The 2014-15 Budget: Pilot Program to Improve Property Tax Administration

The 2014-15 Budget: Pilot Program to Improve Property Tax Administration MAC TAYLOR • L E G I S L A T I V E A N A L Y S T • MARCH 13, 2014 Summary The property tax is a major source of revenue for local governments, raising more than $50 billion annually for counties, cities, special districts, and schools and community colleges. Counties administer the property tax. While most local governments that receive property taxes reimburse the county for their proportionate share of administrative costs, schools and community colleges (“schools”) are not required to pay these costs. Instead, counties pay the schools’ share of costs as well as their own. Statewide, counties pay about two-thirds of the cost to administer the tax while receiving less than one-third of the revenues they collect. As a result of this imbalance, there have been long-standing concerns that counties might not fund property tax administration appropriately. If property tax administration were not funded appropriately, this could have a fiscal effect on the state because local property taxes that go to schools generally offset required state spending on education. The 2014-15 Governor’s Budget proposes a modest pilot program to study potential improvements to the current property tax administration system. We recommend that the Legislature approve a pilot program but make several modifications to (1) ensure each county has the same fiscal incentive to participate, (2) provide participating counties greater funding certainty, (3) promote representative and consistently measured results, and (4) potentially increase near-term state savings on school spending. Background page) shows how property tax revenues were distributed statewide to these governments in The property tax is California’s second largest 2012-13. In future years, the share of the property source of revenue, raising more than $50 billion tax allocated to schools and community colleges annually for local governments—including (schools) will increase to more than 50 percent due cities, counties, special districts, and school and to the end of a temporary adjustment known as the community college districts. Figure 1 (see next “triple flip” and the dissolution of redevelopment. 2014-15 BUDGET Property Tax Allocation Varies Across the assessors determine the taxable value of property, State. The distribution of property taxes shown county tax collectors bill property owners, and in Figure 1 reflects statewide averages. As we county auditors distribute the revenue among discuss in our report, Understanding California’s local governments. Statewide, county spending Property Taxes (November 2012), the share of for assessors’ offices exceeds $500 million each countywide property taxes allocated to specific year. County costs for property tax collectors and counties, schools, and other local governments auditors are unknown but much smaller. varies across the state. Among other factors, Paying for Property Tax Administration. this variation reflects taxation decisions of the For most of the state’s history, counties paid all mid-1970s. In some counties, the distribution of property tax administration costs using county property tax revenues differs considerably from resources. After passage of Proposition 13 in the distribution shown in Figure 1. For example, 1978 and some changes to state-county program Orange, San Mateo, and Santa Clara Counties get a responsibilities, however, counties argued that Graphic Sign Off smaller share of the countywide property tax than they did not have sufficient revenues to continue the share shown in Figure 1 and schools in these paying all these cosStse. Icnr e19ta9r0y, the state authorized counties receive above-average shares. Los Angeles counties to split theAsen caolsytss tamong all governments and San Francisco Counties, in contrast, get a receiving property tax revenues, including schools MPA larger share of the countywide property tax and (Chapter 466, Statutes of 1990 [SB 2557, Maddy]). Deputy their schools receive smaller shares. One year later, in response to concerns from County Role in Property Tax Administration. schools, the state prohibited counties from charging Counties administer the property tax. County schools, in effect requiring counties to cover the schools’ share of these costs (Chapter 75, Statutes of Figure 1 1991 [SB 75, Maddy], and How Are Property Taxes Chapter 282, Statutes of Allocated Among Local Governments?a 1991 [SB 282, L. Greene]). 2012-13 Current Cost Allocation System Raises Concerns. Counties Schools and Making counties responsible Community Colleges for covering the schools’ share of property tax administrative costs, in turn, has prompted Former Redevelopment concerns that counties Obligations might not fund these activities appropriately. This is because counties pay a Special Districts large share of property tax Cities administrative costs (often a As a percentage of total revenue from the 1 percent basic rate and voter-approved debt rates. more than two-thirds) yet receive a small share of ARTWORK #140117 2 Legislative Analyst’s Office www.lao.ca.gov Template_LAOReport_mid.ait 2014-15 BUDGET property tax revenues (often less than one-third). supervisors are more likely to approve assessor If tax administration is not funded appropriately, office spending proposals that generate enough counties could collect less property taxes for all county benefits to offset the county’s costs. We note local governments than they otherwise would. This that the state uses a similar analytical approach would also affect the state because most property as part of its review of budget proposals from the tax revenue allocated to schools offsets required Franchise Tax Board, the agency that administers state spending on education. the state’s personal income and corporation taxes. Prior State Actions to Support County Cost