HomeMy WebLinkAboutMINUTES - 09142004 - SD6 ...................................................... ...... .............. .............................................
CONTRA
TO: BOARD OF SUPERVISORS
COSTA
FROM: Gayle B. Ui1kema,Supervisor District H COUNTY
DATE: September 14, 2004
SUBJECT: Support Proposition 1A, Protect Local Taxpayers and Public Safety
SPECIFIC REQUEST(S)OR RECOMMENDATION(S)& BACKGROUND AND JUSTIFICATION
RECOMMENDATIONJU
1. ADOPT the attached resolution supporting Proposition I A, Protect Local Taxpayers and Public Safety, a
constitutional amendment that limits the State's ability to reduce local government revenues or impose
unfunded service mandates, as recommended by CSAC,
2. WITHDRAW the County's support of Proposition 65, also a measure to protect local government funds,
originally sponsored by a coalition of local governments, prior to the introduction Proposition IA.
BACKGROUND/REASON(S)FOR RECOMMENDATION(S):
In recent years, it has become increasingly difficult for Contra Costa County to provide essential services for its
citizens and businesses due to the loss of local revenues and the continuing imposition of unfunded State
mandates. Since 1992-93, Contra Costa County has lost over $1.1 billion of local property taxes. For FY 2003-
04, the County's loss was over $123 million. In addition, reduction of the vehicle license fee (VLF) rate from
2% to .65% cost the County $9.3 million, while the VLF backfill "loan" to the State reduced FY 03-04 revenues
by another$18 million.
Over the past 12 years, local governments have lost more than $40 billion in local revenues. These ongoing shifts
and raids of local property tax funds and other dedicated local government funding have seriously reduced
resources available for local fire and paramedic response, law enforcement, public health and emergency medical
care, roads, parks, libraries, transportation and other essential local services. The drain of local resources
continued even during the late 1990s when the state's budget was overflowing with surpluses.
CONTINUED ON ATTACHMENT: YES
REcommENoATtomoFCOUNTY ADmiNisTRAToR REcomm"6ATioNoFio
ARocommaTEE
—APPROVE —OTHER
SIGNATURE(S)*
01
ACTION OF BOARD ON APPROVED ASRECOMMENDED:X'OTIiERX
--I/-
APPROVED the recommendations; and DIRECTED that today's action be communicated to the
County Supervisors Association of California.
VOTE OF SUPERVI[SORS
I HEREBY CERTIFY THAT THIS IS A
UNANIMOUS(ASSENT TRUE AND CORRECT COPY OF AN
AYES: NOES: ACTION TAKEN AND ENTERED
ABSENT- ABSTAIN: ON MINUTES OF THE BOARD OF
SUPERVISORS ON THE DATE SHOWN.
Contact:Sara Hofkuv,4 336-1090
ATTESTED
cc: CAG X Etlhl,CLERK OF
CSAC THE BOARD OF SUPERVISORS
UCC AND COU Y ADMINISTRATOR
State Lobbyist
7
6;7
.............................
BACKCROUND/REASONfS3 FOR RECOMMENDATIONS fcont'dj
Increasingly frustrated by the State's indifference to the plight of local government, cities, counties and special
districts began discussing ways to protect their local resources. These discussions resulted in the introduction of
Proposition 65 that qualified for the November 2004 ballot. Contra Costa County joined with other cities,
counties and special districts throughout California in supporting this measure.
The introduction of Proposition 65 in conjunction with the State's need to rely on local revenues to balance its
budget for FY 04-05 then led to discussions on hove to stabilize local government financing at the same time
handle the State's current fiscal crisis. in addition, local government organizations began discussions with the
Governor and the Legislature about the state-local fiscal relationship in order to respond to the Governor's
budget proposal to shift an additional $1.3 billion to ERAF. The final local government agreement contained
both elements: 'a one-time reduction of$2.6 billion of local property tax revenues over two years and long term
protection of funding for local services through a constitutional amendment to be put before the voters in
November.
The statewide ballot measure, Proposition IA:
■ Constitutionally protects city,county and special district property taxes in the aggregate by
county (including growth). Requires 2/3 vote of Legislature to reallocate property taxes from one
local government to another within each county. Retains existing funding shift from local
governments to school districts (ERAF), but does not allow Legislature to permanently increase
amount of these shifts in future. Legislature may increase a local governments' share of property
tax.
■ Constitutionally protects each city's and county's existing Bradley-Burns 1% sales tax rate
and method of distribution (including growth), plus local sales tax add-ons (e.g., transportation,
library, local option general, etc.). Guarantees return of 1/4 cent sales tax to cities and counties
when the Prop 57 bonds are retired.
■ Protects VLF Revenue. Statutorily reduces VLF rate from 2%to 0.65% (current effective rate).
City and county VLF "backfill" would be replaced with a like amount of property taxes that are
constitutionally protected (less the two-year "contribution" by cities and counties of$350 million
each year). Remaining 0.65% city and county VLF revenue also constitutionally protected.
Statutorily requires repayment in 2006-07 of 2003-04 VLF Backfill Gap Loan ($1.23 billion
statewide).
Provides for Payment for State Mandates and Automatic Suspension of Unfunded
Mandates. Constitutionally requires annual reimbursement of local governments for state-
mandated local programs or provides for mandate suspension, except for those affecting specified
employee rights and benefits, beginning July 1, 2005.
Prop 1A also contains flexibility for the State to deal with future budget crises. Beginning in 2008-09, if the
Governor proclaims a "significant state fiscal hardship", the Legislature may suspend the constitutional
protections and may borrow local property taxes under following conditions:
A separate urgency bill must be passed by a 2/3 vote of Legislature;
The Legislature must pass statute to fully repay loan with interest within 3 fiscal years at the same time
the urgency bill is passed;
The state VLF Gap Loan must have already been repaid;
No more than two loans may occur during any ten-year period;
The loan amount is capped at Sala of local government property tax amount (equivalent of$1.3 billion in
today's property tax dollars);
New loans are prohibited until prior loans have been repaid.
Prop l A is supported by a bipartisan, diverse coalition including Governor Schwarzenegger, Democrat and
Republican legislative leaders, local government officials, public safety representatives, healthcare, business, labor
and communityleaders.
