BILL ANALYSIS �
AB 1191
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Date of Hearing: January 19, 2012
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 1191 (Huber) - As Amended: January 4, 2012
Policy Committee: Local
GovernmentVote:9-0
Urgency: No State Mandated Local Program:
Yes Reimbursable: Yes
SUMMARY
This bill creates a process for cities and counties to seek
reimbursement for lost revenues due to legislation in 2004 that
enacted the "Triple Flip" and the "Vehicle License Fee (VLF)
Swap," both of which are methods of reallocating tax payments.
Specifically, this bill:
1)Requires, for the 2012-13 fiscal year and each subsequent
fiscal year, the county auditor calculate, for the county and
each city in that county, the difference between the
countywide adjustment amount for that fiscal year and the in
lieu local sales and use tax revenues actually received by the
county and each city in that county.
2)Requires the county auditor to submit a claim to the
Controller if there is not enough property tax otherwise
required to be allocated under the provisions of the "Triple
Flip."
3)Requires the Controller, upon appropriation by the
Legislature, to deposit the amount of the claim into the Sales
and Use Tax Compensation Fund (SUTCF) and requires the county
auditor to allocate the funds to the county and to each city
in that county the amount that was calculated by the county
auditor.
4)Requires, for the 2012-13 fiscal year and each subsequent
fiscal year, the county auditor to identify the shortfall in
the amount of property tax needed to complete the VLF swap.
5)Requires the county auditor to submit a claim to the
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Controller, if there is not enough property tax revenue to
complete the VLF Swap provisions.
6)Requires the Controller, upon appropriation by the
Legislature, to deposit the amount of the claim into the
Vehicle License Fee Property Tax Compensation Fund (VLFPTCF)
and allocate that amount among the cities and county in
accordance with specified provisions.
7)Provides that reimbursement to local agencies and school
districts shall be made if the Commission on State Mandates
determines this bill contains state-mandated costs.
FISCAL EFFECT
This bill contains mandates that may be reimbursable by the
state. If reimbursable, the amount would likely be
approximately $25,000. The preparation of the claims would
present cost pressure and addressing these claims could take a
substantial amount of funds. The Governor's budget contains
$4.4 million to address this issue for one fiscal year for the
Counties of Amador and Mono and the incorporated cities within
the counties. If additional counties experience the same
issues, the costs would rise.
If the Commission on State Mandates finds that these costs are
reimbursable, the may be exempt from reimbursement if the
governing board of an affected county passes a resolution
requesting the legislation. No such resolutions have been
provided to the committee. Any counties that did not pass such
a resolution would still be eligible for reimbursement in this
case.
COMMENTS
1)Purpose. According to the author, the current economic
conditions were not contemplated by the state or local
governments back in 2004. As a result of the deteriorating
economy, all school districts within two counties, Amador and
Mono, have become basic aid school districts. Because state
law explicitly prohibits moving property tax revenues from
basic aid schools for both the VLF Swap and the Triple Flip,
there is no legally available revenue source from which to
backfill cities and counties for the loss of VLF or local
sales tax revenue. The author believes that this bill creates
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a process to address and remedy these unintended consequences
to ensure that cities and counties are treated equitably under
the provisions of the Triple Flip and the VLF Swap.
2)Background . In March of 2004 voters approved Proposition 57,
the California Economic Recovery Bond Act, which allowed the
state to purchase bonds to help reduce the state budget
deficit. To help complete the bond sale, the Legislature
enacted what was known as the "Triple Flip" which was an
exchange of revenues. The revenues generated from the 0.25%
Bradley-Burns local sales tax, that previously went to cities
and counties, was pledged to pay off bond debt related to the
Economic Recovery Bonds. The revenue loss to cities and
counties was replaced by property tax revenues from the
county's Educational Revenue Augmentation Fund (ERAF).
Finally, the last part of the swap occurred when the state's
General Fund was used to backfill the loss to the County ERAF
in order to protect the minimum-funding guarantee of
Proposition 98.
Another flip occurred during the 2004-05 fiscal year with the
swapping of the discretionary vehicle license fee from cities
and counties to the State of California, in return for funds
from each county's ERAF, known as the "VLF Swap." Provisions
in the VLF Swap legislation provided that if the ERAF in any
county is insufficient to satisfy the VLF for property tax
swap, any additional amounts required will be drawn from the
non-basic aid schools share of the property tax, which will
then be replenished by the state General Fund.
3)Basic aid school districts. These are districts that receive
100% of their funding from local property taxes. Because of
the fluctuations in local property tax revenues and
enrollment, school districts can be basic aid one year and
non-basic aid the next. The State Department of Education
certifies which school districts are on basic aid. Provisions
in both the Triple Flip and the VLF Swap hold harmless those
basic aid counties, meaning that there would be no
redistribution from school property tax funds to other local
agencies for their losses.
4)Impacts on local government. According to the sponsors, all
school entities in Mono County will become basic aid in
2009-10, and therefore, no reimbursement for the Triple Flip
or VLF swap will be made because there are no sources from
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which to provide such reimbursement. The sponsors estimate
the loss for the Town of Mammoth Lakes at roughly $1 million.
Amador County is in a similar situation as it has also been
certified as basic aid. Amador County estimates its
cumulative loss at approximately $1.4 million.
5)Budget proposal . Governor Brown's proposed 2012-13 fiscal
year budget released January 5, 2012 includes $4.4 million to
the counties of Amador and Mono and the cities therein for
shortfalls in 2010-11 associated with the Triple Flip and VLF
Swap.
6)Support. The sponsors, the California State Association of
Counties and the Regional Council of Rural Counties argue that
the process contained in this bill will remedy a loophole that
was not only unanticipated, but was also not part of the
agreement that was made back in 2004 in which local
governments swapped funds and were promised to be kept whole
from such swaps.
Analysis Prepared by : Roger Dunstan / APPR. / (916) 319-2081