BILL ANALYSIS
SENATE COMMITTEE ON BUDGET AND FISCAL REVIEW
Denise Moreno Ducheny, Chair
Bill No: SB 845
Author: Committee on Budget and Fiscal Review
As Amended: March 18, 2010
Consultant: Brian Annis
Fiscal: Yes
Hearing Date: April 12, 2010
Subject : Local Government.
Summary : This bill would amend statute to fully implement
the local-government reform provisions of Senate
Constitutional Amendment 19 (SCA 19). This bill, SCA 19,
and SB 844, constitute a state and local government reform
package that is sponsored by the group California Forward.
Among the provisions of this bill, are implementation
requirements related to constitutional changes in SCA 19 in
the areas of local government planning and accountability,
and new local government revenue authority.
Background :
Budget and Local Government Reform. There have been
numerous proposals to reform the budget and State/local
government relationships over the past decades. Historical
reform efforts include, but are not limited to the
following:
Pilot Projects on performance budgeting in four
State departments starting in 1993 by then Governor
Pete Wilson.
Recommendations by the California Constitution
Revision Commission that convened from 1994 to 1996 at
the direction of statute and made various
recommendations regarding the State budget process and
alignment of programs between State and local
governments.
Recommendations by the California Citizens Budget
Commission in 1998 that proposed statutory and
constitutional changes to the budget process,
including reducing the vote requirement for the State
budget to a majority vote.
Recommendations in the Governor's 2004 California
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Performance Review regarding the State budget process,
including a recommendation to adopt a biennial budget
and a performance-based budgeting system.
Reforms implemented in recent years include:
Proposition 58 which was passed by voters in 2004
requires that the State enact a balanced budget and
provides for mid-year actions in the event that the
budget falls out of balance. Proposition 58 also
established a special budget reserve called the Budget
Stabilization Account and prohibited borrowing to
cover budget deficits.
Proposition 1A which was passed by the voters in
2004 and reduced the State's authority over local
finances by restricting the State from reducing or
altering the allocation of local sales tax rates.
Proposition 1A also restricted the State from shifting
property taxes from local government to schools or
community colleges and does not allow the State to
decrease vehicle license fee revenues to local
government without providing replacement funding.
Proposition 1A allows the state to redirect local
property tax revenue to schools for state General Fund
relief only twice in a consecutive ten year period.
The redirection is considered a loan which must be
repaid within three years with no second redirect
allowed until the first is repaid.
California Forward Organization. California Forward is an
organization that was created by California Common Cause,
the Center for Governmental Studies, the New California
Network, and the Commonwealth Club of California's Voices
for Reform Project in March 2008. The organization's main
goal is to contribute to improving the quality of life for
all Californians by creating a more responsive,
representative, and cost-effective government. This
organization is funded by the following foundations: the
California Endowment, the Evelyn and Walter Haas Jr. Fund,
the William and Flora Hewlett Foundation, the James Irvine
Foundation, and the David and Lucile Packard Foundation.
California Forward started in 2008 a process of
consultation and engagement with the public and community
leaders regarding a government reform agenda. They have
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made hundreds of presentations, consulted with hundreds of
community leaders, conducted focus groups and public
opinion research in the development of a reform agenda that
includes budget process reform and local government reform.
California Forward submitted to the Attorney General
ballot initiatives to implement the reform aimed at the
November 2010 ballot.
Local Authority to Impose Sales and Use Taxes. Currently,
local governments have the authority to increase sales and
use taxes to support local programs up to certain maximum
levels defined in state law. The constitution sets voter
approval thresholds depending on how the tax proceeds would
be used. If the tax would be directed to a special or
designated purpose, such as transportation improvements,
the tax requires approval by two-thirds of local voters.
If the tax would be directed to general purposes, the tax
requires approval by a majority of voters.
Proposed Law:
Countywide Strategic Action Plans. This bill specifies the
process for local governments to create a Countywide
Strategic Action Plan, and describes the required
components of the plan, including the following.
The plan would begin with a majority vote of the county
board of supervisors to initiate the development of the
plan. The plan is discretionary - it is not a local
mandate.
The plan would be developed through a public process and
require that the county consult with local agencies
responsible for services such as education, public
safety, and public health.
The plan would include a declaration of community goals
and desired outcomes, as well as an inventory of existing
programs, and assessment of their effectiveness, and an
inventory of the state agencies whose cooperation and
assistance is necessary to implement the plan.