By the time Proposition 1 A was finalized, it was too late to delete Prop 65 from the November ballot. The
measure with the greatest number of votes (above a majority) will prevail. Consequently, CSAC, the League of
California Cities and Special Districts Association recommend a"no"vote on Proposition 65.
THE BOARD OF SUPERVISORS OF CONTRA COSTA COUNTY, CALIFORNIA
PASSED by the following vote of the Board of Supervisors on this 14th day of September 2004
AYES: SUPERVISORS GIOIA, UILKMIA, GREENBERG, DESAMENIER AND GLOVER
NOES: NONE
ABSENT: NONE
ABSTAIN: NONE
RESOLUTION NO. 20041454
Subject: Support of Proposition 1A, Protection of Local Government Revenues
WHEREAS, state government currently seizes more than $5.2 billion annually in local
property tax funds statewide from cities, counties and special districts, costing local governments
more than$40 billion in lost revenues over the past 12 years; and
WHEREAS,these ongoing shifts and raids by the state of local property tax funds and other
fimding'dedicated to local governments have seriously reduced resources available for local fire and
paramedic response, law enforcement, public health and emergency medical care, roads, parks,
libraries,transportation and other essential local services; and
WHEREAS,this drain of local resources has continued even during periods when the state's
budget overflowed with surpluses; and
WHEREAS, Proposition IA is a historic measure that will appear on the November 2044
statewide ballot that would limit the State's ability to take and use local government funding;and
WHEREAS, by protecting local government funding, Prop IA would protect local public
safety, healthcare and other essential local services; and
WHEREAS, Prop IA will not raise taxes or reduce funding for schools or any other state
program or service; and
WHEREAS,Prop IA was carefully written to allow flexibility in the event of a state budget
emergency; and
WHEREAS, Prop IA is supported by a bipartisan, diverse coalition including Governor
Schwarzenegger, Democrat and Republican legislative leaders, local government officials, public
safety representatives, healthcare, business, labor and community leaders.
NOW, THEREFORE, BE IT RESOLVED THAT the Contra Costa County Board of
Supervisors hereby expresses strong support for Preposition IA, the statewide ballot initiative that
will protect local government revenues and services; and
RESOLVED FURTHER,that the Clerk of the Board is directed to send a copy of this resolution
to Contra. Costa County's legislative delegation, the Honorable Governor Schwarzenegger, the cities in
Contra Costa County and Yes on I A-Californians to Protect Local Taxpayers and Public Safety.
I hereby cettify that is is a true and correct
COPY of ars OC ;on .w,f .,,rid entered on the
minutes of the )ar u of Supervisors on the
date shown. ,
ATTESTED-
JOHN
TTESTED JOHN SW TEP, Clerk of the Board
of Supervisors and County Administrator
BYeputy
RESOLUTION NO. 200414
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Proposition ,
This amendment proposed by Senate Constitutional Amendment 4 of (ii) Subparagraph(A)shall not be suspended during any fiscal year if”
the 2003--2004 Regular Session (Resolution Chapter 133, Statutes of the full repavntent required by a statue enacted in accordance with clause
2004)expressly amends the California Constitution by amending sections (iii)of subparagraph(B)has not vet been completed.
thereof and adding a section thereto; therefore, existing provisions pro- (iii) Subliaragraph(A)shall not besuspencied ditrirtg anvfiseal year if
posed to be deleted are printed in�t+4- and new provisions pro- thectrnount that was required to be paid to cities,counties,and cities aced
posed to be added are printed in italic type to indicate that they are new, counties tinder Section 10754.11 of the Revenue and laxation Code, as
PROPOSED AMENDMENTS TO ARTICLES XI,XIII,AND X111 B that section read on November 3, _1004,has not beers paid in fill prism to
First That Section IS of Aa isle XI thereof is amended to read: the effective date of the statute providing firr that suspension as described
SEL:, 15. (a) Org 1�e•om the revenues derived from taxes imposed in clause(it)of cu paragraph(B).
pursuant to the Vehicle License Fee haw(Part 5(coinmencing with Section (ii) ,4 suspension afsubparagraph(4)shall not result in a total ad 1,41-
10701)ol'Division 2 ol'the Revenue and:Taxation Code),or its successor, lorem property tax revenue loss to all local agencies within a county that
other than fees on trailer coaches and mobilehomes, over and above the eviceedis 8 percent of the total amount of ad valorem property tax revenues
costs of collection and any refunds authorized by law, those revenues that ivere allocated among all local agencies within that cornty for the ft's-
derived front that portion of the vehicle license fc:e rate that does not cal vear immediately preceding thefiscal year far which subparagraph(4)
exceed 0.65 peivent gfthe market value o_fthe vehicle shall be allocated to is suspended.
(2) (4) Except as otherwise provided in s•rtbparagrarphs(B)and(C),
restrict the authority of'a city;county,or eio,and county to impose it tax
as mete under,or change the method tf distributing revenues derived under;
follows: the Bradle,v-Burns Uniform Local Sales and Use Ta.i Law setforlh in Part
1.5 (coinniencing with.Section 7200) of'Division 2 of the Revenue and
(1) amount sluff he spcc(fiedl in size GF�hicle License Pee Law or the Taxation Coote, as that law read on November 3, 21)04. The restriction
uccessor ar ra that law;fisc deposit in the.State Tiea•suty to the credit gfthe imposed by this subparagraph also applies•to the entitlement of a city,
Local Revenue P'tsnd established in Chapter 6(commencing with Section count or cit and county to the change in tax rate resultin r•arrt the end
17600)of Part 5 gf Division 9 o f the We�eure and hatitutions Code,or its y ) 1'f
af'the revenue exchange period, as defined in Section 7203.1 of the
cue Ther t tl airy, id allocation i<+cities,counties,and citiesand counties Revenue and Tvcution Coale as that section read on November 3,2004.
as atlrerst iseTrrovided by law.
uting
(2) The balance .shall be allocates!to cities, counues, and cities and the are enues der vedtunder a use tax�vinposedstatutetpuuauant to theethodstribBrudl€}
counties as other ,se provided 17V law. Burns Uniform local Sales and Use Tax Law it)allow the State to par-
(b) 1f'o statute enacted by the Legislature reduces the annual vehicle ticipate in on interstate compact or to contply with fedeivi law.