Allocation System Weakens Incentive to Property Tax Administration. Recognizing Fund Property Tax Administration Appropriately. the state’s fiscal interest in school property tax Under the current cost allocation system, counties revenues, the Legislature has created programs to pay their share and the school’s share of property support county property tax administration on tax administration costs. A portion of the several occasions. These efforts, summarized later benefits from county spending on administration in this brief, were temporary in nature, modest (increased property taxes) nevertheless go to in scope, and oriented toward giving all counties schools, and do not benefit the county. Given this some financial resources. The program evaluations fiscal incentive, when considering proposals for did not provide useful information and tended to funding the assessor’s office, county supervisors overstate additional property tax collections. might decide not to approve spending that benefits all local governments financially but imposes a net Property Tax Administration— negative fiscal impact on the county itself. County Perspective Incentive to Fund Property Tax Counties Pay Disproportionate Share of Administration Is Weaker in Some Counties Property Tax Administration Costs. As discussed Than Others. The fiscal effect of this cost above, the average county pays more than allocation system varies considerably among two-thirds of the costs to administer the property counties, depending on the share of property taxes tax, yet receives less than one-third of revenue allocated to the county, schools, and other local collected. Cities and special districts typically governments. Figure 2 (see next page) shows the pay the remaining one-third of property tax county benefits and costs for three hypothetical administration costs and receive about one-third counties considering a proposal to increase funding of the revenue. Schools, in contrast, usually receive for property tax administration. In the case of the over 40 percent of the property tax but do not pay County A (low county share), the county would any property tax administration costs. In effect, receive 10 percent of any increased property tax counties pay their share and the schools’ share. revenues, but would pay 70 percent of the proposal’s County Assessors Must Justify Their Spending. costs. Counties B and C would receive 25 percent or County assessors have a statutory obligation to 50 percent of the revenues while paying 75 percent administer the property tax fairly and effectively. or 80 percent of the costs. In many cases, therefore, As part of county government, however, a proposal to increase funding for property tax funding for county assessors’ offices depends administration would need to show that it could on annual budget decisions by county boards of generate considerable returns in order for the supervisors. Given the many competing uses for county to “break even.” In the case of County A, county resources, it is reasonable to assume that for example, the county would need to generate www.lao.ca.gov Legislative Analyst’s Office 3 2014-15 BUDGET returns of seven-to-one in order to break even. local property taxes offset about $16 billion in Thus, we characterize County A’s incentive to required state spending on education. (In certain fund property tax administration as “very low.” instances, under Proposition 98’s so-called “Test 1” County B supervisors, in contrast, would have to calculation, school property tax revenue increases determine that the assessor would generate roughly the overall level of school funding and does not $3 for each additional dollar spent on property offset the required state contribution.) tax administration, and County C supervisors The state also has a policy interest in a fairly would require about $2. Under a proportionate administered system with accurate determinations funding system, in contrast, each county’s share of value, complete property tax rolls, accessible of costs would be the same as its share of benefits. records, and full compliance with the laws In these cases, boards of supervisors would have a governing property tax administration. Such a greater financial incentive to provide resources to system likely would function more efficiently, be assessors’ offices. viewed more favorably by taxpayers, and would help ensure that property owners in different Property Tax Administration— counties are treated similarly. State Perspective Past Efforts to Improve System Were Modest Though considered a local tax, the property and Temporary. Recognizing the disproportionate tax has a major impact on the state’s budget. Under share of administrative costs borne by counties, the the state’s education finance system, the amount state has provided grants and loans for these costs of school funding each year is set according to on several occasions over the past 20 years. First, Proposition 98 and paid for with a combination the 1994-95 budget package included $25 million in of local property tax revenue and state General grants to counties for property tax administration. Fund revenue. Increases in property tax revenues This grant program helped reduce county assessor generally allow for decreases in state General Fund backlogs that resulted from the early 1990s recession. spending on education. The state therefore benefits Over the following three years, the administration from additional local property taxes. In 2012-13, loaned $60 million annually to counties for property tax administration. The administration forgave Figure 2 these loans if additional Counties May Face Weak Incentive to property taxes for schools Fund Property Tax Administration exceeded the county’s loan County A County B County C amount. (Ultimately, all Low Average High loans were forgiven.) Later, Share of Property Taxes County Share County Share County Share between 2002 and 2005, County 10% 25% 50% Schools 