Realignment / VLF

AB 1098 (Carter) – Request for Veto
As Enrolled on September 5, 2012

AB 1098, by Assembly Member Wilmer Amina Carter, would allocate Vehicle License Fee revenues to cities that either incorporated or annexed inhabited land since August 2005, including those that do so in the future. The author amended this language into the bill on the day before the end of the legislative session and is identical to SB 1566 (Negrete McLeod), which died in the Senate Appropriations Committee in the spring.

Currently, the great majority of Vehicle License Fee revenues fund 1991 Realignment and 2011 Realignment, with a small portion paying for DMV and FTB (Franchise Tax Board) administrative costs. AB 1098 removes the appropriation for those state agencies and specifies that 2011 Realignment gets third call on the funds.

The explicit understanding between the state and counties regarding 2011 Realignment is that counties take on the considerable risk that these funding sources will be sufficient to fund the realigned services, and in return the shift in funding sources will be permanent and uninterrupted. AB 1098 would clearly alter this agreement.

Prior to 2011 Realignment, some VLF revenues went to cities that were newly incorporated or recently annexed inhabited land. Four new cities in Riverside County in particular relied heavily on these funds for their general operations. CSAC worked diligently with the bill’s proponents and authors earlier in the year to limit the bill’s benefit to only cities that formed or expanded expecting this money. Unfortunately, the amendments we proposed were not included in AB 1098, leaving the door open to all future incorporations and annexations, which poses a threat to 2011 Realignment funding.

Under the formulas in the bill, funding to 2011 Realignment would be permanently reduced below expected levels once about 150,000 people are incorporated or annexed or move into the recently formed cities or annexed areas. Between 2005 and 2011, this number was well over 350,000.

In the closing minutes of the legislative session, both houses passed AB 1098. It now awaits the Governor’s consideration.

CSAC has committed to working with the four new cities in Riverside County next year to sponsor a bill restoring their funding while also protecting 2011 Realignment. We have requested that, should the Governor decide to veto the bill, he include in his veto message language acknowledging the fiscal difficulty of those cities and the common desire for a solution to their problem that does not result in an erosion of county revenues. Conversely, should he decide to sign the bill, we have requested he include a signing message urging the Legislature to approve urgency legislation to shield counties from any impact to realignment funding.

State Receipts

State Controller John Chiang recently reported on the state’s receipts through August. The report shows cash receipts to date right at expected levels. Higher-than-expected income tax receipts have made up for relative weakness for other revenue sources.

The report also notes that total state employment in July was up almost 2.4 million from the previous year, to 16.4 million, an increase of 16.8 percent.

Summary document
The raw numbers