license fie he/ow 0.65 percent of the market value of a vehicle, the (C) The Legislature ntr{v autTrr>rize fly statute trove or more slrecifrcallj�
Lcgislattuc shall,_fi)r each fiscal year far-which that reduced fi>e applies, identified local agencies within a county,with the approval of the govern-
pirivide bi,statute far the allocation q(an additional amount gf'ntoney sisal ing body of each of those agencies, to enter into a contract to exchange
s cristal to the decrease, re sarlting.fwrn tete fee cadre tion, in (he total allocations of ad valorem property tax revenues fir revenues derived from
amount of rc venues that are otherwise required to be deposited and alto- a tax rate imposed tinder the Bradlev-Burns Uniform Local Sales and Use
cated undo r cubdivrston(a)for that.sante fiscal year T hat amount.shall be lit.a•L,aw. 7'he exchange under this sad>paragraph of'revenues derived front
allocated to c i,ics, urinties, and cities and counties in the,same pro rata a tau rate imposed under that law shall not require voter approval fiir else
amounts and./or the same purposes as are revenues sing ect to suh- continued imposition of anv portion of an existing tax rate from which
division(a). those revenues are derived.
Second -That Section 25.5 is added to Article Xlil thereof;to read: (3) Except as otherwise provided in subparagraph (C.) of para-
SEC. 25 5, (a) On or after November 3,2004,the Legislature shall graph (2), change for any fiscal year the pro rata shares in which ad
not enact a statute to it)any of the following: valorem property tax revenues are allocated among local agencies in a
(1) (A) Except as otherwise provided in subparagraph(B),modify the county other than pursuant to a bill passed in each house -?/'the
manner in which ad valorem property tax revenues are allocated in actor- Legislature 17y rollcall vote entered in the journal. two-thirds of rhe
dance withsubdivision(a)of�See.•tion I(OrticleX111 A so as to reduce for nteinhership concurring.
ata fiscal year the pe rcent,ge of the total amount of art valorem property (9) h'xiend beyond the revenue exchange period,as defined in Section
tax revenues tit a counlY that is allocated among alt of'rhe local agencies 7203.1 of the Revenue and T tration Code as that section rend on
in that county below the percentage ol'the total amount of those revenues November 3,2004,the suspension of the authority, set,forth in that section
that would be allocated among those agencies for the same fiscal vear on that date,of a city.county,or city and county to impose a sides and use
tinder the:staintes tit eftect on November 3,2004.Icor purposes if this sub- tax rade under the Bradley-Burns Uniform Local Sales and Use Tote Latin:
paragraph, 'percentage-does not include any property,tax revenues ref- (S) IZed ice,during arlp period in avTrieh the rate aarthority'suspension
erertced in paragraph(_'). described in paragraph(4)is operative,the pervotents to it cit);count),or
(B) Beginning with the 2ofm-o9 fiscal vear and except as otherwise city and county that are required by.Section 97.68 of the Revenue and
Provided lit mhparagraph(C"),subparagraph(4)may he suslendedfar a 'Taxation Cade,its that section read on November 3,2004.
fiscal vear if all of d c fiillowing conditions are met: (6) Restrict the atahority ofa local entity to intpose a treutsactions and
ri) The Governor issues a)rizi<larnatr.'an that declares that, dire to a use tete rate in accordance with the transactions and Use True Law(Part
severe state fscid hardship, the suspension of suhparagraloh(4)is neces- 1,6 (commencing with Section 7251) of Division 2 of the Revenue and
.aria Taxation Cade), or clarrge the method for distributing rr venues derived
(ii) The Legislature enacts an urgenev statute, putstiarn to a 1>Il under a transaction and use tax rate imposed under that lass;as it read ort
passed in each house of the Legislature by mileall vole entered in the jour- November 3,2004.
nal, two-thirds(ifthe membership concurring, that contains a suspension (h) For purposes of this section,the fallowingg definitions apps v:
of subpawgraph (4)fhr that fiscal year and does reit contain any other
provision, (1) Ad valorens property tax revenues"means all revenues derived
from the tax collected by a county under subdivision (a)al Section 1 of
(iii) No later than the e#fictive date of the statute described in clauw <Irticie X111 A, regardless+of ani,of tus revenue being otherwise classified
(it),a statute is enacied that provides,/or Ilse fad repayment to local argen- by statute,
cies of the total amount of revenue losses, including interest as provided (2) "Local ao�,enc'l,-has the same meaning as specified in Section 95
by lax,resulting,from the modification elf ad valorent property tae revenue f the Reverrtre and Taxation Code as that section read on November 3,
allocations to local agencies.This full repayment shall be made not later 2004
than the end of the third fiscal year immediately fibIlowing the fiscal vear•
ni
to which the odtfication applies. Third That Section 6 of Article X111 B thereof is amended to read:
(C) (i) Subliaragraph (4)shall not be.suspended for more than two SI:C. 6. (a) Whenever the Legislature or any state agency mandates
fiscal nears during any period of 10 consecutive•fiscal years, which a new program or higher level of service on any local government, the
period begins with the firsifiscal yearfin-which subparagi-aph(4)is sus- State shall provide a subvention oftunds to reimburse; that local gov-
pended. ernment ti'sr the casts of*t#r the program or increased level of service,
16 1 Text of Proposed Laws
TEXT OF PROPOSED 1AWS
Proposition 1 A (cont.)
except that the Legislature may,hilt need not,provide ohe4 a subvention (4) This subdivision applies to a mandate only its it q/kits a cit),
of funds for the following mandates: county;city and c unry or special district.
(S) This subdivision shall not apply to a requirement to provide or rec-
(1) Legislative mandates requested by the local agency affected#• ogniae any procedural or substantive prrrtection,right,benefit,or employ-
Ment status of any local government employee or retiree;or afany local
government employee organizatii,n, that arises filum, affects, or directly
(2) Legislation defining a new crime or changing an existing,definition relates to future,current or past local government e enploymcent and that
of•a crime;-err. constitutes a mandate subject to this section.
