BILL ANALYSIS
AB 1051
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Date of Hearing: May 13, 2009
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Kevin De Leon, Chair
AB 1051 (Fletcher) - As Amended: April 28, 2009
Policy Committee: Veterans
AffairsVote: 8-0
Insurance 10-0
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill requires the Department of Veterans Affairs (DVA) to
establish and maintain a Pooled Self-Insurance Fund for purposes
of pooling the reserves of its various insurance reserve funds.
This bill also:
1)Requires the department to publish rules and regulations for
administration of the pooled fund, and authorizes the
department to purchase insurance out of appropriated moneys in
the pooled fund.
2)Requires DVA to report annually to the Legislature regarding
activities of the fund, and to conduct a biennial audit six
months after inception of the fund.
FISCAL EFFECT
Minor absorbable administrative costs for DVA to establish the
pooled insurance fund, report annually, and conduct the biennial
audits, and potential savings in the CalVet Home Loan Program
due to increased program security resulting from the
establishing the pooled fund.
COMMENTS
1)Background . Since 1922, the DVA has administered the CalVet
Home Loan Program, which finances the purchase of homes and
farm properties to eligible veterans. It is funded primarily
by self-liquidating general obligation bonds approved by the
voters, the most recent being in November 2008. The Program
AB 1051
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sells properties to veterans using contracts of purchase
whereby the Program retains the title to the properties until
the veterans have paid in full, after which the legal title is
transferred to the veterans.
The CalVet Program has four insurance reserve funds: the
Disaster Indemnity Fund (covers earthquakes and floods), the
Fire & Hazard Insurance Fund, the CalVet Legacy Self-Insurance
& Disability Fund, and the CalVet Primary Mortgage Insurance
Fund. All of these insurance programs are either mandated or
authorized by state law and are intended to provide additional
security for the CalVet Program's interest in the properties.
2)Purpose . Current law does not allow the commingling of moneys
among the four insurance reserve funds. With the exception of
the Disaster Indemnity Fund, premiums for the other three
insurance reserve funds are paid directly into the CalVet
Program's operating fund, and shortfalls experienced by these
funds result in use of the Program Fund to reconcile a
deficit.
This bill, sponsored by the DVA, is intended to remove the
insurance reserve funds from the CalVet Program Fund, and then
combine the four insurance reserve funds into one Pooled
Self-Insurance Fund with segregated sub-accounts, and
authorize the insurance reserve funds to subsidize each other,
as needed. According to the department, this will stabilize
CalVet Program reserves and thus strengthen the department's
bond ratings, thus reducing costs in the home loan program.
Analysis Prepared by : Chuck Nicol / APPR. / (916) 319-2081