Brown sets aside money to right ERAF Triple Flip wrongs
What can Brown, that is Gov. Jerry Brown, do for you? If you’re Mono and Amador counties, Public Education budget cut triggers aside, it seems he’s amenable to helping out with squaring up ERAF (Education Revenue Augmentation Fund) deficiencies.
Earlier this year, as part of his proposed 2012-2013 Fiscal Year budget, Brown pledged his support for AB 1191, a bill that would allocate $4.4 million in funding to cover ERAF shortfalls in both counties. Current estimates say Mono County is short $1 million, and Amador County is $1.5 million in the red when it comes to “triple flip” ERAF funding status.
ERAF is the fund used to collect the property taxes in each county that are shifted from cities, the county, and special districts prior to their reallocation to K-14 school agencies. In the early 1990s, legislation was passed that authorized a shift of property taxes from local governments to K-14 school agencies and a corresponding reduction in the state support of K-14 education. The shift transferred more than $3.7 billion in property tax revenues from cities, the county and special districts, such as fire departments and water districts.
In response to cries of foul, the state made numerous changes to the Revenue and Taxation Code to modify the calculations. In 2004-05, three shifts of property taxes from school agencies to local government occurred which affected the allocation of ERAF. One tax shift is known as the “Triple Flip” began March 2004, after voters approved a bond initiative known as the “California Recovery Act.” This act authorized issuance of $15 billion in bonds to finance the 2002-03 and 2003-04 state budget deficits.
The revenue stream for payment of these bonds was established by the redirection of tax revenues through the “Triple Flip.” Under the “Triple Flip,” one quarter of the local governments’ 1% share of sales taxes are redirected to the state as a dedicated revenue source for the bond repayment. To mitigate the loss of this revenue to the local governments, the legislation “redirected” property taxes in the ERAF to local government. The loss of ERAF property taxes to the school agencies is then backfilled with state aid.
In short, counties and agencies get paid back with their own money. The swap of sales taxes for property taxes will terminate once the deficit financing bonds are paid, which is currently expected in 9-13 years.
This is where 1191 comes into play. According to the bill’s author, Alyson Huber (D-El Dorado Hills, 10th District), neither the state nor local governments contemplated California’s current economic conditions when the Triple Flip was enacted in 2004. Because of this, Mono and Amador counties are set to experience “a unique condition” in which all school districts in those counties have become Basic Aid school districts. As such, there’s no legal revenue source to backfill Mono and Amador cities and counties for the loss of license fees or local sales tax revenues.
In short, the law let the state take the money, but when the school districts were converted, there was no legal mechanism in place to return it. The bill’s intent is to remedy those “unintended consequences,” and bring Mono and Amador into reimbursement parity with the rest of the state’s counties.
As such, Brown’s proposed 2012-2013 Fiscal Year budget (Jan. 5, 2012) includes a $4.4 million line item specifically for Mono and Amador counties. Opponents say there’s no guarantee that the legislature will act to appropriate the funds especially in ongoing tight budgetary times.
However, after a recent series of meetings with Sacramento lawmakers and lobbyists, and bill co-sponsors the California State Association of Counties and the Regional Council of Rural Governments, according to Mono County District 2 Supervisor Hap Hazard, AB 1191 cleared the Assembly on a bipartisan vote, and late last week had cleared the Senate in similar fashion.
Also endorsed by both counties’ Boards of Supervisors and local town governments, AB 1191 is currently undergoing final legal and budgetary review. The funding has enjoyed bipartisan support thus far, and Hazard suggested the prospects are good at this point for the line item to survive legislative budget scrutiny and final passage as part of the state budget.
“This will have a huge benefit to our local special districts, schools and other agencies that rely on this money to effectively do their jobs and provide essential services,” Hazard told The Sheet.