Existing law authorizes the Controller, upon approval of a claim for the postponement of ad valorem property taxes, to directly pay a county tax collector for the property taxes owed by the claimant, as provided. Existing law establishes the Senior Citizens and Disabled Citizens Property Tax Postponement Fund and continuously appropriates moneys in the fund to the Controller for specified purposes, including disbursements relating to the postponement of property taxes pursuant to the Property Tax Postponement Law. Existing law requires the Controller, on June 30, 2018, and on June 30 each year thereafter, to transfer any moneys in the fund in excess of $15,000,000 to the General Fund.

This bill would require money to be transferred, on June 30, 2025, and on June 30 each year thereafter, from the General Fund to the Senior Citizens and Disabled Citizens Property Tax Postponement Fund when the balance in the latter fund is less than $15,000,000. The bill would require the amount of money transferred each year to be equal to the sum needed to bring the balance of the Senior Citizens and Disabled Citizens Property Tax Postponement Fund to $15,000,000. By requiring the transfer of moneys into a continuously appropriated fund, the bill would make an appropriation.

Existing law authorizes the Controller, upon approval of a claim for the postponement of ad valorem property taxes, to directly pay a county tax collector for the property taxes owed by the claimant, as provided. Existing law establishes the Senior Citizens and Disabled Citizens Property Tax Postponement Fund and continuously appropriates moneys in the fund to the Controller for specified purposes, including disbursements relating to the postponement of property taxes pursuant to the Property Tax Postponement Law. Existing law requires the Controller, on June 30, 2018, and on June 30 each year thereafter, to transfer any moneys in the fund in excess of $15,000,000 to the General Fund.

This bill would require money to be transferred, on June 30, 2025, and on June 30 each year thereafter, from the General Fund to the Senior Citizens and Disabled Citizens Property Tax Postponement Fund when the balance in the latter fund is less than $15,000,000. The bill would require the amount of money transferred each year to be equal to the sum needed to bring the balance of the Senior Citizens and Disabled Citizens Property Tax Postponement Fund to $15,000,000. By requiring the transfer of moneys into a continuously appropriated fund, the bill would make an appropriation.

GOVERNOR'S VETO

GV Bill Id:AB 2564

Author:(Boerner)

As Enrolled Ver:August 31, 2024

2/3 vote

SUMMARY

Requires that money be transferred from the General Fund (GF) to the Senior Citizens and Disabled Citizens Property Tax Postponement Fund (Fund) when the Fund balance is less than $15 million.

1. Provides that, on June 30, 2025, and on June 30 each year thereafter, the State Controller shall transfer moneys from the GF to the Fund when the Fund balance is less than $15 million.
2. Provides that the amount of money transferred each year shall be equal to the sum needed to bring the Fund balance to $15 million.

Governor's Veto Message

This bill would require the Controller to make General Fund transfers to ensure an ongoing balance of $15 million in the Senior Citizens and Disabled Citizen Property Tax Postponement (PTP) Fund.

The PTP Program allows income-eligible senior citizens and disabled homeowners to defer their property taxes, secured by a lien against the property, and later repay those taxes when the property is sold or refinanced. By design, the PTP Fund is structured to be self-sustaining.

While I appreciate the author's intent to provide additional funding for this important program, the 2024-25 Budget Act provided a $7.5 million General Fund transfer to the PTP Fund to cover the costs of new applicants and program administration for the next two fiscal years. Additional allocations to the PTP Fund, if necessary, should be considered in the annual budget process.

In partnership with the Legislature, we enacted a budget that closes a $46.8 billion deficit in 2024-25 and a projected deficit of $27.3 billion in 2025-26 through balanced solutions that avoided deep program cuts to vital services and protected investments in education, health care, climate, public safety, housing, and social service programs that millions of Californians rely on. It is important to remain disciplined when considering bills with significant fiscal implications that are not included in the budget, such as this measure.

COMMENTS

1. Constitutional authority for property tax postponement program: In provisions originally adopted June 8, 1976, the California Constitution authorizes the Legislature to establish a program under which low- or moderate-income individuals aged 62 or older may postpone property taxes on their principal place of residence. These provisions, which predate Proposition 13, were adopted to address concerns that senior homeowners on fixed incomes might lose their homes because of an inability to pay rising property tax bills.^[1]
2. The Property Tax Postponement Program is suspended: In 2009, in the wake of the Great Recession, the Property Tax Postponement Program was indefinitely suspended as part of budget reductions to the state's GF programs. Specifically, SBx3 8 (Ducheny), Chapter 4, Statutes of 2009, Third Extraordinary Session, prohibited the filing of claims for property tax postponement on or after February 20, 2009, and prohibited the State Controller from accepting applications for postponement on or after that date.
3. A revised program is reinstated: In 2014, the Property Tax Postponement Program was revived with a delayed start date for property taxes associated with the 2016-17 fiscal year. Additionally, the Program was modified to include tightened eligibility criteria and funding was no longer GF based.^[2]
4. The Legislative Analyst's Office issues a comprehensive report on the Program: In October 2018, the Legislative Analyst's Office (LAO) issued a report, "Evaluation of the Property Tax Postponement Program". This report criticized the Program for having high administrative costs and noted that Program participants must subsidize the relatively high costs associated with processing unapproved applicants. The report also faulted the Program's low participation rate. Specifically, the report noted:

Participation in PTP is very low – a clear shortcoming of the program. In particular, in the most recent years, PTP has had around 1,000 participants – compared to the over one million Californians who are over the age of 62, own their own homes, and live in a household with incomes less than $35,500.

The report did commend the Program for providing guaranteed eligibility for those who qualify and for allowing participants to indefinitely postpone repayments. The report also noted that Program loans were less costly than reverse mortgages.

Finally, the report highlighted the fact that the Program does not impose a cost on taxpayers by noting, "[i]n fact, PTP provides a [GF] benefit – meaning low-income participants in the program are effectively subsidizing the state's [GF]." This last comment reflects the fact that the reinstated Program is both self-funded and requires the State Controller, on June 30 of each year, to transfer any Fund moneys in excess of $15 million to the GF.

In the end, the report set forth two policy options for the Legislature to consider. The first option would be to eliminate the Program. Specifically, the report noted:

PTP has a very low participation rate and a high per-participant administrative cost. Both of these factors suggest the program is providing little total benefit. As such, the Legislature may want to consider eliminating the Program.

Alternatively, the LAO noted that if the Legislature wanted to maintain the Program, the Program would benefit from a number of changes. Specifically, the LAO recommended the following:

• 1. Basing income eligibility on the "income limits" published annually by the Department of Housing and Community Development, which are tailored for county median income and household size;
  2. Eliminating the Program's GF benefit and lowering the 7% interest rate; and,
  3. Expanding Program eligibility to low-income homeowners in their 40s and 50s, who spend a higher share of their income on property taxes than older homeowners.

Since the report's issuance, the Legislature has adopted some, but not all, of these recommendations. Specifically, the Legislature has acted to lower the Program's interest rate and modify income eligibility, but has not eliminated the Program's benefit to the GF or expanded eligibility to younger homeowners.

1. The current program: The Property Tax Postponement Program, administered by the State Controller, currently allows homeowners who are seniors, are blind, or have a disability to defer current-year property taxes on their principal residence if they meet certain criteria, including having at least 40% equity in the home and an annual household income of $51,762 or less (among other requirements). The deferment of property taxes is secured by a lien against the property that must eventually be repaid. The Program is self-funded from repayments from previous Program participants, and the Fund is capped at $15 million per year, with any moneys above this threshold transferred annually to the GF.
2. So what is the problem? The State Controller notes that, for a variety of reasons, the Program is in jeopardy of being unable to fund all eligible applicants and cover its administrative costs. The State Controller also notes that collections have decreased due to the fact that new loans were not made between 2009 and 2016 during the Program's suspension, "resulting in [the State Controller] collecting on a dwindling number of old loans or waiting until recent loans become due and payable." The author has also noted that, in recent years, Program eligibility has been expanded and the interest rate of Program loans reduced, meaning more individuals will be eligible each year with a shrinking pool of collection accounts in the immediate future.
3. What would this bill do? This bill would reinstate GF support for the Program by requiring an annual transfer of GF moneys to the Fund when the Fund balance is less than $15 million.

According to the Author

The author notes the following in support of this bill:

Since 1977, the Senior Citizens and Disabled Citizens Property Tax Postponement Fund has helped keep some of our state's most vulnerable residents in their own homes. Currently, the California State Controller is projecting the Program will be insolvent as soon as 2025-26. AB 2564 seeks to ensure this vital Program never runs out of the funding it needs. If no alternative funding source is established, the Program will be unable to approve future eligible applicants such as low-income seniors and disabled homeowners who are in need of financial relief to stay in their homes.

