Special Notice Form California - State Board Of Equalization
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1
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4Special Notice
S
B
TATE
OARD
O
E
F
QUALIZATION
How Local Governments Will Be Reimbursed for the
450 N Street
Upcoming Reduction in the Local Sales and Use Tax Rate
Sacramento
California 95814
In March, voters approved Proposition 57, the California Economic Recovery Bond Act,
which allowed the state to purchase bonds to reduce the state budget deficit. The legis-
lature enacted provisions* that will change how sales and use taxes and other revenues
are distributed to schools and local governments on and after July 1, 2004. These
changes will remain in effect until the State Director of Finance notifies the Board of
BOARD MEMBERS
Equalization that the state’s bond obligations have been satisfied.
CAROLE MIGDEN
First District
The Triple Flip
San Francisco
Under the new revenue "swapping" procedures—commonly referred to as the
BILL LEONARD
Second District
"triple flip"—the following changes will occur:
Ontario
CLAUDE PARRISH
Local sales and use tax revenues will decrease, beginning July 1, 2004
Third District
Long Beach
The statewide base sales and use tax rate will remain at 7.25%. However, the
JOHN CHIANG
local government portion of the statewide rate will decrease by 0.25%, and the
Fourth District
Los Angeles
state portion will increase by 0.25% (see the table on the back for a detailed
STEVE WESTLY
breakdown of the new rate structure).
State Controller
Sacramento
Local sales and use tax losses will be offset by property tax revenues
The County Auditor in each county will use property tax revenues to reim-
EXECUTIVE DIRECTOR
burse the county and cities within the county. They will set aside some funds
Ramon J. Hirsig
Sacramento
from the County Educational Revenue Augmentation Fund and place them in a
Sales and Use Tax Compensation Fund. In January and May of each year, the
State Director of Finance will instruct County Auditors to allocate revenues
from the Compensation Fund to the county and to the cities within the county.
State General Fund revenues will be used to help schools
Since a portion of the County Educational Revenue Augmentation Fund will be
set aside to offset sales and use tax losses, schools will receive less revenue from
county property taxes. The State of California will use state General Fund revenues
to protect the minimum-funding guarantee of Proposition 98.
* See ABX5 9 and ABX1 7, which were passed in the 2002-2003 legislative session.
See over for information on how the "triple flip" will affect
warrants issued by the Board to local jurisdictions.
June 2004
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