State Tax Allocations to Counties in Error
Counties to Receive More than $100 Million in Under-Allocated Revenue
The State of California has mistakenly under-allocated sales tax revenues to three local government programs, meaning the state will be paying counties more than $100 million to compensate for the error. The money could be flowing as soon as next month, although the exact timing is not yet clear.
HdL Companies, a tax consulting firm that specializes in local agency revenues, found the error in allocations of state sales taxes for Proposition 172, 1991 realignment, and 2011 realignment that occurred after the implementation of the gas tax swap. HdL pursued this issue with the Board of Equalization, and an ensuing internal audit shows that there was an over-allocation of sales tax revenues to the state General Fund and a corresponding under-allocation of sales tax revenues to Proposition 172, 1991 realignment, and 2011 realignment.
HdL estimates that about $50 million in Proposition 172 funds, $50 million in 1991 realignment funds, and a smaller amount of 2011 realignment funds will need to be corrected to the benefit of local agencies.CSAC has reached out to the Department of Finance to better understand how they plan to handle the corrections. Finance staff continues to work with the Board of Equalization to fully understand the scope and source of the problem. Finance has indicated that they will reach out to CSAC for input as to the remedy before they direct the Controller to make the corrected allocations.
CSAC will continue to follow this issue closely, and will communicate more when more details are available. In the meantime, please don’t hesitate to contact us with your questions. We also want to extend our appreciation to HdL Companies for their persistence on this issue and for keeping us informed during the process.