transferred to the General Fund. 3)PTP Fund woes. According to SCO, who supports the bill, beginning in 2017-18 PTP claims will exceed the fund that year, resulting in applicants being rejected. 4)Purpose. This bill is intended to help make the existing PTP Program more sustainable and more accessible for eligible applicants. Analysis Prepared by:Luke Reidenbach / APPR. / (916) 319-2081