BILL ANALYSIS �
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: AB 1676 HEARING: 6/27/12
AUTHOR: Alejo FISCAL: Yes
VERSION: 3/15/12 TAX LEVY: No
CONSULTANT: Weinberger
SAN BENITO COUNTY'S PROPERTY TAX REVENUE ALLOCATIONS
Declares erroneous property tax allocations in San Benito
County to be correct.
Background and Existing Law
County auditors allocate property tax revenues to cities,
county governments, special districts, and schools. To
check the accuracy of the county auditors' work with these
complex formulas, the State Controller regularly audits the
counties' property tax allocations. Sometimes the State
Controller discovers that a county auditor has allocated
too much property tax revenue to some local governments
while others haven't received enough. When these errors
come to light, the Legislature used to forgive past
mistakes in return for prospective compliance.
In 2001, the Legislature created a standard approach to
fixing these errors, declaring the State Controller's
audits to be correct. If adjustments are needed, the law
requires repayments but caps them at 1% of the current
year's secured tax revenues, paid in equal increments over
the next three fiscal years. This approach applies only to
errors uncovered on or after July 1, 2001 (AB 169, Wiggins,
2001).
In response to state budget deficits in the early 1990s,
the Legislature reduced State General Fund spending on
education by permanently shifting property tax revenues
from local governments into an Educational Revenue
Augmentation Fund in each county to benefit schools (the
so-called ERAF shifts). The State Controller's 1998, 2005,
and 2009 audits of San Benito County's property tax
allocations found that the county incorrectly apportioned
property tax revenues to the County's ERAF from 1993
through 2001. These errors resulted in ERAF receiving $3.9
AB 1676 -- 3/15/12 -- Page 2
million less revenue than it should have received during
that period. SB 1096 (Senate Committee on Budget and
Fiscal Review, 2004) forgave approximately $514,000 of the
amount San Benito County owed to ERAF.
Public officials in San Benito Count want legislators to
forgive the remaining $3.4 million debt to ERAF.
Proposed Law
Assembly Bill 1676 declares that, notwithstanding any other
provision of law, the property tax apportionment factors
applied in allocating property tax revenues in the County
of San Benito for each fiscal year through the 2000-01
fiscal year, inclusive, are deemed correct.
AB 1676 requires that for the 2001-02 fiscal year and each
fiscal year thereafter, property tax apportionment factors
applied in allocating property tax revenues in the County
of San Benito must be determined on the basis of property
tax apportionment factors for prior fiscal years that have
been fully corrected and adjusted, pursuant to the review
and recommendation of the Controller.
State Revenue Impact
No estimate.
Comments
1. Purpose of the bill . Allocating property tax revenues
is an excruciatingly complex process involving technical
computations and statutory interpretations. San Benito
County officials made mistakes when designing, in good
faith, a methodology to allocate certain property tax
revenues. After 2001, the County corrected its
allocations, but it can't easily reallocate money that
local officials have already spent. Like many local
governments, San Benito County is confronting significant
fiscal challenges. Forcing the county to repay $3.4
million to ERAF will force the County to make cuts to vital
programs, like the county free library and safety net
services for some of the county's most vulnerable
AB 1676 -- 3/15/12 -- Page 3
residents. To avoid these painful budget cuts, the County
wants the Legislature to validate its past allocations.
2. Forgiveness has a price tag . When county auditors
don't shift enough property tax revenue to ERAF, the State
General Fund must increase its apportionment payments to
schools. Between 1993 and 2001, San Benito County's
incorrect apportionment of property tax revenues into ERAF
cost the State General Fund nearly $4 million. The
Legislature has already forgiven more than $500,000 of the
amount the County owes to ERAF. Contrary to the policy
established by the 2001 Wiggins bill, AB 1676 forgives all
of the County's obligations to the State General Fund. The
Committee may wish to consider whether the Legislature
wants to set a precedent by letting the State General Fund
subsidize San Benito County's errors.
3. Special legislation . The California Constitution
prohibits special legislation when a general law can apply
(Article IV, �16). AB 1676 contains findings and
declarations explaining the need for legislation that
applies only to San Benito County.
Assembly Actions
Assembly Local Government Committee: 8-0
Assembly Appropriations Committee:17-0
Assembly Floor: 78-0
Support and Opposition (6/21/12)
Support : County of San Benito; Advocacy, Inc.; California
State Association of Counties; Cities of Hollister and San
Juan Bautista; Regional Council of Rural Counties; San
Benito County Health and Human Services Agency; San Benito
County Administrative Office; San Benito County Assessor's
Office; San Benito County Counsel's Office; San Benito
County District Attorney's Office; San Benito County
Probation Department; San Benito County Treasurer-Tax
Collector's Office; San Benito County Water District; San
Juan Bautista Cemetery District; Seniors Council and Area
Agency on Aging of Santa Cruz and San Benito Counties;
State Association of County Auditors.
AB 1676 -- 3/15/12 -- Page 4
Opposition : Department of Finance.