BILL ANALYSIS                                                                                                                                                                                                    




                   Senate Appropriations Committee Fiscal Summary
                           Senator Christine Kehoe, Chair

                                           277 (Wiggins)
          
          Hearing Date:  05/18/2009           Amended: A I 
          Consultant: Mark McKenzie       Policy Vote: Loc Gov 4-1
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          BILL SUMMARY:   SB 277, an urgency measure, would reduce future  
          property tax revenue shifts from the Cordelia Fire Protection  
          District (Cordelia FPD) to the Educational Revenue Augmentation  
          Fund (ERAF) in SolanoCounty.
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          ____
                            Fiscal Impact (in thousands)

           Major Provisions         2009-10      2010-11       2011-12     Fund
           ERAF shift correction             $61*        $64*      General
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          *assumes an annual property tax growth rate of 5%
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          STAFF COMMENTS: This bill meets the criteria for referral to the  
          Suspense File.
          In response to state budget deficits in the early 1990s, the  
          Legislature reduced state General Fund spending on education by  
          shifting property taxes from counties, cities, and special  
          districts to an ERAF in each county to support schools.  The  
          statutory formula for the 1992-93 ERAF shifts required special  
          districts to shift up to 40% of total property tax revenues, but  
          not more than 10% of total district revenues.  Some districts  
          were exempted, while others, including fire districts, were  
          granted exceptions to the formulas.  In the 1993-94 ERAF shifts,  
          most fire districts were effectively exempted because the  
          formulas allowed them to credit other funds they receive against  
          their ERAF contribution.  

          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  
          recent years, the amount of property tax revenues received by  
          the Cordelia FPD has decreased dramatically.  The largest loss  
          of revenues followed a correction in the District's allocation  
          after it was discovered that nearly half of its annual property  










          tax revenues were coming from areas that had been annexed into  
          nearby cities and were no longer served by the District.

          SB 277 would prospectively reduce Cordelia FPD's ERAF payments  
          by specifying that the amount of property tax deemed allocated  
          to ERAF by the district in 2009-10 would be decreased by  
          $58,310.  This adjustment would be reflected in future  
          allocations of property tax revenues, beginning in 2010-11.  SB  
          277 would also ensure that other special districts would not  
          absorb the adjustment.

          Staff notes that any shifts of property tax revenues from ERAF  
          or directly from school districts must be backfilled by the  
          General Fund to satisfy the requirements of Proposition 98.  The  
          adjustment to Cordelia FPD's property tax allocations for the  
          2009-10 fiscal year would result in a 2010-11 General Fund cost  
          of $58,310, plus a growth factor.  This amount would be  
          compounded annually by the property tax growth rate.