Town budget takes another $1 million hit. But this time, amazingly, it’s not the Town’s fault.
They call it the triple flip. No, it’s not an Olympic event, though it took an Athena-like effort (Greek Goddess of Wisdom) for Lunch’s pea brain to figure out what in Hades a triple flip is.
A triple flip, in California budgeting parlance, is what happens when the state finds itself a little short. The Sacramento solution: Steal local tax dollars via invention of a complex taxing mechanism. Why? Because it’s illegal to steal straight up; the state doesn’t have the authority to directly raise your property taxes (due to Proposition 13).
The state initiated the first part of the flip in 1992 with the invention of ERAF (Education Revenue Augmentation Fund). According to a position paper by the League of California Cities, “To meet its obligation to fund education at specified levels under Proposition 98, the State enacted legislation that shifted partial responsibility for funding education to local governments (cities, counties and special districts). The state did this by instructing county auditors to shift the allocation of local property tax revenues from local government to ERAF.
Translation: Education used to be the state’s financial responsibility. In ‘92, thestate began taking money from local governments to help meet this responsibility.
Fast forward to 2004. The State requires guaranteed funding streams to satisfy its debt bond obligations. So it decides to steal from local governments again, this time targeting sales tax revenues and vehicle license fees.
At the time, opponents believed this would result in too much of a burden on local governments, so the triple flip was invented.
Local governments pay ERAF money. A portion of ERAF money is siphoned off to backfill the sales tax and vehicle fee revenues, which is then returned to the local governments.
In essence, the triple flip allows local governments to pay themselves back from money stolen from local governments to begin with.
As Mono County Auditor-Controller Roberta Reed said this week, “They were truly paying us back with our own money.”
Fluke in the law
That is, until they recently decided to stop paying us back as a result of a “fluke in the law,” according to County Finance Director Brian Muir.
When the “triple flip” was enacted in 2004, all 58 California counties received at least a portion of their school funding through ERAF.
But this year, both of Mono County’s school districts became “Basic Aid” districts. A Basic Aid district is essentially a wealthy district where the combination of high property values and relatively low enrollment ensures that the school district can fund itself entirely through local property taxes and doesn’t need any revenue “augmentation” from the state.
In which case, ERAF is not needed to backfill schools.
In which case, ERAF is returned to the districts whence it was stolen from.
In which case, because there is no ERAF, there is no money to backfill the sales tax and vehicle fees.
Other Counties are nearing the point where all their districts become Basic Aid (Marin, San Mateo), but Mono County is the lone wolf for now.
Certain entities benefit from the new reality. Mono County, for example, used to pay about $4.3 million to ERAF and collect just $1.75 million back in sales tax and vehicle fee refunds. So the County has, in essence, just realized a $2.5 million windfall.
Likewise, districts such as the Mammoth Lakes Fire District (($249,000), Mono County Libraries ($197,000) and the June Lake Public Utilities District ($154,000) will all see money they normally just kissed goodbye and forgot about, returned.
Then there’s poor Mammoth Lakes. This year, Mammoth was expected to pay about $320,000 in ERAF, but collect nearly $1.35 million in sales tax and vehicle fee reimbursements.
So Mammoth ends up about $1 million upside down.
And as Brian Muir says, because we’re the only County currently affected by this situation, don’t expect some timely legislative fix anytime soon.
For now, the County has pledged to work with the Town to sort out this dilemma. And despite its $2.5 million windfall, the County has some thngs to work out as well.
According to the Gann Limit (enacted as part of Prop 13), a government entity is limited in its year-over-year budget appropriations and how it spends excess revenue.
If you don’t spend it on big-ticket capital investments, you’re actually supposed to return it to the people in the form of tax rebates.
Governments don’t do tax rebates.
So the County has to find some way to spend this money. One proposal might be for the County to buy an additional stake in the Hospital Exchange parcel, for example. That would provide the Town some cash flow.
Or, as some have suggested, maybe the County could buy itself a slightly used ice rink (roof not included).