BILL ANALYSIS �
AB 192
Page 1
Date of Hearing: May 16, 2011
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Henry T. Perea, Chair
AB 192 (Logue) - As Amended: February 22, 2011
VOTE ONLY
2/3 vote. Urgency. Fiscal committee.
SUBJECT : Public safety: Local Safety and Protection Account:
appropriation.
SUMMARY : Provides for an annual transfer of $500 million from
the General Fund (GF) to the Local Safety and Protection
Account. Specifically, this bill :
1)States that beginning July 1, 2011, and each July 1
thereafter, for a total of five years, the sum of $500 million
shall be transferred from the GF to the Local Safety and
Protection Account, established in the Transportation Tax
Fund.
2)Specifies that, notwithstanding Government Code (GC) Section
13340, all of those moneys are continuously appropriated,
without regard to fiscal year (FY), to the State Controller
(SC) for allocation pursuant to all of the following:
a) GC Sections 29553, 30061, and 30070;
b) Penal Code Section 13821; and
c) Welfare and Institution Code Sections 18220 and 18220.1.
3)Provides that this bill is an urgency statute needed to ensure
that funding for local public safety programs is not
interrupted.
4)Takes effect immediately as an urgency statute.
EXISTING LAW :
1)Imposes a state sales tax on the retail sale of tangible
personal property (TPP) to be used or consumed in California
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at the rate of 7 % of gross receipts. A state use tax is
imposed at the same rate on the storage, use or other
consumption in California of TPP purchased outside of
California. For sales occurring after July 1, 2011, the rate
of the state sales and use tax (SUT) will be decreased by 1%,
down to 6 %.
2)Establishes, in lieu of any ad valorem property tax upon
vehicles, an annual license fee for any vehicle subject to
registration in this state in an amount of 1.15% of the market
value of that vehicle. For vehicle registration after July 1,
2011, the vehicle license fee (VLF) rate will be decreased to
0.65%.
3)Imposes a personal income tax (PIT) on individuals but allows
various credits, including a dependent exemption credit. For
taxable years beginning on or after January 1, 2009, and
before January 1, 2011, the PIT Law was amended temporarily to
add to each marginal PIT rate an additional increase of a 0.25
percentage point, to decrease the amount allowable as a
dependent exemption credit from $309 to $98, and to increase
the alternative minimum tax rate by adding a 0.25 percentage
point to the current rate of 7%.
FISCAL EFFECT : Committee staff estimates that this bill would
result in an annual GF loss of $500 million for the next five
FYs, beginning with the 2011-12 FY.
COMMENTS :
1)Author's Statement . The author states that, "AB 192 would
provide a continuous appropriation of $500 million from the
General Fund to the Local Safety and Protection Account, in
order to fund local law enforcement programs after the
temporary VLF increase of 2009 expires. Instead of renewing
the fee, which would burden individuals and families in a
struggling economy, funding for these local law enforcement
programs would come out of the general fund. This returns
public safety to its rightful place as the primary purpose of
government."
2)Arguments in Support . The proponents of this bill emphasize
the importance of adequately funding local public safety
programs, which include support for juvenile justice plans,
probation activities, and the rural crime prevention. The
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proponents assert that this bill "would provide local law
enforcement with much needed funding, which is vital to the
success of �the probation industry] and the overall public
safety of our communities." The proponents also state that
funding the Rural Crime Prevention programs that "support law
enforcement activities targeted at crimes against agricultural
property" is important to California agriculture.
