BILL ANALYSIS
AB 2663
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Date of Hearing: April 14, 2010
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
Cameron Smyth, Chair
AB 2663 (Bonnie Lowenthal) - As Introduced: February 19, 2010
SUBJECT : Local government: federal fiscal year.
SUMMARY : Requires the state to delay borrowing from those
cities and counties that operate on the federal fiscal year.
Specifically, this bill :
1)Defines "federal fiscal year" to mean a fiscal year beginning
on October 1 and ending September 30.
2)Defines "federal fiscal year city, county, or city and county"
to mean any city, county, or city and county that observes the
federal fiscal year calendar.
3)Provides that if the Legislature transfers, borrows, or
suspends revenues allocated to a federal fiscal year city,
county, or city and county, that the transaction shall be
suspended during the months of July, August, and September,
and instead, commence on October 1.
4)Provides that the suspended transaction for federal fiscal
year cities and counties shall apply to all of the following
transactions enacted by law on or after January 1, 2011,
involving the following funds and revenues:
a) The borrowing, transfer, or suspension of property tax
revenues, allocated in accordance with subdivision (a) of
Section 1 of Article XIII A of the California Constitution;
b) The borrowing, transfer, or suspension of revenues from
the Highway Users Tax Account (HUTA) required to be
apportioned pursuant to Section 3 of Article XIX of the
California Constitution;
c) The borrowing, transfer, or suspension of revenues from
the Transportation Investment Fund (TIF) allocated pursuant
to subdivision (b) of Section 1 of Article XIX B of the
California Constitution (Proposition 42 funds); and,
d) The borrowing, transfer, or suspension of funds
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allocated to a redevelopment agency pursuant to subdivision
(b) of Section 16 of Article XVI of the California
Constitution.
5)Makes other findings and declarations about the impact of
borrowing local revenues on those cities and counties that
observe the federal fiscal year.
EXISTING LAW :
1)Provides that the Legislature can borrow a specified amount of
total property tax revenues from local governments if:
a) The Governor issues a proclamation of "severe fiscal
hardship;"
b) The Legislature enacts an urgency statute suspending
Proposition 1A property tax protection with a two-thirds
vote of each house; and,
c) The Legislature enacts a law providing for full
repayment of the borrowed funds plus interest within three
years.
2)Redirects $1.7 billion of redevelopment property tax increment
revenues to K-12 school districts serving redevelopment areas
in 2009-10 and an additional $350 million in 2010-11 and
shifts an equivalent amount of existing property tax revenue
from those school districts to the Supplemental Revenue
Augmentation Fund.
FISCAL EFFECT : Unknown
COMMENTS :
1)According to the author, there are five local governments in
California that operate on a federal fiscal year including the
cities of Long Beach, Huntington Beach, Inglewood,
El Segundo and South Lake Tahoe.
2)The federal fiscal year commences on October 1st, three months
after the beginning of the state's fiscal year. In previous
years, if the state intended to borrow money from local
governments, it usually did so at the start of the state's
fiscal year on July 1st. The author notes that "for the five
cities on the federal fiscal year, the state's borrowing comes
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at the end of their budget cycles - when they are least able
to adapt to borrowing, placing an undue financial burden on
those cities." For those local governments that follow the
state's fiscal year, borrowing would typically occur at the
beginning of their calendar year, and those local governments
would be better able to plan for the borrowing, transfer, or
suspension in an up-front manner.
3)AB 2663 provides for a delay in state borrowing, transfer, or
suspension of revenues for the affected five cities, meaning
that state borrowing would start on October 1 and any
transactions for July, August, and September for those five
cities would be suspended. The bill provides the revenue
streams that this delay would apply to - property tax
revenues, HUTA funds, Proposition 42 transportation funds, and
redevelopment funds.
4)One of the revenue streams mentioned in the bill is from the
Transportation Investment Fund allocated pursuant to
subdivision (b) of Section 1 of Article XIX B of the
California Constitution. Staff notes that the Legislature
passed, and the Governor signed AB X8 6 and AB X8 9 in March
of 2010. Both bills were part of a package of bills that
enacted a gas tax swap affecting transportation funds. The
author may want to ensure that with the recent changes to
transportation funding, that the cross-reference to
transportation funds contained in the bill is correct.
5)Support Arguments . The five cities that observe the federal
calendar year face a bigger financial burden than other cities
when state borrowing, transfer, or suspension of revenues
occurs. A delay that would coincide with the start of the
federal fiscal year makes sense from an administrative
standpoint for the five cities, and allows those local
governments to retain the ability to budget as necessary to
better absorb any borrowing, suspension, or transfer that
might occur.
6)Opposition Arguments . This bill may create some minor
administrative work for the state in order to track such
delays through various processes. Also, there may be very
minimal impacts to the state's cash flow due to the provisions
allowing for the delay, in which portions of the borrowed
revenues might be realized in the year following the fiscal
year from when it is actually borrowed or suspended.
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As we've seen in recent years, there could be instances of
mid-year budget adjustments. This bill assumes that any
borrowing, suspension, or transfer would commence at the start
of the state's fiscal year in July, but this is not
necessarily the case in all situations.
REGISTERED SUPPORT / OPPOSITION :
Support
City of Long Beach [SPONSOR]
City of Huntington Beach
Opposition
None on file
Analysis Prepared by : Debbie Michel / L. GOV. / (916)
319-3958