"Finance calculates that there were no additional revenues and no increased savings to the state from the implementation of Article XIII A, Section 2.1 in fiscal year 2021-22. Therefore, by September 15, 2022, the Controller will not transfer any funds to the California Fire Response Fund or the County Revenue Protection Fund pursuant to Section 2.2(e)."
 

Full pdf here: (I’ll try and get a link to see the pdf better) 

DEPARTMENTOF
Gavin Newsom , Governor FINANCE

September 1, 2022
Honorable Toni Atkins President pro Tempore
Honorable Scott Wilk Senate Republican Leader
HonorableNancy Skinner. Chair
Senate Budget and Fiscal Review Committee
Honorable Anthony Portantino, Chair Senate Appropriations Committee
Honorable Betty T. Yee State Controller
Honorable Anthony Rendon Speaker of the Assembly
Honorable James Gallagher Assembly Republican Leader
Honorable Phil Ting, Chair Assembly Budget Committee
Honorable ChrisR. Holden, Chair Assembly Appropriations Committee
TRANSFER TO THE CALIFORNIA FIRE RESPONSE FUND AND THE COUNTY REVENUE PROTECTION FUND

In November 2020. the voters passed Proposition 19, the Home Protection for Seniors, Severely Disabled, Families, and Victims of Wildfire or Natural Disasters Act.The Act added Sections 2.1, 2.2, and 2.3 to Article XIII A of the California Constitution. Section 2.1 expanded the ability for certain homeowners to transfer the taxable value of their primary residence to a replacement residence and restricted the ability for homeowners to transfer the lower taxable value of inherited properties to their children or grandchildren, which results in a net increase in local property taxrevenues. Section 2.2(b) created the California Fire Response Fund a nd the County Revenue Protection Fund to receive transfers of the additional revenues and savings that accrue to the state, as determined using a calculation prescribed by the measure. due to the additional local property tax revenues resulting trom Section 2.1.
Section 2.2(d) (1) of Article XIII A of the California Constitution requiresthat the Director of Finance, on or before September 1, 2022, and annually thereafter through September 1, 2027, calculate the additional revenues and savings that accrued to the state from the implementation of Section 2.1, including, but not limited to, any increase in state income tax revenues and net savingsto the state arising from any reduction in the state's funding obligation under Section 8 of Article XVI, during the immediately preceding fiscal year ending on June 30.The measure specifies that in making the calculation, Finance shall use a c t u a l d a t a o r b e s t a v a i l a b l e e s t i m a t e s w h e r e a c t u a l d a t a i s n o t a v a i l a b l e . T h e c a l c u la t i o n shall be final and shall not be adjusted for any subsequent changes in the underlying data.
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Finance shall certify the results of the calculation to the Legislature and the Controller no later than September 1of each year.
P u r s u a n t t o S e c t i o n 2 . 2 ( e ) . b y S e p t e m b e r 1 5 f o l l o w i n g e a c h d e t e r m i n a t i o n b y Fi n a n c e under Section 2.2(d). the Controller isrequired to transfer funds equaling 75 percent of that amount to the California Fire Response Fund and funds equaling 15 percent of that amount to the County Revenue Protection Fund.
Two interactions between local property taxes and the state budget are relevant to the calculation. First. personal income taxpayers can deduct real estate taxes from their gross income. thereby reducing their income tax liability. Hence, an increase in local property taxes will lead to a decrease in state personal income tax revenue. Second, increased local property tax revenues can potentially result in savings to the state through a reduction in the state'sfunding obligation under Section 8 of Article XVI (Proposition 98).
Increase in local Property Tax Revenue
Section2.1(b) expandstheabilityofhomeownerswhoareover55yearsofage,severely disabled,orthevictimofa wildfireornaturaldisastertotransferthetaxablevalueoftheir primary residence to a replacement residence. Section 2.3(a)(1) states that revenue increases result from the sale and reassessment of original primary residences for outbound inter-county transfers pursuant to Section 2.1(b). Section 2.3(a)(2) states that revenue decreases result from the transferof taxablevalues of originalprimaryresidences located in other counties to replacement primary residences located within the county for inbound inter-county transfers pursuant to Section 2.1(b).
Finance calculates that in any fiscal year, the revenue increases to local property tax r e v e n u e s u n d e r S e c t i o n 2 . 3 ( a ) ( 1 ) w i l l e x c e e d t h e r e v e n u e d e c r e a se s t o l o c a l p r o p e r t y t a x revenues under Section 2.3(a)(2) due to the following:
• Under Section 2.1(b)(2)(A), for any transfer of taxable value to a replacement primary residence of equal or lesser va lue than the original primary residence. the taxable value of the replacement primary residence shall be deemed to be the taxable value of the original primary residence. When a transfer of taxable value to a replacement primary residence of lesser value occurs. the calculated revenue gain to the outbound county will exceed the calculated revenue loss to the inbound county for local property tax revenues.
• Under Section 2.1(b)(2)(B). for any transfer of taxable value to a replacement primary residence of greater value than the original primary residence. the taxable value of the replacement primary residence shall be calculated by adding the difference between the full cash value of the original primary residence and the full cash value of the replacement primary residence to the taxable value of the original primary residence. When a transfer of taxable value to a replacement primary residence of greater value occurs, the calculated revenue gain to the outbound county will be equal to calculated revenue loss to the inbound county for local property tax revenues.

