BILL ANALYSIS                                                                                                                                                                                                    






                                                       Bill No:  AB  
          727
          
                 SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
                       Senator Roderick D. Wright, Chair
                           2009-2010 Regular Session
                                 Staff Analysis



          AB 727  Author:  Nielsen
          As Introduced:  February 25, 2009
          Hearing Date:  June 23, 2009
          Consultant:  Art Terzakis
          

                                     SUBJECT  
              Prompt Payment Act: Resource Conservation Districts

                                   DESCRIPTION
           
          AB 727 makes resource conservation districts (RCDs)  
          eligible for specified late payment penalties, pursuant to  
          the state's Prompt Payment Act, when state agencies are  
          delinquent in making contract payments to RCDs.

                                   EXISTING LAW

           Existing law, the Prompt Payment Act, requires state  
          agencies to pay properly submitted, undisputed invoices  
          within 45 calendar days of initial receipt.  If the  
          requirement is not met, state departments must  
          automatically calculate and pay the appropriate late  
          payment penalties as specified in Government Code Section  
          927, et seq.  The penalty rate is 0.25% per calendar day if  
          the contractor is a small business or the Pooled Money  
          Investment Account (PMIA) rate plus 1% (not to exceed 15%)  
          for all other businesses.

                                    BACKGROUND
           
           Purpose of AB 727:   According to the author's office,  
          current law treats Resource Conservation Districts (RCDs)  
          in several 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  




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          code they are treated as quasi-state entities, as an  
          extension of the state itself.  Due to this complex and  
          ultimately ambiguous nature of treatment of RCDs, they 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, of payments not being made for  
          several years with no penalty to the state.
           
          As noted above, existing law 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 1% above the PMIA rate for all other  
          businesses.  This measure would simply include RCDs within  
          the prompt payment provisions applicable to small  
          businesses.
           Arguments in Support:   Proponents state that late payments  
          to RCDs around the state continue to hamper districts'  
          ability to administer state contracts and since RCDs do not  
          receive funding for basic capacity, they do not have  
          adequate cash reserves to front money to their contractors  
          while waiting for payment from the state agencies that have  
          funded the projects. 

          Proponents of this measure note that RCDs across the state  
          are completing millions of dollars of conservation and  
          restoration work.  Proponents emphasize that RCDs need to  
          receive timely reimbursement on invoices for state-funded  
          projects to assure that this good work continues.

           Arguments in Opposition:   Opponents express sympathy to the  
          plight of RCDs when invoices are slow to be paid, however  
          given the State's current fiscal situation and the  
          potential costs associated with this measure, opponents do  
          not believe the timing is right to afford RCDs this  
          prioritization.

           Resource Conservation Districts (RCDs):   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  




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          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 approximately 103 RCDs, most of  
          which are funded largely through state and federal grants.

                            PRIOR/RELATED LEGISLATION
           

           SB 643 (Denham) 2009-10 Session.   Would add "disabled  
          veteran business enterprise" (DVBE) to the definition of  
          small business, found within the California Prompt Payment  
          Act so that certified DVBEs receive the same prompt payment  
          protections afforded other California small businesses.   
          (Held in Senate Appropriations - suspense file) 

           SB 553 Wiggins) 2009-10 Session.   Would make substantive,  
          clarifying and technical changes to the California Prompt  
          Payment Act in order to create clarity and equity for  
          nonprofits with respect to late payments for contracts and  
          grants.  (Held in Senate Appropriations - suspense file)
           
          AB 2992 (La Malfa) 2007-08 Session.   Identical to AB 727  
          (Nielsen) of 2009.  (Vetoed by Governor on the basis that  
          the delay in passing the 2008-2009 State Budget forced him  
          to prioritize bills and only sign bills that met his  
          standard of "highest priority for California.")  
          
           SB 159 (Wyland) 2007-08 Session.   Identical to SB 643  
          (Denham) of 2009.  (Died in Assembly Appropriations  
          Committee)
           
          SUPPORT:   As of June 19, 2009:

          California Association of Resource Conservation Districts
          California Special Districts Association 
          Contra Costa Resource Conservation District
          Counties of Colusa and Siskiyou
          Glenn County Resource Conservation District
          Honey Lake Valley Resource Conservation District
          Inland Empire Resource Conservation District
          Marin Resource Conservation District
          Mission Resource Conservation District




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          Napa County Resource Conservation District
          Regional Council of Rural Counties
          Resource Conservation District Ventura County
          San Jacinto Basin Resource Conservation District
          Shasta Valley Resource Conservation District
          Sotoyome Resource Conservation District
          Tahoe Resource Conservation District
          Tehama County Resource Conservation District
          Western Shasta Resource Conservation District
          Wildscape Restoration

           OPPOSE:   As of June 19, 2009:

          Department of Fish and Game
          State Water Resources Control Board
           
          FISCAL COMMITTEE:   Senate Appropriations Committee

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