Arguments in Support

This bill is sponsored by State Controller Malia M. Cohen, who notes the following:

As you are aware, the Senior Citizens Property Tax Postponement Act became law in 1977 and established the PTP Program which received General Fund support. This popular program was briefly suspended in 2009 due to the recession and a modified version was reinstated in 2016. In its reconstituted state, a person over 62 years of age, blind, or disabled qualifies so long as the applicant has a specified income level, and has at least 40 percent equity in their home to postpone payment of their property taxes. The program does not receive any additional General Fund support, and all new postponement loans and administrative costs are paid through collections on existing loans. The deferment of property taxes is secured by a lien against the property, which is typically repaid when the home is sold, title is transferred, or the participant dies. The fund is capped at $15 million per year requiring my office to transfer any funds above this amount on June 30^th of each year to the General Fund. My office has transferred funds to the General Fund in years when the fund balance exceeded $15 million, totaling just over $7.9 million to date.

Recent statutory changes to the program reduced loan interest rates from seven percent to five percent and increased the income threshold on an annual basis as a hedge against inflation. These changes have increased the number of eligible participants, while reducing future collections earned on loan interest. The level of funding was not adjusted in a manner which would cover the increased number of eligible Californians. At the current rate of program expansion, with no additional funding source, the program has had to reject certain applicants in the Manufactured Home category and is in jeopardy of turning away eligible applicants across the program potentially causing more harm to those vulnerable individuals who rely on the assistance provided by the PTP Program.

Arguments in Opposition

None on file

FISCAL COMMENTS

According to the Senate Committee on Appropriations:

1. This bill would result in GF costs of an unknown amount, but likely in the millions of dollars annually, depending on the extent to which funds would be transferred to reset the PTPF balance at $15 million.
2. The State Controllers Office's administrative costs would be minor and absorbable.

VOTES

ASM REVENUE AND TAXATION: 7-0-0

YES: Irwin, Ta, Bains, Gipson, Grayson, Jim Patterson, Luz Rivas

ASM APPROPRIATIONS: 15-0-0

YES: Wicks, Sanchez, Arambula, Bryan, Calderon, Wendy Carrillo, Dixon, Mike Fong, Grayson, Haney, Hart, Jim Patterson, Pellerin, Ta, Villapudua

ASSEMBLY FLOOR: 72-0-8

YES: Addis, Aguiar-Curry, Alanis, Alvarez, Arambula, Bains, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Juan Carrillo, Wendy Carrillo, Chen, Connolly, Davies, Dixon, Flora, Mike Fong, Vince Fong, Gabriel, Gallagher, Garcia, Gipson, Grayson, Haney, Hart, Hoover, Irwin, Jackson, Jones-Sawyer, Kalra, Lackey, Lee, Low, Lowenthal, Maienschein, McCarty, McKinnor, Muratsuchi, Stephanie Nguyen, Ortega, Pacheco, Papan, Jim Patterson, Joe Patterson, Pellerin, Petrie-Norris, Quirk-Silva, Ramos, Rendon, Reyes, Rodriguez, Blanca Rubio, Sanchez, Santiago, Schiavo, Soria, Ta, Ting, Valencia, Villapudua, Waldron, Wallis, Ward, Weber, Wicks, Wilson, Wood, Zbur, Robert Rivas

ABS, ABST OR NV: Calderon, Cervantes, Megan Dahle, Essayli, Friedman, Holden, Mathis, Luz Rivas

SENATE FLOOR: 39-0-1

YES: Allen, Archuleta, Ashby, Atkins, Becker, Blakespear, Bradford, Caballero, Cortese, Dahle, Dodd, Durazo, Eggman, Glazer, Gonzalez, Grove, Hurtado, Jones, Laird, Limón, McGuire, Menjivar, Min, Newman, Nguyen, Niello, Ochoa Bogh, Padilla, Portantino, Roth, Rubio, Seyarto, Skinner, Smallwood-Cuevas, Stern, Umberg, Wahab, Wiener, Wilk

ABS, ABST OR NV: Alvarado-Gil

UPDATED

VERSION: August 31, 2024

CONSULTANT: M. David Ruff / REV. & TAX. / (916) 319-2098 FN: 0005197

1. At the time, property tax assessments were based on a home's full market value. Today, however, property taxes are generally based on assessed values linked to a home's market value on the date it was purchased. ↑

2. AB 2231 (Gordon), Chapter 703, Statutes of 2014. ↑

 THIRD READING  

Bill No: AB 2564

Author: Boerner (D)

Introduced: 2/14/24

Vote: 27

SENATE REVENUE AND TAXATION COMMITTEE: 7-0, 6/26/24

AYES: Glazer, Dahle, Ashby, Bradford, Dodd, Padilla, Skinner

SENATE APPROPRIATIONS COMMITTEE: 7-0, 8/15/24

AYES: Caballero, Jones, Ashby, Becker, Bradford, Seyarto, Wahab

ASSEMBLY FLOOR: 72-0, 5/22/24 - See last page for vote

SUBJECT: Property tax postponement: Senior Citizens and Disabled Citizens Property Tax Postponement Fund

SOURCE: State Controller Malia M. Cohen

DIGEST:

This bill requires annual General Fund transfers to ensure a $15 million minimum balance in the Senior Citizens and Disabled Citizens Property Tax Postponement Fund.

ANALYSIS:

Existing law:

1. Provides that all property is taxable unless explicitly exempted by the Constitution or federal law (California Constitution, Article XIII, Section One).
2. Allows the Legislature to provide a manner for persons of low or moderate income to postpone their property taxes on their principal place of residence (California Constitution, Article XIII, Section 8.5)
3. Enacts the Senior Citizens and Disabled Citizens Property Tax Postponement Law (PTP), which allows the State Controller to pay property taxes to county tax collectors due on the principal residence of individuals over the age of 62 or disabled persons with household income of less than the currently inflation adjusted threshold of $49,017 annually.
4. Creates the Senior Citizens and Disabled Citizens Property Tax Postponement Fund (PTP Fund) as an interest-bearing fund in the State Treasury, which is continuously appropriated to the Controller to fund PTP loans.
5. Directs any PTP loan repayments into the PTP Fund.
6. Requires the State Controller to transfer to the General Fund PTP repayments received above a $20 million total on June 30, 2017, and $15 million for each June 30 thereafter.

This bill:

1. Transfers from the General Fund to the PTP Fund an amount equal to the sum needed to bring the balance of the PTP Fund to fifteen million dollars.
2. States that transfers begin on June 30, 2025, and occur on June 30 each year thereafter.

Background

PTP law allows the Controller to pay property taxes on behalf of income-eligible senior citizen and disabled taxpayers who file a claim. The claimant or the claimant’s spouse does not need to repay the Controller so long as they continue to occupy the home; instead, the Controller secures repayment by recording a lien against the claimant’s property, which is satisfied with interest when the home is sold or refinanced. As liens are repaid out of sales proceeds, revenue flows back to the PTP Fund, which then funds loans for new applicants.

In 2009, due to budgetary constraints and fewer funds flowing back to the Controller as a result of diminishing home values, the Legislature prohibited persons from filing new claims for property tax postponement, and the Controller from accepting them. Prior to suspension, the Controller granted about $12 million annually in claims, but repayments only ranged between $6 and $10 million. During the suspension, the Controller did not approve additional applications for property tax payments, but still collected repayments.

The Legislature resuscitated the program in 2014 by removing SBX3 8’s prohibition (AB 2231, Gordon, Chapter 703, Statutes of 2014). Because of the reduced repayments that resulted in its suspension, AB 2231 tightened eligibility criteria, including increasing the percentage of equity an applicant must have to be eligible from 20% to 40%, among other measures.

In September 2016, the Controller began accepting applications, and paying property taxes out of approximately $7 million of previously collected funds on a first-come, first-served basis. Today, individuals can apply between October 1 and February 10 each year. If approved, the Controller pays the individual’s property taxes only for that year; they must meet the eligibility criteria and reapply each year.

In 2018, the Legislative Analyst’s Office (LAO) published “Evaluation of the Property Tax Postponement Program,” which reviewed the PTP program. Among other recommendations, LAO stated that PTP’s interest rate of 7% was too high, which the state could afford to lower and keep the program self-funded. In 2019, the Legislature lowered the interest rate to 5%, increased the income eligibility threshold from $35,000 in annual household income to $45,000, and directed the Controller to increase the threshold annually to account for any inflationary growth (AB 133, Quirk Silva, Chapter 794, Statutes of 2019).

Recently, PTP collections have decreased, jeopardizing PTP’s ability to maintain its self-sufficiency in the long run. Repayments usually peak between eight and ten years after loans are made, but no new loans were made between 2009 and 2016, so repayments are derived only from repayments from loans made before 2009, or those made more recently. The state’s booming real estate market has pushed property values, and therefore property taxes and PTP loans, higher. During the 2020-21 fiscal year, program costs and postponement loans exceeded amounts collected by more than $1 million. Additionally, AB 133’s lower interest will reduce future repayments, and more applicants can now apply for PTP under the bill’s higher income threshold and inflation adjustment.

