BILL ANALYSIS                                                                                                                                                                                                    



                                                                  SB 323
                                                                  Page  1

          Date of Hearing:   August 19, 2009

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                                Kevin De Leon, Chair

                    SB 323 (Oropeza) - As Amended:  July 15, 2009 

          Policy Committee:                             Revenue and  
          Taxation     Vote:                            6-3

          Urgency:     No                   State Mandated Local Program:  
          No     Reimbursable:              

           SUMMARY  

          This bill authorizes a taxpayer to direct any portion of their  
          personal income tax refunds into a qualified tuition program  
          (QTP) account. Specifically, the bill:

          1)Requires the Franchise Tax Board (FTB) to modify its income  
            tax form to include information necessary to facilitate such a  
            designation, which would be limited to one QTP account per  
            return.

          2)Requires the Scholarshare Investment Board (Board) to  
            reimburse FTB through an interagency agreement for the actual  
            cost of implementing this bill, up to $475,000. Specifies that  
            the reimbursement shall be applied to the fiscal year in which  
            FTB incurs the costs.

          3)Sunsets on December 31, 2014.

           FISCAL EFFECT  


          1)FTB estimates one-time costs of approximately $373,000 and  
            ongoing costs of $51,000 (GF) to administer this refund  
            program. This includes expenses for programming changes to  
            computer systems, additional customer service contacts from  
            taxpayers, and transferring funds to QTP accounts.

          2)Implementation costs could be greater if FTB is required to  
            redirect staffing from revenue producing activities to  
            implement program (see Comment #3 below.)









                                                                  SB 323
                                                                  Page  2

          3)Costs up to $475,000 would be reimbursed from the Scholarshare  
            Administrative Fund (special fund).  However, the balance (at  
            least $100,000) would be borne by the GF.

          4)Less than $10,000 reduction in state revenues to the extent  
            refunds diverted into QTP accounts would have otherwise been  
            invested in taxable accounts.


           COMMENTS  

           1)Background  . Qualified Tuition Programs (QTPs) are established  
            and maintained by the state to encourage savings for  
            education. Under federal and state law, contributions to a QTP  
            (also known as a "529" plan) are made after taxes have been  
            paid and are not deductible. However, income earned on the  
            accounts and distributions from the accounts is tax free.

           2)Rationale  . This bill, sponsored by the state treasurer, is  
            intended to encourage taxpayers to save for future educational  
            expenses for themselves or their dependents. The author points  
            out that the cost of a college education has risen faster than  
            consumer prices and states that this bill one way to help  
            families address these rising costs.

           3)Concerns  . FTB indicates that, given budget cuts and furloughs,  
            implementation of this bill beginning in 2010 will not be  
            possible without approval of additional positions, unless the  
            board redirects staff and resources from other higher priority  
            activities.

           Analysis Prepared by  :    Brad Williams / APPR. / (916) 319-2081