Briefing Report: The Senior Citizens' and Disabled Citizens' Property Tax Postponement Law

A Tax Program that Worked
Wednesday, June 18, 2014

Introduction

In 2009, the Senior Citizens’ and Disabled Citizens’ Property Tax Postponement program (PTP), an invaluable program that helped to keep thousands of low- and fixed-income seniors, blind and disabled Californians in their homes, was indefinitely postponed due to state budget cuts made during “the Great Recession.”

Since then, California’s economy has stumbled and struggled to regain its strength, but now seems to be on a shallow glide path to recovery. While many Californians are benefiting from the state’s economic recovery, many others continue to struggle to meet their financial obligations. Rising food, electricity and gas prices, higher taxes, increasing housing and medical costs don’t make the life of low-to-moderate income seniors or those dealing with the challenges of being disabled any easier.

As evidence of this need, county assessors have received thousands of calls from needy and potentially qualified Californians over the last 5 years seeking to apply for the PTP program because of significant hardships yet; the Legislature has been reluctant to revive it. This year may be the time for the Legislature to reenact the PTP.

The PTP’s Origins

During the 1970s, California’s real estate market grew significantly with home values increasing year over year. California homeowners’ frustration with property taxes grew almost as quickly as home values. While county assessors were required to assess homes at the current prices, many assessors only did so every few years resulting in shocking property tax bills.

In response to these skyrocketing property taxes and the resulting impact on low-to-moderate income seniors, California voters approved Proposition 13 (1976). This was two years before the passage of California’s transformative, yet normalizing, approach to property taxation, Proposition 13 (1978).

Proposition 13 of 1976 added Section 8.5 to Article XIII of the California Constitution, which authorized the Legislature to postpone ad valorem taxes on principal owner occupied primary residences of low- or moderate-income people who are 62 years of age or older. Enabling legislation was subsequently enacted in 1977 to effectuate the program.

Just a few years later, California voters approved Proposition 33 in 1984, extending the Legislature’s authority to postpone the payment of ad valorem taxes, but doing so regardless of age.

How PTP worked

California can be an expensive place to live, especially on fixed low-to-moderate incomes. Since its inception, PTP program has helped thousands of seniors, blind and disabled Californians avoid making the decision between paying for medications or medical care or paying their property taxes. Fortunately for those who participated in the program, they could pay their property taxes and have their medication too.

Generally, under the former PTP program the state Controller either paid the county tax collector or issued a certificate to the claimant that guaranteed the state would pay the property taxes. Property taxes included ad valorem taxes, assessments, charges and user fees.

The program amounted to a state “loan” to qualified Californians. Secured by a lien placed on the homeowner’s property, the participant would have to repay the loan, plus accrued simple interest, when the homeowner either dies, sells or transfers the title to the home, or leaves the property leaving no spouse or another qualified person to reside in the home.

To have qualified for the program, an applicant/participant would have to be 62 years of age or older, blind, or disabled; have an annual household income of less than $39,000 and have at least a 20% equity interest in your home. A claim must have been filed each year to have the property taxes postponed.

During its lifetime, approximately 5,000 persons annually took advantage of the program. Many have been participating in the program for over 20 years with a majority being over 70 years old, and many claimants over 90.

Despite decades of benefiting elderly, blind and disabled Californians, the PTP program was indefinitely suspended in 2009 by the Legislature.  Chapter 4, Statutes of 2009 of the Third Extraordinary Session (SB 8xxx, Ducheny) prohibited the state Controller from accepting applications for the program and its funding was eliminated. According to the analysis of SB 8xxx, suspending the program saved about $30 million General Fund in the 2009-10 budget.

Since the demise of the PTP

Since the demise of the PTP program, there have been several legislative attempts to revive it.

  • AB 1718 (Blumenfield, 2010) would have allowed counties to create a local PTP program, but was vetoed by Governor Schwarzenegger stating that the program “grants counties a super priority lien on a participating senior or disabled individual's residential property. Not only would an individual's participation in a county program violate their mortgage contract, it would most likely render them unable to obtain future loans.”

  • AB 1029 (Blumenfield, 2010) would also have restored the PTP program.  That bill was held on the Appropriations Committee Suspense File. 

  • AB 34x (Budget Committee, 2011) would have restored the PTP but was vetoed by Governor Brown because the up-front and on-going costs associated with the program would take away money from “core” public services.

Also in 2011, Chapter 369, Statutes of 2011 (AB 1090, Blumenfield) established the County Deferred Property Tax Program (similar to the one proposed in AB 1718), which allowed counties to implement a PTP program for seniors, the blind and disabled persons. To date, only one county has adopted this program.

During the current 2013-14 legislative session, three measures have been introduced seeking to reenact a modified version of the PTP program.

  • AB 1322 (Patterson, 2013/14) would have reinstated the PTP program, but it was held in the Assembly Appropriations Committee.

  • SB 1214 (Anderson, 2013/14) would have restored a modified version of the PTP program, but it was held in the Senate Appropriations Committee.

The last remaining hope to restore some version of the PTP program to help seniors, blind and disabled Californians is AB 2231 (Gordon, 2013/14), which is currently in the Senate awaiting its fate.

Conclusion

The Senior Citizens’ and Disabled Citizens’ Property Tax Postponement Law has helped to reduce the financial burdens of thousands of California’s low-to-moderate and fixed-income seniors, blind and disabled Californians so they could remain in their homes.

While the PTP is not a long-term solution to the financial challenges facing many low-to-moderate income Californians, it is a workable and proven solution with an immediate impact to those in need.

 

For more information on this report or other Taxation issues, contact Scott Chavez, Senate Republican Office of Policy at 916/651-1501.