BILL ANALYSIS                                                                                                                                                                                                    



                                                                  SB 53
                                                                  Page  1

          Date of Hearing:   July 1, 2009

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                                Kevin De Leon, Chair

                SB 53 (DeSaulnier) - As Introduced:  January 14, 2009 

          Policy Committee:                               
          JudiciaryVote:10-0 (Consent)

          Urgency:     Yes                  State Mandated Local Program:  
          No     Reimbursable:               

           SUMMARY  

          This bill authorizes the Attorney General (AG) to negotiate  
          amendments to the Master Settlement Agreement (MSA) that would  
          not materially adversely alter, limit, or impair the rights to  
          receive tobacco assets or in any way materially impair the  
          rights and remedies of bondholders or the security for their  
          bonds.

           FISCAL EFFECT  

          Negligible fiscal impact.

           COMMENTS  

           1)Background .  In November 1998, the attorneys general of 46  
            states (including California) entered into the MSA, a  
            structured settlement agreement, with various tobacco  
            manufacturers for the payment of moneys to the Settling  
            States.  In August 1998, California entered into a memorandum  
            of understanding (MOU) with various local governments in the  
            state to coordinate pending cases and to allocate certain  
            portions of the recovery under the MSA.  SB 1831  
            (Peace)/Chapter 414 of 2002, authorized the state to sell its  
            right to receive future payments under the MSA in order to  
            provide one-time General Fund revenue.  Specifically, the  
            legislation authorized the issuance of bonds, pledging the  
            tobacco assets as security. The authorizing legislation  
            prohibits the state from amending the MSA or MOU in any way  
            that would impact MSA payments.  Any MSA amendment that would  
            change how participating manufacturers' payments are  
            calculated or the amount of such payments to the Settling  








                                                                  SB 53
                                                                  Page  2

            States cannot become effective unless all MSA Settling States  
            agree to the amendment.  

           2)Purpose  .  This bill, sponsored by the AG, is intended to give  
            the AG the flexibility to agree to amendments to the MSA or  
            MOU if such amendments do not materially adversely affect the  
            right to receive tobacco assets or materially impair  
            bondholders' rights and remedies.  According to the AG, among  
            states that have securitized all or part of their future MSA  
            payments, only California is required to promise the  
            bondholders that the state will not agree to amend the MSA in  
            any way that would alter the rights to receive MSA payments  
            pledged as security for the bonds.

           3)Urgency Clause  .  The reasons for this measure including an  
            urgency provision are:

             a)   One amendment is ready for approval, but it cannot go  
               into effect until California agrees.

             b)   Other amendments are in negotiations, and if resolved,  
               would require California's approval.

           Analysis Prepared by  :    Chuck Nicol / APPR. / (916) 319-2081