BILL ANALYSIS AB 5 X8 Page 1 CONCURRENCE IN SENATE AMENDMENTS AB 5 X8 (Budget Committee) As Amended February 19, 2010 2/3 vote. Urgency ----------------------------------------------------------------- |ASSEMBLY: | |(February 4, |SENATE: |37-2 |(February 22, | | | |2010) | | |2010) | ----------------------------------------------------------------- (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. AB 5 X8 Page 2 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 AB 5 X8 Page 3 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. AB 5 X8 Page 4 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 FN: 0003697