(c) A mandated new program or higher level cf service includes a
(3) Legislative mandates enacted prior to January 1, 1975.or execu- transf€,r by the Legislanire frorri the State to cities, counties, vities and
tive orders or regulations initially implementing legislation enacted prior counties,or special districts of complete or partial.,
artial.financial re sponsi�bili-
0'f,r a required p)vgrctm for which the State previrucsty had complete or
to January 1, 1975. partial financial responsibility.
('b) (1) Except as provided in paragraph (2),.1br the 2905-fila fiscal FourthThatthe people find and declare that this measure and the
year and every subsequent fiscal year for a mandate for which the costs Taxpayers and Public Safety Protection Act,which appears as Proposition
gf a local government claimant have been determined in a preceding fis- 65 on the November 2,2004,general election ballot(hereafter Proposition
cal year to be payable by the State pursuant to last;the Legislature shall 65)both relate to local government,including matters concerning tax rev-
either appropriate,in the annual Budget Act,the full payable amount that enues and reimbursement for the cost of state mandates,in a comprehen-
has not been previously pale or suspend the:operation of the mandate fi,r sive and substantively conflicting manner.Because this measure is intend-
the fiscal year fi,r which the annual Budget Act is applicable in It manner ed to be a comprehensive and competing alternative to Proposition 65,it
prescribed by lane is the intent of the people that this measure supersede in its entirety
(2) Pgvable claims far costs incurred pr ior°to the 2004-05 fiscal;year Proposition 65,if this ince are and Proposition 65 both are approved and
that have Writ been paidprior to fife 2f)O,S.-dl6,jiscaC year m€zy be paid over this measure receives a higher number of affirmative votes than
a tern gfyears,as prescribed liv law. Proposition 65.Therefore,in the event that this measure and Proposition
(3) Ad vakrrem property tav revenues shall not be Wed to reinthrzucse a 65 both are approved and this measure receives a higher number of
local government Jbr the costs qt'a new pivgra?n or higherlevel cjservice. affirmative votes,none of the provisions of Proposition 65 shall take effect.
Proposition 65
This initiative measure:is submitted to the people in accordance with new or expanded programs, then the state shall reimburse local govern-
the provisions of Section ll of Article It of the California Constitution, ments for the cost of those programs.
This initiative measure amends an article of,and adds an article to, the (g) 'The Local 'taxpayers and Public Safety Protection Act does
California Constitution, therefore, existing provisions proposed to be not amend or modify the School Funding Initiative, Proposition 98
deleted are printed in Meilieti*44ype and new provisions proposed to be (Section 8 of Article XVI of the California Constinution).
added are printed in italic;npe to indicate that,they are new. (h) Therefore,the people declare that the purposes of this act are to:
PROPOSED LAW (1) Require voter approval before the Legislature removes local
tax dollars from tete control of local government, as described in this
THE LOCAL TAXPAYERS AND PUBLIC SAFETY measure.
PRC3TFC'TION ACT (2) Insure that local tax dollars are dedicated to local governments to
fund local public services.
SECTION 1, Short T"it.le (3) Insure that the Legislature reimburses local governments when the
These amendments to the California Constitution shall be knower and state mandates local governments to assume more financial responsibility
may be cited as the Focal Taxpayers and Public Safety Protection Act, for new or existing programs.
SECTION 2. Findings and Purposes (4) Prohibit the Legislature from deferring or delaying annual rcim-
(a) The people of the State of California find that restoring local con- bursenient to local governments for estate-mandated programs.
trot over local tax dollars is vital to insure that local tax dollars are used to SECTION 3, Article XIII L is added to the California Constitution.
provide critical local services,including,but not limited to,police, fire, to read:
emergency andltrainna care.public health,libraries;,criminal justice,and
road and street maintenance. Reliable funding for these services is essen- AR'7'1CCF,:VIII E
tial for the security,well-being,and quality of life of all Californians.
LC)C',fL 7i3X1'?Y1RSA1VC7 PUBLIC SAFGTI'
(b) For many years, the Legislature has taken away local tax dollars 1'ROTF.,'C'1'IONAC'T
used by local governments so that the state could control those local tax
dollars.In fact the Legislature has been taking away billions of local tax S'%"MON 1. Statewide hoterApproval Required
dollars each year, Ibreing local governments to either raise local fees (a) Approval by it ma ority vote gf the electorate, cis provided fiw in
or taxes to maintain services, or cut back on critically needed this section,shall be required before any act gfthe Legislature takes eff<:ct
local services. that removes thce.following funding sources,or portions theregf,'fi•o,ra the:
(c) The Legislature's diversion of local tax dollars from local govern- control cif anv local government
meats harms local governments'ability to provide such specific services (1) Reduces, or suspends or delays the receipt cf any local govern-
as police,fire,emergency and#raautzta care,public health,libraries,Grin}i- ment's proportionate share of the local property tax when the Legislature
nal justice,and road and street:maintenance, ever rses its power to apportion the local property tax; or requires any
(d) In recognition of the harm caused by diversion of local tax dollars local government to remit local property tales to the State, a state-
and the importance placed oil voter control of major decisions concerning created fiend,or,without the cr,rssent oftke gfected local governments,to
government finance, and consistent with existing provisions of the another local government.
California Conetntiltion that give the people the right to vote on fiscal (2) Reduces, or delays or suspends the receipt oJ; the Local
clta»ges,the people otthe State of Cafilornia want the right to vote upour Government Base)ear,Fund to any local governinent,without appropriat-
actions by the state government that take local tax dollars from local gov- ittgr ends to offset the reduction,delay"or suspension in an equal aniount.
ernments.
(3) Restricts the authority to impose,or changes the method of distrib-
(e) The local Taxpayers and Public Safety Protection Act is designed uting,the local sates tax.
to insure that the people ofthe State of California shall have the light to
approve or reject the actions of state government to take away local rev- (4) Reducers, or suspends or delays the receipt of the 2003 Local
enues that fund vitally needed local services. Goverrunent Payment Deferral.
