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), the redevelopment trailer bill, 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 cities,
counties and special districts receiving excess ERAF
(Educational Revenue Augmentation Fund).
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
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each district to be brought up to the revenue limit. No
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, 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
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if, for example, ERAF 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.
The proposal encompassed in this bill would remove 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 of
this bill, 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 measure 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
The current data indicates that three counties - Marin,
Napa and San Mateo - are receiving funds from excess ERAF
and would be affected by the provision in current law
enacted in AB 1484. Based on information provided by these
counties, the fiscal impact of redirecting additional
excess ERAF from the former property tax increment would
likely be in the range of $4 million. A preliminary
analysis by the Legislative Analyst's Office indicates
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potential impacts of up to $16 million. As RDA debts are
extinguished and depending upon revenue limits and other
factors, additional counties - or potentially fewer
counties - could be affected by the diversion of a portion
of excess ERAF, as directed under current law. These
changes would affect fiscal impacts in future years. In
addition, if the provision applies to assets of former RDAs
as well, there could be unknown, additional fiscal impacts.
SUPPORT : (Verified 8/30/12)
County of Marin
County of Napa
County of San Mateo
DLW:m1 8/30/12 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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