BILL ANALYSIS
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|SENATE RULES COMMITTEE | AB 1389|
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THIRD READING
Bill No: AB 1389
Author: Assembly Budget Committee
Amended: 8/29/08 in Senate
Vote: 27 - Urgency
PRIOR VOTES NOT RELEVANT
SUBJECT : General Government: Budget Trailer Bill
SOURCE : Author
DIGEST : This bill provides the necessary statutory
changes in the area of General Government in order to enact
the 2008 Budget Act.
ANALYSIS :
This is the omnibus general government trailer bill for the
Budget Act of 2008. Major changes are as follows:
1. Cash Management . Makes various changes to allow
specified payment deferrals and cash-flow loans, all
within a fiscal year, to reduce the need for external
cash-flow borrowing. When combined with other cash
management actions in the budget bill, General Fund
savings of over $60 million will result.
2. Central Service Agency Cost Recovery Fund . Creates the
Central Service Cost Recovery Fund to add transparency
to those central-service-agency budgets that are
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primarily budgeted with General Fund, but then recover a
portion of costs from special funds through the pro rata
process.
3. Cesar Chavez Day of Service Learning Program . Suspends
for two years $2.5 million of the annual $5.0 million
appropriation for the Cesar Chavez Day of Service
Learning program.
4. Conservation and Liquidation Office Reporting . Requires
the Department of Insurance's annual report to the
Legislature to provide additional information related to
the Conservation and Liquidation Office, including any
insolvencies not closed within ten years of a
court-ordered liquidation.
5. Energy Efficiency in State Facilities . Requires the
Department of General Services to report on progress
towards implementing energy efficiency measures in state
facilities and obstacles preventing further
implementation.
6. Green Building . Requires the Department of Housing and
Community Development to review relevant existing green
building guidelines when developing proposed building
standards, to consider including any cost effective and
feasible features, and to summarize efforts to this
effect in annual reporting to the Legislature.
7. Return-to-Work . Extends the sunset for the Department
of Industrial Relations Return-to-Work program from
January 1, 2009, to January 1, 2010.
8. Cal-OSHA . Creates the Occupational Safety and Health
Fund to address a deficit in the Target Inspection and
Consultation Fund (TICF) which had covered the costs for
Occupational Safety and Health. The new fund would be
supported by revenue of approximately $18.9 million
annually from a new assessment on Workers' Compensation
premiums. With the creation of the fund, the Department
of Industrial Relations will also be authorized to
revise the TICF fee structure to increase revenue by
approximately $3.9 million to help pay off a $13 million
loan taken in the 2007-08 fiscal year to address a
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revenue shortfall in the fund.
9. Occupational Safety and Health Law Assessments and
Penalties . Reinstates authorization for the Franchise
Tax Board (FTB) to collect delinquent assessments and
penalties that are levied against employers for
violation of specified labor laws and specified
occupational safety and health laws.
10. Veterans Homes Estimate Package . Requires the
Department of Veterans Affairs to annually submit a
fiscal estimate package to the Legislature as part of
the Governor's Budget and to update the estimates in the
package at the May Revision of the Budget.
11. Financial Information System for California (FI$Cal)
Project . Authorizes the State Public Works Board to
issue $277 million in bonds, notes, or certificates for
Phase One of FI$Cal, a single integrated financial
management system that encompasses the management of
resources and dollars in the areas of budgeting,
accounting, procurement, cash management, financial
management, financial reporting, cost accounting, asset
management, project accounting, grant management, and
human resources management. Prior to initiation of
Phase 2, requires (a) a report to the Legislature; (b)
legislative authorization for further issuance of debt,
not to exceed $1.4 billion over the life of the project;
and (c) an annual appropriation by the Legislature for
payment of debt service.
12. California Science Center Specialty Contracts .
Authorizes the California Science Center to contract
with the California Science Center Foundation without a
competitive bidding process to acquire specific skills
not generally available through the state civil service.