(f) The Local Taxpayers and Public Safety Protection Act strengthens (5) Falls to reinstate the suspended Bradley-Burns Ilniforni Local
(lie requirement that if the state mandates local governments to implement Sales and Use htv rate in accordance with Sec=tion.97.68 gf the Revenue
"Text of Proposed Laws 1 17
PRt3POSMON
Ism M PROTECTION OF LOCAL GOVERNMENT
1AREVENUES
Protection of Local Government Revenues
• Protects local funding for public safety, health, libraries, parks, and other locally
delivered services.
• Prohibits the State from reducing local governments' property tax proceeds.
• Allows the provisions to be suspended only if the Governor declares a fiscal necessity
and two-thirds of the Legislature approve the suspension. Suspended funds must be
repaid within three years.
• Also requires local sales tax revenues to remain with local government and be spent for
local purposes.
• Requires the State to fund legislative mandates on local governments or suspend their
operation.
Summary of Legislative Analyst's Estimate of Net State and Local Government
Fiscal Impact:
+ Significant changes to state authority over local finances. Higher local government rev-
enues
evenues than otherwise would have been the case, possibly in the billions of dollars annu-
ally over time. Any such local revenue impacts would result in decreased resources to
the state of similar amounts.
Final Votes Gast by the Legislature on SGA 4 (Proposition IA)
Assembly: Ayes 64 Noes 13
Senate.: Ayes 34 Noes 5
ANALYSIS : LEGISI-ATIVE ANALYST
BACKGROUND State Authority Over Local Finance
Local Government Funding 'l lte State("Onstitution and existing statutes give
the Legislature authority over the tuxes described
California cines, counties, and special districts it-) Figure 1. For example, the I,e.gisl.atute has
provide services such as fire and police protection, some authority to change tax rates; items subject
water, libraries, and parks and recreation pro-
to taxation; and the distribution of tax revenues
grains. Local governments pay for these programs among local governments, schools, and C011trttutxi-
and services with money frc>an local taxes,fees,and ty cortege districts. The state has used this
user charges; state and federal aid; arid other authority for many purposes, including increasing
sources. fhree taxes play a m4jor rale in local funding for local services, reducing state costs,
finance because they raise significant suets of*gen- reducing taxation, addressing concerns regarding
eral-purpose reventies that local governments ttlay funding f«r particular local governments, and
use, to pay f:or a variety of programs and services. restructuring local finance. Figure 2 describes
These three taxes are the property tax, tie tttai- some of these past actions the Legislature has
form local sales tax, and the vehicle license: fee taken.
(VLF). Many local governments also impose
optional local sales taxes and use these revenues to Requirement to Reimburse for State Mandates
support specific programs, such as transportation. 'The State Constitution generally requires the
Figure I provides inforaxtation oil these major rev- state to reimburse local government., schools, and
etttze sotarces. community college districts when the state
4 Tine and Summary/Analysis
101ROTECTION OF LOCAL GOVERNMENT REVENUES
ANALYSIS BY THELEGISLATIVE ANALYST
"inattdates" a new local.program or higher level of
service. For example, the state requires local agen
LOCAL GOVERNMENT TAXES cies to past agendas for their hearings, ,As a nian-
Pr� rt lax elate, the state must pay local governments,
��- schools, and community college districts fc>r their-
-Local governments receivegeneral-purpose revenues from a
casts to past these agendas. Because ofthe state's
1 percent property tax levied on real property. budget difficulties, the state has not pro,6ded in
•During the 2003-04 fiscal year,local governments received recent year's reimbursements for many mandated
approximately$15 billion in property tax revenues.(An costs, Currently, the state owes these: local agencies
additional$16 billion in property taxes went to schools and
community colleges.) about $2 billion for the prior-year costs of state-
mandated programs. In other cases, the state has
-There is wide variation in the share of property taxes "suspended"
received by individual local governments.This variation State mandates, eliminating both
local
largely reflects differences among local agency property tax over'rrrrrent responsibility for COrnplyirn
rates during the mid-1970s,the period on which the state's with the mandate an the. treed for state reh -
property tax allocation laws are based. bursements.
Vehicle Lic_ensc,Feeµ ''4�tt � ___ _..._ PROPOSAL
m^
*The VLF is a tax levied annually on the value of vehicles Limitations on.Legislature's Authority to Change
registered in the state. Loeaal Revenues
-For about a half century,the VLF rate was 2 percent of This nn..asure amends the: State: Constitution to
vehicle value. In 1999,the Legislature began reducing the
rate charged to vehicle owners,with the state"backfilling" sinifrt:arlCly reduce the state's authority over
the resulting city and county revenue losses.
•During 2003-04,the VLF(set at a rate of 0,65 percent of
vehicle value)and the VLF backfill would have provided
about$5:9 billion to cities and counties.The scare, MAJOR STATE ACTIONS ACFECTIN(. LOCAL FINANCE
however,deferred payment of part of the backfill to 2006. Increasing Funding far Local Services. In 3 979,the state shifted
•Under current law,most VLF revenues are allocated to an ongoing share of the property tax from schools and
counties for health and social services programs.Some VLF community colleges to local governments(cities,counties,
revenues are allocated to cities for general purposes. and special districts).This shift limited local government
Local Mlles Tax_( l dorm) program reductions after the revenue losses resulting from
the passage of preposition 1:3,but increase state costs to
-Cities and counties receive revenues from a uniform local backfill schools'and community colleges'property tax
sales tax levied on the purchaseprice of most goods---such loo
sses.
as clothing,automobiles,and restaurant meals.This tax is Reducing State Costs. In 1992 and 1993,the state shifted an
sometimes called the"Bradley-Burns"sales tax. ongoing share of property taxes from local governments to
•During 2003-04,this tax was levied at a rate of 1.25 schools and community colleges. In 2004,the state
percent and generated about$5.9 billion. enacted a similar two-year shift of property taxes($1.3
•Under current law,80 percent of sales tax revenues is billion annually)from local governments to schools and
distributed to local governments based on where sales community colleges.These Shifts had the effect of reducing
occur—to a city if the sale occurs within its boundaries,or local government resources and reducing state costs.The
to a county if the sale occurs in an unincorporated area. state also reduced its costs by deferring payments to local
The remaining 20 percent of local sales tax revenues is governments for state mandate reimbursements(most
allocated to counties for transportation purposes. notably in 2002,2003,and 2004)and for a portion of the
•Beginning in 2004 05,local governments will receive vehicle license fee(VLF)"backfill"(2003),described below.
additional property taxes to replace some local sales tax Reducing Taxation. Beginning in 1999,the state reduced the
revenues that are pledged to pay debt service on state VLF rate to provide tax relief.The state backfilled the
deficit-related bonds,approved by voters in March 2004. resulting city and county revenue losses.