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The<efO<e. Seclion 2.1 (b) In the aggregate will increase local property tax revel'l<Je$,
S e c t i o n 2 . t ( c ) n a r r o w s t h e r u l e s f O< h o m e o w n e r s t o b e a b l e t o l r o n s f e r t h e t o w e r t a x a b l e value ol inherited ptopertle$ to 1he!rc~ren 0< grondchldren byllmmng the lrol'1$fe<> to inheri1ed ptopertles .ned os o primary residence by o chid 0< grondchld and terms. In oddilion. Seclion 2.1(C) Increases the taxable value Hthe cosh value of the inherited poperty exceeds Ps taxable value by more than $1 mllon (adjusted fO< lnliollon every two yeor1). Since the change to Seclion 2 t(c) reduce$ the tax benefit fO< inherited properties. Anonce colculotes that Section 2.1(c) will Increase local ptoperly tax revenues.
Anonce has determined that since both Seclion 2.1(b) and Section 2.1(c) resUlt In revenue increases lo local property lox revenues. the implementa tion of Section 2.1 will Increase local property tax revenues.
Oecreas• In Stotelncome Tax Revenue
Changes in local poperty tax revel'l<Jes directly impact state per1onol Income tax revenue throughtherealestatetaxdeduction.whichallowstoxpoyMwhoItemizetheir dedvclions to reduce their taxable per10nol income IO< state Pef10nol Income lox pvrposes by the amount of property lex<!$ paid. Since. on aggregate. the implementation ol Section 2.1 willncreose local poperty lox paid by taxpayers. stole reel estate lox dedvclions wil inaeose. and stole personot Income lox revenues viii decrease. The<eiO<e. Finance colculotes that the<e wll be no Increase in state Income
toxreve,....,. os o resut of the lmplementolion of Section 2.I fO< fiscal yeot 2021-22.
No Chon~ in State Educolion Cost>
Changes In property lox revel'l<Jes at the local level con affect the state through the minimum funding guarantee under Proposition 98. which determines the minimum level of funding thai stole and local governments combined must spend on schools and comrl'l<Jnlly colleges each year. Each year, the minimum funding guorontee is detennined by comparing the results of three tests.
Under Tests2 0< 3. the state's required con1ribulion to the minimum tvndlng guarantee is determined by subtracting local property tax revenues from the minimum funding guarantee. In either Test. Increases to local property tax revenue con decrease the amount of state funding needed to reach the gvorontee which Y~&d result in savings t o t h e s t o l e . C o n v e r s e l y , u n d e r Te$1 I . c h a n g e s I n l o c a l f u n d i n g f r o m p o p e r t y t a x r e v e n u e do not affect the state's required con1ribulion to the minimum fvnding guarantee.
Becouse Test I was operative In fiscal yeor 2021-22. there were no net savings that accrued to the stole from theimplementationofSection 2.1 in fiscal year2021-22.

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Certified Calculat;on by th• Department of Finance
Pvrsvont to Section 2.2(d). Finance calculates tho! there were no oddilional revenues and no increased savings to the slate from the Implementation of Article XIII A. Section 2.1 in fiscal year 2021-22. Therefore. by September 15. 2022. the Controller will not transfer any funds to the California Fire Response Fund or the County Revenue Protection Fund pursuant to Section 2.2(e).
If you hove any questions. please contact
JOE STEPHENSHAW Director
By:
.. ERIKAU
Chief Deputy Director
cc: HonorableJimNielsen.ViceChoir.SenateBudgetandFiscalReviewCommittee Honorable Vince Fong. VICe Cho~. Assembly Budget Committee
Gabriel Petel<. Legislative Analyst (3)
Elisa Wynne. Stoff Director. Senate Budget and Fiscal Review Committee
Marl< McKenzie. Staff Director. Senate Appropriations Committee
Kirl< Feely. Budget Fiscal Director. Senate Repubfican Fiscal Office
Christopher W. Woods. Senate President pro Tempore's Office (2)
ChrisHan Griffith. Chief Consultant. Assembly BudgeI Committee
Joy Dickenson, Chief Consultant. Assembly AppropriaHons Committee
Joseph Shinstock. Fiscal Direc tor. Assembly Republican Caucus. Office of Poficy
and Budget
Paul Dress. Caucus Co-Chief of Staff. Assembly Republican Leader's Office
Katja Townsend. Capitol ~ector. Assembly Republican l eader's Office
Jason Sisney. Assembly Speaker's OffiCe (2)
Tam Marez. Chief. Bureau of Accounling and Consulting, State Accounting and
Reporting Division, State Controller's OffiCe