BILL ANALYSIS
SENATE LOCAL GOVERNMENT COMMITTEE
Senator Patricia Wiggins, Chair
BILL NO: SB 277 HEARING: 4/29/09
AUTHOR: Wiggins FISCAL: Yes
VERSION: 2/24/09 CONSULTANT:
Weinberger
CORDELIA FIRE PROTECTION DISTRICT'S
PROPERTY TAX ALLOCATION (URGENCY)
Background and Existing Law
Proposition 13 (1978) reduced local property tax revenues
by 57%. The Legislature responded by bailing out local
governments with $858 million in block grants; $125 million
went to special districts (SB 154, Rodda, 1978).
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. Cities and
counties got their "AB 8 shift" directly and in proportion
to the amount of their bailout. However, instead of
allocating the "AB 8 shift" directly to special districts,
the Legislature created a Special District Augmentation
Fund (SDAF) in each county. Each special district
"contributed" to the SDAF in proportion to the amount of
bailout aid it received after Proposition 13. County
supervisors had discretion in allocating the SDAF money to
special districts in their county.
To balance the State Budget in 1992-93 and then again in
1993-94, the Legislature permanently shifted property tax
revenues from local governments to each county's
Educational Revenue Augmentation Fund (ERAF) to benefit
schools --- and the State General Fund. The Legislature
used different formulas in each of those years to determine
the amount of money that each agency shifted to ERAF.
Under the 1992-93 ERAF shift, special districts had to give
up 40% of the property tax revenues, capped at 10% of their
total revenues. Some local agencies were exempt from the
ERAF shift. Others, including fire districts, were granted
exceptions to the formulas.
SB 277 -- 2/24/09 -- Page 2
In 1993-94, the state ordered a second round of ERAF
shifts. Under this shift, the Legislature allowed
districts engaged in fire protection activities to credit
any funds received through the SDAF against their ERAF
contribution. Because most fire districts received money
from the SDAF, this action effectively exempted most fire
districts from the 1993-94 shift.
The Cordelia Fire Protection District provides fire
protection and emergency medical services to approximately
5,000 residents within 56 square miles of unincorporated
Solano County.
In 2001, Solano County officials discovered that the
District was receiving nearly half of its annual allocation
of property taxes from areas that had been annexed into
nearby cities and were no longer served by the District.
After officials corrected the tax rate areas, the
District's property tax revenues dropped by over $156,000
in 2002, a 46% decrease from the prior year's revenues. At
the same time, the District lost more revenue when the City
of Fairfield cancelled its contract with the District to
provide fire protection within part of the City. Solano
County and Cordelia Fire District officials want the
Legislature to reduce the District's annual ERAF shifts
because of these revenue losses.
Proposed Law
Senate Bill 277 provides that, for 2009-10, the amount of
ad valorem property tax revenues deemed allocated by the
Solano County Auditor to the Educational Revenue
Augmentation Fund for the Cordelia Fire Protection District
in 2009-10 shall be decreased by $58,310.
SB 277 requires that this adjustment be reflected in the
District's allocation of property tax revenues in future
years.
The bill specifies that the reductions in the amount of
allocations from Solano County's ERAF under the bill's
provisions apply only to school districts and county
offices of education, and not to community college
districts.
SB 277 -- 2/24/09 -- Page 3
SB 277 requires the State Director of Finance, for 2009-10
and all future fiscal years, to ensure that the adjustments
required by the bill do not result in a net increase in the
amount of any special district's required ERAF
contribution.
Comments
1. Righting a wrong . Unlike most fire protection
districts, which were not subject to the 1993-94 ERAF
shift, the Cordelia Fire Protection District's ERAF
contributions increased because of property tax revenues
which were allocated to it erroneously, and which it no
longer receives. It is unfair to ask the District to
continue to sacrifice funding for vital public safety
services to fulfill an ERAF obligation that is based on
flawed data. In contrast with the tragic end that befell
its namesake at the end of Shakespeare's King Lear, the
Cordelia Fire Protection District's story can have a happy
ending. SB 277 will enhance fire protection for thousands
of Solano County residents by preventing the District from
suffering any more losses from excessive ERAF shifts in
future years.
2. Picking up the tab . Every dollar that local
governments don't contribute to ERAF must be backfilled by
the State General Fund. While ERAF's effect on the
Cordelia Fire Protection District may be substantial, many
other special districts confront severe financial
challenges because of ERAF. Many of them would undoubtedly
welcome the opportunity to revise how their ERAF
contributions were calculated. The Committee previously
defeated bills to help other districts with their ERAF
computations: the McFarland Recreation and Park district
(AB 677, Parra, 2006) and the Stallion Springs Community
Services District (SB 732, Ashburn, 2005). If the
Legislature rewrites fiscal history to help Cordelia, the
Committee should expect other special districts to seek
similar treatment. The Committee may wish to consider
whether it wants to open this fiscal door.
3. Get it in writing . In 2007, the Legislature approved
the Fresno Metropolitan Flood Control District's request to
SB 277 -- 2/24/09 -- Page 4
decrease its future ERAF shifts after the State
Controller's office (SCO) provided written confirmation of
many of the District's claims (AB 263, Arambula, 2007).
While the Cordelia Fire Protection District has talked to
the SCO's staff about its ERAF calculations, the SCO has
neither conducted a formal review nor produced written
findings. Legislators may wish to consider whether it is
premature to approve SB 277's ERAF reductions without
obtaining the SCO's written confirmation of the District's
claims.
4. Mandate . Legislative Counsel says that SB 277 creates
a new state mandated local program by changing the manner
in which property tax revenues are allocated by Solano
County officials. SB 277 disclaims the state's
responsibility for providing reimbursement by citing the
county's authority to charge special districts for the
actual and reasonable costs incurred by the county in
allocating property tax revenues.
5. Special legislation . The California Constitution
prohibits special legislation when a general law can apply
(Article IV, 16). SB 277 contains findings and
declarations explaining the need for legislation that
applies only to the Cordelia Fire Protection District.
Support and Opposition (4/23/09)
Support : Solano County.
Opposition : Unknown.