Local Sales Tax_(Optiqraal)__.. Addressing Concerns Regarding Funding for Specific Local
Governments. In the past,the state has at various times
•Cities and counties can impose certain additional sales adjusted the annual allocation of property taxes and VLF
taxes for local purposes. revenues to assist cities that received very low shares of the
•During 2003-04,40 jurisdictions levied these optional sales local property tax,
taxes and generated about$3.1 billion. Restructuring Local Finance. In 2004,the state replaced city
•Most revenues are used for transportation purposes. and county VLF backfill revenues with property taxes
shifted from schools and community colleges.
Analysis 1 5
PROTECTION OF LOCAL GOVERNMENT REVENUES
ANALYSISBY THE LEGISLATIVE ANALYST (CONT.)
major local government revenue sources. Under to approve voluntary exchanges of local sales tax
the measure the stage could not: and property tax revenues among local govern-
* Reduce Local Sales Tax Rates or Alter-the Method of rrrents within a county.
Allocation. The measure prohibits the state frons: State Mandates
reducing any local sales tax rate, limiting exist- The measure amends the State constitution to
ing local government authority to levy a sales tax require the state to suspend certain state laws cre-
rat.e, or changing the allocation of local sales tax acing mandates in any year that the state does not
revenues. For example, the state could not fully reimburse local governments for their costs
reduce a city's uniform or optional sales tax rate, to comply with the mandates. Specifically, begin-
or enact laws that drift sales taxes from a city to ning.july 1., 2005, the rneasure requires the state
the county in which it:is located. to either fully fund each mandate affecting cities,
• Shift Property Taxes From Local Governments to counties, and special districts or suspend the man-
Schools or Community Colleges. The measure gen- (late's requirements fbr the fiscal year. This provi-
erally prohibits the state from shifting to schools cion does not: apply to mandates relating to
or cormnunity,colleges any share of property tax schools or community colleges, or to those inan-
revenues allocated to local governments for any dates relating to employee rights.
fiscal year under the laws in effect as of The measure also appears to expand the circum-
November 3, 2004. The measure also specifies stances under which the state would be responsi-
that any change in how property tax revenues ble for reimbursing cities, counties, and special
are shared among local governments within a districts for carrying out new state requirements.
county must be approved by two-thirds of` both Specifically, the measure; defines as a mandate
llo'ttSe.S of the Legislature (instead of by majority state actions that transfer to local governments
votes). For example, state actions that shifted a financial responsibility for a required program for
share; of property tax 3:evenrxes from one local which the suite previously had complete or partial
special district to another, or from a city to the financial responsibility. Under current law, some
county, would require approval By two-thirds of such transfers of financial responsibilities.may not
both houses ofthe I...egislatu.re. Finally, the meas- be considered a stage mandate.
ure prohibits the state from reducing the prop- Related Provisions in Proposition 65
erty tax revenues provided to cities and counties
as replacement for the local. sales tax revenues Proposition 65 on this ballot contains similar
redirected to the state and pledged to pay debt provisions affecting local govertrmetit finance and
service on. state deficit-related bonds approved mandates. (Tire nearby box provides information
by voters in March 2004. on the rnajor similarities and differences Between
these measures.) Proposition ].A.specifically states
+ Decrease YLF Revenues Without Providing that: if it and Proposition 65 are approved and
Replacement Funding. If the state reduces the VLF Proposition lA receives more yes votes, none of
rate below its current level, the measure requires the provisions of Proposition 65 will go into effect:.
the state to provide local governments with
equal replacement revenues. The measure also 14scAL EFFECTs
requires the: state to allocate VLF revenues to Proposition lA would reduce state authority
county health and social services programs and over local finances. Over time, it could have sigrrif-
local governments. icant fiscal impacts ori state and local govern-
The measure provides two significant excep- merits, as described below.
tions to the above restrictions regarding sales and Long-'Perm Effect on Local and State Finance
property taxes. First., beginning in 2008-09, the Higher and More Stable Local Government
state may shift to schools and community colleges Revenues. Given the number and magnitude (-A
a limite(i amount of local governrrrc:.trt property tax past state actions affecting local taxes, this mea-
revenues if. the Governor proclaims that the shift wire's restrictions on state authority to enact such
is needed due to a Severe state financial hardship, measures in the future would have potentially
the Legislature approves the shift with a two-thirds major fiscal effects on local governments. For
vote of both houses, and certain other conditions example, the state could not enact measures that
are met. The state must repay local governments permanently shift: property taxes from local gov-
for their property tax losses, with interest, within ernments to schools in order to reduce state costs
three years. Second, the, measure allows the state for education programs.In these cases,this measure
6 Analysis
PROTECTION OF LOCAL GOVERNMENT REVENUES
ANALYSIS SIS . THE LEGISLATIVE ANALNT.)
77777 would result in local government revenues being
more stable—and higher—than otherwise would
Propositions 1 A and 65 both amend the State Constitution to be the case. The magnitude of increased local rev-
achieve three general objectives regarding state and local enues is unknown. and would depend oil future
government finance.The similarities and differences between actions by the state. Given past actions by the state,
the two measures are highlighted below. however, this increase in local government rev-
Limits state A.uthnrity to IZeduce_Major Laca1 Tax Revenues enues could be in the billions of dollars annually.