60 50 30 the state operated a similar Cities and special districts 30 25 20 loan program funded at Totals 100% 100% 100% $60 million annually. The County share of costs 70% 75% 80% Legislature ended this County share of benefits 10 25 50 program as part of the Amount county needs to “break even” Seven-to-one Three-to-one About two-to-one County incentive to fund property tax Very low Low Moderate 2005-06 budget agreement. administration 4 Legislative Analyst’s Office www.lao.ca.gov 2014-15 BUDGET Past efforts to improve property tax property taxes. Staff hired with grant funds could administration produced some positive results. The undertake the following activities: programs provided additional resources to process • Assess new construction. reassessments and to meet audit requirements. They also generally resulted in additional property • Assess property that changed ownership. tax revenue. Evaluation of the programs, however, • Assess property additions or modifications. likely overstated the amount of additional revenues they generated and did not provide data sufficient • Assess property that was not taxed in prior to evaluate the programs’ overall effectiveness. years. Proposal • Reassess properties that received tax reductions in recent years. The 2014-15 Governor’s Budget proposes a modest grant program to study ways to improve • Respond to and defend property tax property tax administration. The administration appeals. proposes appropriating $7.5 million from the Counties Must Report Results. Each year, General Fund to begin a three-year pilot program, participating counties would have to report to the called the State-County Assessors’ Partnership administration the number and taxable value of Agreement Program. The administration expects properties added to the local property tax roll as the program to generate additional property taxes a result of activities undertaken with grant funds. for schools and other local governments. In addition to new or updated assessments, each Additional Staff to Accelerate, Increase, county would report the total amount of property and Preserve Property Tax Revenues. Under taxes “preserved” when staff successfully defended this proposal, the Department of Finance would a property owner’s appeal to reduce their property’s provide state funds for nine counties—two urban, taxable value. four suburban, and three rural counties, all to be Measuring Success. Each year, the selected later—to hire additional county assessor’s administration would determine whether each office staff. Participating counties would match county’s pilot was successful. The administration the state grant on a dollar-for-dollar basis. New defines success as a county pilot resulting in staff hired with these funds would be directed to additional property tax revenues being allocated accelerate, increase, and preserve county property to schools that are at least three times larger than tax revenue. Accelerated revenue occurs when the amount of the state grant in that county. property tax collections happen sooner than they (Additional revenue from the program includes otherwise would. Increased revenue occurs when revenue accelerated, increased, or preserved by staff update the taxable value of properties that staff hired using state grants and county matching received tax reductions during the real estate crisis. funds.) The administration’s calculation would (These properties are known as Proposition 8 [1978] not vary by county based on the schools’ share decline-in-value properties.) Preserved revenue of countywide property taxes in that county. occurs when staff successfully defend the initial The Director of Finance would have authority to taxable value of a property when a property owner terminate the grant program in any county that appeals that value. Otherwise, an appeal would does not meet this level of return. result in a smaller tax bill and therefore reduced www.lao.ca.gov Legislative Analyst’s Office 5 2014-15 BUDGET Findings From Pilot Program to Inform participants, full-scale results may differ Future Decisions. The administration’s grant significantly from those of the pilot. This program is a three-year pilot program, after which is because, as the program expands to the administration would use its findings to make new participants, these participants might a “recommendation as to whether the Program perform differently. Therefore, having should be continued in its current form, expanded representative participants makes pilot to include additional county assessors’ offices, or programs more helpful for policy makers. terminated in 2017-18.” • Measured Accurately and Consistently. Analysis In order for the state to make informed decisions about whether to expand a pilot The Governor’s proposal recognizes the state’s program, the program’s results must be interest in property tax administration. The measured accurately and consistently current system does not give counties appropriate for all participants. This way, the state incentives regarding property tax administration can appropriately consider the costs and funding, potentially resulting in delayed and lower benefits of full-scale implementation. If revenue for local governments (including schools). outcomes are measured inaccurately or The administration’s proposal is one approach the inconsistently across participants, it may state could pursue to improve county incentives be impossible to notice important trends to fund property tax administration and merits or identify areas where the program might serious consideration. In our view, however, benefit from modifications prior to full the administration’s pilot program has several implementation. shortcomings. We discuss these below after first outlining the characteristics of an effective pilot Is the Administration’s Proposal an program. Effective Pilot Program? What Makes an Effective Pilot Program? Requiring Dollar-for-Dollar County