3)Background . On February 20, 2009, the Governor signed into
law AB x3 3 (Evans), Chapter 18, Statutes of 2009, which
implemented the revenue raising provisions of the 2009-10
Special Session budget agreement. AB x3 3 temporarily
increased (through June 30, 2011) the rate of the GF portion
of the state SUT by 1% and the rate of the VLF from 0.65% to
1.15%, except for commercial vehicles with a gross weight of
10,000 pounds or more. The SUT rate increase was effective on
April 1, 2009, and the VLF rate increase became effective for
registrations beginning May 19, 2009 (corresponding to the
timing of a weekly VLF billing cycle). In addition, for
taxable years 2009 and 2010, AB x3 3 reduced the dependent
credit exemption amount from $309 to $98, as adjusted for
inflation, and temporarily added to each marginal PIT rate an
additional increase of a 0.25 percentage point.
4)The VLF Increase . The VLF is a state tax levied on the
purchase price of a vehicle and, subsequently, annually
assessed against the vehicle's value adjusted by a statutory
depreciation schedule. Proposition 1A, approved by the voters
in November 2004, requires that VLF revenue from the 0.65%
rate be allocated to support local health, mental health, and
social services costs under Realignment or, otherwise,
allocated to local government. However, the Legislature may
increase the VLF rate, which it did in 2009. The revenues
from the portion of the VLF rate increase from 0.65% to 1% are
retained by the GF ($121 million in FY 2008-09 and $1.2
billion in FY 2009-10) and revenues from the additional
increase of 0.15% are transferred to a newly created Local
Safety and Protection Account, which is continuously
appropriated for specific local public safety programs ($82
million in FY 2008-09 and $502 million in FY 2009-10).
5)Local Public Safety Funding . While public safety is a matter
of local control in California, the state provides financial
assistance to local government for various public safety
activities, including law enforcement and programs focused on
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preventing crime and reducing recidivism. One of the biggest
sources of revenue for public safety was established with the
passage of Proposition 172 in 1993, which amended the
California Constitution to include a 0.5% SUT to help finance
local public safety. The Legislature proposed this tax to
mitigate the effects of a shift in local property taxes that
prompted some local governments to reduce expenditures on
public safety. The revenues collected from the SUT increase
are deposited in the Local Public Safety Fund and later
disbursed to individual counties according to their proportion
of total state taxable sales. The money could be used by
local governments for specified public safety programs,
including police, sheriffs, and district attorneys. The
Legislative Analyst's Office (LAO) reported in its 2008-09
analysis that, as the sales tax revenue has increased since
1993, due to economic growth and general price inflation, the
Fund has grown significantly. Thus, in FY 2008-09, $3 billion
were deposited in the Local Public Safety Fund, in contrast to
$1.4 billion collected in FY 1993-94.
In addition, the Local Safety and Protection Account (LSPA)
provides funding for various local law enforcement and public
safety programs that were previously supported by the GF.
Those programs include (a) Small and Rural Sheriff
Subventions; (b) Citizens Option for Public Safety; (c)
Juvenile Justice Crime Prevention; (d) Juvenile Probation; (e)
Juvenile Camps and Ranches; (f) Booking Fees; and (g) several
programs administered by the California Emergency Management
Agency. Each of these local programs receives a percentage of
the total revenue deposited into the LSPA. In general, the
funds are spent to reimburse local law enforcement for booking
and detention expenses and to support juvenile justice
programs, including prevention services operated by
community-based agencies, specialized law enforcement task
forces and training programs to suppress the use of illegal
drugs, sexual assaults, gang activity and technological theft,
and juvenile probation services, including camps. However, as
discussed above, the additional 0.15% VLF rate increase is set
to expire on July 1, 2011, at which point those programs will
be defunded, unless the Legislature either extends the VLF
increase or provides for an alternative funding source.
Governor Brown, in his budget proposal, has suggested to realign
state and local program responsibilities further, subject to
voter approval, including public safety grant programs that
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are currently funded through a temporary VLF increase. The
proposal would raise $5.9 billion in taxes to fund the shift
of a like amount to counties to implement increased program
responsibilities. According to the LAO report, the proposed
shift "would allocate resources directly to the local
governments that bear the primary responsibility for ensuring
public safety and provide them with greater flexibility to
meet their unique public safety needs." (Governor's
Realignment Plan-Criminal Justice, LAO report presented to
Senate Budget and Fiscal Review Subcommittee No. 5, January
25, 2011).