Effect ortOt74w tI.S State Budget. ' llese increased local revenues could result in
higher Spending on 4-)cal programs or decreased
-Proposition 65's restrictions apply to state actions taken over
thelast year,and thus would prevent a major component local fees or taxes,
of the 2004-05 budget plan(a$1.3 billion property t-tx Lower Resourcav for State Prograins. In general,
shift in 2004-05 and again in 2005.06) from taking effect the measure's effect on shite finances would be the
unless approved by the state's voters at the subsequent opposite of its effect on local finances. That,is, this
statewide election. measure could result in decreased resources being
•Proposition ?A's restrictions apply to future state actions available for state programs than otherwise would
only,and would allow the planned $1.3 billion property tax be the case. This reduction, in turn, would affect
shift to occur in both years. state spending and/or taxes. For example,
Effect on Future state Budgets. because the state could not use local government
-Proposition 65 allows the state to modify major local tax propert:y taxes permanently as part of the state's
revenues for the fiscal benefit of the state,but only with the budget Solution, the Legislature would need to
approval of the state's voters. take tatternative actions to resolve the state's budget
•Proposition 1A prohibits such state changes,except Por difficulties—such as increasing] state taxes or
limited,short-term shifting of local property taxes.The- decreasing spending on other state programs. As
state must repay local governments for these property tax with•the ltycal impact. the total fiscal effect also
losses within three years. could be in the billions of dollars annually.
Reduces State Authority to Less Change to the Revenue of Individual Local
Reallocate Tax RevenuesAmggg Local dove mel is Governments. Proposition IA restricts the state's
Effect on Reminte Allocation. authority to reallocate local tax revenues to
-Proposition 65 gerierally requires state voter approval before address concerns regarding funding for specific the state can reduce any individual local government's local governments or to restructure local govern-
revenues from the property tax; uniform local sales tax,or relent finance. For example, the state could not
vehicle license Pee(VLF). enact measures that changed how local sales tax
*Proposition ?A prohibits the state from reducing any local revenues are allocated to cities and counties. In
government's revenues from local sales taxes, but maintains addition, ineasures that reallocated property taxes
some state authority to alter the allocation of property tax among local governments in a county would
revenues,VLF revenues,and other taxes. Proposition 1 A require approval by two-thirds of the. Members of
does not include a state voter approval requirement. each house of the Legislature (rather than majori-
DicalGovernments Affectei. ty votes). As a result, this measure would reStalt ill.
-Proposition 65's restrictions apply to cities,counties,special fewer changes to local government revenues than
districts,and redevelopment agencies. otherwise would have been the case.
•Proposition IA's restrictions do not apply to redevelopment Effect on Local Programs and State
agencies. Reimbursements
Restricts State Authority to Impose Mandates on Because the measure Appears to expand the c.ir-
Local Governments Without Reimbursement ,__._.._.. ._ _ ,. curnstallces under which the state is required to
reimburse local agencies, the measure may
-Proposition 65 authorizes local governments,schools,and
community college districts to decade whether o not to increase ase. future state costs or alter future state,
t
comply with a state requirement decide
state does rear,fully actions regarding local or jointly funded state-local
reimburse local costs. programs. While it is not possible to determine the
cost: to reimburse local agencies
•Proposition?A's mandate provisions do not apply to schools for potential
f
and community colleges.ifthe state does not fund afuture state actions, crus review of state ineasrires
suggests that, over time,
gg
cast h
in the su r
mandate in any year,the state must eliminate local enactedl
government's duty to implement it for that same time increased state reimbursement costs may exceed a
period. hundred million dollars annually.
i 'Prop 1 Analysis 7
r x[.01mso
" PROT'EC'TION OF LOCAL GOVERNMENT REVENUES
. $ , ti
PROPOSITION IA—A HISTORIC AGRk.P'N1I~.IvT TO Cities and counties also revitalize downtowns and create
PROTECT LOCAL TAXPAYERS AND VITAL LOC
AL ,jobs and affordable housing using redevelopment agency
GOVERNMENT SERVICES. funding. Redevelopment agency tax increment revenues are
Proposition ]A is a historic: bipartisan agreement aunong already protected by die State Constitution and do not need
local governments, public safety leaders, the State to be further protected by Proposition M.
Legislature:, Republican) Governor Arnold Schwarzen€agger, PROPOSITION IA PROTECTS LO(AL TAXPAYERS
and is authored by Democratic State Senator'fbm Torlakson. AND WON'T RAISE:"FAXES.
Proposition IA prevents the Suite from taking and using Proposition IA will not raise taxes.it simply ensures that
funding that local gotiernments need to provideservices like existing local tax dollars continue to be dedicated to local
fire and par.arnedic response,law enforcement,health care, services. It also helps ensim local governments aren't firrced to
parks, and libraries. raise taxes or fees to make upfor revenue raided 71 the 'State.
These individuals and groups urge a YES vote: PROPOSITION 1A. .PROVIDES FLEXIBILITY IN A.
•Governor Schwarzenegger STATE BUDGET EMERGENCE AND WrON'T TAE.
•State Controller Steve Westly FUNDING FROM SCHOOLS OR OTHER STATE
• California Professional Firefighters PROGRAMS.
• California Fire Chiefs Association Proposition IA.protects only exioinglevels of local fund-
•California Police Chiefs Association irzg. It does not reduce funding for schools or other state
•O lifornia State Sheriffs' Association programs.And, IA was carefully written to allow flexibility.
•Cal oiniaAssociaztion of Public Hospitals and Health,Systems It allows the. State to bot-rout local government revenues—
• league of£:alifo rnia Cities only in the event of a fiscal emergen€y—if funds are need-
• C:rzliforni<a Special L)rstricts Association cad io supppoort schools or other state pr€7#;rarrrs.
• California State Association of Counties PROPOSITION ]A IS A BEV E.R APPROACH T"ILra
PROPOSITION lA IS NEEDED TO STOP THE STATE; REPLACES THE NEER FOR PROPOSITION 65.
FROM TAKING,LOCAL GOVrRNMENT FUNDING. Proposition 65 was put on the ballot earlier this year
For snore than a dozen years, the Sunt: has been taking before this historic; agreement was reached. Proposition
local tax dollars that local governments use: to provide 1A is a better, more flexible a.)prc>acir to protect local scar-
essential services—more than 40 billion in the last 12 years, vices and tare dollars.Tli<at:'s w�iy A:IJ,of the official prop<r
Even in years with state budget surpluses, the State has nents of 65 are. now ENDORSING PROPOSITION IA
taken billions of local tax clollars. AND OPPOSING PROPOSITION 6.5.
