BILL ANALYSIS
Appropriations Committee Fiscal Summary
1457 (Assy Budget -
Steinberg)
Hearing Date: 4/19/04 Amended: as proposed
to be amended :RN 0408675
Consultant: Anne Maitland Policy Vote: not
applicable
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BILL SUMMARY:
AB 1457, as proposed to be amended in Committee, (1)
transfers VLF revenues to the Local Revenue Fund for
realignment programs in 2003-04, (2) authorizes the
Controller to makes adjustments so the Local Revenue Fund
receives its correct share of VLF revenues, and (3) makes a
technical correction to trailer bill legislation enacted
last year.
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Fiscal Impact (in thousands)
Major Provisions 2004-05 2005-06
2006-07 Fund
Transfers approximately $50 million monthly to the Local
Revenue Fund for the 2003-04 fiscal year
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STAFF COMMENTS: This bill may meet the criteria for
referral to the Suspense file; although it doesn't raise
new revenue, it gives authority for approximately $50
million to be allocated each month to local governments
Current law imposes a vehicle license fee (VLF) on motor
vehicles. The VLF is calculated by multiplying the
depreciated value of the vehicle by the 2% tax rate and
reducing the amount the owner pays by a 65% offset. The
General Fund then backfills this offset amount. Revenues
from the VLF are distributed to local governments under
several formulas.
There is a statutory depreciation schedule; current law
also authorizes DMV to determine current market value.
In 1991, the statutory depreciation schedule was changed to
reflect the fact that vehicles retained value longer: e.g.,
in the first year of vehicle ownership, the depreciation
factor was changed from 85% of value to 100%. The
increased revenues from this change were transferred to a
new Local Revenue Fund for local health and mental health
programs as part of the realignment of state and local
program responsibilities. The 1991 legislation contained a
"poison pill": if the State lost a lawsuit over its
obligation to provide medical services to medically
indigent adults, then the higher depreciation schedule
would be repealed, the lower depreciation schedule would go
into effect and funding for realignment programs would be
lost.
-continued-
AB
1457 (Steinberg)
Page 2
In 2001, as part of legislation to increase the amount of
VLF offsets paid by the General Fund and reduce the amount
of VLF paid by vehicle owners, the lower depreciation
schedule was repealed.
In 2004, the Supreme Court ruled against the State on the
MIA case. This had the effect of repealing the higher
depreciation schedule enacted in 1991 and ending transfers
to the Local Revenue Fund. It also meant that there was no
depreciation schedule in statute. DMV issued emergency
regulations that imposed the higher depreciation schedule;
they expire June 29th. DMV has also filed permanent
regulations with the Office of Administrative Law for the
higher depreciation schedule; the public comment period
ends May 31, 2004.
The effect of the emergency regulations is to continue
funding for local realignment programs. However, there is
no statutory authority to make the transfer into the Local
Revenue Fund.
This bill makes the necessary transfer to the Local Revenue
Fund for revenues attributable to the 2003-04 fiscal year.
In addition, it authorizes the Controller to make any
adjustments to the allocation of VLF revenues to ensure
that the Local Revenue Fund receives its correct share and
makes a technical correction to the VLF allocations
contained in one of last year's budget trailer bills.