Match Governments, nonprofit organizations, and Will Influence Which Counties Apply. To receive private businesses frequently use pilot programs state grants under the pilot program, counties must to test new projects on a small scale before agree to match the amount of state funds they implementing larger, more costly, versions. An receive. The administration’s proposed matching effective pilot program evaluates a project’s requirement likely would influence the types of outcomes—its costs, benefits, and effectiveness—for counties that apply. Figure 3 illustrates this fiscal a small but representative portion of the potential effect for the three hypothetical counties (discussed project. In particular, an effective pilot proposal is: earlier in Figure 2), under the assumption that each dollar of grant funding for property tax • Representative. Participants selected for administration generates three dollars of additional a pilot project should be similar to the revenue. Specifically, County A (low county share) additional participants that would be pays $50,000, yet receives only $30,000 of the included in the full-scale project. This resulting revenues. County C (high county share), way, the pilot’s results are more likely to in contrast, pays $50,000, and receives $150,000 be replicated. If the pilot’s participants in additional property taxes. Overall, the ratio of are systematically different from other 6 Legislative Analyst’s Office www.lao.ca.gov 2014-15 BUDGET benefits to costs for high-share counties would benefit most in cases where the counties have little tend to be greater than for low-share counties or no incentive to participate. because high-share counties would receive a larger Achieving “Success” Easier for Some Counties portion of additional property taxes generated Than Others. According to the administration, its under the pilot, yet they would be required to pilot program would be successful if accelerated, match the same amount to participate. Given increased, and preserved revenue allocated to these fiscal incentives, some counties, particularly schools as a result of the grant program are at lower-share counties, may not participate in the least three times greater than the state’s grant pilot because the expected benefits (in this case, the amount in each county. (This measure would be amount of increased revenue) of doing so would calculated annually for each participating county, be outweighed by the required dollar-for-dollar and the administration could discontinue funding matching amount. Because of this influence, for counties that do not achieve this three-to-one counties that participate in the pilot may not be return.) As shown in the section of Figure 3 labeled representative of counties that do not participate. “State Perspective,” additional property taxes for State Benefit Smallest in Counties Most schools depend on (1) the amount of additional Likely to Apply. Counties that receive a relatively property taxes resulting from the pilot, and (2) the large share of countywide property taxes (such share of these revenues allocated to schools. as County C) are most likely to benefit from, and In order to meet the administration’s target, a therefore apply to, the Figure 3 proposed pilot program. Benefits Vary Under Administration’s Proposal The share of property taxes allocated to schools County A County B County C in these counties tends to Low County Average County High County Share of Property Taxes Share Share Share be smaller than in other County 10% 25% 50% counties. Conversely, Schools 60 50 30 as shown in Figure 3, a Cities and special districts 30 25 20 relatively small share of Totals 100% 100% 100% each additional tax dollar Under Administration’s Proposal generated by the pilot Total Grant Amount $100,000 $100,000 $100,000 program in County C State portion 50,000 50,000 50,000 would provide state benefit County portion 50,000 50,000 50,000 by reducing required state Revenue Generateda $300,000 $300,000 $300,000 spending on education. In Schools/state portion 180,000 150,000 90,000 County portion 30,000 75,000 150,000 general, the state would tend to benefit least from State Perspective Net impact $130,000 $100,000 $40,000 the pilot program in Ratio of benefits to costs 3.6 3.0 1.8 counties where the county County Perspective government has the most Net impact -$20,000 $25,000 $100,000 to gain from participating Ratio of benefits to costs 0.6 1.5 3.0 a in the pilot. Consequently, For illustrative purposes, example assumes that each dollar of grant funding for property tax administration generates three dollars of additional property tax revenue. In practice, the amount of the state would tend to revenue generated per dollar of grant funding would vary in each county. www.lao.ca.gov Legislative Analyst’s Office 7 2014-15 BUDGET county with a lower allocation to schools, such as Each County Category Would Receive Same County C, would need to generate a greater overall Grant Amount. The administration recognizes that return than other counties. Alternatively, a county counties vary in terms of the number and value with a large school share, such as County A, could of properties in their jurisdiction, their so-called meet its target with a lower overall return on pilot “assessed valuation.” Mindful of this, grants of funds. Given this variability among counties, it is different sizes would be made under the proposed unclear whether the administration’s three-to-one pilot: $1,875,000 to urban counties, $825,000 to target is the best measurement of the program’s suburban counties, and $150,000 to rural counties. effectiveness. However, variation within each category remains Increased and Preserved Revenue problematic. For example, Monterey County and Difficult to Quantify. Federal, state, and local Modoc County would be eligible as rural counties governments regularly invest in tax administration and receive the same grant amounts, yet Monterey