These citrate raids result in jeiver jireji�fatrrs, fnrcrer ltrrr, errf6r, Join Governor Schwarzcnegger,Senator`f2rrlErks€an,frr€�
iris^rzt r jacrrs, longer ra;caals a'ra emergency rrx>rns or hig ter local fighters, police officers, sheriffs, paramedics, health care
taxes and fees, leaders, taxpayers,business and labor-leaders.
PRO P£)SITTON IA PROTE(I S PU ILIC Sa1FE"IN,rME"R PROTEC L.L.00 AL TAXPAYF.RS ANI?Pt)BL IC SA "1 1"Y.
GE:NC V HEA FH CARE,AND OTHER LOCAs.SERVICES. Vote YES on PROPOSITION 1A. Vote: NO on PROPOSI-
L.ocal governments spend a vast: maiority of their bud- 'LYON 65.
gets providing critical services,including: GOVERNOR ARNOLD SC RVARLENEGGER
• Fire protection CHIEF MR.HAEL WARREN, Pwsideat
• Paramedic response
•Law enforcement CcsGaj«)rraica lire(aziefs Association
•
Emergency medical SHERIFF ROBERTT. DOYLE, President
* Health care (:aliforrairr,State Sheriff's'�issocriratzvn
* Parks and libraries
e :
Proposition lid was cooked zip at the last minute as ax will fall ever) harder on funding for K-1.2 educa-
part of a load budget deal tion, higher education, children's health care, pro-
There were no public hearings. grams for seniors, and public&ifety.
Proposition IA protects local governments, but it Proposition ]A gives local politicians a blank check
i)zzrts education by allowing the State to raid ycrzrr without any scrutiny over how the money is spent.
property taxes tint fund your local schools. And it We can do better.We deserve better.
puts that into the State Constitution! Vote NO on Proposition ]A.
Proposition IA prevents the Legislature from low- CAROLE MIGDEN, Chairwoman
ering taxes by locking in the: local Sales tax rate. '1"hat State Board ofFquralization
goes into the;State Constitution too!
Proposition IA,jeopardizes critical programs. As
('4rlifornia's fiscal challenges continue,the State budget
8 1 Arguments
PROTECTION OF LOCAL GOVERNMENT REVENUES
m
We should protect local taxpayers, not irresponsible 'There is NO fiscal accountability provision in
spending; by local governments. Vote NO on Proposition IA.
Proposition ]A. Every new school Bond we've placed on the ballot
As Chairwoman of the State Board of Equalization, I contains specific accountability provisions to guarantee
know that too many branches of government waste: too that the money is spent the way the voters intend.
march money. There is NO fiscal accountability provision in
Proposition IA gives local governments a spending Proposition IA.
guarantee without any fiscal accountability or oversight. Every one of California's Water, Parks, and Wildlife
It's a blank check for spending and turns a blind eye to bonds had strict accountability provisions.
waste.
There is .NO fiscal accountability provision in
Died you know that the City of Stockton is emptying its Proposition IA.
cash reserves to build a downtown arena, but at the
Calif
same time they're trying to raise taxes to pay for police
California is facing serious budget challenges. "There
officers and firefighters? They've got their priorities have been great sacrifices made to meet those chai-
backwards. lenges... cuts in children's health care, nursing home.
Did you know that the City of Los Angeles raised their care,and college adinissioris.
water rates, but at the same time: they're being audited WTby should local politicians get a blank check? I say
for wasting millions on unnecessary public relations
NO they shouldn't. Why should :local politicians get a
contracts? guarantee that sick children don't: get? I say NO they,
shouldn't.
California has a responsibility to help and support
o v
local governments. We are all in this trrgethcr. But NO NO fiscal accountability Proposition deserves a
one should be exempt frorn fiscal oversight and NO torte?
accountability. Checks and balances are essential. Please,join me in voting NO on Proposition IA.
Public schools in California are . funded lay C AROL.E MI.GDEN, (ahrrinrJtrrratarz
Proposition 98; But in 198€, California's teaclx:rs ,State Baarf of 1'qualization
included specific language to hold school districts
accountable for the money they spend.
Contrary to misleading claims mane by the opponent of Prof. lA does NOT increase taxes.The measure PRO-
IA, THIS MEASURE INCREASES FISCAL ACCOUNT- TF;C7S FX..S?"1NC. LOCAL TAX DOLLARS—WIIICI-I
A111R.1`lY, ARE USED TO PROVIDE FIREFIGHTING, LAW
Prop. IA increases local budget accountability by keeping ENFORCEMENT, EMERGENCY PiCJt)1v1 ("ARE, PRA-
tax dollars close to home,where voters have rnore control. MEDIC RESPONSE, and other essential local services.
Prop. IA.will also make the. State more accountable by Prop. IN supporters know it's tune to end business as
preventing it frons taking;acrd using local grove:rnent flunds usual in Sacramento and stop the State from taking and
—except.irr ar furcal erncr e;ncy. using local government funds.
FOR YEARS, 1"ZIF QST TF,HAS I-LA.D A BldVNK CHECK Join Governor Schw<rrzenegger,firefighters,law enforce.
to take your local tax.dollars. PROD I A`PEARS UP HA'L' rnent officers,paramedics,and taxpayer groups.
BLAINK (1JEC K and requires the State to live within its PROTECT LOCAL'T4NXPAYERS AND PUBLIC SAFETY
means, SERVICES.WYFE YES carr IA.
The opponent would have you believe the State is in ai SL NA`T"t7R"L"OM'I'(7RI f1ILSON, l;liruir
better position to manage your local tax dollars than your
city or county'leaders. In fact, over the past decade., cities .Senate Coraarraittee ars lcicrd Governwnt
and counties have tightened their belts,increased account- LOLL RNULSON, N^ident
ability,and prioritized spending for essential local services, C;'cctzlt»�ia.Professirrrzrrl Eirefighters
Prop, lA does NO'T increase, local governmentfunding CAM SANC1-EZ,President
and does not take one dirne frorn schools,state health care Czrh iytia.Police Chiefa Association
services,or any other state program or service.
Arguments 1 9