BILL ANALYSIS
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|SENATE RULES COMMITTEE | SB 1160|
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THIRD READING
Bill No: SB 1160
Author: Dutton (R)
Amended: 6/2/10
Vote: 21
SENATE GOVERNMENTAL ORG. COMMITTEE : 7-1, 4/13/10
AYES: Wright, Calderon, Denham, Florez, Negrete McLeod,
Padilla, Price
NOES: Yee
NO VOTE RECORDED: Harman, Oropeza, Wyland
SENATE APPROPRIATIONS COMMITTEE : 10-0, 5/27/10
AYES: Kehoe, Alquist, Corbett, Denham, Leno, Price,
Walters, Wolk, Wyland, Yee
NO VOTE RECORDED: Cox
SUBJECT : State fiscal analysis
SOURCE : Author
DIGEST : This bill requires the Legislative Analyst and
the Department of Finance, to the extent that any fiscal
estimate of the annual state budget involves a change in
state tax law, to estimate, the statewide economic impact
of the change, using a dynamic economic analysis that
includes probable behavioral responses of taxpayers,
businesses, and other residents of the state, and the
impact of the change on state spending reductions,
including reductions in education spending.
CONTINUED
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ANALYSIS : Existing law requires Legislative Analyst's
Office (LAO), operating under the authority of the Joint
Legislative Budget Committee, to provide the Legislature
with specified fiscal analyses of matters affecting state
finances.
Existing law requires a state agency proposing to adopt,
amend, or repeal any administrative regulation to assess
the effect of the proposed regulation on jobs and
businesses within the state.
Existing law requires the Department of Finance (DOF) to
perform various duties pertaining to the preparation and
analysis of the annual state budget, and the fiscal
analysis of legislative proposals before the Legislature.
Prior law, which sunset on January 1, 2000, required both
the LAO and DOF to prepare "dynamic" estimates of the
revenue effect of tax incentive measures.
This bill:
1.Requires LAO, when preparing any fiscal estimate in the
annual state budget that involves one or more proposed
changes in state tax law, including, but not limited to,
new taxes, tax rate changes, new credits, deductions,
exclusions, or exemptions, or changes to credits,
deductions, exclusions, or exemptions, the Legislative
Analyst to estimate the statewide economic impact of the
change or changes, using dynamic economic analysis that
takes into account probable behavioral responses of
taxpayers, businesses, and other residents of the state,
except where it is unreasonable to do so.
2.Requires LAO to also estimate the economic impact of the
state spending reductions that would be necessitated by
the proposed state tax reduction, in accordance with the
constitutional requirement that the state enact a
balanced budget each year. The Legislative Analyst's
estimate of the economic impact of spending reductions
shall identify the reductions in state education spending
required by the tax reduction proposal, and the long-term
effect of reduced education spending on the growth of the
state domestic product. Limits this to proposed changes
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in state tax law determined by LAO, pursuant to a static
fiscal estimate, to have a fiscal impact in excess of ten
million dollars ($10,000,000) in any one fiscal year.
3.Requires DOF, when preparing any fiscal estimate that
involves one or more proposed changes in state tax law,
including, but not limited to, new taxes, tax rate
changes, new credits, deductions, exclusions, or
exemptions, or changes to credits, deductions,
exclusions, or exemptions, DOF to estimate the statewide
economic impact of the change or changes, using dynamic
economic analysis that takes into account probable
behavioral responses of taxpayers, businesses, and other
residents of the state, except where it is unreasonable
to do so.
4.Requires DOF to also estimate the economic impact of the
state spending reductions that would be necessitated by
the proposed state tax reduction, in accordance with the
constitutional requirement that the state enact a
balanced budget each year. DOF's estimate of the
economic impact of spending reductions shall identify the
reductions in state education spending required by the
tax reduction proposal, and the long-term effect of
reduced education spending on the growth of the state
domestic product. Limits this requirement set forth in
this section applies only to a proposed change in state
tax law determined by DOF, pursuant to a static fiscal
estimate, to have a fiscal impact in excess of ten
million dollars ($10,000,000) in any one fiscal year.
Note: Please refer to the Senate Governmental Organization
Committee analysis for background information and the
2006 LAO report on the Dynamic Revenue Analysis.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee:
Fiscal Impact (in thousands)
Major Provisions 2010-11 2011-12
2012-13 Fund
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LAO economic analysis
variable, about $25 per year, on average
General
DOF economic analysis
variable, about $25 per year, on average
General
SUPPORT : (Verified 5/27/10)
American Council of Engineering Companies of California
Associated Builders and Contractors of California
Automotive Aftermarket Industry Association
California Aerospace Technology Association
California Automotive Wholesalers' Association
California Building Industry Association
California Business Properties Association
California Construction and Industrial Materials
Association
California Forestry Association
California Framing Contractors Association
California Grocers Association
California Hotel and Lodging Association
California League of Food Processors
California Manufacturers & Technology Association
California Restaurant Association
California Retailers Association
California Taxpayers Association
Chemical Industry Council of California
Engineering and Utility Contractors Association
Howard Jarvis Taxpayers Association
Industrial Environmental Association
National Federation of Independent Business
TechAmerica
Western Growers
Western States Petroleum Association
ARGUMENTS IN SUPPORT : According to groups in support of
this bill, "We support SB 1160 to require that analysis of
tax proposals and state budgets be dynamic, at least under
certain conditions, to take into account the likely
behavior changes of taxpayers and regulated parties.
"If the static estimate first shows that a proposal will
have an annual cost of over ten million dollars, then the
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Legislative Analyst and Department of Finance must perform
a dynamic analysis.
"A non-dynamic, or "static" analysis is insufficient to
identify the true costs and benefits of a tax, credit or
expenditure. Changes in California taxes and regulators
are factors in decisions being made every day by investors,
employers and consumers. These decisions will impact
general fund revenues, employment, and ultimately determine
the outcome of the policy being analyzed.
"An understanding of the dynamic revenue potential of these
proposals before they go into effect will improve
decision-making and provide opportunities to adopt
complementary policies to address negative outcomes."
TSM:nl 6/2/10 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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