Friday, August 17, 2012 The CSAC Bulletin
Government Finance and Operations
For more information, please contact Jean Kinney Hurst at 916.650.8133, or Geoff Neill at 916.650.8115.

Economic Development

SB 1156 (Steinberg) – Support
As Proposed to Be Amended

SB 1156, by Senate President Pro Tem Darrell Steinberg, would create a structure for continuing local economic development activities in transit priority areas and for the manufacture of renewable energy equipment.

The foundation of CSAC’s support is allowing counties a clear option whether to financially participate in tax increment financing for economic development purposes or not. We believe an approach that encourages collaboration between counties and cities will best serve Californians. This approach would not only allow counties appropriate control over their own general funds, but necessitates discussions about what kinds of development benefits the community as a whole.

We appreciate the work and long discussions Senator Steinberg and the other stakeholders have had with counties during this process, and the resulting bill, which includes a variety of governance models and a list of eligible uses, is one that we can fully support.

The Assembly Appropriations Committee passed SB 1156 at its hearing on Thursday, August 16. The bill now moves to the Assembly floor.

Local Revenue

AB 1191 (Huber) – Sponsor
As Amended on January 23, 2012

AB 1191, by Assembly Member Alyson Huber, would have provided counties and their cities a process to seek reimbursement for revenues lost as a result of the triple-flip and the VLF swap. CSAC and the Regional Council of Rural Counties jointly sponsored the bill, which died in committee this week.

Several years ago, the state shifted a portion of the local sales and use tax away from counties and cities to pay off some of the state’s debt, the Economic Recovery bonds; this diversion will end when these bonds are fully paid. Around the same time, the state also decided to reduce a tax whose proceeds went entirely to counties and cities, the Vehicle License Fee.

To reimburse counties and cities for these reductions to their taxes, the state directed county auditor-controllers to reallocate a portion of K-14 property taxes to counties and cities. Due to Proposition 98, the schools are made whole by the state General Fund. Thus, the end result of these accounting maneuvers is that the state pays its debt with its own money and locals don’t suffer tax revenue losses because the state reduced the rate.

However, basic aid schools don’t receive state General Fund money, so to avoid cutting schools the deal stipulated that county auditor-controllers may not allocate property taxes away from these basic aid schools for these purposes. No one foresaw at the time that any county would one day contain only basic aid schools. But that has now occurred.

Amador County finds itself in the unfortunate situation of having no source to reimburse itself for the taxes the state redirected and reduced.

AB 1191 outlined a process by which county auditors could present information to the State Controller that identifies the amount of reimbursement owed to each local agency pursuant to the deals the state made with locals. Once those amounts are appropriated by the Legislature, the Controller then transfers the owed funds to the county auditor for distribution to the affected county and cities.

This is money that the state has already been counting on spending, but instead of reimbursing counties and cities indirectly through Proposition 98, it would be reimbursing locals directly in the same amount.

AB 1191 failed to get off the Senate Appropriations Committee’s suspense file. CSAC and RCRC will work to get similar language passed in the last two weeks of the legislative session.

AB 1289 (Davis) – Support
As Amended on July 3, 2012

AB 1289, by Assembly Member Mike Davis, AB 1289, would have applied interest penalties uniformly for underpayments to various state funds. Currently, underpayments to the State Trial Court Construction Fund are penalized at a far higher rate than those for all other funds.

AB 1289 would have made the state whole for local underpayments by requiring full repayment plus penalties equal to the annual LAIF returns. The LAIF rate is what the money would have earned absent underpayment.

This change to statute would have not only ensure the state is made whole, but would also have been fair to local agencies. The State Controller only audits most counties every few years, and the current high penalty rate is applied annually, so an error made a few years before the discovering audit results in an exorbitant penalty.

AB 1289 failed to get off the Senate Appropriations Committee’s suspense file and is dead for the year.


SB 379 (Fuller) – Support
As Amended on June 25, 2012

SB 379, by Senator Jean Fuller, would modify the state’s High-Cost Fund- A (CHCF-A) to help support technology deployment to rural California.

Last year, the FCC changed the focus and goals of the USF to recognize that telephone and broadband have become unified systems. As part of that change, the FCC will require that rural telecommunications companies achieve broadband speeds of 4Mbps downstream and 1 Mbps upstream, reaching higher speeds in future years, as a requirement to receive federal high cost support. To achieve that goal, the CHCF-A governing statutes must be revised to conform to the federal program or California’s efforts to provide basic phone service to residents in hard to reach areas could lose roughly $25 million annually in federal support.

Both the CHCF-A and the California High-Cost Fund B (CHCF B), were established to subsidized both small independent telephone companies and large telephone corporations to provide service in the rural and smaller metropolitan communities. These subsidies promote the goal of universal service by providing reasonable rates for basic telephone service in many rural and hard-to-reach areas of the state. Access to reliable, high-speed internet service is the next generation of universal service. SB 379 would help bring the state’s policies in line with the goal of broadband deployment to the most rural areas of the state while also protecting access to affordable basic telephone service.

Affordable telephone and other telecommunication rates are vital to both residential and business customers in our member counties. Without the changes to CHCF-A the state could lose $25 million annually of federal support, potentially causing rate increases for all telephone customers and ensuring the delay of broadband deployment. The deployment of technology in all areas of California is a high priority of our members. We believe it is imperative that state programs and policies are updated to support the goal of residents throughout all of California having access to broadband services.

The Assembly Appropriations Committee passed SB 379 at its hearing on Thursday, August 16. The bill now moves to the Assembly floor.