During the 2020-21 and 2021-22 fiscal years, program costs and postponement loans exceeded amounts collected by more than $1 million. In 2022-23, the Controller estimates the difference expanding more quickly with expenses outpacing collections by an estimated $3.7 million So far, the PTP Fund balance has been sufficient to cover the difference; however, the Controller expects the gap between revenues and expenditures will continue to grow. The annual Budget Act – AB 107 (Committee on Budget) – contained a $7.5 million appropriation from the General Fund to the PTP Fund, which should sustain the program in 2024-25 and keep it solvent through 2025-26.

Comments

AB 2564 is mostly identical to AB 265 (Boerner, 2023), which the Governor vetoed. AB 2564 is also mostly identical to AB 1707 (Boerner Horvath, 2022), which the Governor also vetoed.

FISCAL EFFECT: Appropriation: Yes Fiscal Com.: Yes Local: No

According to the Senate Appropriations Committee:

• This bill would result in General Fund costs of an unknown amount, but likely in the millions of dollars annually, depending on the extent to which funds would be transferred to reset the PTP Fund balance at $15 million.
• The State Controller’s Office’s (SCO) administrative costs would be minor and absorbable.

SUPPORT: (Verified 8/16/24)

California State Controller Malia M. Cohen (source)
California Association of County Treasurers and Tax Collectors
California Association of Realtors
California Special Districts Association
California State Association of Counties
City of Colton
City of Thousand Oaks
League of California Cities

OPPOSITION: (Verified 8/16/24)

None received

ARGUMENTS IN SUPPORT: According to the author, “Since 1977, the Senior Citizens and Disabled Citizens Property Tax Postponement Fund has helped keep some of our state’s most vulnerable residents in their own homes. Currently, the California State Controller is projecting the Program will be insolvent as soon as 2025-26. AB 2564 seeks to ensure this vital Program never runs out of the funding it needs. If no alternative funding source is established, the Program will be unable to approve future eligible applicants such as low-income seniors and disabled homeowners who are in need of financial relief to stay in their homes.”

ASSEMBLY FLOOR: 72-0, 5/22/24

AYES: Addis, Aguiar-Curry, Alanis, Alvarez, Arambula, Bains, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Juan Carrillo, Wendy Carrillo, Chen, Connolly, Davies, Dixon, Flora, Mike Fong, Vince Fong, Gabriel, Gallagher, Garcia, Gipson, Grayson, Haney, Hart, Hoover, Irwin, Jackson, Jones-Sawyer, Kalra, Lackey, Lee, Low, Lowenthal, Maienschein, McCarty, McKinnor, Muratsuchi, Stephanie Nguyen, Ortega, Pacheco, Papan, Jim Patterson, Joe Patterson, Pellerin, Petrie-Norris, Quirk-Silva, Ramos, Rendon, Reyes, Rodriguez, Blanca Rubio, Sanchez, Santiago, Schiavo, Soria, Ta, Ting, Valencia, Villapudua, Waldron, Wallis, Ward, Weber, Wicks, Wilson, Wood, Zbur, Robert Rivas

NO VOTE RECORDED: Calderon, Cervantes, Megan Dahle, Essayli, Friedman, Holden, Mathis, Luz Rivas

Prepared by: Colin Grinnell / REV. & TAX. / (916) 651-4117

8/18/24 9:19:19

**** END ****

SENATE COMMITTEE ON APPROPRIATIONS

Senator Anna Caballero, Chair

2023 - 2024 Regular Session

AB 2564 (Boerner) - Property tax postponement: Senior Citizens and Disabled Citizens Property Tax Postponement Fund

Bill Summary:

AB 2564 would require the State Controller to transfer money from the General Fund to the Senior Citizens and Disabled Citizens Property Tax Postponement Fund (PTPF) when its balance is less than $15 million.

Fiscal Impact:

• This bill would result in General Fund costs of an unknown amount, but likely in the millions of dollars annually, depending on the extent to which funds would be transferred to reset the PTPF balance at $15 million.
• The State Controller’s Office’s (SCO) administrative costs would be minor and absorbable.

Background:

The Property Tax Postponement Program (PTPP) authorizes the State Controller to pay property taxes to county tax collectors on behalf of individuals over the age of 62 or disabled persons with household income of less than the currently inflation adjusted threshold of $51,762 annually. The claimant or the claimant’s spouse does not need to repay the Controller so long as they continue to occupy the home; instead, the Controller secures repayment by recording a lien against the claimant’s property, which is satisfied with interest when the home is sold or refinanced. As liens are repaid out of sales proceeds, revenue flows back to the Controller, who in turn uses these funds to pay property taxes for new applicants.

In 2009, reflecting budgetary constraints and fewer funds flowing back to PTPF as a result of diminishing home values, the Legislature prohibited persons from filing new claims for property tax postponement. Prior to suspension, the Controller granted about $12 million annually in claims, but repayments only ranged between $6 and $10 million. During the suspension, the Controller did not approve additional applications for property tax payments, but still collected repayments.

The Legislature renewed the program in 2014, albeit with tightened eligibility criteria, including increasing the percentage of equity an applicant must have to be eligible from 20 percent to 40 percent. The Controller was also required to transfer to the General Fund repayments received above a $20 million total on June 30, 2017, and $15 million for each June 30 thereafter.

In September, 2016, the Controller began accepting applications, and paying property taxes out of approximately $7 million of previously collected funds on a first-come, first-served basis. Today, individuals can apply between October 1 and February 10 each year. If approved, the Controller pays the individuals’ property taxes only for that year; they must meet the eligibility criteria and reapply annually.

Program participation has been increasing. In 2016-17, the Controller approved 812 claims and paid $2.3 million in property taxes. The amounts increased to 891 claims and $2.8 million in 2017-18. Loan disbursements have since increased to $4.4 million in 2021-22, and an estimated $5.6 million in the current fiscal year.

In 2018, the Legislative Analyst’s Office (LAO) reviewed the PTPP program. Among other recommendations, LAO stated that PTP’s interest rate of 7 percent was too high, which the State could afford to reduce and keep the program self-funded. In 2019, the Legislature enacted AB 133 (Quirk Silva), which lowered the interest rate to 5 percent. That bill also increased the income eligibility threshold from $35,000 in annual household income to $45,000, and directs the Controller to increase the threshold annually to account for any inflationary growth.

Recently, PTP collections have decreased, jeopardizing PTP’s ability to maintain its self-sufficiency in the long-run. Repayments usually peak between eight and ten years after loans are made, but since no new loans were made between 2009 and 2016, repayments are derived only from repayments from loans made before 2009, or those made more recently. The State’s robust real estate market has increased property values, and therefore property taxes and PTP loans, higher. During 2020-21, program costs and postponement loans exceeded amounts collected by more than $1 million. Additionally, AB 133’s lower interest will reduce future repayments, and more applicants can now apply for PTP under the bill’s higher income threshold and inflation adjustment. Data from the Department of Finance indicate that program expenditures exceeded revenues by $3.3 million in 2022-23, and an estimated $3.5 million in 2023-24 and $3.5 million in 2024-25. The current balance is $6.2 million, below its $8.4 million total in 2022-23.

Proposed Law:

This bill would require money to be transferred from the General Fund to the Senior Citizens and Disabled Citizens Property Tax Postponement Fund when its balance is less than $15 million. It would require the initial transfer to occur on June 30, 2025 and then occur on June 30 each year thereafter. The measure sets the amount of money transferred each year equal to the sum needed to bring the balance of the PTP Fund to $15 million.

Related Legislation:

AB 265 (Boerner) was substantially similar to this bill, and was vetoed by the Governor.

Staff Comments:

The 2024 Budget Act contains a one-time $7.5 million appropriation from the General Fund to PTPF.

-- END --

SENATE COMMITTEE ON REVENUE AND TAXATION

Senator Steven Glazer, Chair

2023 - 2024 Regular

Property tax postponement: Senior Citizens and Disabled Citizens Property Tax Postponement Fund

Requires the Controller to transfer money from the General Fund to the Senior Citizens and Disabled Citizens Property Tax Postponement Fund when its balance is less than $15 million.

Background

Added by voters in 1976, Section 8.5 of Article XIII of the California Constitution allows the Legislature to provide a manner for persons of low or moderate income to postpone their property taxes on their principal place of residence. The Legislature enacted the Senior Citizens and Disabled Citizens Property Tax Postponement Law (PTP) in 1977 to implement the change. In 1984, voters allowed the Legislature to provide a process for disabled persons too.

Today, PTP allows the State Controller to pay property taxes to county tax collectors on behalf of individuals over the age of 62 or disabled persons with a household income of less than the currently inflation-adjusted threshold of $51,762 annually. The claimant or the claimant’s spouse does not need to repay the Controller so long as they continue to occupy the home; instead, the Controller secures repayment by recording a lien against the claimant’s property, which is satisfied with interest when the home is sold or refinanced. As liens are repaid out of sales proceeds, revenue flows back to the Controller, who in turn uses these funds to pay property taxes for new applicants.

