BILL ANALYSIS �
AB 1676
Page 1
Date of Hearing: March 28, 2012
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 1676 (Alejo) - As Amended: March 15, 2012
Policy Committee: Local
GovernmentVote:8-0
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY : This bill addresses errors made in allocating property
tax in San Benito County. Specifically, this bill:
1)States the property tax apportionment factors applied in
allocating property tax revenues in the County of San Benito
for each fiscal year through 2000-01, inclusive, are correct,
including the factors used to allocate funds to the
Educational Revenue Augmentation Fund (ERAF).
2)Specifies for 2001-02 and each fiscal year thereafter,
property tax apportionment factors applied in allocating
property tax revenues in the County of San Benito shall be
determined on the basis of property tax apportionment factors
for that have been fully corrected or adjusted, pursuant to
the review and recommendation of the Controller.
FISCAL EFFECT
1)Based on the audits they perform, the Controller's Office
states the County of San Benito underfunded ERAF by a net of
$3.8 million from July 1, 1991 and June 30, 2001. Absent this
bill, repayment of this amount would be subject to a
negotiated agreement with the Controller. Typically repayment
would occur over three to seven years. The repayment would
benefit the General Fund, which backfilled the underpayments
to ERAF.
2)Other counties are repaying the state for incorrect
misallocations of property tax. The enactment of this bill
could affect the willingness of other counties to repay the
state, increasing the impact of this bill on the General Fund.
AB 1676
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COMMENTS :
1)Background . In 1992-93 and 1993-94, in response to serious
budgetary shortfalls, the Legislature and Governor permanently
redirected over $3 billion of property taxes from cities,
counties and special districts to schools and community
college districts. Under Proposition 98, these redirected
funds reduce the state's funding obligation for K-14 school
districts by a commensurate amount. The property tax shift is
accomplished through contributions that cities, counties and
special districts deposit into ERAF, the proceeds of which
then are transferred to school districts within the county.
2)Rationale . This bill is sponsored by the County of San Benito
to rectify a local taxation problem. Following an audit by
the Controller's Office, it was determined that San Benito
County underfunded ERAF between July 1, 1993 and June 30,
2001. The Controller's Office and the County of San Benito
have had different interpretations of state law and its
applicability to ERAF between the years of 1993 and 2001.
3)Controller's audits . In the 1998 audit of San Benito County,
the Controller's Office determined that ERAF was underfunded
by approximately $500,000. The county did not reimburse ERAF
for this amount nor change their allocation methodology, which
led to the underpayment growing, as noted in subsequent audits
published in 2005 and 2009. Beginning July 2001, San Benito
County began using the correct formulas and there is no
dispute about the allocations from FY 2001-02 onward.
4)Second forgiveness for San Benito County. SB 1030 (Mello),
Chapter 846 Statutes of 1995, deemed correct mistakes made by
the County of San Benito in the allocation of property tax.
The legislation was sought to protect the county from
litigation after the county settled a case with the City of
Hollister. The bill also stated:
"It is the intent of the Legislature not to validate
in the future any other mistakes made in San Benito
County in the allocation of property tax revenue,
unless the mistake is the result of written advice
from the Department of Finance with respect to the
particular allocation."
5)Previous legislation.
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a) AB 1339 (V. Manuel Perez), of 2010) allowed an incorrect
calculation to stand when the county auditor did not
include the Imperial County Free Library in the ERAF shift
and forgave the over $950,000 that was owed. AB 1339 died
in the Senate Appropriations Committee.
b) SB 1096 (Senate Budget and Fiscal Review Committee),
Chapter 211, Statutes of 2004, forgave county property tax
allocation errors and deemed correct any misapplication of
apportionment factors for any State Controller's audit
conducted between July 1, 1993 and June 30, 2001. The
effect of this provision reduced the underpayment owed by
San Benito County by approximately $500,000.
c) AB 1615 (Longville), Chapter 604, Statutes of 2000,
deemed Riverside County's property tax calculation in
previous years as correct. In the course of the audits,
the Controller discovered that Riverside County owed the
state $2.4 million, which the county paid back prior to
enactment of the legislation.
d) AB 236 (Honda), Chapter 567, Statutes of 1999, deemed
correct past property tax allocations to fire districts in
Santa Clara and Santa Barbara Counties and relieved the
counties of the obligation to pay the state the funds.
e) AB 1945 (Honda), of 1998, deemed correct past property
tax allocations to fire districts in Santa Clara and Santa
Barbara Counties and relieved the districts' of the
obligation to pay the state the funds. Vetoed by Governor
Wilson.
f) AB 1712 (Cuneen), of 1998, deemed as correct San Joaquin
County property tax allocations for the 1992-93 fiscal year
to the San Joaquin County Free Library and for specified
fire districts in Santa Clara County and relieved both
counties of their obligation to repay the state. Vetoed by
Governor Wilson.
g) SB 1895 (O'Connell), of 1998 deemed correct past
property tax allocations to fire districts in Santa Barbara
County and relieved the districts' of the obligation to pay
the state the funds. Vetoed by Governor Wilson.
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h) AB 1082 (Leslie), Chapter 179, Statutes of 1995, deemed
Plumas County's property tax calculation in previous years
as correct. These errors favored the state by $140,000 but
the county sought this legislation protect the affected
local governments from possible litigation.
Analysis Prepared by : Roger Dunstan / APPR. / (916) 319-2081