City Attorney David Chiu

City Attorney and Controller statement on court victory allowing the City to keep windfall funds

San Francisco will retain approximately $42 million annually as a result of court decision

SAN FRANCISCO (June 8, 2022) — City Attorney David Chiu and Controller Ben Rosenfield released the following statements today after a Sacramento Superior Court judge sided with San Francisco and other counties in a case centering around how property tax revenue diversions to the Educational Revenue Augmentation Fund (ERAF) are calculated by county auditor-controllers. The decision saves San Francisco approximately $42 million annually and upholds the principle that counties should be able to keep any diverted funds in excess of statutory requirements.

City Attorney David Chiu
City Attorney David Chiu

“For years, I have consistently defended San Francisco’s ability to keep excess ERAF funds,” said City Attorney Chiu. “I am pleased the Court agreed that these funds are being calculated appropriately and the City will retain tens of millions of dollars per year to benefit all San Franciscans.”

“We are grateful that the Court has seen through this latest effort to pull money away from local governments as a means to relieve the State of California of their obligation to fund our schools,” said Controller Rosenfield. “We remain grateful to Controller Betty Yee for her careful understanding of these complex laws and guidance on these issues.”

Case Background

ERAF is funded by local property taxes and is distributed to school districts to meet the State’s minimum funding requirements for schools. Once the minimum funding requirement is met, any remaining ERAF revenues are returned to the city, county, or special district from which they originated and can be used by local officials to fund government services or programs. San Francisco is one of five counties in the California that have excess ERAF funds.

In 2021, at the direction of the California State Legislature, California Controller Betty Yee issued guidance to county auditor-controllers regarding how ERAF funds should be calculated, and San Francisco has followed that advice in calculating its ERAF share.

In an attempt to extract more funding from the five counties with excess ERAF monies, the petitioners filed suit asking the Court to invalidate the guidance provided by the State Controller’s Office. San Francisco partnered with Marin and Santa Clara counties to defend the suit, and the Court denied the plaintiffs’ petition for a writ of mandate today.

The case is California School Boards Association v. Betty T. Yee, Sacramento Superior Court, Case No. 34-2021-80003680. The order can be found here.