BILL ANALYSIS �
SB 874
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Date of Hearing: July 2, 2012
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Henry T. Perea, Chair
SB 874 (Hancock) - As Amended: January 4, 2012
Majority vote.
SENATE VOTE : 35-0
SUBJECT : School and community college districts: parcel taxes:
exemptions.
SUMMARY : Authorizes school districts to exempt disabled persons
from special taxes. Specifically, this bill expands an existing
exemption from "qualified special taxes" that may be imposed by
school districts to include any persons receiving Social
Security Disability Insurance (SSDI) regardless of age, as
provided.
EXISTING LAW :
1)Prohibits school districts from imposing general taxes, but
allows school districts, community college districts, and
county offices of education to issue bonded indebtedness for
school facilities with 55% approval. (Proposition 39, 2000).
2)Authorizes school districts to impose qualified special taxes,
in accordance with specified procedures, including the
approval of two-thirds of the voters in the district.
3)Provides that "qualified special taxes" must apply uniformly
to all taxpayers or all real property within the school
district and do not include special taxes imposed on a
particular class of property or taxpayers.
4)Authorizes a school district to exempt from a "qualified
special tax" a person 65 years of age or older or persons
receiving Supplemental Security Income for a disability,
regardless of age.
FISCAL EFFECT : Unknown, but Committee staff estimates a
possible revenue gain to local school districts.
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COMMENTS :
1)Author's Statement . The author states that, "SB 874 gives
school districts options when crafting local taxes measures by
allowing them to exempt certain property owners from a parcel
tax. Individuals who are disabled and receiving SSFI may not
be able to pay the tax because their disability prevents or
limits their ability to work."
2)Arguments in Support . The proponents state that SB 874 would
"help correct an inequity in the current law" by expanding the
current exemption to include persons receiving SSDI. The
proponents argue that SSDI recipients are "among California's
neediest citizens," who live on "fixed incomes and are already
impacted by benefit reductions due to state budget cuts." The
proponents believe that exempting SSDI recipients "increases
the likelihood that parcel taxes will be approved, thereby
providing flexible ways of raising revenues upon affirmation
by local voters."
3)Arguments in Opposition . The opponents argue that SB 874 "is
deceptive" and, while "superficially beneficial to seniors and
the disabled, in application, it is a bait and switch scheme."
The opponents claim that because seniors and the disabled
"would have to opt-out annually - something that most will
forget to do - the real objective of this measure is to create
the appearance of an exception as a means for additional votes
in favor of tax increases."
4)"Qualified Special Taxes": Background. In 1978, Proposition
13 limited both the tax rates and assessments, thus
significantly reducing property tax revenues. It also
eliminated the ability of school districts to levy an
incremental ad valorem tax on real property. However, school
districts still have limited authority to generate local
revenues from qualified special taxes, as long as the special
tax applies uniformly to all taxpayers (other than persons
over the age of 65 or persons receiving Supplemental Security
Income (SSI)) or real property within the district. While
Proposition 13 did not define the term "special tax", the
courts, over time, have opined that a tax is a "special tax"
whenever expenditure of its revenues is limited to specific
purposes, i.e. the proceeds of the tax are earmarked or
dedicated in some manner to a specific project or projects.
In contrast, a tax is a "general tax" only when its revenues
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are placed into the General Fund and are available for
expenditure for any and all governmental purposes. �Bay Area
Cellular Telephone Co. v. City of Union City (2008) 162 Cal.
App.4th 686; Howard Jarvis Taxpayers Assn. v. City of
Roseville (2003) 106 Cal.App.4th 1178]. School districts and
special districts are prohibited from imposing general taxes
(Proposition 218) and thus, by definition, any tax levied by a
school district or community school district is considered to
be a special tax subject to a two-thirds voter approval.
Furthermore, school districts are not allowed to impose a
special tax that is imposed on a particular class of property
or taxpayers. Therefore, thus far, school districts have only
imposed "qualified special taxes", under Government Code
Section 50079, in the form of a parcel tax.
5)Parcel Taxes. A parcel tax is a flat fee imposed by a city,
county, or special district on each parcel, residential as
well as commercial, rather than on the assessed value of
property located within the local entity's jurisdiction.
Because the same dollar amount of tax is assessed on each
parcel of property, whether the parcel is one acre or 100
acres, parcel taxes are generally regressive, which means
owners of smaller parcels of land pay a larger percentage of
tax as compared to owners of larger parcels of land. Some
districts levy a rate at a fixed amount per square foot of
taxable land, and many include an annual inflation adjustment.
Parcel taxes are flexible ways of raising revenues at the
local level, but are subject to certain requirements. Parcel
tax elections must be held on "established election dates",
which means in March, April, or November of an even-numbered
year, or March, June, or November in an odd-numbered year.
