BILL ANALYSIS
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|SENATE RULES COMMITTEE | AB 1457|
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THIRD READING
Bill No: AB 1457
Author: Assembly Budget Committee
Amended: 5/3/04 in Senate
Vote: 27 - Urgency
SENATE APPROPRIATIONS COMMITTEE : 8-0, 4/19/04
AYES: Alpert, Battin, Ashburn, Bowen, Escutia, Johnson,
Machado, Speier
NO VOTE RECORDED: Aanestad, Burton, Karnette, Murray,
Poochigian
ASSEMBLY FLOOR : Not relevant
SUBJECT : Local Government Finance
SOURCE : Author
DIGEST : This bill: (1) transfers vehicle license fee
(VLF) revenues to the Local Revenue Fund for realignment
programs in 2003-04; (2) authorizes the Controller to make
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.
Senate floor amendments of 5/3/04 end the transfer when the
2003-04 realignment fiscal year ends. It also authorizes
the Controller to make necessary transfers from the General
Fund to the Local Revenue Fund and to reduce transfers from
the General Fund to non-realignment VLF backfill consistent
with the 2003-04 budget agreement. The amendments
explicitly state that the amount of any reduction in
CONTINUED
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transfers to non-realignment VLF will be included in the
amount to be repaid to cities and counties by August 15,
2006.
Senate Appropriations Committee amendments delete the prior
version. As it left the Senate, this bill: (1)
appropriated $2.5 million from the California High-Cost
Fund-A Administrative Committee Fund to the Public
Utilities Commission in order to pay subsidies to small
independent telephone companies serving high-cost rural
areas for 2001-02, as specified; and (2) was authored by
Assembly Utilities and Commerce Committee.
ANALYSIS : 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 two
percent tax rate and reducing the amount the owner pays by
a 65 percent 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 percent of value to 100 percent.
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.
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.
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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.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
SUPPORT : (Verified 4/20/04)
California Health Executives Association of California
ARGUMENTS IN SUPPORT : The County Health Executives
Association of California states, "Realignment VLF provides
core funding for essential health and public health
services which counties are mandated to provide. Since
March 1, $66 million has been withheld for these critical
services. The next VLF Realignment payment is scheduled to
go out on April 26. Absent swift action by the
Legislature, approximately $120 million could be withheld
in additional funding at that time. Most county health
departments are already facing severe financial problems,
and could not withstand losses of this magnitude without
major service reductions."
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LB:sl 5/3/04 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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