BILL ANALYSIS �
AB 191
Page 1
Date of Hearing: March 23, 2011
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
Cameron Smyth, Chair
AB 191 (Berryhill and Galgiani) - As Introduced: January 26,
2011
SUBJECT : Local government finance: property tax revenue
allocations: negative sum counties.
SUMMARY : Revises property tax allocations for "negative sum"
counties in order to provide fiscal relief to those counties.
Specifically, this bill :
1)Requires, for purposes of property tax revenue allocations,
the county auditor of a "negative sum" county, as defined, for
the 2010-11 fiscal year, to do both of the following:
a) Increase the total amount of ad valorem property tax
revenue deemed allocated to the county in the immediately
preceding fiscal year by an amount equal to the absolute
value of the negative sum, as defined, and the proportional
share of any growth in assessed valuations of property
attributable to that negative sum through the 2009-2010
fiscal year; and,
b) Reduce the total amount of ad valorem property tax
revenue deemed allocated to the county's Educational
Revenue Augmentation Fund (ERAF) by the amount of the
increase as specified in 1a) above.
2)Defines "proportional share of any growth in assessed
valuation of property attributable to that negative sum" to
mean that amount that results in a fiscal year from the annual
compounding of the absolute value of the previously calculated
negative sum account, from fiscal year to fiscal year, by the
application of the relevant proportional share of the county's
amount of annual tax increment as determined in accordance
with the determination of annual tax increment allocations and
modifications as contained in Revenue and Taxation Code 96.5.
3)Provides, for the 2011-12 fiscal year and for each fiscal year
thereafter, that the amount of the increases and reductions
required by 1a) and 1b) above shall be reflected in the
application of specified provisions of the Revenue and
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Taxation Code, or any successor to those specified provisions.
4)States that reimbursement to local agencies and school
districts shall be made if the Commission on State Mandates
determines that this act contains costs mandated by the state.
5)States that this act is an urgency statute and is needed in
order to timely provide vital fiscal relief to counties
suffering from unusually acute fiscal difficulties.
EXISTING LAW :
1)Requires the county auditor, in each fiscal year, to allocate
property tax revenues to local jurisdictions in accordance
with specified formulas and procedures, and generally requires
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.
2)Requires the county auditor, for purposes of property tax
revenue allocations for the 2011-12 and 2012-13 fiscal years,
for a negative sum county, to reduce the amount of property
tax revenue otherwise allocated to the county by an amount
attributable to that negative sum, to apply a reduction amount
equal to the reduction amount determined for specified years.
FISCAL EFFECT : Unknown
COMMENTS :
1)According to the sponsor, Stanislaus County, this bill would
fix a long-standing formula problem that has unfairly impacted
Stanislaus County for more than 30 years. The author notes
that since 1983, Stanislaus County has transferred more than
$60 million in "negative bailout" to the schools, with the
payment increasing annually. Stanislaus County officials
argue that the "negative bailout" payments are an unintended
consequence from legislative measures taken post-Proposition
13, in which the Legislature intended to relieve the fiscal
pressures on counties, not increase them.
2)"Negative sum," counties, also known as "negative bailout"
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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.
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.
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
reduced rather than augmented to balance the relatively larger
health and welfare payments.
In 1982, the Department of Finance discovered the six counties
had not been shifting their "negative bailout" amounts to
schools. The Legislature forgave the past $5.5 million in
miscalculations, clarified some counties would receive a
"negative bailout" amount, and required counties to shift
their "negative bailout" amounts in future years (AB 2162,
Condit, 1983).
3)AB 191 is not the first attempt to address the problems
stemming from "negative bailout" payments for these counties.
Most recently, SB 85 (Cogdill), Chapter 5, Statues of 2010,
contained provisions to provide property tax relief to seven
counties, including the six negative bailout counties and Yolo
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County. SB 85 also contained provisions to ensure that
counties would not be harmed if property tax receipts in those
counties come in lower than expected during fiscal years
2011-12 and 2012-13. In February 2009, as part of the state
budget package, SB 8 X3 (Ducheny), Chapter 4, Statutes
2009-10, contained property tax relief provisions for Orange
County, the county with the lowest share of property taxes
allocated to county government in the 2006-07 year. SB 8 X3
increases property tax revenue allocations to Orange County by
$35 million annually in 2009-10 and 2010-11 and by $50 million
annually thereafter. The additional funds for Orange County
are diverted from property tax revenues currently allocated to
local K-12 school districts and the County Office of Education
in Orange County.
SB 684 (Cogdill) was held in Assembly Appropriations Committee
on its suspense file in 2009. In 1996, AB 698 (Cannella,
1996) died in Senate Appropriations Committee and
AB 1069 (Cardoza, 1997) died in Assembly Appropriations
Committee. In 1997, Governor Wilson vetoed AB 472 (Cardoza,
1997), arguing the counties received additional fiscal relief
when the state took over trial court funding. 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.
4)Governor Jerry Brown, in his January 2011 Budget Summary,
addressed the intention of the state to provide funding for
local governments post-Proposition 13 in 1978. The Budget
Summary states that "in order to prevent mass layoffs of
teachers, police, and firefighters and enormous cuts in other
essential services, the state used its budget surplus to
essentially 'bail out' local governments for the 1978-79
fiscal year. The bailout consisted of allocations to local
jurisdictions to make up for a significant portion of their
property tax loss. As part of the bailout to counties, the
state either assumed responsibility for programs or took on
new funding obligations." The author and sponsor argue that
the intent of the bailout was not to put additional financial
strain on counties, including Stanislaus County.
5)This bill is substantially similar to AB 12 X1 (Berryhill and
Galgiani).
6)This bill is an urgency statute and requires a two-thirds vote
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of each house.
7)Support Arguments: There are major differences in the
percentages of property taxes that are currently allocated to
cities, counties, special districts and school districts
within counties across the state. Representatives of counties
with below-average allocations have long advocated for state
relief, normally involving a reallocation of property taxes
from schools to county governments. The Legislature may wish
to consider property tax relief for these negative sum
counties, especially given the current economic environment
that counties face.
Opposition Arguments: Most counties in California are dealing
with tough economic times and have had to cut services,
programs, and undergo employee lay-offs and furloughs. While
AB 191 targets six "negative bailout" counties which have
suffered from property tax allocation formulas stemming back
from the late 1970s and early 1980s, the overall climate for
counties may not warrant additional monetary help just for
these six, especially at the state's expense of then having to
backfill the loss to schools.
REGISTERED SUPPORT / OPPOSITION :
Support
Stanislaus County Board of Supervisors �SPONSOR]
Opposition
None on file
Analysis Prepared by : Debbie Michel / L. GOV. / (916)
319-3958