LOS ANGELES — A measure introduced by an Orange County, Calif., lawmaker to restore funding the county lost during changes in apportionment of a state vehicle license fee passed the state legislature.

Gov. Jerry Brown has until Oct. 13 to act on the bill.

Assembly Bill 701 by Assemblywoman Sharon Quirk-Silva, D-Fullerton, would settle a long-term vehicle license fee adjustment amount formula dispute between Orange County and the state by restoring $53 million in annual funding.

"AB 701 is bipartisan solution that ensures continued budget stability for Orange County and prevents additional cuts to county public safety programs in this fiscal year," Quirk-Silva said.

The county will still have to repay $148 million in disputed property taxes it seized over a two year period after the state took the vehicle license fee funds under legislation passed during the 2011 session.

If Brown signs the bill, the county now has six years to repay the $148 million it seized after it lost a lawsuit against the Department of Finance over the disputed property taxes in May, rather than the three-year period ordered by the court.

The bill sets payments up to start with $5 million in fiscal year 2014-15 and balloon to $55 million by fiscal 2018-19 for the final payment.

Quirk-Silva's bill would restore $53 million in annual funding, less than the $73 million county officials say they lost after the change. The $73 million figure is what the county used to decide how much in local property taxes to hold onto over the two years over the state's objection.

Orange County Supervisor John Moorlach said supervisors voted in support of Quirk-Silva's bill, although it doesn't restore the total estimated amount the county has lost to the state.

The bill also trades $50 million in funding for local schools that the state would have paid to Orange County K-12 schools through the Educational Revenue Augmentation Fund for the $53 million in vehicle license fee money. So, the legislation only costs the state $3 million.

The county will now get a formula-based dollar-for-dollar disbursement of the state's vehicle license fee adjustment funds like other counties, said Shawn Nelson, chair of the county's board of supervisors.

The county was able to avoid layoffs expected after the 2011 legislation was passed by the state, but decisions made at the state level continue to put pressure on counties, Moorlach said.

He cited the prison reform efforts that returned prisoners to the county to deal with overcrowding issues and the dissolution of the redevelopment agencies as other decisions at the state level that have kept budgets constrained at the local level even as the economy recovers.

County leaders made the decision with former Auditor-Controller David Sundstrom to seize the $73 million in 2011 after the state took funds the county had been receiving to repay bonds issued in 1995to emerge from its 1994 bankruptcy.

When it refunded the 1995 bonds in 2005 the county obtained much lower interest rates but the refunding bonds did not include the state's pledge of a flow of vehicle license fees that helped support the original 1995 bond issue.

Those were the funds the state took to solve its own budget crisis in legislation passed during the 2011 session.

County officials argued that state legislators had erred in how they allocated property taxes back to the county and should have allowed the county to keep a greater share.

Attorneys for the state argued that Orange County was trying to achieve in court what it could not achieve in the state Legislature.

Assemblyman Jose Solorio, an Orange County Republican, sponsored last-minute legislation to restore funding to the county in 2011, but it failed to make it through both chambers of the state legislature.

After the failure of Solorio's bill, county leaders, with the help of several law firms, persuaded Sundstrom to ignore Sacramento's budget allocations on property taxes.

On Jan. 31, Sundstrom allocated the $73 million to the county instead of local schools.

The move didn't harm the county's K-12 schools, who received backfilled funds from the state through an equalization law, but it resulted in less money for the county's community colleges, which joined the DOF in the lawsuit against the county.


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