In 2009, due to budgetary constraints and fewer funds flowing back to the Controller as a result of diminishing home values, the Legislature prohibited persons from filing new claims for property tax postponement, and the Controller from accepting them (SBx3 8, Ducheny, 2009). Prior to suspension, the Controller granted about $12 million annually in claims, but repayments only ranged between $6 and $10 million. During the suspension, the Controller did not approve additional applications for property tax payments, but still collected repayments.

The Legislature resuscitated the program in 2014 by removing SBx3 8’s prohibition on accepting new applicants for property tax payments (AB 2231, Gordon). Because of the reduced repayments that resulted in its suspension, AB 2231 tightened eligibility criteria, including increasing the percentage of equity an applicant must have to be eligible for the program from 20% to 40%, among other measures.

In September 2016, the Controller began accepting applications, and paying property taxes out of approximately $7 million of previously collected funds on a first-come, first-served basis. Today, individuals can apply between October 1 and February 10 each year. If approved, the Controller pays the individual’s property taxes only for that year; they must meet the eligibility criteria and reapply each year.

Since the program’s reenactment, the Controller has granted increasing numbers of applications each year. In 2016-17, the Controller approved $2.3 million in property tax loans, which grew to $2.8 million in 2017-18. The Controller increased approvals in every year since, with $4.4 million in 2021-22, $5.6 million in 2022-23, and $6.3 million for 2023-24 through June. The Controller indicates the increase is due to both more applicants, and higher property values.

In 2018, the Legislative Analyst’s Office (LAO) published “Evaluation of the Property Tax Postponement Program,” which reviewed the PTP program. Among other recommendations, LAO stated PTP’s interest rate of 7% was too high, which the state could afford to lower and keep the program self‑funded. In 2019, the Legislature enacted AB 133 (Quirk Silva), which lowered the interest rate to 5%. AB 133 also increased the income eligibility threshold from $35,000 in annual household income to $45,000, and directed the Controller to increase the threshold annually to account for any inflationary growth.

Recently, as applicants and loan amounts have increased, PTP collections have decreased, jeopardizing the program’s ability to maintain its self-sufficiency in the long run. Repayments usually peak between eight and ten years after loans are made, but no new loans were made between 2009 and 2016, so repayments are derived only from loans made before 2009, or those made more recently. The state’s real estate market has pushed property values higher, and therefore property taxes and PTP loan amounts higher. Additionally, AB 133’s lower interest rate will reduce future repayment amounts, and more applicants can now apply for PTP under the bill’s higher income threshold and inflation adjustment. According to the Governor’s Proposed Budget, program expenditures have outpaced revenues by $3.27 million in 2022-23, and an estimated $3.54 million in 2023-24 and $3.5 million in 2024-25. The current balance is $6.2 million; however, the balance is below its $8.4 million total in 2022-23.

So far, the PTP Fund balance has been sufficient to cover the difference; however, the Controller expects the gap between revenues and expenditures will continue to grow. The Controller wants authority to transfer funds from the General Fund to the PTP to ensure a minimum $15 million fund balance.

Proposed Law

Assembly Bill 2564 requires money to be transferred from the General Fund to the Senior Citizens and Disabled Citizens Property Tax Postponement Fund when its balance is less than $15 million. The bill requires the initial transfer to occur on June 30, 2025 and then occur on June 30 each year thereafter. The measure sets the amount of money transferred each year equal to the sum needed to bring the balance of the PTP Fund to $15 million.

State Revenue Impact

No estimate.

Comments

1. Purpose of the bill. According to the author, “Since 1977, the Senior Citizens and Disabled Citizens Property Tax Postponement Fund has helped keep some of our state’s most vulnerable residents in their own homes. Currently, the California State Controller is projecting the Program will be insolvent as soon as 2025-26. AB 2564 seeks to ensure this vital Program never runs out of the funding it needs. If no alternative funding source is established, the Program will be unable to approve future eligible applicants such as low-income seniors and disabled homeowners who are in need of financial relief to stay in their homes.”

2. Tradeoffs. When the Legislature resuscitated PTP in 2016, it required the Controller to transfer to the General Fund repayments received above a $20 million total on June 30, 2017, and $15 million for each June 30 thereafter. The General Fund transfer requirement ensured loan repayment funds not needed to fund new PTP loans, meaning those funds could be used by the state for other purposes. The Controller has transferred $8 million to the General Fund since the Legislature enacted the requirement, with the most recent transfer in the 2019-20 fiscal year. Now that loan repayment amounts have fallen below the amount needed to fund new loans, the PTP fund balance is diminishing. AB 2564 would ensure the Controller can continue to fund loans to the state’s neediest homeowners under one of its most established and successful assistance programs, but would require reducing General Fund resources needed for other programs to do so.

3. Do it again. AB 2564 is mostly identical to AB 265 (Boerner, 2023), which the Governor vetoed last year, stating in part:

“The Department of Finance conducted an analysis of the PTP Program and concluded the program has enough funding for 2023-24, but cannot be sustained without an annual commitment of potentially millions of General Fund dollars to support it thereafter. While I support the PTP Program, discussions regarding this continuous appropriation should be considered in the annual budget process. While I am unable to sign this bill, I look forward to continuing discussions to identify necessary resources in the upcoming fiscal year.”

AB 2564 is also mostly identical to AB 1707 (Boerner Horvath, 2022), which the Governor also vetoed, stating in part:

“Although recent changes in law have expanded eligibility for the program, the State Controller's Office does not project a shortfall until the 2025-26 fiscal year. My administration supports this program and its role in helping our most vulnerable homeowners remain in their homes. Therefore, I am directing the Department of Finance to conduct an analysis of the Program to identify any fiscal stability concerns and propose appropriate solutions for consideration.

“I am returning AB 1707 without my signature until additional information on the viability of the program has been determined.”

Department of Finance notes it conducted an internal analysis, and found that the main reasons for the declining fund balance trend are the reduction under AB 133’s lower interest rates and expanded eligibility.

4. Necessary? As noted in Comment #3, AB 2564 is the third effort to use the General Fund to financially backstop the PTP fund. However, the annual Budget Act – AB 107 (Committee on Budget) – contains a $10 million appropriation from the General Fund to the PTP Fund, which should sustain the program in 2024-25 and keep it solvent through 2025-26. While AB 2564’s solution is an ongoing one, it may not be necessary this year if the funding is included in the Budget Act signed by the Governor. However, the Controller states that this one-time funding may not be sufficient to meet all applications from owners of manufactured homes, and only buys one more year of time, when AB 2564 would provide an ongoing funding backstop.

Assembly Actions

Assembly Revenue & Taxation Committee: 7-0
Assembly Appropriation Committee: 15-0
Assembly Floor: 72-0

Support and Opposition

(6/21/24)

Support: California State Controller Malia M. Cohen (Sponsor)
California Association of County Treasurers and Tax Collectors
California Association of Realtors
California Special Districts Association
California State Association of Counties (CSAC)
City of Thousand Oaks
League of California Cities

Opposition: None submitted.

-- END --

ASSEMBLY THIRD READING

ATR Bill Id:AB 2564

Author:(Boerner)

As Introduced Ver:February 14, 2024

2/3 vote

SUMMARY

Requires that money be transferred from the General Fund (GF) to the Senior Citizens and Disabled Citizens Property Tax Postponement Fund (Fund) when the Fund balance is less than $15 million.

Major Provisions

1. Provides that, on June 30, 2025, and on June 30 each year thereafter, the State Controller shall transfer moneys from the GF to the Fund when the Fund balance is less than $15 million.
2. Provides that the amount of money transferred each year shall be equal to the sum needed to bring the Fund balance to $15 million.

COMMENTS

1. Constitutional authority for property tax postponement program: In provisions originally adopted June 8, 1976, the California Constitution authorizes the Legislature to establish a program under which low- or moderate-income individuals aged 62 or older may postpone property taxes on their principal place of residence. These provisions, which predate Proposition 13, were adopted to address concerns that senior homeowners on fixed incomes might lose their homes because of an inability to pay rising property tax bills.^[1]
2. The Property Tax Postponement Program is suspended: In 2009, in the wake of the Great Recession, the Property Tax Postponement Program was indefinitely suspended as part of budget reductions to the state's GF programs. Specifically, SBx3 8 (Ducheny), Chapter 4, Statutes of 2009, Third Extraordinary Session, prohibited the filing of claims for property tax postponement on or after February 20, 2009, and prohibited the State Controller from accepting applications for postponement on or after that date.
3. A revised program is reinstated: In 2014, the Property Tax Postponement Program was revived with a delayed start date for property taxes associated with the 2016-17 fiscal year (FY). Additionally, the Program was modified to include tightened eligibility criteria and funding was no longer GF based.^[2]
4. The Legislative Analyst's Office issues a comprehensive report on the Program: In October 2018, the Legislative Analyst's Office (LAO) issued a report, "Evaluation of the Property Tax Postponement Program". This report criticized the Program for having high administrative costs and noted that Program participants must subsidize the relatively high costs associated with processing unapproved applicants. The report also faulted the Program's low participation rate. Specifically, the report noted:

Participation in PTP is very low – a clear shortcoming of the program. In particular, in the most recent years, PTP has had around 1,000 participants – compared to the over one million Californians who are over the age of 62, own their own homes, and live in a household with incomes less than $35,500.

