BILL ANALYSIS Ó
SENATE COMMITTEE ON APPROPRIATIONS
Senator Ricardo Lara, Chair
2015 - 2016 Regular Session
AB 2678 (Gray) - State-designated fairs: funding
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|Version: May 31, 2016 |Policy Vote: GOV. & F. 5 - 0 |
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|Urgency: No |Mandate: No |
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|Hearing Date: August 1, 2016 |Consultant: Robert Ingenito |
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This bill meets the criteria for referral to the Suspense File.
Bill
Summary: AB 2678 would temporarily require (1) retailers at
specified fairs to segregate revenue from sales, and (2) that 30
percent of the General Fund portion of this revenue be allocated
for specified fair projects.
Fiscal Impact:
The Board of Equalization (BOE) indicates that this bill
would result in an annual General Fund revenue loss of
$16.7 million. BOE's administrative costs would be
reimbursed.
The California Department of Food and Agriculture (CDFA)
would incur costs to administer the additional funds and to
AB 2678 (Gray) Page 1 of
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perform auditing functions to ensure compliance with the
bill's working condition requirements. The magnitude of
these costs is unknown, but potentially in the hundreds of
thousands of dollars annually.
Background: Except where a specific exemption or exclusion is provided,
current law imposes the sales and use tax (SUT) on all retailers
for the privilege of selling tangible personal property (TPP) at
retail in California, or on the storage, use, or other
consumption in this state of TPP purchased from a retailer.
After the State collects SUT revenue ($48 billion in 2013-14),
it allocates the money to various state and local funds. Roughly
half-collected from an approximately 3.9 percent rate-goes to
the General Fund and can be spent on any state program, such as
education, health care, and criminal justice. Another 1.25
percent, known as the Bradley-Burns rate, goes to cities and
counties for general purposes. Three sales tax funds have
uniform state rates and support specified programs-an
approximately 1.1 percent rate for 2011 realignment
(county-administered criminal justice, mental health, and social
service programs); a 0.5 percent rate for 1991 realignment
(county-administered health and social services programs); and a
0.5 percent rate for city and county public safety programs
pursuant to Proposition 172 (1993). Additionally, some local
governments levy optional local rates-known as Transactions and
Use Taxes (TUTs)-and a small portion of these funds are used for
general purposes. As of January 1, 2017, the average statewide
SUT rate will be 8.21 percent.
State law fully exempts many items from SUT (such as
prescription drugs, food, electricity, and poultry litter),
while other items are exempted from the state sales tax, but not
the local share, such as farm equipment and machinery, diesel
fuel used for farming and food processing, teleproduction and
postproduction equipment, timber harvesting equipment and
machinery, and racehorse breeding stock. Partial SUT exemptions
are difficult for both retailers and the BOE, and complicate
return preparation and processing. Moreover, errors attributable
to these partial exemptions occur frequently, resulting in
additional return processing workload for BOE.
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Proposed Law:
This bill would, until January 1, 2022, require taxpayers to
segregate on their SUT return their sales and purchases of TPP
when the place of sale or use is on or within a state designated
fair (as specified) or any real property of a state designated
fair that is leased to another party; fairs in Los Angeles
County are excluded from the requirement.
Additionally, the bill would require that 30 percent of the
General Fund portion of SUT revenues (or 1.18 percentage
points), less refunds and BOE's administrative costs, derived
from those segregated SUT revenues be deposited into the Fair
and Exposition Fund and continuously appropriated for
fair-related purposes, including the following:
Capital outlay to California fairs for fair projects
involving public health and safety.
Fair projects involving major and deferred maintenance.
Fair projects necessary due to any emergency.
Projects that are required by physical changes to the
fair site.
Projects that are required to protect the fair property
or installation, such as fencing and flood protection.
For the acquisition or improvement of any property or
facility that will serve to enhance the operation of the
fair.
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The bill would allow CDFA to allocate an unspecified portion of
the funds subject to California fairs (excluding those in Los
Angeles County) for general operational support, and
additionally limits allocation of funds to state-designated
fairs unless nonmanagement employees at that state-designated
fair, or nonmanagement employees at any real property of that
state-designated fair that is leased to another party, have the
following working conditions:
The employee receives a meal period of not less than 30
minutes for a work period of more than five hours per day,
unless the work period per day of the employee is less than
six hours and the meal period is waived by mutual consent
of both the employer and the employee.
The employee receives a second meal period of not less
than 30 minutes for a work period of more than 10 hours per
day, unless the work period per day of the employee is less
than 12 hours, the second meal period is waived by mutual
consent of both the employer and the employee, and the
first meal period was not waived.
Any work in excess of eight hours in one workday, any
work in excess of 40 hours in any one workweek, and the
first eight hours worked on the seventh day of work in any
one workweek is compensated at the rate of no less than one
and one-half times the regular rate of pay for an employee.
Any work in excess of 12 hours in one day is compensated
at the rate of no less than twice the regular rate of pay
for an employee.
Any work in excess of eight hours on any seventh day of
a workweek is compensated at the rate of no less than twice
the regular rate of pay for an employee.
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Staff
Comments: According to CDFA, there are 78 fairs in California:
the California Exposition and State Fair, 52 district
agricultural association fairs, 23 county fairs, and 2 citrus
fruit fairs. As noted previously, the measure would not apply to
fairs in Los Angeles, which houses the Los Angeles County Fair
held in the City of Pomona, and three smaller fairs in the
cities of Industry, San Fernando, and Antelope. Staff notes the
revenue impact on this bill would depend on (1) annual fair
attendance, (2) taxable sales, which in turn would depend on
future economic conditions. Consequently, BOE's revenue loss
estimate of nearly $17 million is subject to volatility.
Recommended
Amendments: Staff recommends deleting the continuous
appropriation authority from the bill, as it limits Legislative
discretion.
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