BILL ANALYSIS
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|SENATE RULES COMMITTEE | AB 564|
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THIRD READING
Bill No: AB 564
Author: Portantino (D) and Lowenthal (D)
Amended: 9/1/09 in Senate
Vote: 27
SENATE HEALTH COMMITTEE : 7-2, 7/15/09
AYES: Alquist, Aanestad, DeSaulnier, Leno, Negrete McLeod,
Pavley, Wolk
NOES: Strickland, Cox
NO VOTE RECORDED: Cedillo, Maldonado
SENATE APPROPRIATIONS COMMITTEE : 13-0, 8/27/09
AYES: Kehoe, Cox, Corbett, Denham, Hancock, Leno, Oropeza,
Price, Runner, Walters, Wolk, Wyland, Yee
ASSEMBLY FLOOR : Not relevant
SUBJECT : Substance abuse treatment: prohibition of
excessive salaries
SOURCE : Author
DIGEST : This bill limits the maximum amount of public
funds in the Substance Abuse Treatment Trust Fund that may
be used for compensation of a director, officer or employee
of a nonprofit entity that provides substance abuse
treatment in California to the salary limitations
established by the federal government.
ANALYSIS : Existing law provides for the licensure of
CONTINUED
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substance abuse treatment programs by the Department of
Alcohol and Drug Programs (DADP). Existing law,
Proposition 36, establishes the Substance Abuse and Crime
Prevention Act of 2000. It requires that non-violent drug
possession offenders and parolees receive drug treatment in
lieu of incarceration. It also establishes the Substance
Abuse Treatment Trust Fund, which requires the transfer of
money from the General Fund commencing in fiscal year (FY)
2000-01 and ending in 2005-06 for allocation to counties
through a specified distribution formula. The program
received General Fund transfers of $60 million in start-up
funding in FY 2000-01, and $120 million annually from FY
2001-02 through FY 2005-06. In the following years, the
Legislature appropriated $120 million in FY 2006-07, $100
million in FY 2007-08, and $90 million in 2008-09. There
is not an appropriation for this program in the FY 2009-10
Budget. Funds are used by counties to provide drug
treatment programs, vocational training, and family
counseling, among other programs.
This bill provides that the following restrictions shall
apply to the compensation of any director, officer, or
employee of any corporation providing substance abuse
treatment in the state, and shall be required terms of any
contract entered into in the state to provide drug
treatment if, under that contract, public funds are to be
used to provide the drug treatment:
1. The maximum amount of public funds that may be used for
compensation for a full-time director, officer, or
employee shall not exceed the salary limitation
established by the federal government on awards made by
the federal Substance Abuse and Mental health Services
Administration (SAMHSA). This amount shall be prorated
for any person working less than full time.
2. Public funds shall not be used for compensation for any
director, officer, or employee who collects rent from a
substance abuse treatment facility unless that person
certifies that he/she is in compliance with the federal
Office of Management and Budget Circular A-122, relating
to cost principles for nonprofit organizations.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
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Local: No
According to the Senate Appropriations Committee:
Fiscal Impact (in thousands)
Major Provisions 2009-10 2010-11 2011-12 Fund
DADP data collection $100 $220
$50General/*
and maintenance Federal
* Substance Abuse Treatment and Prevention Fund - its
sources are the General Fund, federal SAMHSA grants,
and other federal funds.
SUPPORT : (Verified 9/1/09)
---
OPPOSITION : (Verified 9/1/09)
California Association of Alcohol and Drug Program
Executives
California Association of Nonprofits
California Opioid Maintenance Providers
ARGUMENTS IN SUPPORT : According to the author's office,
this bill is intended to limit excessive executive
compensation paid with public funds allocated to drug
treatment programs under Proposition 36. The author's
office explains that under this bill, the amount of
Proposition 36 grant funds that could be used for executive
compensation would be limited to one percent of the grant
multiplied by the percentage of revenues the organization
receives from public sources, provided this limitation is
greater than or equal to one-quarter of a percent. The
author's office argues that this calculation ensures that
programs receiving substantial public funding are allotted
more funds for executive compensation than those funded by
private sources, while still limiting compensation to a
reasonable percentage. The author's office points out that
the federal government, through the National Institute of
Health, imposes a cap of $196,700 on salaries paid from
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grants. The author's office argues that California lacks a
similar limitation to protect public dollars from being
spent on excessive executive salaries and that this bill
ensures that Proposition 36 funds are used for the purposes
intended under the Substance Abuse and Crime Prevention Act
of 2000.
ARGUMENTS IN OPPOSITION : The California Association of
Alcohol and Drug Program Executives (CAADPE) opposes the
bill because although they agree with the intent of the
legislation which is to assure that public funds are
expended in the most efficient manner, they do not believe
that this bill will achieve this goal. They argue that
instead, it will result in less government efficiency.
CAADPE also points out that this bill has not been properly
vetted through the legislative committee process as the
bill was amended on June 26 and is scheduled for hearing on
July 15, 2009, which, they argue, is not enough time for
adequate public policy discourse and for legislators to
make informed decisions. They also question the need for a
separate state standard, given that the federal government
has standards governing executive compensation for SAMHSA
grantees. CAADPE argues that to establish a separate and
inconsistent state standard will require nonprofit agencies
to establish recordkeeping procedures to meet two reporting
and operating standards and would force nonprofit agencies
to redirect a portion of public funds that otherwise would
go to program support into administrative functions to
account for the new state requirements outlined in this
bill. They also argue that this bill sets arbitrary limits
on cost allocation procedures and ignores federal tax rules
related to non-profit organizations as well as generally
accepted accounting procedures which are acceptable
methods of determining cost allocation for rental property
for agencies with multiple grants. They note that
generally accepted accounting procedures take into
consideration the fair market value of the leased property
and cost allocation methodologies with agencies that have
multiple grants and assign a proportion of the grant
activity to the rental cost of the facility.
DLW:mw 9/1/09 Senate Floor Analyses
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SUPPORT/OPPOSITION: SEE ABOVE
SUPPORT/OPPOSITION: NONE RECEIVED
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