June 8, 2020

The Honorable Toni Atkins, President pro Tempore

California State Senate
State Capitol, Room 205
Sacramento, CA 95814

The Honorable Anthony Rendon, Speaker of the Assembly

California State Assembly
State Capitol, Room 219
Sacramento, CA 95814

RE: Proposed Amendments to Revenue & Taxation Code Section 97.2 in Education Omnibus
Trailer Bill with May Revision Amendments – OPPOSE

Dear Honorable President Pro Tempore Atkins and Honorable Speaker Rendon:

The Board of Supervisors for the city and county of San Francisco and the counties of Marin, Napa,
San Mateo, and Santa Clara (collectively, the “Boards”) strongly oppose the provision in the
Education Omnibus Trailer Bill that would amend Revenue and Taxation Code section 97.2 to add
new subsection (d)(2)(B) to impose civil penalties on counties if they fail to comply with guidance just
recently issued by the Department of Finance (DOF) regarding Educational Revenue Augmentation
Fund (ERAF) allocations. This issue currently impacts the Counties of Marin, Napa, San Mateo, and
Santa Clara and the City and County of San Francisco (the “Counties”) but could impact additional
counties in the future. The proposal is unfairly punitive and improper, especially given the
significant fiscal challenges facing our counties, and we urge you to reject it.

The proposal will harm the most vulnerable: The Counties pride themselves in providing
programs to bridge inequities and focus on lifting vulnerable communities. The proposed changes will
likely result in our communities losing an important source of discretionary revenue used to provide
many General Fund supported programs. This could significantly impact our social services,
immigration, childcare, healthcare, mental health, and other safety net programs desperately needed by
our disadvantaged communities, especially during this pandemic.

The proposal is premature: There is significant disagreement between the State Agencies
internally, and also with the auditor-controllers, that must be reconciled. The Legislative Analyst’s
Office (“LAO”) and DOF differ significantly on financial impact. LAO calculated the State budget
impact to be $350 million, whereas DOF’s new guidelines calculated it to be $250 million. A 40%

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difference simply cannot result from the same methodology. Furthermore, the State Controller’s
Office has audited the Counties for years and had no audit findings with the Counties’ methodologies.
Our auditor-controllers cannot fully reconcile the DOF guidelines either. We urge you to instead
allow our auditor-controllers the opportunity to work with the Controller, DOF, and other stakeholders
to actually identify the relevant issues and work through them in good faith.

Retroactivity and Civil Penalties are Improper and a Dangerous Precedent: The proposed
amendment is retroactive to fiscal year 2018-19, but the guidelines were only just created and issued
three days ago. As such, in some instances, the proposal seeks money that has already been spent.
The proposal also imposes unprecedented civil penalties and interest. Civil penalties suggest
misconduct, and they are unwarranted and punitive, and create a dangerous precedent for all local
governments across California. Retroactivity and civil penalties must be removed from the proposed
trailer bill.

The Counties and the State face unprecedented fiscal challenges. But all levels of government should
be working together to solve the crisis at hand. An attempt to shift funds to the State based on
unsubstantiated allegations that the Counties are somehow not following the law is simply wrong. We
respectfully request that you oppose the DOF proposal.

Sincerely,

Cindy Chavez, President Warren Slocum, President

Santa Clara County Board of Supervisors County of San Mateo

Norman Yee, President Katie Rice, President

City and County of San Francisco Marin County Board of Supervisors

Diane Dillon, Chair

County of Napa

c: The Honorable Holly Mitchell, Chair, Senate Budget and Fiscal Review Committee
The Honorable Phil Ting, Chair, Assembly Budget Committee
Keely Martin Bosler, Director, Department of Finance
Santa Clara County Legislative Delegation
San Mateo County Legislative Delegation
San Francisco City and County Legislative Delegation
Marin County Legislative Delegation
Napa County Legislative Delegation
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