6)The Potential Sources of Funding for the LSPA: GF Tax versus
VLF. Prior to the enactment of the 0.15% VLF increase in
2009, the LAO issued a Criminal Justice Realignment report, as
part of the 2009-10 Budget Analysis Series, recommending that
the realignment be funded from the VLF rate increase. The LAO
stated that, if the state's fiscal condition were stronger,
the Legislature could realign the additional program
responsibilities from the state to local government by
"shifting existing state revenues into the realignment fund."
However, because the state faced major financial challenges in
2009 - as it does today - the LAO proposed a tax increase to
support the local governments' additional responsibilities.
Specifically, LAO explained that, while deciding "which tax
should support the realignment fund is a difficult policy call
for the Legislature," the VLF increase seemed the most optimal
for several policy reasons. First of all, the 1% VLF rate
increase "remedies an inconsistency in the state's system of
property taxation whereby cars and trucks are taxed at lower
rates than boats and business equipment." Secondly, the VLF
"historically has been a revenue source reserved for local
governments." Next, the VLF "historically has been less
sensitive to economic fluctuations than have many other taxes"
and a stable revenue source is important in funding ongoing
public safety programs. Finally, the LAO noted that, under
California's property tax system, both "real property" and
"TPP" are subject to tax. Until 2009, however, cars and
trucks that were "personal property" were taxed at a 0.65%
rate, in contrast to the 1% property tax rate imposed on all
other types of property. No constitutional provisions limit
the Legislature's authority to raise the VLF rate or
reallocate the new revenues, in contrast to the constitutional
limitations imposed on ad valorem property taxes.
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The GF revenues, on the other hand, come from a variety of
sources but, mostly, from the imposition of the income,
corporation, and sales and use taxes. If this bill becomes
law, it would constrain spending choices for other state
programs. In order to compensate for the potential loss of
$500 million of GF money, the Legislature will be forced to
either raise taxes or decrease funding for other programs,
such as education, social services, health care, the
judiciary, or infrastructure.
7)Should the Local Public Safety Programs Be Funded Via a
Stand-Alone Bill ? As discussed, the enactment of the VLF rate
increase and funding for the LSPA were done as part of the
overall 2009-10 budget plan. As pointed out by the LAO in its
analysis of the Governor's proposed constitution amendment to
tie a reduction in spending on state corrections with the
corresponding increases in spending for public universities,
budgeting is not about inappropriately pitting two program
areas against each other. Instead, the Legislature "must make
decisions among all programs, choosing as best as possible
where the commitment of resources would be most beneficial."
The Committee may wish to consider whether a stand-alone bill
is an appropriate vehicle for funding local public safety
programs and whether the appropriation proposed by this bill
should be done as part of the overall budget process.
8)Related Legislation .
AB 168 (Gorrell), introduced in the current legislative session,
is almost identical to this bill. AB 168 is currently pending
in the Assembly Public Safety Committee.
AB 66 (Chesbro), introduced in the current legislative session,
and AB x1 9 (Chesbro), introduced in the First Extraordinary
Session, would make the 0.15% VLF rate increase permanent. AB
66 is pending in this Committee and ABx1 9 has not yet been
referred to a Committee.
AB 1700 (Gaines), introduced in the 2009-2010 legislative
sessions, would have repealed the VLF but for the 0.15% rate
increase, the revenue from which is dedicated to the Local
Safety and Protection Account. AB 1700 was held in this
committee.
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REGISTERED SUPPORT / OPPOSITION :
Support
California Farm Bureau Federation
State Coalition of Probation Organizations
Los Angeles County Board of Supervisors
Opposition
None on file
Analysis Prepared by : Oksana G. Jaffe / REV. & TAX. / (916)
319-2098