BILL ANALYSIS
SB 85
Page 1
SENATE THIRD READING
SB 85 (Cogdill)
As Amended September 10, 2009
Majority vote
SENATE VOTE : Vote not relevant
APPROPRIATIONS 15-0
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|Ayes:|De Leon, Conway, Ammiano, | | |
| |Charles Calderon, Coto, | | |
| |Davis, Fuentes, Hall, | | |
| |Harkey, Miller, Nielsen, | | |
| |Skinner, Solorio, Audra | | |
| |Strickland, Torlakson | | |
|-----+---------------------------+---+--------------------------|
| | | | |
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SUMMARY : Provides limited property tax relief to seven
counties. Specifically, this bill :
1)Requires, for purposes of property tax revenue allocations,
the county auditor of a "negative sum" county, in reducing the
amount of property tax that otherwise would be allocated to
the county, to apply a reduction amount according to the
following:
a) For fiscal years (FYs) 2011-12 and 2012-13, a reduction
amount that is equal to the reduction amount that was
determined for FY 2010-11;
b) For FY 2013-14, a reduction amount that is determined on
the basis of the reduction amount applied for FY 2010-11
without any increase in the latter amount for FYs 2011-12
and 2012-13; and,
c) For FY 2014-15 and each fiscal year thereafter, a
reduction amount that is determined on the basis of the
reduction amount applied for the immediately preceding FY.
2)Increases the countywide property tax allocation (and reduces
school districts' allocation) by $100,000 in 2011-12 and
$200,000 in 2012-13 and thereafter for the county with the
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second lowest percentage share of combined county-wide and
less than countywide property tax shares as of 2006-07.
3)Declares that no reimbursement is required under the
provisions of this bill because it provides for offsetting
savings to local agencies or school districts that result in
no net costs to the local agencies or school district.
EXISTING LAW :
1)Limits the maximum amount of ad valorem tax on real property
to 1% of the full cash value of the property with counties
collecting the tax revenues and then apportioning it to
cities, the county, special districts, redevelopment, and
school districts in the county.
2)Requires the county auditor in each fiscal year to allocate
property tax revenues to local jurisdictions in accordance
with specified formulas and procedures, and generally requires
each jurisdiction be allocated an amount equal to the total
amount of revenue allocated to that jurisdiction in the prior
fiscal year, subject to certain modifications and that
jurisdiction's portion of the annual tax increment.
FISCAL EFFECT : According to Assembly Appropriations Committee,
reallocations of property tax revenues from school districts to
counties totaling $290,000 in 2011-12 and $580,000 in 2012-13,
consisting of:
1)About $190,000 in 2011-12 and $380,000 in 2012-13 and
thereafter due to the freezing of the "negative sum"
adjustment for two years;
2)About $100,000 in 2011-12 and $200,000 in 2012-13 and
thereafter due to the bill's provision that raises the
specified countywide property tax share.
Under Proposition 98, the state General Fund will be required to
backfill the loss in property taxes to schools.
COMMENTS : SB 85 would provide limited property tax relief to
seven counties in California. One section of SB 85 would cap
the amount of property tax reduction for six counties in
California on a going-forward basis, with specified caps for
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specified fiscal years. These six counties, dubbed the
"negative bailout" counties (Alpine, Lassen, Mariposa, Plumas,
Stanislaus, and Trinity), are in a unique situation stemming
from the passage of Proposition 13 in 1978, and subsequent
legislation relating to local government finance. Because
Proposition 13 reduced revenues received by local governments
from property taxes, the Legislature responded by bailing out
local governments with $858 million in block grants. Of this
amount, $436 million went to counties. SB 85 also contains
provisions that would increase the countywide property tax
allocation by $100,000 in 2011-12 and $200,000 in 2012-13 and
thereafter for the county with the second lowest percentage
share of combined county-wide and less than county-wide property
tax shares as of 2006-07, provisions that would specifically
affect Yolo County.