The plan would include strategies for addressing goals,
problems and inefficiencies identified in the plan, and a
mechanism for measuring the progress toward these goals.
The plan may include a plan to expend new revenue from a
locally-imposed sales tax increase, should that tax be
forwarded to voters and approved by a majority vote (see
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below for further explanation of the local tax
authority).
The completed plan would be adopted by a county board of
supervisors.
New Local Tax Authority. In a county where a Countywide
Strategic Action Plan is approved, the associated
constitutional amendment would allow a county to increase
the sales and use tax by up to 1-cent with a majority vote
of the electorate. The new tax authority would work as
follows:
For a county that adopts a Countywide Strategic Action
Plan that includes new sales tax revenue, the county
board of supervisors may, by a simple majority vote,
place before the voters a measure to increase the sales
and use tax in that county by up to one cent. The tax
increase would require a majority vote of the people for
implementation.
Fifty percent of revenue raised from the new tax would go
to school districts within the county on the basis of
each school district's average daily attendance. The
county could alternatively redirect other tax revenue,
such as property tax, to schools instead, but the net new
funding for schools would have to equal an amount
equivalent to 50 percent of the new tax revenue. The new
funds directed to schools could not be considered in
calculating the state's portion of the school district's
revenue limit funding.
The state would be prohibited from reducing subventions
to the participating local government agencies in
response to any tax approved pursuant to this measure and
the related constitutional amendments.
An approved sales and use tax increase would remain in
place for 10 years, unless a county board of supervisors
agreed to dissolve or amend the plan earlier. The county
board of supervisors may vote to extend the tax for
additional 10-year periods, but any extension would
require a new vote of the electorate.
Provisions Dependent on Enactment of related Constitutional
Amendment. The provisions of this bill are dependent on a
voter approval of the related constitutional amendment.
Fiscal Effect :
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Direct Fiscal Effects. If the new local sales tax
authority was maximized - if voters in all counties
approved a full 1-cent sales tax increase - approximately
$5 billion in new annual revenues would be created for
local government expenditures. Half of the new revenue
would augment school funding and the rest would be
allocated to local governments within a county on the basis
of the Countywide Strategic Action Plan.
Source : California Forward
Support :
Organizational Endorsements for SB 845:
AARP
State Building and Construction Trades Council of
California
Sierra Business Council
Monterey County Business Council
San Joaquin County Business Council
Fresno Business Council
Greenlining Institute
California Church IMPACT
Yolo County Board of Supervisors
San Gabriel Valley Economic Partnership
California Alliance of Child and Family Services
Kern County Taxpayers Association
Progressive Christians Uniting
WELL Network
Organizational Endorsements for the California Forward 2010
Reform Principles:
Inland Empire Economic Partnership
Orange County Business Council
San Carlos Chamber of Commerce
California Senior Advocates League
San Francisco Chamber of Commerce
California La Raza Lawyers Association
Individuals:
Jane Affonso, Redondo Beach
Ernest and Hannah Biberstein, Davis
Jerry Brown, Chatsworth
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Margaret Fertschneider, Atascadero
Elaine Holder, San Luis Obispo
Jeanette McNeely, San Jose
Merilie Robertson, Canoga Park
Dennis Quirin, Oakland
Opposed :
California Taxpayers'Association
Mayor Joe Esquiel, On behalf of the Lakewood City Council
Staff Comments :
1. The Countywide Strategic Action Plan would provide
a new forum for local governments to work together
to develop strategies to achieve common community
goals. It would track progress toward those goals,
which may improve performance management at the
local level. Since the County Strategic Action Plan
would not be a local mandate, some counties may
choose not to participate. However, if a county
board of supervisors was interested in pursuing the
new sales tax authority, the plan would need to be
completed.
2. The new tax authority in the proposed
constitutional amendment and this measure would make
it easier for county voters to approve an increase
in the sales tax compared to the existing two-thirds
vote requirement in the Constitution for special
taxes. The Legislative Analyst examined 2004 local
sales tax measures and found that votes approved
one-third of them. If the voter approval threshold
for these taxes had been 50 percent, instead of 67
percent, another one-third would have been approved.
Based on past behavior of local governments and
local voters, it is unlikely the tax increase would
be implemented in all counties, and where
implemented, it might not be set at the maximum
1-cent level. New local tax revenue might be
expected to be more in the range of $1 billion
instead of the maximum of $5 billion.
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