In prior years, this authority has been provided in
budget bill language.
13. Retired Teachers' Inflation Protection Benefit . Revises
the payments and calculations used by the State
Teachers' Retirement System (STRS) for the Supplemental
Benefits Maintenance Account (SBMA). The revisions
include:
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A. Increases the targeted non-vested purchasing
power benefit from 80 percent to 85 percent, but
gives the STRS board authority to adjust that
target between 80 percent and 85 percent based on
long-term actuarial valuations.
B. Maintains that benefit payments may only be made
to the extent funding is available in the SBMA.
C. Reduces state General Fund payments into the SBMA
by $66 million in 2008-09, $70 million in 2009-10,
$71 million in 2010-11, and $72 million in 2011-12
and thereafter.
D. Schedules the Court Ordered interest payments to
STRS over the next four years with annual payments
of $57 million General Fund beginning in 2009-10.
E. Gives STRS the authority to amend their payroll
reports up until April 15th.
F. States Legislative intent to appropriate up to
$3 million in 2009-10 to correct a payroll
reporting error related to Los Angeles Unified
School District payroll issues reported in 2005-06.
G. Specifies that this section of the bill is a
package and most of the components are
non-severable.
14. Rural Health Care Equity Program . Eliminates the Rural
Health Care Equity Program supplemental payments to
state annuitants, which results in General Fund savings
of $5.5 million. This program provides payments to
state employees living in rural areas, who may incur
higher out-of-pocket healthcare costs because their area
is not served by a board-approved health maintenance
organization. This change does not affect the core
healthcare benefit.
15. Human Resources Modernization Project . Authorizes the
Department of Personnel Administration to assess the
appropriate funds in the amount necessary - not to
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exceed the amounts authorized in the annual Budget Act,
to implement the Human Resources Modernization Project.
16. Redevelopment Agencies Pass-through Payments to
Education . Establishes a process to improve the
compliance of redevelopment agencies (RDAs) with
existing law, which requires them to pass through to
school districts, county offices of education, and
community college districts (K-14 education agencies) a
portion of their tax increment revenues from post-1993
project areas and expansions and that requires a
portion of those pass-through payments to be reported
by K-14 education agencies as property tax revenues for
apportionment and Proposition 98 purposes. This
process will identify and recover pass-through payments
that redevelopment agencies failed to make to K-14
education agencies for the 2003-04 through 2007-08
fiscal years and ensure proper payments in 2008-09. The
process also will ensure that the required percentage
of those pass-through payments are identified as K-14
property tax revenues and offset state education costs
for an estimated General Fund savings of $98 million
in 2008-09. An audit by the State Controller's Office
found substantial noncompliance with these
requirements.
17. Williamson Act Open-Space Subventions . Reduces annual
open-space (Williamson Act and Farmland Security Zones)
subventions to counties and cities by 10 percent,
starting in 2008-09, resulting in an annual General
Fund savings of $3.9 million.
18. Reconsideration of Sexually Violent Predator Mandate .
Directs the Commission on State Mandates to review and
reconsider its previous decision that state law
establishing the Sexually Violent Predator Program is a
state-reimbursable local mandate in light of the
voters' passage of Jessica's Law in 2006.
19. Franchise Tax Board Collection of Court-Ordered Debt .
Clarifies that bail is included among the unpaid
court-ordered fines and penalties that the courts may
refer to the Franchise Tax Board for collection after
90 days of delinquency.
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20. Franchise Tax Board Electronic Payment of Tax
Liability . Requires personal income taxpayers with
estimated tax or extension payments in excess of
$20,000, or with total tax liability in excess of
$80,000 in any year, to remit their tax payments
electronically to FTB, starting January 1, 2009. The
penalty for noncompliance without a reasonable cause
would be one percent of the payment amount. Once
subject to this provision, taxpayers could choose to
opt out in the year following any tax year in which
their tax liability falls below the threshold.
