BILL ANALYSIS                                                                                                                                                                                                    

                                                                  AB 117
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          Date of Hearing:   April 24, 2001

                                  Lou Correa, Chair
                  AB 117 (Migden) - As Introduced:  January 22, 2001
          SUBJECT  :   State infrastructure.

           SUMMARY  :   Requires that 1% of General Fund revenues shall be  
          used, upon appropriation in the annual Budget Act, for the  
          acquisition, construction, rehabilitation, modernization, or  
          renovation of infrastructure that is owned by the state.

           EXISTING LAW  , AB 1473 (Hertzberg), Chapter 606, Statutes of  
          1999, requires that, commencing in 2002, the Governor shall  
          submit annually a five-year infrastructure plan to the  
          Legislature.  The plan must include identification of  
          infrastructure requested by agencies, aggregate funding for  
          transportation, infrastructure needs for K-12, and instructional  
          facility needs for UC, CSU, and the Community Colleges.   
          Additionally, the plan must detail the cost of providing the  
          needed infrastructure, identify sources of funding, and estimate  
          the impact of funding the infrastructure on California's debt  

           FISCAL EFFECT  :   Potentially significant annual diversion of  
          funding from the General Fund to support state infrastructure. 

           COMMENTS  :   

           1)Purpose of bill  .  The bill would increase pay-as-you-go  
            funding for infrastructure by setting aside 1% of annual  
            General Fund revenues to be used for the acquisition, building  
            and rehabilitation of state-owned infrastructure, such as  
            universities, highways, correctional facilities, office  
            buildings, state hospitals, and parks.  All monies would be  
            appropriated by the Legislative in the annual budget act.

           2)Report of Legislative Analyst's Office (LAO)  .  As discussed in  
            the LAO's December 1998 report, "Overhauling the State's  
            Infrastructure Planning and Financing Process," the state owns  
            almost 2.5 million acres of land, 180 million square feet of  
            building space, and 15,000 miles of highways.  Much of the  
            state's existing infrastructure is aging and in need of repair  
            and renovation, and accommodating the state's growing  


                                                                  AB 117
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            population will require a vast array of new infrastructure.   
            Addressing the issues of growth and aging infrastructure poses  
            a significant challenge to the state.

          The LAO indicated that adequately funding the state's  
            infrastructure has been a problem for a number of reasons,  

             a)   Infrastructure investment has not been treated as a  
             b)   There is no stable funding source for infrastructure.
             c)   There is an over-reliance on bond funding with little  
               pay-as-you-go funding from the General Fund.  (For example,  
               from 1994-95 through 1998-99, General Fund debt service on  
               bonds totaled $11.5 billion while direct General Fund  
               appropriations totaled only $735 million.  Three-fourths of  
               those direct General Fund appropriations occurred in  

           3)Rationale Behind Diverting 1% of General Fund for  
            Infrastructure  .  The bill diverts 1% of annual General Fund  
            revenues for infrastructure.  The case for increasing state  
            resources for infrastructure building and improvement has been  
            made by entities such as the Department of Finance, California  
            Business Roundtable and many others, with an estimated need in  
            the range of $80 to $100 billion over the next decade. 

          The Governor's January budget proposes approximately $760  
            million from the General Fund for state infrastructure in  
            2001-02.  A 1% diversion of General Fund revenues (based on  
            estimates by the LAO in February) would be approximately $790  
            million, or $30 million more than the January budget proposal  
            for infrastructure.

           4)Related Legislation  .  AB 1020 (Leach), set for hearing in this  
            committee on April 24, 2001, similarly creates an  
            infrastructure account funded through the diversion of General  
            Fund revenues.  AB 1020 uses a sliding scale to gradually  
            increase the percentage of General Fund revenues placed into  
            the infrastructure account, peaking and maintaining at 5% in  
            fiscal year 2017-2018.




                                                                 AB 117
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          California Chamber of Commerce

          None on file.
          Analysis Prepared by  :    Jay Greenwood / B. & P. / (916)