BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 5 X8
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          CONCURRENCE IN SENATE AMENDMENTS
          AB 5 X8 (Budget Committee)
          As Amended  February 19, 2010
          2/3 vote.  Urgency
           
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          |ASSEMBLY:  |     |(February 4,    |SENATE: |37-2 |(February 22,  |
          |           |     |2010)           |        |     |2010)          |
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                    (vote not relevant)
           
           Original Committee Reference:    RLS.

          SUMMARY  :  Provides both current year and budget year solutions  
          to allow the Department of Finance, State Treasurer and State  
          Controller to handle the state's cash flow to ensure sufficient  
          cash on hand for required payments at all times.  
           
           The Senate amendments  delete the Assembly version of this bill,  
          and instead address the state's cash crisis predicted for March  
          and April of 2010, as well as provides the tools necessary to  
          avoid any cash shortages during the 2010-11 fiscal year.  

          In regards to 2009-10 cash issues: 

          1)Addresses the projected cash shortage in March and April of  
            2010 by authorizing specific deferrals of payments to trial  
            court operations, the California State University system, the  
            University of California system, and the California Community  
            College system.

          2)Changes statutorily required payment dates to the State  
            Teachers' Retirement System from April 1 to April 15, with a  
            corresponding change in other payment dates forward by 15  
            days.

          3)Requires the Controller, Treasurer and Director of Finance to  
            review the actual cash situation prior to implementing the  
            deferrals to determine if they are in-fact necessary, and  
            allows those three to not implement the deferrals if they deem  
            it fiscally prudent to do so.  If such a decision is made,  
            notification must be made to the Joint Legislative Budget  
            Committee within 10 days.  If such a determination is not  
            made, the deferrals move forward as specified.  









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          4)If the deferrals are implemented, it requires the Controller,  
            Treasurer and Director of Finance, after April 1, to review  
            daily the actual cash receipts and disbursements to determine  
            when all or a portion of the deferrals can be paid, and to  
            make such payments as soon as is feasible.  Requires  
            notification to the Joint Legislative Budget Committee within  
            10 days of determining payments can be made.

          In regards to 2010-11 cash issues:

          1)States that an effective cash management plan is needed for  
            2010-11, and that the goals of such plan should be to increase  
            the ability to address cash shortages quickly and responsibly,  
            address rating agencies' and bond markets' concerns, preserve  
            external borrowing capacity, and provide predictability to  
            affected programs.

          2)Specifies that this act does not affect the timing or amount  
            of state payroll, delay debt service payments, or restrict  
            payment of other legally and constitutionally required  
            payments.

          3)Specifies that deferrals authorized in this bill are in  
            addition to existing deferrals.  

          4)Authorizes specified deferrals for K-12 apportionments,  
            Supplemental Security Income/State Supplementary Payments  
            (SSI/SSP), local government social services and transportation  
            payments, and trial court operations as follows:  

             a)   These deferrals are allowed only in July 2010 for no  
               more than 60 days, October 2010 for no more than 90 days,  
               and March 2011for no more than 60 days;

             b)   Requires the Controller, Treasurer and Director of  
               Finance to review the actual cash situation prior to  
               implementing the deferrals to determine if they are in-fact  
               necessary, and allows those three to not implement the  
               deferrals if they deem it fiscally prudent to do so.  If  
               such a decision is made, notification must be made to the  
               Joint Legislative Budget Committee within 10 days.  If such  
               a determination is not made, the deferrals move forward as  
               specified;  

             c)   If the deferrals are implemented, it requires the  








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               Controller, Treasurer and Director of Finance, after April  
               1, to review the actual cash receipts and disbursements  
               each month, or as necessary, to determine when all or a  
               portion of the deferrals can be paid, and to make such  
               payments as soon as is feasible.  Requires notification to  
               the Joint Legislative Budget Committee within 10 days of  
               determining payments can be made; and,  

             d)   Authorizes the Controller, Treasurer and Director of  
               Finance to move these deferrals forward or back one month  
               from those dates specified, if all three determine it is  
               necessary.  Such a change, however, can not be implemented  
               without 30 day notification to the Joint Legislative Budget  
               Committee.

          5)The bill additionally: 

             a)   Limits the K-12 deferral to no more than $2.5 billion at  
               any given time;  

             b)   Authorizes a hardship exemption process for County  
               Offices of Education, Local Education Agencies, and Charter  
               Schools;

             c)   Implements a smoothing policy for CSU and UC payments,  
               which limits the monthly payments from July 2010 to April  
               2011 to no more than 1/12 of their annual appropriation;

             d)   Authorizes the deferral of $200 million from July 2010  
               to October 2010 and $100 million from March 2011 to May  
               2011 for the California Community Colleges.  This provision  
               includes a hardship exemption similar to that in place for  
               the County Offices of Education;

             e)   Authorizes the Director of Finance anytime during the  
               year to defer up to $250 million in payments to the  
               California State University system.  Specifies the deferral  
               shall be paid during the final week of April 2011; and,  

             f)   Authorizes the deferral of $50 million each month from  
               July 2010 through March 2011, inclusive, from payments to  
               the Highway Users Tax Account (HUTA).  Any deferrals shall  
               be paid within two business days of April 28th, 2011.  This  
               deferral exempts counties and cities with a population of  
               less than 50,000.








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          6)For payments to cities, counties, and other public entities  
            for social services programs, transportation programs, and  
            Proposition 63 of 2004 programs, provides the following  
            limitations:

             a)   Deferrals are limited as specified;

             b)   Deferrals cannot total more than $1 billion at any point  
               in time;

             c)   Each specific program may have payments deferred no more  
               than three times each fiscal year; and,

             d)   Exempts counties and cities with populations of less  
               than 50,000.  

          7)Specifies that the provisions of this act are severable.

          8)Specifies that nothing in this act shall be construed to limit  
            the power or authority of the Controller, Treasurer or  
            Director of Finance.

          9)Specifies that this act addresses the fiscal emergency  
            declared by the Governor on January 8, 2010.  

          10)Urgency Clause:  Declares this bill take effect immediately  
            as an urgency statute.

           AS PASSED BY THE ASSEMBLY  , this bill was a vehicle for 2009  
          Budget legislation.  


           Analysis Prepared by  :   Adam Dondro / BUDGET / (916) 319-2099


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