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Summary of LAO Findings and Recommendations on the 2012-13 Budget

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Last Updated
 Go Back  Seismic Safety Commission Revised Seismic Safety Commission funding proposal We raise no objections with the Governor's revised budget proposal to provide permanent funding ($1.3 million in 2012-13) for the Seismic Safety Commission through a charge on insurance policy holders. 5-23-12

Detailed Narrative

Background

The state created the Seismic Safety Commission in 1975 to provide policy guidance and coordination for earthquake-related government programs. The commission consists of 20 commissioners who meet six times per year and is supported by seven staff members.

The state General Fund supported the commission for most of its history. Beginning in 2001-02, the commission was funded through a charge on the gross receipts of insurers of commercial and residential properties. This charge is set to expire on July 1, 2012.

In January, the Governor’s budget proposed deleting the sunset provision in existing law to make the charge on insurers permanent. The Office of Legislative Counsel advised us, however, that extending the charge on insurers would be unconstitutional. Specifically, under Article XIII A, Section 3, of the State Constitution (Proposition 26, 2010) the extended charge on insurers to support the commission would be a tax because the commission provides a broad public benefit rather than a direct benefit to the insurers paying the charges. Such a tax would not be permissible because Article XIII, Section 28(f), of the Constitution states that with limited exceptions the state’s insurance tax (one of the General Fund's major revenue sources) shall be in lieu of all other state and local taxes on insurers.

Governor’s May Revision Proposal

As part of the May Revision, the Governor proposes new trailer bill language that would shift the responsibility for paying the charge from insurers to insurance policy holders. This would provide ongoing funding for the commission (approximately $1.3 million in 2012-13). We raise no objections with this revised proposal.