BILL ANALYSIS
SENATE LOCAL GOVERNMENT COMMITTEE
Senator Dave Cox, Chair
BILL NO: AB 2663 HEARING: 6/30/10
AUTHOR: Lowenthal FISCAL: Yes
VERSION: 6/22/10 CONSULTANT:
Weinberger
FISCAL YEARS
Background and Existing Law
The State of California's fiscal year begins on July 1 (AB
2447, Deddeh, 1970). The federal government's fiscal year
begins on October 1.
State law does not specify a date on which a city must
begin its fiscal year. Five of California's 480 cities use
the federal fiscal year: El Segundo, Huntington Beach,
Inglewood, Long Beach, and South Lake Tahoe.
To help close state budget deficits, the Legislature often
borrows funds from local governments, transfers local
government revenues, and suspends payments to local
governments. For example, the 2009-10 budget transferred
$1.7 billion of redevelopment funds to offset State General
Fund spending and suspended Proposition 1A to borrow $1.9
billion of local property tax revenues.
To avoid making dramatic spending cuts during the final
quarter of a fiscal year, officials in the cities that use
the federal fiscal year want to suspend state borrowing,
transfers, or suspensions of those cities' revenues until
October 1.
Proposed Law
If the Legislature transfers, borrows, or suspends revenues
allocated to a city that observes the federal fiscal year
calendar, Assembly Bill 2663 suspends the transaction July,
August, and September. AB 2663 requires, instead, that the
transfer, borrowing, or suspension of revenues must
commence on October 1 and be completed on or before June 30
of that same state fiscal year.
AB 2663 applies to all borrowings, transfers, or
AB 2663 -- 6/22/10 -- Page 2
suspensions, enacted on and after January 1, 2011, for four
types of funds and revenues allocated to a city that
observes the federal fiscal year calendar:
Ad valorem property tax revenues.
Revenues placed into the Highway Users Tax Account
in the Transportation Tax Fund.
Revenues placed into the Transportation Investment
Fund.
Redevelopment agencies' property tax increment
revenues.
AB 2663 defines "federal fiscal year" as a fiscal year
beginning on October 1 and ending September 30. The bill
defines "state fiscal year" as a fiscal year beginning on
July 1 and ending June 30.
The bill includes legislative findings and declarations
regarding the need to accommodate cities that observe the
federal fiscal year calendar.
Comment
Fiscal year fix . When the state borrows, transfers, or
suspends local governments' funds during July, August, and
September - the first quarter of the state's fiscal year -
it disproportionately affects the five cities in which
those three months are the final quarter of their preceding
fiscal year. To avoid closing the fiscal year with a
deficit, those cities must adapt to state borrowing,
transfers, or suspensions by sharply adjusting their
spending over a three-month period. By contrast, other
cities can plan ahead to accommodate state fiscal policy
changes over a full fiscal year. AB 2663 grants cities
that follow the federal fiscal year the opportunity to wait
until a new fiscal year begins to adjust to state fiscal
policy changes.
Assembly Actions
Assembly Local Government Committee: 8-0
Assembly Appropriations: 12-5
Assembly Floor: 73-1
AB 2663 -- 6/22/10 -- Page 3
Support and Opposition (6/24/10)
Support : Cities of Huntington Beach, Inglewood, Long
Beach, and South Lake Tahoe.
Opposition : Unknown.