BILL ANALYSIS
AB 1328
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Date of Hearing: April 29, 2003
ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS
Lou Correa, Chair
AB 1328 (Simitian) - As Amended: April 7, 2003
SUBJECT : State budget: nonprofit vendors.
SUMMARY : Requires the Controller to provide for reimbursement
of nonprofit vendors for goods delivered or services rendered
under existing contracts in the event of an impasse over the
Budget Act of 2003. Specifically, this bill :
1)Appropriates from the General Fund an amount no greater than
what is necessary for the Controller to compensate any
nonprofit vender.
2)Applies only to nonprofit vendors who contracted with the
state prior to July 1, 2003.
3)Reimburses only for goods delivered or services rendered for a
term that includes any portion of the 2003-2004 fiscal year,
until the date that the Budget Act is enacted.
EXISTING LAW provides, under the California Constitution, that
funds may be only drawn from the State Treasury through an
appropriation made by law and upon a Controller's duly drawn
warrant.
FISCAL EFFECT : Unknown
COMMENTS :
Purpose of this bill . Prompt payment when the state budget is
delayed will allow nonprofit vendors to maintain continuity of
services, thereby protecting public health and safety.
Support . According to the author, "Last year the State budget
was not approved until September 5th, a record 67 days late! AB
1328 is crucial to ensure that nonprofit organizations will be
able to continue to provide vital services to the public in the
event of another budget impasse."
When nonprofits have to wait to be reimbursed for the provision
of services under state government contracts, they often face
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cash-flow problems, and, in contrast to private enterprise,
nonprofits often do not have sufficient assets to secure private
credit to tide them over in cash-poor circumstances. Nor do
nonprofits typically have adequate cash reserves to pay their
staff and maintain provision of services. Cash-flow
interruptions limit their ability to provide services, to pay
staff and vendors and to meet matching requirements of local and
federal government and private funding sources.
During last summer's budget impasse, hundreds of nonprofit
vendors had to delay payrolls, lay off staff and cut back on
programs to the detriment of their clients needing health,
educational and other services. Service disruptions or
uncertainties destabilizes the lives of those who are homeless,
mentally ill, jobless, or uninsured and sends the nonprofits who
serve them scrambling for dollars and curtailing much needed
services.
According to Planned Parenthood, in 1992 when the State of
California was technically bankrupt and unable to pay its bills
for 64 days, many of their clinics were forced to cut back on
clinic hours and delay payrolls. Other clinics needed to take
out bank loans and/or dip into their reserves. A few clinics
closed their doors temporarily and were unable to serve those
that needed medical care.
Can Controller meet the bill's terms ? According to the State
Controller's Office, they do not distinguish between nonprofit
and for-profit vendors. In order to comply with the provisions
of this bill, each contracting state agency would have to submit
a claim form to the Controller for payment of their nonprofit
vendors that could result in a substantial workload depending on
the number of vendors. In addition to staff time needed to
process each claim individually, there would be costs to process
the transfer of expenditures and unexpected funds to the
appropriate item when the Budget Act was finally passed.
Under existing law, the state is precluded from making any
payments to vendors when the fiscal year budget is not passed by
the constitutional deadline. Staff notes that although this
bill establishes the appropriation authority for payment, the
issuance of a warrant is also dependent upon the availability of
cash in each fund.
Does bill undercut budgetary process ? The creation of a budget
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should be based on a comprehensive view that takes into
consideration the multitude of deserving groups and competing
interests affected by the budget. The logic of an effective
budgetary process is contrary to the logic of this bill, which
proposes special consideration for one deserving interest group.
The logic underlying this bill is easy to universalize because
there are so many deserving groups. If that were to happen, the
budgetary process would collapse.
Related legislation . In this current session, there are a
number of bills requesting special consideration in a budget
impasse year for funding specified issues or groups, including:
AB 273 (Bogh) makes a continuous appropriation for public
employees.
AB 472 (Correa) makes a continuous appropriation of federal
bioterrorism preparedness funds.
AB 1451 (Wyland) advances one-sixth of the prior year's state
budget during a budget impasse.
AB 1535 (Bermudez) makes a continuous appropriation for state
employees.
Last year, AB 2475 (Simitian) was similar to AB 1328 and was
referred to Assembly Budget Committee, but no hearing was ever
held.
Other bills in this area have failed, including SB 1028 (Speier)
in 1999 and SB 657 (Ortiz) in 1999.
AB 561 (Scott), Chapter 993, Statutes of 1998, established the
Medical Providers Interim Payment Fund that is a continuously
appropriated to pay Medi-Cal, AIDS drug assistance program, and
developmental service bills in the case that the budget is late.
The Controller is authorized to loan up to $2 billion to the
fund (half General Fund, half federal funds) to cover the costs
of those claims while the budget is stalled.
REGISTERED SUPPORT / OPPOSITION :
Support
California Association of Nonprofits
AB 1328
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California Council of Community Mental Health Agencies
Community Violence Solutions
Mental Health Association in California
Planned Parenthood Affiliates of California
San Diego Youth & Community Services
Opposition
None on file.
Analysis Prepared by : David Pacheco / B. & P. / (916)
319-3301