In 1979, the Legislature permanently restructured the allocation
of property taxes (AB 8, L. Greene, 1979). AB 8 shifted some of
the schools' property tax revenues to local agencies and
replaced the schools' losses with increased subventions from the
state General Fund. The
AB 8 formula shifted additional property taxes to counties in an
amount equal to their 1978-79 block grants, plus a portion of
Aid to Families with Dependent Children (AFDC) costs not covered
by the state buyout, minus the new state grants for county
health services. This three-part package was intended to
provide proportionate bailout to all counties, but, under the
provisions of AB 8, the six counties were not awarded additional
property tax revenues.
For the six "negative bailout" counties, the state grants for
health services exceeded their 1978-79 block grants plus the
adjustment for AFDC costs. Consequently, rather than shifting
additional property tax revenue from schools to these counties,
these counties shifted property tax revenue to schools. In
these six counties, property tax revenues were reduced rather
than augmented to balance the relatively larger health and
welfare payments.
In 1982, the Department of Finance discovered the six counties
had not been shifting their "negative bailout" amounts to
schools. The Legislature forgave the past $5.5 million in
miscalculations, clarified some counties would receive a
"negative bailout" amount, and required counties to shift their
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"negative bailout" amounts in future years (AB 2162, Condit,
1983).
Since 1983, Stanislaus County has transferred more than $52
million in "negative bailout" to the schools. Its "negative
bailout" increases annually, just as property tax revenues grow.
Stanislaus County officials argue the "negative bailout"
payments are an unintended consequence of AB 8 because the
Legislature wanted to relieve the fiscal pressures on counties,
not increase them.
In future years, the six counties will benefit from the growth
in property tax revenues, meaning the schools in those counties
will no longer benefit from that property tax growth. As a
result, the state's General Fund will take a hit because the
state must backfill the property tax revenues that the schools
will no longer receive.
SB 85 is not the six counties' first attempt to cap their
"negative bailout payments." This year, SB 684 (Cogdill) was
held in Assembly Appropriations Committee on its suspense file.
In 1996, AB 698 (Cannella, 1996) died in Senate Appropriations
Committee and AB 1069 (Cardoza, 1997) died in Assembly
Appropriations Committee. In 1997, Governor Wilson vetoed AB
472 (Cardoza, 1997), arguing the counties received additional
fiscal relief when the state took over trial court funding.
Senate Local Government Committee passed SB 756 (Denham, 2003),
SB 9 (Denham, 2006), and SB 215 (Denham, 2007), but those bills
died on the Senate Appropriations Committee's suspense file.
SB 85 also contains provisions that would provide property tax
relief to Yolo County, the county with the second lowest share
of combined countywide and less than countywide property tax
shares as of 2006-07. In February 2009, as part of the state
budget package, SB 8 X3 (Ducheny), Chapter 4, Statutes 2009-10
Third Extraordinary Session, contained property tax relief
provisions for Orange County, the county with the lowest share
of property taxes allocated to county government in the 2006-07
year. SB 8 X3 increases property tax revenue allocations to
Orange County by $35 million annually in 2009-12 and 2010-11 and
by $50 million annually thereafter. The additional funds for
Orange County will be diverted from property tax revenues
currently allocated to local K-12 school districts and the
County Office of Education in Orange County.
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There are major differences in the percentages of property taxes
that are currently allocated to cities, counties, special
districts and school districts within counties across the state,
for various reasons. Part of the difference in percentages from
jurisdiction to jurisdiction can be explained by the
determination of the AB 8 formula, which was to some extent
based on each local government's share of property tax
collections before Proposition 13 was enacted. Although
differences in allocation are due to a variety of complex
factors, representatives of counties with below-average
allocations have long advocated for state relief, normally
involving a reallocation of property taxes from schools to
county governments. Previously, several bills have been
proposed to provide relief to "low wealth" counties, generally
defined as counties in which the countywide share of property
taxes is below the statewide average. For example, AB 2682
(Daucher, 2006) and AB 405 (Duvall, 2007) would have required
that schools' share of tax increment revenue available upon the
expiration of redevelopment areas be reallocated to counties.
SB 1909 (Machado, 2003) would have established an 11% floor for
property taxes allocated to county governments, but the bill was
vetoed by the Governor.
Analysis Prepared by : Debbie Michel / L. GOV. / (916)
319-3958
FN: 0003172