BILL ANALYSIS �
SB 1030
Page 1
SENATE THIRD READING
SB 1030 (Budget and Fiscal Review Committee)
As Amended August 23, 2012
Majority vote. Budget Bill Appropriation Takes Effect Immediately
SENATE VOTE :Vote not relevant
SUMMARY : Removes a provision of AB 1484 (Budget Committee),
Chapter 26, Statutes of 2012, the Redevelopment Trailer Bill,
related to "excess Educational Revenue Augmentation Fund (ERAF),"
to ensure that the state continues to fully fund the replacement
of local revenues under the Vehicle License Fee (VLF) swap and the
2004 Triple-Flip in the three excess ERAF counties.
FISCAL EFFECT : Unknown. Information provided by the three excess
ERAF counties suggest that between $1 million to $5 million
annually would remain with the county and not offset school
funding if this provision is removed. However, an initial
analysis by the Legislative Analyst's Office suggested that the
costs could be as much as $17 million per year.
COMMENT : AB 1484 prohibits any increase in "excess ERAF"
allocations of former redevelopment tax increment or assets. This
measure would repeal that provision. The ERAF in each county
receives a share of property tax revenue that was shifted to
schools from cities, counties and special districts in the 1990s
in order to offset state education costs. If the amount of ERAF
in a county exceeds the amount needed to offset state revenue
limit apportionments to schools, then the excess is distributed
back to local governments as "excess ERAF." However, the
calculation of excess ERAF ignores any state aid to schools needed
to offset property taxes shifted back from schools to local
governments due to the "VLF swap" and the "Triple Flip."
For example, if ERAF totals $100 million and school revenue limits
only require $80 million of state apportionments (disregarding,
for example, $25 million for the swap and the flip), then there
would be $20 million of excess ERAF allocated to local
governments. However, the state would still have to backfill the
schools to replace the $25 million of property taxes shifted from
schools to fund the swap and the flip. This policy was intended
to keep local governments in excess ERAF counties whole for the
SB 1030
Page 2
VLF swap and the Triple Flip rather than reducing their excess
ERAF allocations.
Excess ERAF occurs in counties where schools' regular shares of
property tax generate revenues that approach their revenue limits
leaving a relatively small requirement for state apportionments.
Currently, only San Mateo, Marin, and Napa are excess ERAF
counties. By increasing property tax allocations to schools
(including ERAF in some cases), redevelopment dissolution reduces
the need for state aid and would increase excess ERAF in these
three counties by an equivalent amount. The AB 1484 provision
prevents this with the effect that these funds are retained by
schools and reduce the state's cost to backfill the swap and the
flip. From a local government perspective, this is perceived as
using their own excess ERAF funds, rather than state General Fund,
to replace the loss of VLF and local sales tax to those local
governments under the VLF swap and Triple Flip. Repealing the
trailer bill provision ensures that local governments in excess
ERAF counties receive additional excess ERAF as schools receive
more freed-up redevelopment property taxes, rather than offsetting
the state backfill for the VLF swap and Triple Flip. While this
eliminates state savings from Redevelopment Agency (RDA)
dissolution in those counties, the constitutionality of the
restriction is uncertain because generally the constitution
prohibits the Legislature from changing the law in ways that
increase the school's share of property tax in a county.
Analysis Prepared by : Christian Griffith / BUDGET / (916)
319-2099
FN: 0005727