BILL ANALYSIS
SENATE COMMITTEE ON VETERANS AFFAIRS
JEFF DENHAM, CHAIRMAN
Bill No: AB 1051
Author: Fletcher
Version: As amended April 28, 2009
Hearing Date: June 23, 2009
Fiscal: Yes
Consultant: Donald E. Wilson
SUBJECT OF BILL
Pooled self-insurance fund
PROPOSED LAW
To establish outside of the Farm and Home Loan program fund
a pooled self-insurance fund within the California
Department of Veterans' Affairs (CDVA) by combining the
department's four separate insurance funds together.
To require CDVA to file an annual report with the
legislature about the health of the fund.
EXISTING LAW AND BACKGROUND
1. Since 1922, the California Department of Veterans
Affairs has managed the CalVet Home Loan Program,
which purchases homes and farm properties to sell to
eligible veterans.
2. The program is a self-funding bond enterprise
program that issues both State of California General
Obligation and Revenue bonds to finance loans.
3. Veterans enter a contract of purchase under the
program until the veteran has paid in full. At that
point, the legal title is transferred to the veteran.
4. 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.
5. All four of these insurance and self insurance
programs are either mandated or authorized by state
law.
COMMENT
1. Three of the four insurance funds are paid directly
into the Farm and Home Loan Program (the1943 fund).
2. When an insurance fund that pays directly into the
1943 fund is short, the money then comes out of the
Farm and Home Loan Program, which potentially
threatens the program's bond rating.
3. Theoretically if a spate of natural disasters
occurred, and those losses were big enough, then
payouts to insurance funds would threaten the ability
of the 1943 fund to pay the bonds taken out for home
loans.
4. By segregating out the insurance funds from the
1943 funds insurance payouts should not be able to
infringe on the integrity of the Farm and Home Loan
Program, which to this point has a sterling record.
5. CDVA would be responsible for creating the rules
and regulations of this fund.
6. The department would also be required to file an
annual report "regarding the status" of the fund with
the legislature by September 1 of each year.
7. Within six months of the establishment of the fund
a biennial audit of the sub funds would begin.
8. If this fund was ever dissolved, money in the funds
would revert to the 1943 fund.
9. This bill is sponsored by CDVA
SUPPORT
American Legion, Department of CA
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California Association of County Veteran Service Officers
OPPOSE
None received
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