BILL ANALYSIS �
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UNFINISHED BUSINESS
Bill No: SB 1030
Author: Senate Budget and Fiscal Review Committee
Amended: 8/23/12
Vote: 21
SUBJECT : Budget Trailer Bill: Redevelopment
SOURCE : Author
DIGEST : This bill removes language that was contained in
AB 1484 (Assembly Budget Committee), Chapter 26, Statutes
of 2012, relating to the disposition of certain additional
property tax revenues that would result from the
elimination of redevelopment agencies (RDAs). The removal
of the language would result in specified additional
property taxes going to counties receiving excess
educational revenue augmentation fund (ERAF).
Assembly Amendments delete the Senate version of the bill
which expressed legislative intent and replace it with the
above language.
ANALYSIS : Each county has a fund into which are
deposited property tax revenues that have been shifted from
cities, counties, and special districts for the support of
K-14 education. The fund is known as ERAF and was
established in 1992 to support local school districts and
offset General Fund payments to education required by Prop
98. ERAF is distributed in inverse proportion to the
receipt of property taxes by school districts in order for
each district to be brought up to the revenue limit. No
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basic aid school districts receive ERAF funding. Basic aid
school districts are those that reach or exceed the revenue
limit based only on the receipt of local property taxes
without any state funding.
Following the 2004 enactment of the vehicle license fee
(VLF) "swap" (which shifted property taxes from school
districts to local governments, thus replacing the General
Fund VLF backfill resulting from the VLF reduction) and the
"triple flip" (which shifted property taxes from school
districts to local governments to compensate for local
sales tax reductions related to the issuance of the
Economic Recovery Bonds), ERAF funds have been used to
reimburse local governments for their revenue losses
associated with these revenue shifts. As a result of the
establishment of ERAF and subsequent revenue shifts
discussed above, county auditor-controllers are required to
determine (but not distribute) the amount of ERAF required
for K-14 revenue limit funding. Any amounts in excess of
this required amount are generally distributed to cities,
counties and special districts in proportion to their ERAF
contributions. Amounts remaining after this initial
distribution are used to compensate for local governments'
revenue losses from the VLF swap and the triple flip. In
situations where ERAF is insufficient to compensate for the
revenue shifts, non-basic aid school district property
taxes are shifted to local governments. In this case,
General Fund backfills the revenue losses to schools.
Section 30 of AB 1484 (Assembly Budget Committee), adopted
as a budget trailer bill to the 2012 Budget Act, contains a
provision, Section 34188 (d) of the Health and Safety Code,
that stipulates that any additional excess ERAF
attributable to the dissolution of RDAs should not be
construed in a manner that results in increased allocations
of these moneys to cities, counties, or special districts.
Additional ERAF from RDA dissolution can result both from
additional "freed-up" property tax going to schools as well
as additional property tax amounts going to ERAF. There is
no indication in the language of where this additional
excess is to go; however, in order for any state benefit to
result from this provision, any additional excess ERAF
would be required to go to schools to supplant General Fund
Prop 98 support. This would occur if, for example, ERAF
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resources were insufficient to replace local revenue losses
due to the VLF swap and the triple flip and school district
property taxes were used for this purpose. In this case,
the state Prop 98 obligation would be reduced as a result
of additional excess ERAF going to schools and offsetting
state General Fund support.
This bill removes the language that stipulates that
additional excess ERAF that may result from the dissolution
of RDAs should not be construed to increase allocations of
these moneys to cities, counties, or special districts. As
a result, any additional excess ERAF created under the
dissolution would go to cities, counties and special
districts.
Comments
The Legislative Counsel Bureau has issued a letter
regarding the provision of AB 1484 that relates to the
disposition of additional excess ERAF. The letter states
that Section 25.5 of Article XIII of the California
Constitution limits the authority of the Legislature to
modify the apportionment of ad valorem property taxes to
reduce amounts received by cities, counties and special
districts. It further notes that by modifying revenue
allocation shifts from ERAF, thereby increasing the share
of ad valorem property tax revenues allocated to school
districts, the bill may result in reducing the percentage
going to cities, counties and special districts, and be in
contravention of the California Constitution.
FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes
Local: No
It appears as though three counties-Marin, Napa and San
Mateo-are receiving funds from excess ERAF and would be
affected by the provision in current law. Based on this
information, the fiscal impact of redirecting additional
excess ERAF would likely be in the range of $4 million,
with potential losses of up to $16 million. As RDA debts
are extinguished, and depending upon revenue limits and
other factors, other counties could be affected by the
diversion of a portion of excess ERAF, as directed under
current law. This could result in additional revenue
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losses in future years.
SUPPORT : (Verified 8/28/12)
Counties of Marin, Napa, and San Mateo
DLW:k 8/29/12 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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