BILL ANALYSIS
SB 684
Page 1
Date of Hearing: July 8, 2009
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
Anna Marie Caballero, Chair
SB 684 (Cogdill) - As Amended: June 22, 2009
SENATE VOTE : 39-0
SUBJECT : Local government finance.
SUMMARY : Requires the county auditor of a "negative sum"
county, beginning in the 2011-12 fiscal year, when determining
the reduction of property tax revenues to the county, to apply a
reduction amount equal to its 2010-11 reduction amount.
Specifically, this bill :
1)Declares that, for purposes of property tax revenue
allocations for the 2011-12 fiscal year and each fiscal year
thereafter, the county auditor of a "negative sum" county
shall, in reducing the amount of property tax that otherwise
would be allocated to the county, shall instead apply a
reduction amount that is equal to the reduction amount that
was determined for the 2011-12 fiscal year.
2)Makes findings and declarations related to the passage of SB
154 of the 1977-78 session and AB 8 of the 1979-80 session
which authorized the transfer of funds from the state to the
counties as part of the "bail out for counties" following the
passage of Proposition 13, and the impact of those bills on
six counties in California.
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, to be collected
by counties and apportioned to cities, the county, special
districts, redevelopment and school districts in the county,
according to state law.
2)Requires the county auditor, in each fiscal year, to allocate
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property tax revenues to local jurisdictions in accordance
with specified formulas and procedures, and generally requires
that 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 : Unknown
COMMENTS :
1)SB 684 would cap the amount of property tax reduction for six
counties in California on a going-forward basis, with the cap
at the 2011-12 fiscal year amount. 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.
2)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.
3)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
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reduced rather than augmented to balance the relatively larger
health and welfare payments.
4)In 1982, the Department of Finance discovered that the six
counties had not been shifting their "negative bailout"
amounts to schools. The Legislature forgave the past $5.5
million miscalculations, clarified that some counties would
receive a "negative bailout" amount, and required counties to
shift their "negative bailout" amounts in future years (AB
2162, Condit, 1983).
5)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 that 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. The author and sponsor
believe that the Legislature should freeze the growth in their
"negative bailout" payments.
6)In future years, the six counties will benefit from the growth
in property tax revenues, meaning that 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.
7)The California State Association of Counties (CSAC), in
support, writes that SB 684 "would not end these negative
bailouts, as they are called?rather, it would take the more
modest step of capping the size of the negative bailouts to
prevent them from growing beyond their 2011 levels."
Additionally, CSAC notes that "this is a critical time for
this bill, given the state in which many counties currently
find themselves, particularly rural counties that have small
tax bases and a constrained ability to borrow?.recent
developments, including the need to pay for a special election
and payment deferrals that have and will help the state manage
its cash flow have made counties' fiscal situations even more
tenuous."
8)SB 684 is not the six counties' first attempt to cap their
"negative bailout payments." In 1996, AB 698 (Cannella, 1996)
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died in the Senate Appropriations Committee and AB 1069
(Cardoza, 1997) died in the Assembly Appropriations Committee.
In 1997, Governor Wilson vetoed AB 472 (Cardoza, 1997),
arguing that the counties received additional fiscal relief
when the state took over trial court funding. The 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.
REGISTERED SUPPORT / OPPOSITION :
Support
Stanislaus County [SPONSOR]
CA State Association of Counties
Opposition
None on file
Analysis Prepared by : Debbie Michel / L. GOV. / (916)
319-3958