BILL ANALYSIS �
SB 874
Page 1
SENATE THIRD READING
SB 874 (Hancock)
As Amended August 7, 2012
Majority vote
SENATE VOTE :35-0
REVENUE & TAXATION 7-0
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|Ayes:|Perea, Beall, Cedillo, | | |
| |Fletcher, Fuentes, | | |
| |Gordon, Nestande | | |
| | | | |
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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 persons receiving Social Security
Disability Insurance (SSDI), regardless of age, whose yearly
income does not exceed 250% of the 2012 federal poverty
guidelines issued by the United States Department of Health and
Human Services, 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,
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regardless of age.
FISCAL EFFECT : Unknown. This bill is keyed non-fiscal by the
Legislative Counsel.
COMMENTS :
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 SSDI may not be
able to pay the tax because their disability prevents or limits
their ability to work."
"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 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.
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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
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.
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 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
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individuals who are blind, disabled or 65 years of age or older.
The Proposed Exemption . This bill 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. 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 Assembly Revenue and Taxation Committee staff
expects that the new exemption will be applied consistent with
current law.
School Districts vs. Community College Districts . The current
version of this bill 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.
Is the Proposed Exemption Warranted ? As a special tax, a parcel
tax levied by a school district requires approval at an election
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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.
Analysis Prepared by : Oksana Jaffe / REV. & TAX. / (916)
319-2098
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