improvements in order to reduce the amount of County’s assessed valuation is 50 times larger than owed taxes that go uncollected each year. The Modoc County’s. Thus, the grant would increase impact of these efforts is often difficult to calculate. Modoc County’s property tax administration This is because it is not possible to know how budget by 36 percent, while Monterey County’s much revenue would be collected in the absence property tax administration budget would increase of increased spending on tax administration. by only 3 percent. For example, though we can calculate how much Such large differences in relative grant amounts additional revenue each additional employee might affect county efforts to improve property tax collected, we do not know how much of that same administration. For example, a large grant might be revenue would have been collected otherwise. As difficult to implement quickly and cost-effectively. a result, the amount of increased or preserved Alternatively, some counties might not require such revenue reported by counties under this pilot a large grant to make a significant new investment program could somewhat overstate the impact of in their property tax systems. On the other hand, the pilot funds. grants that are small may be insufficient to hire Accelerated Revenue Treated the Same as qualified staff. Ultimately, these differences might Increased Revenue. In reporting its outcomes unnecessarily influence pilot outcomes. to the administration, each participating county Administration’s Selection Process Unclear. is required to estimate the amount of additional Under the administration’s proposal, all counties property taxes collected as a result of activities could apply for pilot funds and nine counties would undertaken with its pilot grant. Many of these be selected—two urban, four suburban, and three activities focus on accelerating revenues, meaning rural counties. In the event that more than nine they would result in collecting revenue earlier counties apply, it is unclear what process or criteria than it otherwise would be (without pilot funds). the administration would use to ultimately select Although local governments and the state receive participating counties. some benefit from accelerated property tax Recommendations revenues, they derive more lasting fiscal benefits from increased revenue. It will be important We recommend the Legislature approve the for counties to distinguish carefully between administration’s pilot proposal but modify the accelerated and increased revenue. proposal in the following four ways. 8 Legislative Analyst’s Office www.lao.ca.gov 2014-15 BUDGET Modify County Matching Amount to Ensure in the pilot. Counties with higher (lower) shares of Representative Participation. As discussed their countywide property taxes would be required earlier, the administration’s dollar-for-dollar to pay a higher (lower) matching amount, but in turn county match would likely influence the types of receive a larger (smaller) share of additional property counties that apply, with counties that receive a taxes generated by the pilot. Therefore, each county large share of countywide property taxes more would face the same ratio of benefits to costs when likely to apply than lower-share counties. In choosing whether to participate in the pilot. addition to influencing the types of counties that Assuming the state still committed $7.5 million participate, it is likely that the greatest state benefit a year to the pilot, modifying the county matching from investing in property tax administration amount under our approach would reduce is with counties least likely to apply under the the overall amount of additional state-county administration’s proposal. funding for property tax administration under As an alternative, we recommend modifying this program. This would occur because instead each county’s matching amount to reflect its of matching state funds dollar for dollar, making proportionate share of benefits received from available a total of $15 million in state-county additional spending on property tax administration. funds annually, counties would match the share In other words, under our suggested approach, of grant funds equal to their share of countywide each county would pay Figure 4 its share of the total Benefits Same for Each County increase in funding from Under LAO Recommendation the pilot. As illustrated County A County B County C in Figure 4, each county Low County Average County High County would face the same fiscal Share of Property Taxes Share Share Share incentive to participate County 10% 25% 50% in the pilot. For example, Schools 60 50 30 if the total grant under Cities and special districts 30 25 20 the pilot was $100,000 Totals 100% 100% 100% and County A’s share Under LAO Recommendation of countywide property Total Grant Amount $100,000 $100,000 $100,000 taxes was 10 percent, the State portion 90,000 75,000 50,000 county would be required County portion 10,000 25,000 50,000 to contribute 10 percent of Revenue Generateda $300,000 $300,000 $300,000 Schools/state portion 180,000 150,000 90,000 the grant cost, or $10,000, County portion 30,000 75,000 150,000 under our approach. This State Perspective would help ensure that Net impact $90,000 $75,000 $40,000 a representative group Ratio of benefits to costs 2.0 2.0 1.8 of counties participated. County Perspective This would occur because Net impact $20,000 $50,000 $100,000 each county would face Ratio of benefits to costs 3.0 3.0 3.0 a For illustrative purposes, example assumes that each dollar of grant funding for property tax the same potential benefits administration generates three dollars of additional property tax revenue. In practice, the amount of and costs of participating revenue generated per dollar of grant funding would vary in each county. www.lao.ca.gov Legislative Analyst’s Office 9 2014-15 BUDGET property taxes. In most cases, this is a smaller