Many special districts have faced tough financial times over the last quarter century. Before Proposition 13, special districts received $945 million from property taxes (1977-78). In 1978-79, their property tax revenues dropped to $532 million, a loss of almost 50%.
Responding to this financial hardship, the Legislature created the Special District Augmentation Fund (SDAF) to provide a supplemental income for special districts. The state government sent state money to the SDAF in each county based on a formula in state law. The county supervisors, in turn, allocated the SDAF money to the special districts within their counties. The State took over a greater percentage of funding for schools from local governments to help local governments get through the Proposition 13 transition. This practice lasted from 1978 to 1992.
Faced with huge state budget deficits in 1992-93 and 1993-94, state officials shifted almost $4 billion annually in property taxes from local governments (cities, counties, special districts, and redevelopment agencies) to an Educational Revenue Augmentation Fund (ERAF) in each county. The property tax revenue in the ERAF supports schools. ERAF helps the state government fulfill its constitutional duty to fund schools. When the Legislature abolished SDAF in 1993-94, the state transferred $244 million in special district property tax revenues to schools. Because non-enterprise special districts rely almost entirely on property tax revenues, many were fiscally devastated as a result of the ERAF funding shifts. (See the box above.) Enterprise special districts were better able to make up for the lost revenue because they have fees that generate revenue and they rely less on property taxes.
Although state legislators have granted some partial relief to special districts, ERAF’s fiscal consequences remain especially harsh for non-enterprise districts. In 2000, Governor Gray Davis vetoed a bill that would have capped ERAF shifts. In 2001, bills that would have helped fire districts, library districts, and recreation and park districts failed to pass. The ERAF issue remains unsolved.
ERAF and the Fulton-El Camino Recreation and Park District
One special district that has been particularly devastated by the ERAF shift is the Fulton-El Camino Recreation and Park District in Sacramento County. This District lost more than $2.9 million in property tax revenue to ERAF between 1992-93 and 2001-02. As a non-enterprise district, it cannot recover these losses with service charges.
This revenue loss has caused the District to demolish the Howe Pool, and it may have to fill another swimming pool. The District lacks money to repair aging facilities and attract quality employees. The lack of funds threatens the public safety at its recreation facilities.