Electronic payment also includes a pay-by-phone option.
The FTB estimates increased General Fund interest
earnings of $2 million in 2008-09 and $4 million
annually thereafter due to quicker receipt of these
funds.
21. Franchise Tax Board Nonresident Group Returns .
Authorizes FTB to allow nonresident taxpayers with
California-derived income of $1 million or more from a
pass-through entity (such as a partnership or an S
corporation) to elect to have the pass-through entity
file a group return for nonresidents on their behalf.
This change will result in the inclusion in group
returns of some nonresident taxpayers who currently
fail to file an individual return. FTB has established
the current $1 million income ceiling because existing
law does not provide for the collection of the
additional 1-percent Proposition 63 tax on group
returns. This provision corrects this oversight and
enable the FTB to eliminate the income ceiling. FTB
estimates a General Fund revenue gain of $2 million in
2008-09 and $6 million in 2009-10 due to improved
compliance.
22. Reversion of Dormant Special Funds to the General
Fund . Reverts about $3.8 million to the General Fund
from special funds associated with dormant programs.
These funds are associated with one-time General Fund
appropriations in 1997-98 and 2001-02 for
child-care-facility loan and loan-guarantee programs.
These programs became dormant due to mid-year budget
reductions in 2001-02. As loans are repaid, or
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guarantees expire, funds continue to flow back into the
special funds. In 2001-02, $11 million was reverted to
the General Fund, and in 2004-05, $694,000 was
reverted.
23. Business, Transportation, and Housing Agency -
Economic Development . Deletes the statutory
designation of the Business, Transportation, and
Housing Agency (BT&H Agency) as the primary state
agency responsible for facilitating economic
development in the state. This language was added in
2007, but is deleted here for further consideration of
the appropriate role and expenditures for the BT&H
Agency in this area.
24. Infrastructure Bank Report . Revises the annual
statutory report requirement for the Infrastructure
Bank to include additional information with respect to
applications received and revenues and expenditures by
program.
25. Department of Alcoholic Beverage Control Fees .
Increases fees in conformance with the level of
inflation (measured by the Consumer Price Index) that
has occurred since the fees were last increased in
2004. This results in an 11.78 percent fee increase on
the annual permit to sell alcoholic beverages.
26. Budget Reform . Authorizes the Director of the
Department of Finance, in consultation with agency
secretaries and other cabinet members, to make mid-year
reductions in General Fund (GF) items of appropriation
for state operations if the Director determines either
of the following:
A. GF total available resources for the fiscal year
will decline substantially below the estimate of
total GF resources available assumed in the Budget
Act; or
B. GF expenditures will increase substantially
above the estimate of GF total resources available.
Additionally, authorizes the Director to suspend for up
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to 120 days any cost-of-living adjustment (COLA) or
rate increase funded in the Budget Act, or, if the
Governor declares a fiscal emergency, to suspend such
an increase until the Legislature passes and sends to
the Governor a bill or bills to address the fiscal
emergency.
Among others, exempts from reduction appropriations for
the Legislature and Constitutional officers and K-12
revenue limit COLA. Limits reductions to no more than
7 percent in any single state operations or capital
outlay items of appropriation, and becomes operative
only upon submission and approval by the voters of a
constitutional amendment in the November 4, 2008,
statewide general election.
27. Redevelopment Agencys' Pass-throughs to Education .
Increases for one year the pass-throughs from
Redevelopment Agencies to education for 2008-09 General
Fund savings of $350 million.
28. Accrual Accounting . Deletes the limitation that revenue
received more than two months into the new fiscal year
cannot be accrued back to the prior fiscal year.
Specifies that any amount accrued to the prior fiscal
year must be measurable, and the actual collection will
occur either during the current period or after the end
of the current period but in time to pay current
year-end liabilities.
FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes
Local: No
DLW:do 9/15/08 Senate Floor Analyses
SUPPORT/OPPOSITION: NONE RECEIVED
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