Budget Subcommittee to Consider Insufficient ERAF

Next Tuesday, March 19, Assembly Budget Subcommittee No. 4 will consider the Governor’s proposal to reimburse counties and cities that would otherwise lose money under the state’s “Triple Flip” and “VLF Swap” revenue shifts.

In one of those schemes, the state shifted local sales and use taxes to secure a better interest rate for a bond. In the other, the state significantly cut the VLF rate, the revenues of which went only to counties and cities. In both, affected local agencies got their reimbursement from the countywide ERAF. The school districts that lose money due to this shift are completely reimbursed by the state under Proposition 98, which guarantees school districts minimum funding levels.

Recently, more school districts have begun to reach their guaranteed funding level entirely with property taxes, no state contribution required. Current statute disallows using property tax revenues allocated to these districts to reimburse the Triple Flip and VLF Swap, meaning that counties that experiencing this situation have an insufficient source for reimbursement.

The budget proposal would provide the funding the affected local agencies are entitled to. The same issue was proposed and approved in the current year budget. CSAC supports the budget allocation for counties experiencing insufficient ERAF to fully fund their Triple Flip and VLF Swap amounts.

LAO: Fund Election Mandates

The Legislative Analyst’s Office recommended this week that the Legislature reject the Governor’s proposal to continue suspending election mandates. The mandates require counties to provide services like voting by mail and checking provisional ballot envelopes to make sure the signatures match those of the voters.

Mandates become optional when the Legislature suspends them, and the LAO argues, appropriately, that this threatens the uniformity of elections. Their report gives the example of a senate district that crosses county lines, and points out that if these counties chose differently when deciding whether to continue performing an optional mandate, voters in different parts of that single district would be voting under different rules.

The LAO suggests that lawmakers either fund the mandates, if they represent state priorities, or else repeal them, preserving uniformity.

Property Taxes

SB 636 (Hill) – Support
As introduced February 22, 2013

CSAC supports SB 636, by Senator Jerry Hill, a bill that would modify a provision included in last year’s redevelopment budget trailer bill (AB 1484) relating to the allocation of property tax revenues from the Redevelopment Property Tax Trust Fund (RPTTF).

Among many other complex issues surrounding the dissolution of redevelopment agencies is the redistribution of property taxes. As successor agencies pay off their obligations, billions of property tax dollars will return to counties, cities, special districts, and of course school districts. No one disputes that these property taxes should be returned exactly as they would have been absent a redevelopment agency’s diversion of the tax increment.

Unfortunately, one provision of the laws passed during the final approval of the 2012-13 state budget inadvertently reduced property tax allocations to local agencies in counties where ERAF payments exceed the amount needed to fulfill school districts’ minimum funding requirements. This situation is known as “excess ERAF,” and when it occurs, the ERAF payments are returned to taxing entities in the proportion they were paid.

Removing this language will restore property tax allocations to their rightful levels, ensuring fairness and equity for the few counties affected and avoiding the legal and constitutional challenges raised by this issue.

SB 636 is scheduled to be heard by the Senate Governance and Finance Committee on April 3.