BILL ANALYSIS Senate Appropriations Committee Fiscal Summary Senator Christine Kehoe, Chair 153 (Hernandez) Hearing Date: 08/27/2010 Amended: 08/12/2010 As proposed to be amended Consultant: Brendan McCarthy Policy Vote: NR&W 6-1 AB 153 (Hernandez), Page 2 _________________________________________________________________ ____ BILL SUMMARY: AB 153, an urgency measure, changes the criteria for spending $100 million from a proposed water bond. Specifically, the bill expands the allowed uses of bond funds for groundwater cleanup to include non-construction costs. _________________________________________________________________ ____ Fiscal Impact (in thousands) Major Provisions 2010-11 2011-12 2012-13 Fund Cost pressure on bond funds Likely in the millions Bond * * Proposed water bond. _________________________________________________________________ ____ STAFF COMMENTS: This bill meets the criteria for referral to the Suspense File. Current law (SB x7 2, Cogdill, Chapter 3, Statutes of 2009) authorizes an $11 billion general obligation bond to be placed on the general election ballot in November 2010. The bond measure authorizes expenditures for a variety of water-related purposes. (AB 1265, Caballero, Chapter 126, Statutes of 2010 delays the vote on this proposed bond measure until 2012.) Funds authorized under the proposed bond measure include $455 million for drought relief, $1.05 billion for water supply reliability, $2.25 billion for Delta sustainability, $3.00 billion for the statewide water supply system, $1.79 billion for conservation and watershed protection, $1.00 billion for groundwater protection, and $1.25 billion for water recycling. Of the $1.00 billion for groundwater protection, Section 79770 (d) provides not less than $100 million for groundwater cleanup projects that meet certain criteria. (It appears that the only projects that currently meet the criteria for these funds are projects to remediate groundwater contamination in the San Gabriel Valley associated with several superfund sites in that area.) AB 153 amends the proposed water bond, to expand the eligible uses of the $100 million allocated under Section 79770 (d) so that funds would be available for "costs associated with projects, programs, or activities" rather than being limited to AB 153 (Hernandez), Page 2 project costs. The intent of the bill is to allow bond funds to be used for ongoing treatment and remediation costs, rather than just the costs to construct capital projects. Under the state's General Obligation Bond Law, bond funds are generally limited to paying for capital costs or other projects with long-term benefits. However, because general obligation bond measures are approved by a vote of the people, a bond measure itself may override those statutory requirements. Previous bond measures have, in fact, allowed bond funds to be used for ongoing program costs. According to the sponsors of the bill, total funding to date for groundwater cleanup projects has been about $620 million, with the bulk of the funding coming from parties responsible for the groundwater contamination and federal funds. The state has contributed about $9.6 million. The sponsors of the bill indicate that remaining cleanup costs total about $710 million. Of the remaining costs, $64 million is for capital projects and $650 million is for ongoing treatment costs. By amending the proposed water bond to allow non-capital costs to be funded, the bill creates cost pressures on the proposed bond funds. By expanding the allowed uses to non-capital costs, the bill may reduce the availability of funds for other capital projects. The extent of this impact will depend on the allocation of funding for non-capital costs and whether there are other eligible capital projects for those bond funds. This bill is an urgency measure. AB 1265 (Caballero, Chapter 126, Statutes of 2010) delayed the vote on the proposed bond measure until 2012. The proposed author's amendments would make technical changes to the bill and add coauthors.