BILL ANALYSIS                                                                                                                                                                                                    

                         Senator Robert M. Hertzberg, Chair
                                2015 - 2016  Regular 

          |Bill No:  |SB 371                           |Hearing    |5/6/15   |
          |          |                                 |Date:      |         |
          |Author:   |Hancock                          |Tax Levy:  |No       |
          |Version:  |4/6/15                           |Fiscal:    |No       |
          |Consultant|Grinnell                                              |
          |:         |                                                      |

                           SCHOOL DISTRICTS: SPECIAL TAXES

          Clarifies that school districts can exempt any, not all, of  
          three sets of persons from its parcel tax.

           Background and Existing Law

           The California Constitution requires 2/3 voter approval when a  
          local agency wants to impose or increase a special tax  
          (Proposition 13, 1978).  However, the Legislature must authorize  
          school or special districts to impose taxes because these  
          agencies have no plenary taxing powers.  Responding to  
          Proposition 13's reduction in local revenue, the Legislature  
          generally authorized all local agencies to impose special taxes  
          with 2/3 voter approval (SB 785, Foran, 1979), but voters  
          subsequently approved an initiative requiring the Legislature to  
          grant specific taxing power to local agencies to impose taxes  
          (Proposition 62, 1986).  

          One common form of local tax is the parcel tax, which can be  
          imposed by cities, counties, or special districts.  Parcel taxes  
          are not ad valorem or assessed based on the value of a property  
          like property taxes; instead they are generally a flat rate  
          assessed per parcel regardless of its size, or per square foot  
          of a parcel or its improvements.  Agencies can use revenues in  
          almost any way that serves local needs, such as ongoing  
          expenses, programs, or buildings.  Counties collect parcel taxes  


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          with property taxes, and then remit funds to the agency imposing  
          the tax.  Property tax law generally guides parcel tax  

          Prior to Proposition 62, school districts imposed parcel taxes  
          to fund education; however, the initiative prompted school  
          districts to seek specific legislative authorization to ratify  
          the existing taxes, and clarify the authority to impose new  
          ones.  The Legislature allowed school and community college  
          districts to impose qualified special taxes that applied  
          uniformly, to all taxpayers or real property within the  
          district, and allowed districts to exempt persons over the age  
          of 65 from the tax (AB 1440, Hannigan, 1988).  In 1991, the  
          Legislature additionally allowed 15 types of local agencies to  
          impose similar taxes; however, the measure allowed local  
          agencies to tax unimproved property at a lower rate than  
          improved property, and contained no other exemptions (SB 158,  
          Committee on Local Government, 1991). 

          In 2006, the Legislature allowed school districts to also exempt  
          persons receiving Supplemental Security Income (SSI) regardless  
          of age (AB 385, Lieber, 2006), and then persons receiving Social  
          Security Disability Insurance (SSDI), whose yearly income was  
          less than 250% of 2012 federal poverty guidelines (SB 874,  
          Hancock, 2012).  When the Legislature enacted AB 385, it clearly  
          allowed school districts to exempt persons over the age of 65  or   
          persons receiving SSI for a disability.  However, during the  
          consideration of SB 874, a drafting mistake deleted the word  
          "or" and instead inserted the words "all of the following." The  
          measure was subsequently enacted.  As a result, some school  
          districts think the statute requires them to either exempt all  
          three categories (individuals over 65, SSI recipients, and SSDI  
          recipients), or exempt no one at all.  The author wants to  
          clarify that school districts can exempt any or all of the  
          groups currently eligible for the exemption from the parcel tax.

           Proposed Law

           Senate Bill 371 provides that school districts can exempt any or  
          all, and do not have to exempt all, of the following from the  
          parcel tax:

                 Persons over the age of 65,


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                 Persons receiving SSI for a disability,

                 Persons receiving SSDI whose yearly income was less than  
               250% of 2012 federal poverty guidelines.

          The measure states that its provisions are declaratory of  
          existing law.

           State Revenue Impact

           No estimate.


           1.  Purpose of the bill  .  According to the author, "Existing law  
          allows school districts and community college districts to  
          impose special taxes (parcel taxes) that apply to taxpayers or  
          real property within the school district.  K-12 school districts  
          may exempt persons 65 years of age and older persons who receive  
          supplemental security income (SSI) regardless of age from paying  
          these taxes and/or persons who receive Social Security  
          Disability Insurance (SSDI).  In 2011, SB 874 (Hancock) gave  
          school districts the option of exempting property owners who  
          receive SSDI, but in 2015 the Santa Clara County Counsel's  
          office raised an issue with this new exemption. The County  
          Counsel's office interpreted Government Code Section 50079 (b)  
          (1) which states, "all of the following taxpayers," to mean that  
          a parcel tax must either have no exemptions or must meet all  
          three exemptions, an interpretation that goes against the  
          intention of SB 874.  SB 371 simply clarifies that school  
          districts can provide the exemption to any or all of exempted  
          categories of tax payers."

          2.   Parcel taxes in California  .  For many years, little  
          aggregate information existed regarding parcel taxes, but a  
          recent report from the Public Policy Institute of California  
          collected a great deal of revealing data regarding the way in  
          which local agencies use parcel taxes.  Cities placed 124 parcel  
          tax measures before voters between 2003 and 2012, with 54  
          receiving the required 2/3 vote, with almost all taxes imposed  
          by cities in the San Francisco Bay Area and Los Angeles County.   


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          School districts placed 329 parcel tax measures before voters  
          during the same period, with 60% passing, mostly concentrated in  
          the Bay Area.  The report argues that the higher frequency of  
          parcel taxes in the Bay Area is partly explained by higher  
          income levels.  Special districts asked voters to enact parcel  
          taxes 238 times from 2003 to 2012, with 3 out of 4 winning.   
          PPIC argues that the use of the parcel tax is growing, and that  
          it has many advantages over other taxes: it has no deadweight  
          loss, and assigns taxes in line with benefits.  However, PPIC  
          cautions that the tax has a major shortcoming in that many large  
          parcels have little value, and are limited in their capacity to  
          support a parcel tax.  

            3.   What's the difference  ?  The Social Security Administration  
          (SSA) administers both the SSI and SSDI programs.  SSI is a  
          federal income supplement program paid out of general federal  
          revenues for persons aged, blind, disabled, and of limited  
          income.  SSDI is funded from federal payroll taxes and provides  
          benefits to disabled persons because their disability serves as  
          a barrier to employment, but unlike SSI, eligibility is not  
          restricted by an individual's income, instead based on the  
          nature of the disability.  While SSDI recipients may be  
          economically better off than SSI recipients, their disability  
          can inhibit their ability to generate income.   

           4.   Uniform  . In 2013, George Borikas successfully challenged  
          Alameda Unified School District's Measure H, which imposed a  
          variable rate parcel tax.  The Fourth District Appellate Court  
          determined that Alameda's tax didn't meet the statute's  
          uniformity requirement, because the school district statute  
          didn't also contain the language in SB 158 allowing for a lower  
          rate on unimproved property (Borikas v. Alameda Unified School  
          District, 214 Cal. App. 4th 135).  Last year, the Committee  
          approved a measure that would have partially addressed the case;  
          however, the measure died in the Assembly Revenue and Taxation  
          Committee (SB 1021, Wolk, 2014).

           Support and  

           Support  :  Unknown.


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           Opposition  :  Howard Jarvis Taxpayers Association.

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