The report did commend the Program for providing guaranteed eligibility for those who qualify and for allowing participants to indefinitely postpone repayments. The report also noted that Program loans were less costly than reverse mortgages.

Finally, the report highlighted the fact that the Program does not impose a cost on taxpayers by noting, "[i]n fact, PTP provides a [GF] benefit – meaning low-income participants in the program are effectively subsidizing the state's [GF]." This last comment reflects the fact that the reinstated Program is both self-funded and requires the State Controller, on June 30 of each year, to transfer any Fund moneys in excess of $15 million to the GF.

In the end, the report set forth two policy options for the Legislature to consider. The first option would be to eliminate the Program. Specifically, the report noted:

PTP has a very low participation rate and a high per-participant administrative cost. Both of these factors suggest the program is providing little total benefit. As such, the Legislature may want to consider eliminating the Program.

Alternatively, the LAO noted that if the Legislature wanted to maintain the Program, the Program would benefit from a number of changes. Specifically, the LAO recommended the following:

• 1. Basing income eligibility on the "income limits" published annually by the Department of Housing and Community Development, which are tailored for county median income and household size;
  2. Eliminating the Program's GF benefit and lowering the 7% interest rate; and,
  3. Expanding Program eligibility to low-income homeowners in their 40s and 50s, who spend a higher share of their income on property taxes than older homeowners.

Since the report's issuance, the Legislature has adopted some, but not all, of these recommendations. Specifically, the Legislature has acted to lower the Program's interest rate and modify income eligibility, but has not eliminated the Program's benefit to the GF or expanded eligibility to younger homeowners.

1. The current program: The Property Tax Postponement Program, administered by the State Controller, currently allows homeowners who are seniors, are blind, or have a disability to defer current-year property taxes on their principal residence if they meet certain criteria, including having at least 40% equity in the home and an annual household income of $51,762 or less (among other requirements). The deferment of property taxes is secured by a lien against the property that must eventually be repaid. The Program is self-funded from repayments from previous Program participants, and the Fund is capped at $15 million per year, with any moneys above this threshold transferred annually to the GF.
2. So what is the problem? The State Controller notes that, for a variety of reasons, the Program is in jeopardy of being unable to fund all eligible applicants and cover its administrative costs. The State Controller also notes that collections have decreased due to the fact that new loans were not made between 2009 and 2016 during the Program's suspension, "resulting in [the State Controller] collecting on a dwindling number of old loans or waiting until recent loans become due and payable." The author has also noted that, in recent years, Program eligibility has been expanded and the interest rate of Program loans reduced, meaning more individuals will be eligible each year with a shrinking pool of collection accounts in the immediate future.
3. What would this bill do? This bill would reinstate GF support for the Program by requiring an annual transfer of GF moneys to the Fund when the Fund balance is less than $15 million.

According to the Author

The author has provided the following statement in support of this bill:

Since 1977, the Senior Citizens and Disabled Citizens Property Tax Postponement Fund has helped keep some of our state's most vulnerable residents in their own homes. Currently, the California State Controller is projecting the Program will be insolvent as soon as 2025-26. AB 2564 seeks to ensure this vital Program never runs out of the funding it needs. If no alternative funding source is established, the Program will be unable to approve future eligible applicants such as low-income seniors and disabled homeowners who are in need of financial relief to stay in their homes.

Arguments in Support

This bill is sponsored by State Controller Malia M. Cohen, who notes the following:

As you are aware, the Senior Citizens Property Tax Postponement Act became law in 1977 and established the PTP Program which received General Fund support. This popular program was briefly suspended in 2009 due to the recession and a modified version was reinstated in 2016. In its reconstituted state, a person over 62 years of age, blind, or disabled qualifies so long as the applicant has a specified income level, and has at least 40 percent equity in their home to postpone payment of their property taxes. The program does not receive any additional General Fund support, and all new postponement loans and administrative costs are paid through collections on existing loans. The deferment of property taxes is secured by a lien against the property, which is typically repaid when the home is sold, title is transferred, or the participant dies. The fund is capped at $15 million per year requiring my office to transfer any funds above this amount on June 30^th of each year to the General Fund. My office has transferred funds to the General Fund in years when the fund balance exceeded $15 million, totaling just over $7.9 million to date.

Recent statutory changes to the program reduced loan interest rates from seven percent to five percent and increased the income threshold on an annual basis as a hedge against inflation. These changes have increased the number of eligible participants, while reducing future collections earned on loan interest. The level of funding was not adjusted in a manner which would cover the increased number of eligible Californians. At the current rate of program expansion, with no additional funding source, the program has had to reject certain applicants in the Manufactured Home category and is in jeopardy of turning away eligible applicants across the program potentially causing more harm to those vulnerable individuals who rely on the assistance provided by the PTP Program.

Arguments in Opposition

None on file

FISCAL COMMENTS

The Assembly Appropriations Committee notes the following:

1. Annual GF costs of an unknown amount, but likely in the millions of dollars, depending on the amount of funds transferred each year to reset the Fund balance at $15 million.

The State Controller's Office (SCO) notes that this is the first year the Property Tax Postponement Program had to deny eligible applicants due to lack of funding. AB 106 (Committee on Budget), Chapter 9, Statutes of 2024, provided, on a one-time basis for FY 2023-24, that disbursements from the Fund's continuous appropriation may exceed 1% of the amount available in the Fund for residential dwellings that are manufactured homes. The early budget action appropriated $3.2 million to the SCO for this purpose.

1. Minor and absorbable costs to the SCO to monitor and transfer funds.
2. According to the Legislative Analyst's Office, the GF faces a structural deficit in the tens of billions of dollars over the next several FYs.

VOTES

ASM REVENUE AND TAXATION: 7-0-0

YES: Irwin, Ta, Bains, Gipson, Grayson, Jim Patterson, Luz Rivas

ASM APPROPRIATIONS: 15-0-0

YES: Wicks, Sanchez, Arambula, Bryan, Calderon, Wendy Carrillo, Dixon, Mike Fong, Grayson, Haney, Hart, Jim Patterson, Pellerin, Ta, Villapudua

UPDATED

VERSION: February 14, 2024

CONSULTANT: M. David Ruff / REV. & TAX. / (916) 319-2098 FN: 0003021

1. At the time, property tax assessments were based on a home's full market value. Today, however, property taxes are generally based on assessed values linked to a home's market value on the date it was purchased. ↑

2. AB 2231 (Gordon), Chapter 703, Statutes of 2014. ↑

Date of Hearing: May 15, 2024

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Buffy Wicks, Chair

ABPCA Bill Id:AB 2564

Author:(Boerner) – As Introduced Ver:February 14, 2024

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill requires the State Controller to annually transfer money from the General Fund (GF) to the Senior Citizens and Disabled Citizens Property Tax Postponement Fund (PTP Fund) when the PTP Fund balance is less than $15 million.

The first transfer must occur on June 30, 2025, and the annual transfer amount must reset the PTP Fund balance at $15 million.

FISCAL EFFECT:

1. Annual General Fund (GF) costs of an unknown amount, but likely in the millions of dollars, depending on the amount of funds transferred each year to reset the PTP Fund balance at $15 million.

The State Controller’s Office (SCO) notes that this is the first year the Property Tax Postponement Program (PTP Program) had to deny eligible applicants due to lack of funding. AB 106 (Committee on Budget), Chapter 9, Statutes of 2024, provided, on a one-time basis for fiscal year (FY) 2023-24, that disbursements from the PTP Fund’s continuous appropriation may exceed 1% of the amount available in the fund for residential dwellings that are manufactured homes. The early budget action appropriated $3.2 million to the SCO for this purpose.

1. Minor and absorbable costs to the SCO to monitor and transfer funds.

According to the Legislative Analyst’s Office, the GF faces a structural deficit in the tens of billions of dollars over the next several FYs.

COMMENTS:

1. Purpose. According to the author:

Since 1977, the [PTP Fund] has helped keep some of our state’s most vulnerable residents in their own homes. Currently, the California State Controller is projecting the Program will be insolvent as soon as 2025-26. AB 2564 seeks to ensure this vital Program never runs out of the funding it needs.

This bill is sponsored by State Controller Malia M. Cohen and supported by local government associations and the California Association of Realtors.

1. Background.

PTP Program. The PTP Program allows homeowners who are seniors, blind, or disabled to defer current-year property taxes on their principal residence if they have at least 40% equity in their home and annual household income of $51,762 or less. The deferment of property taxes is secured by a lien against the property in favor of the State of California, as the PTP Fund fronts the property tax payment to the county. The homeowner may make full or partial repayments at any time, but no repayment is required until certain qualifying events occur, such as when the homeowner sells the property, refinances, or dies. Repayments, in turn, fund deferments for new PTP Program participants, with postponed property taxes subject to an annual 5% interest rate.

