BILL ANALYSIS
AB 2663
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB 2663 (Bonnie Lowenthal)
As Amended August 17, 2010
Majority vote
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|ASSEMBLY: |73-1 |(June 2, 2010) |SENATE: |32-1 |(August 19, |
| | | | | |2010) |
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Original Committee Reference: L. GOV.
SUMMARY : Requires the state to delay the borrowing, transfer,
or suspension of Highway Users Tax Account (HUTA) revenues until
the start of the federal fiscal year for those cities that
operate on the federal fiscal year.
The Senate amendments :
1)Limit the provisions of the bill to cities that follow a
federal fiscal year by deleting references to counties.
2)Limit the provisions of the bill to the borrowing, transfer,
or suspension of revenues of HUTA revenues from federal fiscal
year cities.
3)Make other technical, clarifying changes.
EXISTING LAW provides that the Legislature can borrow a
specified amount of total property tax revenues from local
governments if:
1)The Governor issues a proclamation of "severe fiscal
hardship;"
2)The Legislature enacts an urgency statute suspending
Proposition 1A property tax protection with a two-thirds vote
of each house; and,
3)The Legislature enacts a law providing for full repayment of
the borrowed funds plus interest within three years.
AS PASSED BY THE ASSEMBLY , this bill:
1)Defined "federal fiscal year" to mean a fiscal year beginning
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on October 1 and ending September 30.
2)Defined "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)Defined "state fiscal year" to mean a fiscal year beginning on
July 1 and ending June 30.
4)Provided 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 and specifies that the
transaction shall be completed on or before June 30 of that
same state fiscal year.
5)Provided 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
HUTA required to be apportioned to cities and counties
pursuant to Chapter 3 of Division 3 of the Streets and
Highways Code [including the revenues apportioned pursuant
to Section 2103 of the Streets and Highways Code, as
amended by AB 9 X8 (Committee on Budget), Chapter 12,
Statutes of 2010];
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
allocated to a redevelopment agency pursuant to subdivision
(b) of Section 16 of Article XVI of the California
Constitution.
6)Made other findings and declarations about the impact of
borrowing local revenues on those cities and counties that
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observe the federal fiscal year.
FISCAL EFFECT : According to the Senate Appropriations
Committee, potential General Fund revenue loss of up to $200,000
due to loss of interest, and a potential cash flow impact due to
a delay of cash receipts. Senate Appropriations notes that the
magnitude of the fiscal impact would depend on the amount and
timing of any state transfer, borrowing, or suspension of local
revenues.
COMMENTS : 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.
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
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.
This bill 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. Amendments taken in the Senate
specify that the delay in borrowing only applies to HUTA funds.
The bill provides that any transferring, borrowing, or
suspension of HUTA revenues that commences on October 1 for the
federal fiscal year cities shall be completed on or before June
30 of that same state fiscal year.
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
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governments to retain the ability to budget as necessary to
better absorb any borrowing, suspension, or transfer of HUTA
funds that might occur.
Opposition arguments: This bill may create some minor
administrative work for the state in order to track such delays
through various processes.
Analysis Prepared by : Debbie Michel / L. GOV. / (916)
319-3958
FN: 0006143