Counties Request Backfill for Diaper and Menstrual Products Tax Exemptions
May 16, 2019
Governor Newsom and members of the Legislative Women’s Caucus recently announced a budget proposal to provide a statewide sales tax exemption for children’s diapers and menstrual products. CSAC recognizes the policy and social considerations associated with these exemptions, but is advocating, along with Rural County Representatives of California (RCRC) and the Urban Counties of California (UCC), for the state to backfill counties for local revenue losses.
In 2011, counties worked hard to engage with the state on realignment. That partnership ensured that the framework for the realignment of nearly $6 billion in programs and services from the state to counties incorporated constitutional protections for revenue predictability and stability, program certainty, and a balanced approach to fiscal risk. Proposition 30 of 2012 included those protections and was the lynchpin of counties’ support for 2011 realignment. Proposition 30 affirmed that the revenues dedicated to counties under 2011 realignment—primarily via sales and use taxes—would be available to fund services transferred to counties.
CSAC, along with RCRC and UCC, urge the Governor and the Legislature to recognize the significant impact of sales tax exemptions to local governments. The local revenue losses associated with the diaper and menstrual product sales tax exemptions amount to more than $60 million for the proposed 2-year period—a considerable loss for local health care, behavioral health, public safety, and other vital social services that benefit our communities’ most vulnerable individuals. Without backfilled funding, the proposed exemptions fail to acknowledge the longstanding partnership that exists between the state and counties on many policy and fiscal issues, particularly as it pertains to county responsibilities under realignment, which are reliant on the sales tax for funding.
On May 14, the Assembly Budget Subcommittee #4 on State Administration discussed the Governor’s May Revision proposal to exempt diapers and menstrual products from sales taxes. The Legislative Analyst’s Office stated that one year of funds not collected due to a diaper sales tax exemption could alternately fund 1,600 more low-income childcare slots and additionally provide $28 million to local programs and $9 million to schools with the greatest needs through Proposition 98. At this hearing, CSAC Legislative Representative Geoff Neill spoke to the critical importance of local programs currently funded, under realignment, by sales taxes. These include public safety, local infrastructure, and social service programs exclusively serving the same low-income women and children these tax exemptions intend to assist.
While the state certainly has the authority to determine the appropriate investment of state funds; in this instance, the proposed exemptions also impose a considerable revenue loss to local governments. CSAC will continue to advocate for the backfilling of local revenue losses associated with the proposed diaper and menstrual product sales and use tax exemptions, and will update county staff and officials regarding any developments as this conversation progresses.