Balancing Act. According to the SCO, the PTP Program recently had to turn away eligible applicants in the program’s Manufactured Home category due to lack of funding and will likely have insufficient funds to cover administrative costs or fund all eligible applicants in FY 2025-26. Repayments have decreased because no new loans were made between 2009 and 2016 when the PTP Program was suspended in the wake of the Great Recession, resulting in the SCO collecting on a dwindling number of old loans and waiting for more recent loans to become due and payable. Additionally, AB 133 (Quirk-Silva), Chapter 794, Statutes of 2019, lowered the interest rate on property tax postponement payments from 7% to 5% and increased the PTP Program’s income eligibility to $45,000, adjusted for inflation. Accordingly, in the immediate future, more people will become eligible each year for a program funded by a shrinking pool of collections.

Existing law effectively caps the PTP Program at $15 million annually, by requiring the SCO to transfer any money in the PTP Fund in excess of that amount to the GF on June 30. Thus, PTP Program expenditures are already limited, with approval into the program granted on a first-come, first-served basis. This bill does not lift the $15 million cap. However, this bill ensures $15 million is available each year for PTP Program expenditures, thus supporting a growing number of eligible homeowners who may otherwise be shut out of the program, by requiring the SCO to transfer from the GF whatever amount is needed to reset a $15 million balance in the PTP Fund on June 30.

1. Related Legislation. AB 265 (Boerner) was virtually identical to this bill. AB 265 was vetoed by Governor Newsom, who stated:

The Department of Finance conducted an analysis of the PTP Program and concluded the program has enough funding for 2023-24, but cannot be sustained without an annual commitment of potentially millions of General Fund dollars to support it thereafter. While I support the PTP Program, discussions regarding this continuous appropriation should be considered in the annual budget process. While I am unable to sign this bill, I look forward to continuing discussions to identify necessary resources in the upcoming fiscal year.

1. Prior Legislation. AB 1707 (Boerner), of the 2021-22 Legislative Session, was virtually identical to this bill. AB 1707 was vetoed by Governor Newsom.

Analysis Prepared by: Irene Ho / APPR. / (916) 319-2081

Date of Hearing: April 22, 2024

ASSEMBLY COMMITTEE ON REVENUE AND TAXATION

Jacqui Irwin, Chair

ABPCA Bill Id:
AB 2564 (

Author:Boerner) – As Introduced Ver:February 14, 2024

SUSPENSE

2/3 vote. Fiscal committee.

SUBJECT: Property tax postponement: Senior Citizens and Disabled Citizens Property Tax Postponement Fund

SUMMARY: Requires that money be transferred from the General Fund (GF) to the Senior Citizens and Disabled Citizens Property Tax Postponement Fund (Fund) when the Fund balance is less than $15 million. Specifically, this bill:

1. Provides that, on June 30, 2025, and on June 30 each year thereafter, the State Controller shall transfer moneys from the GF to the Fund when the Fund balance is less than $15 million.
2. Provides that the amount of money transferred each year shall be equal to the sum needed to bring the Fund balance to $15 million.

EXISTING LAW:

1. Authorizes the Legislature to provide by law for the manner in which a person of low or moderate income who is 62 years of age or older may postpone ad valorem property taxes on their principal place of residence. (Article XIII, Section 8.5 of the California Constitution.)
2. Authorizes the Legislature to provide by law for the manner in which a disabled person may postpone payment of ad valorem property taxes on their principal place of residence. (Id.)
3. Authorizes the State Controller, upon approval of a claim for the postponement of ad valorem property taxes, to directly pay a county tax collector for the property taxes owed by the claimant, as provided. (Government Code Section 16180 et seq.)
4. Establishes the Fund and continuously appropriates moneys in the Fund to the State Controller for specified purposes, including disbursements relating to the postponement of property taxes under the Property Tax Postponement Law. (Government Code Section 16180.)
5. Requires the State Controller to, on June 30, 2018, and on June 30 of each year thereafter, transfer any moneys in the Fund in excess of $15 million to the GF. (Government Code Section 16180.)

FISCAL EFFECT: Unknown

COMMENTS:

1. The author has provided the following statement in support of this bill:

Since 1977, the Senior Citizens and Disabled Citizens Property Tax Postponement Fund has helped keep some of our state's most vulnerable residents in their own homes. Currently, the California State Controller is projecting the Program will be insolvent as soon as 2025-26. AB 2564 seeks to ensure this vital Program never runs out of the funding it needs. If no alternative funding source is established, the Program will be unable to approve future eligible applicants such as low-income seniors and disabled homeowners who are in need of financial relief to stay in their homes.

1. This bill is sponsored by State Controller Malia M. Cohen, who notes the following:

As you are aware, the Senior Citizens Property Tax Postponement Act became law in 1977 and established the PTP Program which received General Fund support. This popular program was briefly suspended in 2009 due to the recession and a modified version was reinstated in 2016. In its reconstituted state, a person over 62 years of age, blind, or disabled qualifies so long as the applicant has a specified income level, and has at least 40 percent equity in their home to postpone payment of their property taxes. The program does not receive any additional General Fund support, and all new postponement loans and administrative costs are paid through collections on existing loans. The deferment of property taxes is secured by a lien against the property, which is typically repaid when the home is sold, title is transferred, or the participant dies. The fund is capped at $15 million per year requiring my office to transfer any funds above this amount on June 30^th of each year to the General Fund. My office has transferred funds to the General Fund in years when the fund balance exceeded $15 million, totaling just over $7.9 million to date.

Recent statutory changes to the program reduced loan interest rates from seven percent to five percent and increased the income threshold on an annual basis as a hedge against inflation. These changes have increased the number of eligible participants, while reducing future collections earned on loan interest. The level of funding was not adjusted in a manner which would cover the increased number of eligible Californians. At the current rate of program expansion, with no additional funding source, the program has had to reject certain applicants in the Manufactured Home category and is in jeopardy of turning away eligible applicants across the program potentially causing more harm to those vulnerable individuals who rely on the assistance provided by the PTP Program.

1. This bill is supported by the League of California Cities and the California State Association of Counties, which note:

Existing law establishes the PTP Program within the State Controller's Office (SCO), which allows homeowners who are seniors or have a disability (who meet specified criteria) to defer current-year property taxes on their principal residence. This deferred payment is secured by a lien against the property that is later repaid when the property is sold or refinanced, and the property taxes are paid by the SCO.

Due to numerous reasons, the PTP Program is in jeopardy of being unable to fund all eligible applicants. AB 2564 remedies this problem by providing ongoing General Fund support to the Fund by ensuring the Fund's balance is never below $15 million at the start of the fiscal year. While we acknowledge there is a significant budget problem, AB 2564 would have negligible impacts on future budgets. AB 2564 is an incremental yet meaningful investment in preventing losses in homeownership among our most vulnerable residents.

1. Committee Staff Comments:
   1. Constitutional authority for property tax postponement program: In provisions originally adopted June 8, 1976, the California Constitution authorizes the Legislature to establish a program under which low- or moderate-income individuals aged 62 or older may postpone property taxes on their principal place of residence. These provisions, which predate Proposition 13, were adopted to address concerns that senior homeowners on fixed incomes might lose their homes because of an inability to pay rising property tax bills.^[1]
   2. The Property Tax Postponement Program is suspended: In 2009, in the wake of the Great Recession, the Property Tax Postponement Program was indefinitely suspended as part of budget reductions to the state's GF programs. Specifically, SBx3 8 (Ducheny), Chapter 4, Statutes of 2009, Third Extraordinary Session, prohibited the filing of claims for property tax postponement on or after February 20, 2009, and prohibited the State Controller from accepting applications for postponement on or after that date.
   3. A revised program is reinstated: In 2014, the Property Tax Postponement Program was revived with a delayed start date for property taxes associated with the 2016-17 fiscal year. Additionally, the Program was modified to include tightened eligibility criteria and funding was no longer GF based.^[2]
   4. The Legislative Analyst's Office issues a comprehensive report on the Program: In October 2018, the Legislative Analyst's Office (LAO) issued a report, "Evaluation of the Property Tax Postponement Program". This report criticized the Program for having high administrative costs and noted that Program participants must subsidize the relatively high costs associated with processing unapproved applicants. The report also faulted the Program's low participation rate. Specifically, the report noted:

Participation in PTP is very low – a clear shortcoming of the program. In particular, in the most recent years, PTP has had around 1,000 participants – compared to the over one million Californians who are over the age of 62, own their own homes, and live in a household with incomes less than $35,500.

The report did commend the Program for providing guaranteed eligibility for those who qualify and for allowing participants to indefinitely postpone repayments. The report also noted that Program loans were less costly than reverse mortgages.

Finally, the report highlighted the fact that the Program does not impose a cost on taxpayers by noting, "[i]n fact, PTP provides a [GF] benefit – meaning low-income participants in the program are effectively subsidizing the state's [GF]." This last comment reflects the fact that the reinstated Program is both self-funded and requires the State Controller, on June 30 of each year, to transfer any Fund moneys in excess of $15 million to the GF.