Existing law does not prescribe a maximum rate of tax nor does
it limit the period within which the qualified special tax may
be imposed. Therefore, the rate of tax varies significantly
among different school districts. Existing law does not limit
how the special tax proceeds may be spent, and therefore, a
local school board can specify in the ballot measure how the
funds will be used. Generally, local parcel taxes provide
secure funding for teacher salaries, books, materials and
supplies, computers, and art, music and sports programs.
According to EdSource, between 1983 through November 2010,
voters approved 289 parcel taxes in 542 elections, with 92% of
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proposals receiving at least a majority vote from the
electorate during that time. Districts have increasingly
turned to parcel taxes in recent years as a result of fiscal
stress: In 2010, 38 districts placed parcel taxes on the
ballot, compared to 31 in 2009, and 13 in 2006. The median
district levying a parcel tax had about 3,180 students of whom
15% qualified for free/reduced-price meals and 9% were English
learners.
Interestingly, school districts in some areas of the state
seek to levy parcel taxes more so than other areas. According
to EdSource, only seven districts in Southern California
imposed the tax, but 66 did in the San Francisco Bay Area.
Districts imposing the tax generally serve fewer low-income
students than the typical California school district, and are
disproportionately smaller, with 66 (80%) of them serving
fewer than 10,000 students.
In 2006, the California voters rejected Proposition 88 that
would have amended the California Constitution to levy an
annual $50 real property tax on most parcels with the funds
allocated to specified K-12 education programs.
6)The Current Exemption: Who Qualifies? School districts are
currently authorized to exempt persons over the age of 65 from
qualified special taxes, as well as persons receiving
Supplemental Security Income (SSI) for a disability,
regardless of age. The SSI program is a federal income
program administered by the Social Security Administration
(SSA). The program is funded by general federal revenues and
provides monthly cash benefits to low-income individuals who
are blind, disabled or 65 years of age or older.
7)The Proposed Exemption . SB 874 authorizes school districts to
exempt persons receiving SSDI when the district levies a
qualified special tax. The SSDI program is administered by
the SSA and is financed with federal payroll taxes. It
provides benefits to disabled persons whose disability serves
as a barrier to employment. To be eligible for SSDI, the
individual must be unable to perform substantial work activity
because of a severe physical or mental impairment, which has
lasted or is expected to last at least 12 consecutive months,
or to result in death. In addition, the individual must earn
sufficient credits based on taxable work to be "insured" for
Social Security purposes. SSDI recipients are eligible for
Medicare after receiving disability benefits for two years.
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However, unlike the SSI program, the SSDI eligibility is not
restricted by an individual's income or assets.
The exemption proposed by this bill is permissive rather than
mandatory, which allows the school district to consider the
need for, and impact of, an exemption from special taxes
imposed. By its terms, this bill does not limit the exemption
to homeowners (taxpayers) that qualify or specify that the
person qualifying for the exemption must also live in the
property rather than own it as an investment. It is unclear
whether the exemption is available if the property is owned by
more than one person and only one person qualifies for the
exemption. However, the exemption granted under this bill
merely expands a current exemption, so committee staff expects
that the new exemption will be applied consistent with current
law.
8)School Districts vs. Community College Districts . The current
version of SB 874 would only apply to school districts, while
one of the previous versions of this bill would have also
authorized community college districts to exempt person over
the age of 65 as well as SSI and SSDI recipients from a
qualified special tax. Under existing law, community college
districts are not allowed to exempt any person from qualified
special taxes.
9)Is the Proposed Exemption Warranted ? As a special tax, a
parcel tax levied by a school district requires approval at an
election of at least two-thirds of the qualified electors of
such district. Courts have interpreted the phrase "qualified
electors of such district" to mean the registered voters
voting in the election concerning the proposed tax. �Neilson
v. City of California City (2005) 133 Cal. App.4th 1296,
1312]. Generally, nonresident landowners are not registered
voters and are not included among the voters voting on the
proposed parcel tax. On the other hand, some registered
voters who do not own land within the district's boundaries
are able to vote on the parcel tax even though they will not
be paying that tax (at least not directly). In addition,
districts may exempt taxpayers over the age of 65 and SSI
recipients, thereby creating another class of voters who do
not bear the incidence of the tax. By exempting an additional
class of taxpayers - SSDI recipients, school districts may be
forced to impose a higher parcel tax for non-exempt taxpayers
because of the diminished base, all else being equal. The
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Committee may wish to consider whether authorizing school
districts to exempt more taxpayers from new parcel taxes is
equitable when many voters already do not bear the cost of tax
and some of those who bear the cost are not eligible to vote.
10)Related Legislation .
AB 385 (Lieber), Chapter 41, Statutes of 2006, allowed school
districts the authority to exempt SSI recipients from
qualified special taxes.
REGISTERED SUPPORT / OPPOSITION :
Support
Community College League of California
Disability Rights California
Opposition
Howard Jarvis Taxpayers Association
Analysis Prepared by : Oksana Jaffe / REV. & TAX. / (916)
319-2098