BILL ANALYSIS
AB 551
Page 1
Date of Hearing: May 13, 2009
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Kevin De Leon, Chair
AB 551 (Furutani) - As Amended: April 23, 2009
Policy Committee: Higher
EducationVote:6-0
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill reduces California Community College (CCC) districts'
reliance on property tax revenues, in lieu of General Fund
revenues, to achieve base Proposition 98 revenues.
Specifically, this bill:
1)Provides that commencing with the 2009-10 fiscal year the
amount of property tax revenue allocated to each CCC district
shall not exceed 75% of the amount allocated in the 2008-09
fiscal year, except for Basic Aid districts, i.e. districts
for which state apportionments are not received because the
revenues from local property taxes and student fees provide
more than the district would receive under state funding
formulas.
2)Provides that the amount of property tax revenues that are not
allocated to a CCC district as a result of this bill shall be
deposited in the county Education Revenue Augmentation Fund
(ERAF) and allocated to K-12 school districts and county
offices of education.
3)Requires each Basic Aid CCC district, by December 12, 2009, to
notify the Department of Finance (DOF) in writing that the
district will either:
a) Continue to retain its current distribution of property
tax revenues for the 2009-10 fiscal year and each year
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thereafter, or,
b) Agree to the distribution of property taxes as described
in (1) for the 2009-10 fiscal year and each year
thereafter.
FISCAL EFFECT
Since this bill essentially eliminates the possibility that the
CCC would need to seek a General Fund (P98) appropriation to
offset underestimated CCC statewide property tax revenues-an
appropriation that has not been provided in some years-and
instead shifts an increasing share of property tax revenues, for
Proposition 98 purposes, to K-12 school districts that receive
an automatic General Fund (P98) offset for property tax
shortfalls, this bill could result in higher General Fund (P98)
costs of tens of millions of dollars in some fiscal years.
The bill would reduce property tax revenues to the CCC, based on
a 2008-09 level of about $2 billion, to $1.5 billion in 2009-10
and annually thereafter. The balance of the CCC's Proposition
98 funding would henceforth come from the General Fund.
COMMENTS
1)Background . As part of the annual CCC budget proposal, the
state estimates how much local property tax revenue will be
available statewide to the CCC. For individual districts,
state 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
systemwide level of local property tax revenue turns out to be
lower than budgeted, the shortfall is proportionally spread
across all districts. In some years, the Legislature provides
a General Fund augmentation to the CCC to backfill this
shortfall. In other years, no augmentation is provided and the
districts must absorb the shortfall.
2)Purpose . The author argues that under the process described
above, the CCC relies on property tax revenue projections that
are rarely accurate, and the lack of an automatic adjustment
mechanism when property tax revenues fall short creates budget
uncertainty for districts. This bill reduces CCC reliance on
property tax revenues, by allocating each year the equivalent
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of only 75% of 2008-09 CCC property tax revenues, and shifting
that reliance to K-12 districts, which unlike CCC districts,
receive an automatic property tax backfill pursuant to current
law. To compensate from the reduced property tax revenues,
the CCC will receive a proportionately larger share of General
Fund revenues in order to meet their Proposition 98 funding
requirements.
3)Basic Aid Districts . Currently there are three CCC Basic Aid
districts: Marin, South Orange, and Mira Costa. This bill will
reduce the amount of property tax funding directed toward CCC
districts, thus reducing the property taxes received by Basic
Aid districts. Under this bill, these CCC districts are
provided a choice-either to continue to retain their current
distribution of property tax revenues or agree to the new
property tax funding formula established by this bill.
4)Prior Legislation . Several bills have been introduced to
establish a statutory CCC property tax backfill:
a) AB 2277 (Eng) of 2008, which was held on Suspense in
this committee, would have provided for the one-time
transfer of funds to compensate for un-received property
tax revenues.
b) 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.
c) AB 1417 (Pacheco) of 2004, which was held on Suspense in
Senate Appropriations, and subsequently amended to require
a study of CCC funding.
d) SB 990 (McPherson) of 2000, which was held in the Senate
Appropriations, was also substantially similar to AB 1402.
Analysis Prepared by : Chuck Nicol / APPR. / (916) 319-2081