BILL ANALYSIS
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|SENATE RULES COMMITTEE | AB 676|
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CONSENT
Bill No: AB 676
Author: Brewer (R)
Amended: 5/27/99 in Senate
Vote: 27 - Urgency
SENATE LOCAL GOVERNMENT COMMITTEE : 7-0, 6/16/99
AYES: Baca, Johannessen, Johnston, Monteith, Perata,
Polanco, Rainey
ASSEMBLY FLOOR : 69-0, 4/22/99 (Passed on Consent) - See
last page for vote
SUBJECT : Property tax allocation study
SOURCE : Orange County Taxpayers Association
DIGEST : This bill requires the Legislative Analyst to
prepare a report to the Legislature presenting alternatives
for restructuring the property tax allocation system in a
manner consistent with specified goals.
ANALYSIS : When the voters passed Proposition 13 in 1978
to limit property taxes, they told the Legislature to
allocate property tax revenues to local governments. For
1978-79, legislators gave counties, cities, special
districts, and schools shares of the remaining property tax
revenues in proportion to what they received in the past.
Starting in 1979-80, legislators gave local governments
their historic proportional shares of property taxes, plus
some of the school districts' property tax revenues. The
CONTINUED
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State General Fund backfilled the schools' losses (AB 8,
Greene, 1979). Special districts didn't get their AB 8
shift amounts directly; the money went to a Special
District Augmentation Fund (SDAF) for allocation by county
supervisors.
Acknowledging the loss of local property tax revenues,
legislators allowed cities to levy a wider range of local
taxes and slightly expanded counties' taxing powers. The
Legislature increased local officials' ability to raise
revenues with special taxes and benefit assessments.
Legislators realigned counties' health, welfare, and trial
court programs, and supplied more revenue by boosting the
Vehicle License Fees and by providing more direct state
funding.
Starting in the mid-1980s, the Legislature required
counties to shift some of their property tax revenues to
the no- and low-property tax cities, those municipalities
that had never received property taxes or had received only
relatively low levels of property tax revenues.
To balance the State Budget for 1992-93 and then again in
1993-94, the Legislature permanently shifted property tax
revenues from counties, cities, and special districts to
each county's Educational Revenue Augmentation Fund (ERAF)
to benefit schools and the State General Fund. The ERAF
shifts are pockmarked with special exceptions and
adjustments. Proposition 172 replaced some of these
losses, earmarking the new revenues for public safety
programs.
After 20 years of voter initiatives, legislative reactions,
and local adjustments, the state/local fiscal relationship
is nearly incomprehensible. The most obvious pathology is
the variation in the property taxes allocated among
counties, cities, special districts, schools, and
redevelopment agencies. Statewide, counties get 19% of
property tax revenues while Orange County gets just 6%.
This bill states that California's system for allocating
property taxes does not reflect (1) modern needs and
preferences of local communities, or (2) the relative need
for funding by cities, counties, special districts,
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redevelopment agencies, and schools to carry out their
mandated and discretionary services; and, additionally, the
current system centralizes control over property tax
allocation in Sacramento and gives the state full authority
to reallocate property taxes to offset state education
funding obligations.
This bill states the Legislature's wish to revamp the
current system of property tax allocation to do the
following:
1. Increase taxpayer knowledge of the allocation of
property taxes.
2. Provide greater local control over property tax
allocation.
3. Give cities and counties greater fiscal incentives to
approve land developments other than retail developments.
To assist the Legislature in the above effort, this bill
requires the Legislative Analyst to prepare a report by
December 31, 1999 presenting at least two alternatives for
restructuring the property tax allocation system in a
manner consistent with these goals. The Legislative
Analyst must consider the option of establishing a minimum
percentage of the property tax to be allocated to each
county.
This bill states that in order to minimize the local fiscal
impact of changes, the Legislature intends to consider
allocating an unspecified amount in additional revenues
available to cities, counties, and special districts.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No
Local: No
SUPPORT : (Verified 6/17/99)
Orange County Taxpayers Association (source)
Costa Mesa Chamber of Commerce
Cities of Costa Mesa, Moreno Valley, Newport Beach.
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ARGUMENTS IN SUPPORT : According to the Senate Local
Government Committee analysis, there's a hard lesson to be
learned about the allocation of property taxes and other
revenues: there is no equity, there are only different
forms of inequity. The allocation of property tax revenues
is a zero-sum game in which there must be a loser for every
winner. To increase one government's share of limited
property tax revenues requires another government to lose.
The AB 8 shift moved property tax revenues from schools to
local agencies. The no- and low-property tax cities gained
at their counties' expense. The ERAF shifts moved property
tax revenues back from local agencies to schools. Although
each change was expediently justified, the results are
incoherent. This bill asks the Legislative Analyst to sort
out the mess of the last 20 years and tell legislators how
to achieve property tax equity.
ASSEMBLY FLOOR : 69-0, 4/22/99
AYES Aanestad, Ackerman, Alquist, Aroner, Ashburn, Bates,
Battin, Baugh, Bock, Briggs, Calderon, Campbell,
Cardenas, Cedillo, Corbett, Correa, Cox, Cunneen, Davis,
Dickerson, Ducheny, Dutra, Firebaugh, Florez, Floyd,
Frusetta, Gallegos, Granlund, Havice, Hertzberg, Honda,
House, Jackson, Keeley, Knox, Leach, Lempert, Leonard,
Longville, Machado, Maddox, Maldonado, Margett, Mazzoni,
McClintock, Migden, Nakano, Olberg, Pescetti, Reyes,
Romero, Scott, Shelley, Soto, Steinberg, Strickland,
Strom-Martin, Thompson, Thomson, Torlakson, Vincent,
Washington, Wayne, Wesson, Wiggins, Wildman, Wright,
Zettel, Villaraigosa
NOT VOTING: Baldwin, Brewer, Cardoza, Kaloogian, Kuehl,
Lowenthal, Oller, Robert Pacheco, Rod Pacheco, Papan,
Runner
LB:jk 6/16/99 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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