BILL ANALYSIS
AB 551
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Date of Hearing: April 21, 2009
ASSEMBLY COMMITTEE ON HIGHER EDUCATION
Anthony Portantino, Chair
AB 551 (Furutani) - As Introduced: February 25, 2009
SUBJECT : Community Colleges: property tax revenues.
SUMMARY : Requires general fund apportionments to California
Community Colleges (CCC) to be automatically adjusted for
changes in property tax revenues. Specifically, this bill :
1)Requires the annual budget act to specify the total local
property tax revenue for CCC districts upon which the General
Fund appropriation for CCC districts is based.
2)Provides that the CCC Chancellor shall certify to the State
Controller, on or before December 31 of each year, the annual
property tax revenue for the prior year based on information
reported on each CCC district's Annual Financial and Budget
Report.
3)Requires, if the total amount of property tax revenue
identified in the annual Budget Act is greater than the amount
of property tax revenue identified and reported by the CCC
Chancellor, the State Controller, at the time of the next
general fund apportionment, to transfer the deficient amount
from the General Fund to Section B of the State School Fund
for the CCC.
4)Requires, if the total amount of property tax revenues
identified in the annual Budget Act is less than the amount of
property tax revenues identified and reported by the CCC
Chancellor, the State Controller, at the time of the next
general fund apportionment, to transfer the excess amount from
Section B of the State School Fund for the CCC to the General
Fund.
EXISTING LAW provides that general fund apportionments to K-12
school districts automatically adjust for changes in property
tax revenues. However, current law does not provide for a
similar adjustment for CCC districts.
FISCAL EFFECT : Unknown
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COMMENTS : Background on CCC Budgeting : In developing the
annual CCC budget, the state must estimate how much local
property tax revenue will be available to the CCC. For any
individual CCC district, General Fund revenues will be adjusted
upward or downward from the budgeted level to compensate for any
surplus or shortfall in actual tax receipts. However, if the
system wide level of local property tax revenue turns out to be
lower than budgeted, this shortfall will be proportionally
spread across all CCC districts. In some years, legislation has
been passed to augment General Fund support to CCCs in order to
make up for this shortfall. In other years, CCCs were required
to absorb the shortfall. While CCC funding is not automatically
"backfilled" for un-received property taxes, state aid to CCC is
also not automatically reduced when property taxes exceed
estimates.
Background on Property Tax Shortfall : As a result of
legislation that responded to the court ruling in Serrano v.
Priest, current law provides for K-12 school districts to be
automatically compensated with state funding when property tax
revenues fall short of expectations relied upon for the state
budget act. Unlike K-12 school districts, CCC does not have a
mechanism for the automatic backfilling of property taxes not
received. As noted above, in years where property tax revenues
are less than estimated, a direct appropriation is the means for
adjustment.
Purpose of this Bill : According to the author, the lack of an
automatic adjustment mechanism for CCC funding creates budget
uncertainty that severely cripples the ability of a CCC district
to plan accordingly to meet the educational demands of the
community. This uncertainty restricts CCC districts from
confidently pursuing future programs that could suffer if an
unexpected drop in property tax revenue occurs. Students feel
the impact when CCC is faced with a short-fall mid-year and is
required to cut services. Such disruptions in a community
college student's enrollment can lead to lower retention rates.
The author believes that this bill will give CCC great security
and certainty of their expected revenue for the academic and
budget year. This will allow the colleges to appropriately plan
for the expected student services.
Additional Pressures on the State Budget : According to the
Legislative Analyst (LAO), "the state's economic and revenue
outlook continues to deteriorate." The LAO projects that
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revenues will fall short of assumptions in the 2009-10 Budget
Act by $8 billion. The LAO believes that without corrective
actions, the state's operating shortfalls will grow from $12.6
billion in 2010-11 to $26 billion in 2013-14. The Committee may
wish to consider the degree to which the annual backfill
requirement contained in this bill will affect the state budget
situation.
Prior Attempts to Establish a CCC Backfill Requirement: AB 2277
(Eng) of 2008, which was held in the Assembly Appropriations
Committee, would have provided for the one-time transfer of
funds to compensate for un-received property tax revenues.
AB 1402 (Blakeslee) of 2005, which was subsequently amended to
address a different subject, would have provided for an annual
transfer of funds to compensate for un-received property tax
revenues.
AB 1417 (Pacheco) of 2004, which was held in this form in the
Senate Appropriations Committee and subsequently amended to
require a study of CCC funding, was substantially similar to AB
1402.
SB 990 (McPherson) of 2000, which was held in the Senate
Appropriations Committee, was also substantially similar to AB
1402.
REGISTERED SUPPORT / OPPOSITION :
Support
Antelope Valley Community College District
California Federation of Teachers
Faculty Association of California Community Colleges
Gavilan Community College District
Glendale Community College District
Kern Community College District
Los Angeles Community College District
Los Angeles College Faculty Guild
Los Rios Community College District
Mt. San Jacinto Community College District
Peralta Community College District
Rio Hondo Community College District
San Jose-Evergreen Community College District
West Kern Community College District
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Opposition
None on file
Analysis Prepared by : Laura Metune / HIGHER ED. / (916)
319-3960