In the end, the report set forth two policy options for the Legislature to consider. The first option would be to eliminate the Program. Specifically, the report noted:

PTP has a very low participation rate and a high per-participant administrative cost. Both of these factors suggest the program is providing little total benefit. As such, the Legislature may want to consider eliminating the Program.

Alternatively, the LAO noted that if the Legislature wanted to maintain the Program, the Program would benefit from a number of changes. Specifically, the LAO recommended the following:

• • 1. Basing income eligibility on the "income limits" published annually by the Department of Housing and Community Development, which are tailored for county median income and household size;
    2. Eliminating the Program's GF benefit and lowering the 7% interest rate; and,
    3. Expanding Program eligibility to low-income homeowners in their 40s and 50s, who spend a higher share of their income on property taxes than older homeowners.

Since the report's issuance, the Legislature has adopted some, but not all, of these recommendations. Specifically, the Legislature has acted to lower the Program's interest rate and modify income eligibility, but has not eliminated the Program's benefit to the GF or expanded eligibility to younger homeowners.

• 1. The current program: The Property Tax Postponement Program, administered by the State Controller, currently allows homeowners who are seniors, are blind, or have a disability to defer current-year property taxes on their principal residence if they meet certain criteria, including having at least 40% equity in the home and an annual household income of $51,762 or less (among other requirements). The deferment of property taxes is secured by a lien against the property that must eventually be repaid. The Program is self-funded from repayments from previous Program participants, and the Fund is capped at $15 million per year, with any moneys above this threshold transferred annually to the GF.
  2. So what is the problem? The State Controller notes that, for a variety of reasons, the Program is in jeopardy of being unable to fund all eligible applicants and cover its administrative costs. The State Controller also notes that collections have decreased due to the fact that new loans were not made between 2009 and 2016 during the Program's suspension, "resulting in [the State Controller] collecting on a dwindling number of old loans or waiting until recent loans become due and payable." The author has also noted that, in recent years, Program eligibility has been expanded and the interest rate of Program loans reduced, meaning more individuals will be eligible each year with a shrinking pool of collection accounts in the immediate future.
  3. What would this bill do? This bill would reinstate GF support for the Program by requiring an annual transfer of GF moneys to the Fund when the Fund balance is less than $15 million.
  4. Current legislation: AB 265 (Boerner), of the current Legislative Session, contained provisions substantially similar to this bill. Governor Newsom vetoed AB 265, noting the following in his veto message:

This bill would require annual transfers from the General Fund to the Senior Citizens and Disabled Citizen Property Tax Postponement (PTP) Fund to ensure the balance each June 30 is $15 million. The PTP Program allows income-eligible homeowners who are seniors, blind, or disabled to defer their property taxes, secured by a lien against the property that is later repaid when the property is sold or refinanced. By design, the PTP Fund is structured to be self-sustaining.

The Department of Finance conducted an analysis of the PTP Program and concluded the program has enough funding for 2023-24, but cannot be sustained without an annual commitment of potentially millions of General Fund dollars to support it thereafter. While I support the PTP Program, discussions regarding this continuous appropriation should be considered in the annual budget process. While I am unable to sign this bill, I look forward to continuing discussions to identify necessary resources in the upcoming fiscal year.

In partnership with the Legislature, we enacted a budget that closed a shortfall of more than $30 billion through balanced solutions that avoided deep program cuts and protected education, health care, climate, public safety, and social service programs that are relied on by millions of Californians. This year, however, the Legislature sent me bills outside of this budget process that, if all enacted, would add nearly $19 billion of unaccounted costs in the budget, of which $11 billion would be ongoing.

With our state facing continuing economic risk and revenue uncertainty, it is important to remain disciplined when considering bills with significant fiscal implications, such as this measure.

• 1. Prior legislation:
     1. AB 1707 (Boerner), of the 2021-22 Legislative Session, contained provisions substantially similar to this bill. Governor Newsom vetoed AB 1707, noting the following in his veto message:

This bill requires annual transfers from the General Fund to the Senior Citizens and Disabled Citizen Property Postponement (PTP) Fund to ensure the balance each June 30 is $15 million. The Property Tax Postponement Program allows income-eligible homeowners who are seniors, blind, or disabled to defer their property taxes, secured by a lien against the property that is later repaid when the property is sold or refinanced. By design, the PTP Fund is structured to be self-sustaining.

Although recent changes in law have expanded eligibility for the program, the State Controller's Office does not project a shortfall until the 2025-26 fiscal year. My administration supports this program and its role in helping our most vulnerable homeowners remain in their homes. Therefore, I am directing the Department of Finance to conduct an analysis of the Program to identify any fiscal stability concerns and propose appropriate solutions for consideration.

• • 1. AB 133 (Quirk-Silva), Chapter 794, Statutes of 2019, lowered the rate of interest on property tax postponement payments from 7% per annum to 5% per annum, and revised the income limitations to provide that a claimant's household income cannot exceed $45,000, compounded annually, as provided.

REGISTERED SUPPORT / OPPOSITION:

Support

Controller Malia M. Cohen (Sponsor)

League of California Cities

California Association of County Treasurers and Tax Collectors

California Association of Realtors

California Special Districts Association

California State Association of Counties

Opposition

None on file

Analysis Prepared by: M. David Ruff / REV. & TAX. / (916) 319-2098

1. At the time, property tax assessments were based on a home's full market value. Today, however, property taxes are generally based on assessed values linked to a home's market value on the date it was purchased. ↑

2. AB 2231 (Gordon), Chapter 703, Statutes of 2014. ↑

Date of Hearing: April 1, 2024

ASSEMBLY COMMITTEE ON REVENUE AND TAXATION

Jacqui Irwin, Chair

ABPCA Bill Id:
AB 2564 (

Author:Boerner) – As Introduced Ver:February 14, 2024

2/3 vote. Fiscal committee.

SUBJECT: Property tax postponement: Senior Citizens and Disabled Citizens Property Tax Postponement Fund

SUMMARY: Requires that money be transferred from the General Fund (GF) to the Senior Citizens and Disabled Citizens Property Tax Postponement Fund (Fund) when the Fund balance is less than $15 million. Specifically, this bill:

1. Provides that, on June 30, 2025, and on June 30 each year thereafter, the State Controller shall transfer moneys from the GF to the Fund when the Fund balance is less than $15 million.
2. Provides that the amount of money transferred each year shall be equal to the sum needed to bring the Fund balance to $15 million.

EXISTING LAW:

1. Authorizes the Legislature to provide by law for the manner in which a person of low or moderate income who is 62 years of age or older may postpone ad valorem property taxes on their principal place of residence. (Article XIII, Section 8.5 of the California Constitution.)
2. Authorizes the Legislature to provide by law for the manner in which a disabled person may postpone payment of ad valorem property taxes on their principal place of residence. (Id.)
3. Authorizes the State Controller, upon approval of a claim for the postponement of ad valorem property taxes, to directly pay a county tax collector for the property taxes owed by the claimant, as provided. (Government Code Section 16180 et seq.)
4. Establishes the Fund and continuously appropriates moneys in the Fund to the State Controller for specified purposes, including disbursements relating to the postponement of property taxes under the Property Tax Postponement Law. (Government Code Section 16180.)
5. Requires the State Controller to, on June 30, 2018, and on June 30 of each year thereafter, transfer any moneys in the Fund in excess of $15 million to the GF. (Government Code Section 16180.)

FISCAL EFFECT: Unknown

COMMENTS:

1. The author has provided the following statement in support of this bill:

Since 1977, the Senior Citizens and Disabled Citizens Property Tax Postponement Fund has helped keep some of our state's most vulnerable residents in their own homes. Currently, the California State Controller is projecting the Program will be insolvent as soon as 2025-26. AB 2564 seeks to ensure this vital Program never runs out of the funding it needs. If no alternative funding source is established, the Program will be unable to approve future eligible applicants such as low-income seniors and disabled homeowners who are in need of financial relief to stay in their homes.

1. This bill is sponsored by State Controller Malia M. Cohen, who notes the following:

As you are aware, the Senior Citizens Property Tax Postponement Act became law in 1977 and established the PTP Program which received General Fund support. This popular program was briefly suspended in 2009 due to the recession and a modified version was reinstated in 2016. In its reconstituted state, a person over 62 years of age, blind, or disabled qualifies so long as the applicant has a specified income level, and has at least 40 percent equity in their home to postpone payment of their property taxes. The program does not receive any additional General Fund support, and all new postponement loans and administrative costs are paid through collections on existing loans. The deferment of property taxes is secured by a lien against the property, which is typically repaid when the home is sold, title is transferred, or the participant dies. The fund is capped at $15 million per year requiring my office to transfer any funds above this amount on June 30^th of each year to the General Fund. My office has transferred funds to the General Fund in years when the fund balance exceeded $15 million, totaling just over $7.9 million to date.