rural. Each county within a category would receive amount than the current match because counties the same amount, despite the wide variation within typically receive less than 50 percent of property categories described earlier. Some counties would taxes. As a result, overall state-county funding therefore receive larger grants, relative to their size, would be somewhat smaller—likely $10 million than other counties. To address this imbalance, we to $12 million—than under the administration’s recommend allocating grants in proportion to each proposal. Paradoxically, however, this modification county’s total property assessed valuation. Mindful might actually increase near-term state General that pilot funds are limited, it may be necessary Fund savings. This is because our modified to cap the grant amount for larger counties, in matching grant would not discourage counties order to preserve adequate funds for all nine that receive lower shares of countywide property counties. Similarly, it may be necessary to provide a taxes from applying. This modification would help minimum amount for rural counties to ensure that maximize state savings because these counties they could hire at least one half-time position. (1) face the weakest incentive to fund property tax Select Counties Randomly When Possible. administration appropriately and (2) tend to be If more than nine counties apply to participate in counties in which schools receive a large share of the pilot program, the administration indicates countywide property taxes. that it would select the final participants based on Provide State Grant for Three Years. Under a review of each county’s application. It is unclear the proposal, the administration could end a what criteria the administration would use to county’s participation if that county’s grant review county applications. Some criteria—for program did not meet the three-to-one target. If instance, selecting counties in which a large share the administration rejected these “low-performing” of countywide property taxes go to schools—would counties, the pilot’s results would not account influence the types of counties participating in the for their performance and thereby overstate the pilot. This could result in the pilot’s outcomes being program’s effectiveness. For the pilot program to systematically biased. We therefore recommend, represent all counties (and thus be an accurate where possible, that the administration be required statewide barometer), it must not systematically to select counties randomly (provided that each exclude low-performing counties. In the near term, county meets basic expectations, such as agreeing of course, this would reduce return on the state’s to collect results from the pilot program). grant funds. In our view, however, the importance Future of Property Tax of a representative pilot outweighs maximizing the Administration state’s near-term savings. Thus, we recommend removing the three-to-one revenue target, in effect The Legislature and administration have had guaranteeing grant funds to each participating long-standing concerns about county incentives county for all three years of the pilot. (This would for funding property tax administration. Over also provide county assessors greater funding the years, a wide variety of approaches to address certainty.) this issue have been proposed. Before making any Allocate State Grant in Proportion to long-term decisions on this matter, the Legislature Total Property Value. State grants under the would benefit from a better understanding of administration’s proposal would be allocated to (1) how counties would spend additional resources three categories of counties—urban, suburban, and for property tax administration (for example, 10 Legislative Analyst’s Office www.lao.ca.gov 2014-15 BUDGET hiring staff or consultants, increasing salaries, or • Allowing counties to deduct each school’s purchasing information technology) and (2) the proportionate share of property tax extent to which school property taxes would administration costs from the school’s increase in the short term (from accelerated share of property tax revenues. revenues) and long term (from increased revenues). • Allowing counties to deduct each school’s The state knows very little about these details. proportionate share of future increases A better understanding of these dynamics not in county funding for property tax only would help the state choose what approach administration from the school’s share it should take, but also would help policy makers of property tax revenues. Under this tailor that approach to best meet the state’s approach, which our office proposed in priorities. In our view, an effective pilot program is Improving the Incentives for Property an important first step and therefore merits serious Tax Administration (1997), increases in consideration. property tax administration costs would be Going forward, the Legislature has an array of paid for by all of the local governments that alternatives for addressing concerns about county benefit from property taxes. incentives to fund property tax administration. Results from a pilot program could help inform • Targeting state funds to those counties policy makers as they weigh these alternative where schools would benefit most from approaches, which include: additional resources for property tax administration. www.lao.ca.gov Legislative Analyst’s Office 11 2014-15 BUDGET LAO Publications This brief was prepared by Chas Alamo and reviewed by Marianne O’Malley. The Legislative Analyst’s Office (LAO) is a nonpartisan office that provides fiscal and policy information and advice to the Legislature. To request publications call (916) 445-4656. This brief and others, as well as an e-mail subscription service, are available on the LAO’s website at www.lao.ca.gov. The LAO is located at 925 L Street, Suite 1000, Sacramento, CA 95814. 12 Legislative Analyst’s Office www.lao.ca.gov