When is a penny paid in local sales tax not a penny?
The answer: When it flows through the coffers of the State of California.
Manteca’s general fund share of the 9.25 cents sales tax on every dollar is supposed to be one cent. But the so-called “triple flip” put in place in 2004 to try and ease the $30 billion deficit that incurred on former Gov. Gray Davis’ watch took 25 percent of the penny each local jurisdiction received, gave it to schools and then back filled it with property tax. Now the state wants to borrow the property tax that they used to replace the sales tax they took.
In the first five months of 2009, Manteca recorded $5.2 million in general fund sales tax as opposed to $5.6 million for the same January to May period in 2008.
At the same time, the half-cent sales tax Manteca collects for public safety came to $3.4 million. If the general fund sales tax was left intact, that would mean the city should be getting $1.6 million more for the past five months which – when taken out over the rest of the year – would cover the remaining gap of $2.5 million in the upcoming fiscal year’s budget.
That gap will be widened if the state takes another $1.2 million in property tax from the city.
“It isn’t quite that simple,” said Manteca Finance Director Suzanne Mallory, noting that car sales are taxed according to where people reside.
Yet if all encumbrances of the past 15 years on local jurisdictions were removed from local jurisdictions, Manteca would have almost $1.6 million in sales tax to run the city from just the past five months.
The state has taken almost $20 million from Manteca’s general fund and the redevelopment agency since 1990 to balance their budget. Most of it has not been repaid.
The end result is Manteca’s budget for the fiscal year starting July 1 would now be balanced with just five months of sales tax revenue. Instead, the state is now talking about taking away even more money from local cities - this time up to $1.2 million in property tax from Manteca – to help cover part of the state’s new $23.1 billion deficit. Ironically, it is property taxes that the state gave to the city to replace the sales tax they took.
The state – as part of another budget band-aid – delayed passing on a percentage of the local sales tax for three to nine months to improve their cash flow. That is responsible for part of the gap between what Manteca received and what it is entitled to receive. And now that the state is facing a cash flow crisis on top of the $23 billion deficit, there is a question whether if the delayed payments will be delayed even further to worsen the city’s fiscal bottom line even more.
“We can expect the state to rob us blind,” said Manteca Councilman John Harris.
Harris for the past year has been advocating rebuilding the state from the bottom up through the calling of a constitutional convention.
“It’s broken and it’s got to be fixed,” Harris said.
Harris added that “John Q. Public groups all government together when it comes to money problems” and more likely than not doesn’t care if most of the city’s financial woes are a direct result of the state “borrowing” local money and then not repaying it as promised.
“I don’t even think I can explain to you the triple flip.” Harris said.
Under the new revenue “swapping” procedures put in place in 2004 —commonly referred to as the “triple flip”—the following changes occurred:
•The state sales tax remains at 7.25%. However, the local government portion of the statewide rate decreased by 0.25%, and the state portion increased by 0.25%.
•The county auditor in each county were directed to use property tax revenues to reimburse the county and cities within the county. They were required to set aside some funds 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 instructs county auditors to allocate revenues from the Compensation Fund to the county and to the cities within the county.
•Since a portion of the County Educational Revenue Augmentation Fund was set aside to offset sales and use tax losses, schools receive less revenue from county property taxes. The State of California uses state general fund revenues to protect the minimum-funding guarantee of Proposition 98.
The answer: When it flows through the coffers of the State of California.
Manteca’s general fund share of the 9.25 cents sales tax on every dollar is supposed to be one cent. But the so-called “triple flip” put in place in 2004 to try and ease the $30 billion deficit that incurred on former Gov. Gray Davis’ watch took 25 percent of the penny each local jurisdiction received, gave it to schools and then back filled it with property tax. Now the state wants to borrow the property tax that they used to replace the sales tax they took.
In the first five months of 2009, Manteca recorded $5.2 million in general fund sales tax as opposed to $5.6 million for the same January to May period in 2008.
At the same time, the half-cent sales tax Manteca collects for public safety came to $3.4 million. If the general fund sales tax was left intact, that would mean the city should be getting $1.6 million more for the past five months which – when taken out over the rest of the year – would cover the remaining gap of $2.5 million in the upcoming fiscal year’s budget.
That gap will be widened if the state takes another $1.2 million in property tax from the city.
“It isn’t quite that simple,” said Manteca Finance Director Suzanne Mallory, noting that car sales are taxed according to where people reside.
Yet if all encumbrances of the past 15 years on local jurisdictions were removed from local jurisdictions, Manteca would have almost $1.6 million in sales tax to run the city from just the past five months.
The state has taken almost $20 million from Manteca’s general fund and the redevelopment agency since 1990 to balance their budget. Most of it has not been repaid.
The end result is Manteca’s budget for the fiscal year starting July 1 would now be balanced with just five months of sales tax revenue. Instead, the state is now talking about taking away even more money from local cities - this time up to $1.2 million in property tax from Manteca – to help cover part of the state’s new $23.1 billion deficit. Ironically, it is property taxes that the state gave to the city to replace the sales tax they took.
The state – as part of another budget band-aid – delayed passing on a percentage of the local sales tax for three to nine months to improve their cash flow. That is responsible for part of the gap between what Manteca received and what it is entitled to receive. And now that the state is facing a cash flow crisis on top of the $23 billion deficit, there is a question whether if the delayed payments will be delayed even further to worsen the city’s fiscal bottom line even more.
“We can expect the state to rob us blind,” said Manteca Councilman John Harris.
Harris for the past year has been advocating rebuilding the state from the bottom up through the calling of a constitutional convention.
“It’s broken and it’s got to be fixed,” Harris said.
Harris added that “John Q. Public groups all government together when it comes to money problems” and more likely than not doesn’t care if most of the city’s financial woes are a direct result of the state “borrowing” local money and then not repaying it as promised.
“I don’t even think I can explain to you the triple flip.” Harris said.
Under the new revenue “swapping” procedures put in place in 2004 —commonly referred to as the “triple flip”—the following changes occurred:
•The state sales tax remains at 7.25%. However, the local government portion of the statewide rate decreased by 0.25%, and the state portion increased by 0.25%.
•The county auditor in each county were directed to use property tax revenues to reimburse the county and cities within the county. They were required to set aside some funds 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 instructs county auditors to allocate revenues from the Compensation Fund to the county and to the cities within the county.
•Since a portion of the County Educational Revenue Augmentation Fund was set aside to offset sales and use tax losses, schools receive less revenue from county property taxes. The State of California uses state general fund revenues to protect the minimum-funding guarantee of Proposition 98.
