BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 727
                                                                  Page  1

          Date of Hearing:   April 29, 2009

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                                Kevin De Leon, Chair

                AB 727 (Nielsen) - As Introduced:  February 26, 2009 

          Policy Committee:                              Business and  
          Professions  Vote:                            9 - 0

          Urgency:     No                   State Mandated Local Program:  
          No     Reimbursable:              

           SUMMARY  


          This bill expands the definition of small businesses in the  
          California Prompt Payment Act to include Resource Conservation  
          Districts (RCDs).  This expansion allows RCDs to be paid the  
          higher level of penalty payment if the state fails to pay them  
          any required payments in a timely manner

           FISCAL EFFECT  


          1)Any delay in the implementation of the annual budget would  
            result in a GF penalty cost for the state under this  
            legislation.


          2)Using this year's budget delay as an example, if a budget were  
            signed by September 23 (85 days into the start of the fiscal  
            year) for every $5 million in delayed RCD payments, the  
            penalty cost for this legislation would be $500,000 in GF. 


           COMMENTS  


           1)Purpose  . According to the author's office, current law treats  
            Resource Conservation Districts (RCDs) in different ways.  In  
            some parts of the code RCDs are treated as non-profit entities  
            that the state contracts with to perform certain projects, and  
            in other parts of the code they are treated as quasi-state  
            entities, as an extension of the state itself.  Due to this  








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            complex and ambiguous treatment, RCDs do not have a clear set  
            of rules under which they are to be paid for projects that  
            they perform for the state.  This leads, in some cases, to  
            payments not being made for several years with no penalty to  
            the state. Under this legislation, RCDs would be eligible for  
            a 0.25% per day payment penalty for all payments that are  
            delayed beyond 45 days.


           2)The Prompt Payment Act  requires the state to pay amounts due  
            on the date specified in a contract or within 45 days of a  
            properly submitted, undisputed invoice, or pay a penalty of  
            0.25% per day if the contractor is a small business or non  
            profit organization, or 1% above the Pooled Money Investment  
            Account rate for all other businesses.   

           3)Resource Conservation Districts  . RCDs emerged during the 1930s  
            as a way to prevent the soil erosion problems of the Dust Bowl  
            from recurring. Formed as independent local liaisons between  
            the federal government and landowners, conservation districts  
            have always worked closely with the USDA Natural Resources  
            Conservation Service (formerly the Soil Conservation Service).  



            In California, RCDs are special districts organized under the  
            state Public Resources Code. Each district has a locally  
            elected or appointed volunteer board of directors made up of  
            landowners in that district. RCDs address a wide variety of  
            conservation issues such as forest fuel management, water and  
            air quality, wildlife habitat restoration, soil erosion  
            control, and conservation education. California has 103 RCDs,  
            most of which are funded largely through state and federal  
            grants.


           4)Related Legislation  . This bill is virtually identical to AB  
            2992 (La Malfa) from 2008 that was vetoed due to the late  
            passage of the 2008-09 budget.  In the message the governor  
            wrote, "I am only signing bills that are the highest priority  
            for California. This bill does not meet that standard and I  
            cannot sign it at this time." 

            In 2008, SB 983 (Correa) would have expanded the definition of  
            small businesses in the California Prompt Payment Act to  








                                                                  AB 727
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            include disabled veteran business enterprises (DVBE).  This  
            expansion allows DVBEs, regardless of size, to be paid the  
            higher level of penalty payment if the state fails to pay them  
            any required payments in a timely manner. That bill was held  
            on this committee's suspense file.


           Analysis Prepared by  :    Julie Salley-Gray / APPR. / (916)  
          319-2081