Recent statutory changes to the program reduced loan interest rates from seven percent to five percent and increased the income threshold on an annual basis as a hedge against inflation. These changes have increased the number of eligible participants, while reducing future collections earned on loan interest. The level of funding was not adjusted in a manner which would cover the increased number of eligible Californians. At the current rate of program expansion, with no additional funding source, the program has had to reject certain applicants in the Manufactured Home category and is in jeopardy of turning away eligible applicants across the program potentially causing more harm to those vulnerable individuals who rely on the assistance provided by the PTP Program.

1. This bill is supported by the League of California Cities and the California State Association of Counties, which note:

Existing law establishes the PTP Program within the State Controller's Office (SCO), which allows homeowners who are seniors or have a disability (who meet specified criteria) to defer current-year property taxes on their principal residence. This deferred payment is secured by a lien against the property that is later repaid when the property is sold or refinanced, and the property taxes are paid by the SCO.

Due to numerous reasons, the PTP Program is in jeopardy of being unable to fund all eligible applicants. AB 2564 remedies this problem by providing ongoing General Fund support to the Fund by ensuring the Fund's balance is never below $15 million at the start of the fiscal year. While we acknowledge there is a significant budget problem, AB 2564 would have negligible impacts on future budgets. AB 2564 is an incremental yet meaningful investment in preventing losses in homeownership among our most vulnerable residents.

1. Committee Staff Comments:
   1. Constitutional authority for property tax postponement program: In provisions originally adopted June 8, 1976, the California Constitution authorizes the Legislature to establish a program under which low- or moderate-income individuals aged 62 or older may postpone property taxes on their principal place of residence. These provisions, which predate Proposition 13, were adopted to address concerns that senior homeowners on fixed incomes might lose their homes because of an inability to pay rising property tax bills.^[1]
   2. The Property Tax Postponement Program is suspended: In 2009, in the wake of the Great Recession, the Property Tax Postponement Program was indefinitely suspended as part of budget reductions to the state's GF programs. Specifically, SBx3 8 (Ducheny), Chapter 4, Statutes of 2009, Third Extraordinary Session, prohibited the filing of claims for property tax postponement on or after February 20, 2009, and prohibited the State Controller from accepting applications for postponement on or after that date.
   3. A revised program is reinstated: In 2014, the Property Tax Postponement Program was revived with a delayed start date for property taxes associated with the 2016-17 fiscal year. Additionally, the Program was modified to include tightened eligibility criteria and funding was no longer GF based.^[2]
   4. The Legislative Analyst's Office issues a comprehensive report on the Program: In October 2018, the Legislative Analyst's Office (LAO) issued a report, "Evaluation of the Property Tax Postponement Program". This report criticized the Program for having high administrative costs and noted that Program participants must subsidize the relatively high costs associated with processing unapproved applicants. The report also faulted the Program's low participation rate. Specifically, the report noted:

Participation in PTP is very low – a clear shortcoming of the program. In particular, in the most recent years, PTP has had around 1,000 participants – compared to the over one million Californians who are over the age of 62, own their own homes, and live in a household with incomes less than $35,500.

The report did commend the Program for providing guaranteed eligibility for those who qualify and for allowing participants to indefinitely postpone repayments. The report also noted that Program loans were less costly than reverse mortgages.

Finally, the report highlighted the fact that the Program does not impose a cost on taxpayers by noting, "[i]n fact, PTP provides a [GF] benefit – meaning low-income participants in the program are effectively subsidizing the state's [GF]." This last comment reflects the fact that the reinstated Program is both self-funded and requires the State Controller, on June 30 of each year, to transfer any Fund moneys in excess of $15 million to the GF.

In the end, the report set forth two policy options for the Legislature to consider. The first option would be to eliminate the Program. Specifically, the report noted:

PTP has a very low participation rate and a high per-participant administrative cost. Both of these factors suggest the program is providing little total benefit. As such, the Legislature may want to consider eliminating the Program.

Alternatively, the LAO noted that if the Legislature wanted to maintain the Program, the Program would benefit from a number of changes. Specifically, the LAO recommended the following:

• • 1. Basing income eligibility on the "income limits" published annually by the Department of Housing and Community Development, which are tailored for county median income and household size;
    2. Eliminating the Program's GF benefit and lowering the 7% interest rate; and,
    3. Expanding Program eligibility to low-income homeowners in their 40s and 50s, who spend a higher share of their income on property taxes than older homeowners.

Since the report's issuance, the Legislature has adopted some, but not all, of these recommendations. Specifically, the Legislature has acted to lower the Program's interest rate and modify income eligibility, but has not eliminated the Program's benefit to the GF or expanded eligibility to younger homeowners.

• 1. The current program: The Property Tax Postponement Program, administered by the State Controller, currently allows homeowners who are seniors, are blind, or have a disability to defer current-year property taxes on their principal residence if they meet certain criteria, including having at least 40% equity in the home and an annual household income of $51,762 or less (among other requirements). The deferment of property taxes is secured by a lien against the property that must eventually be repaid. The Program is self-funded from repayments from previous Program participants, and the Fund is capped at $15 million per year, with any moneys above this threshold transferred annually to the GF.
  2. So what is the problem? The State Controller notes that, for a variety of reasons, the Program is in jeopardy of being unable to fund all eligible applicants and cover its administrative costs. The State Controller also notes that collections have decreased due to the fact that new loans were not made between 2009 and 2016 during the Program's suspension, "resulting in [the State Controller] collecting on a dwindling number of old loans or waiting until recent loans become due and payable." The author has also noted that, in recent years, Program eligibility has been expanded and the interest rate of Program loans reduced, meaning more individuals will be eligible each year with a shrinking pool of collection accounts in the immediate future.
  3. What would this bill do? This bill would reinstate GF support for the Program by requiring an annual transfer of GF moneys to the Fund when the Fund balance is less than $15 million.
  4. Current legislation: AB 265 (Boerner), of the current Legislative Session, contained provisions substantially similar to this bill. Governor Newsom vetoed AB 265, noting the following in his veto message:

This bill would require annual transfers from the General Fund to the Senior Citizens and Disabled Citizen Property Tax Postponement (PTP) Fund to ensure the balance each June 30 is $15 million. The PTP Program allows income-eligible homeowners who are seniors, blind, or disabled to defer their property taxes, secured by a lien against the property that is later repaid when the property is sold or refinanced. By design, the PTP Fund is structured to be self-sustaining.

The Department of Finance conducted an analysis of the PTP Program and concluded the program has enough funding for 2023-24, but cannot be sustained without an annual commitment of potentially millions of General Fund dollars to support it thereafter. While I support the PTP Program, discussions regarding this continuous appropriation should be considered in the annual budget process. While I am unable to sign this bill, I look forward to continuing discussions to identify necessary resources in the upcoming fiscal year.

In partnership with the Legislature, we enacted a budget that closed a shortfall of more than $30 billion through balanced solutions that avoided deep program cuts and protected education, health care, climate, public safety, and social service programs that are relied on by millions of Californians. This year, however, the Legislature sent me bills outside of this budget process that, if all enacted, would add nearly $19 billion of unaccounted costs in the budget, of which $11 billion would be ongoing.

With our state facing continuing economic risk and revenue uncertainty, it is important to remain disciplined when considering bills with significant fiscal implications, such as this measure.

• • 1. Prior legislation:
       1. AB 1707 (Boerner), of the 2021-22 Legislative Session, contained provisions substantially similar to this bill. Governor Newsom vetoed AB 1707, noting the following in his veto message:

This bill requires annual transfers from the General Fund to the Senior Citizens and Disabled Citizen Property Postponement (PTP) Fund to ensure the balance each June 30 is $15 million. The Property Tax Postponement Program allows income-eligible homeowners who are seniors, blind, or disabled to defer their property taxes, secured by a lien against the property that is later repaid when the property is sold or refinanced. By design, the PTP Fund is structured to be self-sustaining.

Although recent changes in law have expanded eligibility for the program, the State Controller's Office does not project a shortfall until the 2025-26 fiscal year. My administration supports this program and its role in helping our most vulnerable homeowners remain in their homes. Therefore, I am directing the Department of Finance to conduct an analysis of the Program to identify any fiscal stability concerns and propose appropriate solutions for consideration.

• • • 1. AB 133 (Quirk-Silva), Chapter 794, Statutes of 2019, lowered the rate of interest on property tax postponement payments from 7% per annum to 5% per annum, and revised the income limitations to provide that a claimant's household income cannot exceed $45,000, compounded annually, as provided.

REGISTERED SUPPORT / OPPOSITION:

Support

Controller Malia M. Cohen (Sponsor)

League of California Cities

California Association of County Treasurers and Tax Collectors

California Association of Realtors

California Special Districts Association

California State Association of Counties

Opposition

None on file.

Analysis Prepared by: M. David Ruff / REV. & TAX. / (916) 319-2098

1. At the time, property tax assessments were based on a home's full market value. Today, however, property taxes are generally based on assessed values linked to a home's market value on the date it was purchased. ↑

2. AB 2231 (Gordon), Chapter 703, Statutes of 2014. ↑