BILL ANALYSIS
SB 74
Page 1
SENATE THIRD READING
SB 74 (Budget and Fiscal Review Committee)
As Amended June 25, 2009
2/3 vote. Urgency
SENATE VOTE :Vote not relevant
SUMMARY : Enacts statutory changes necessary to implement
various cash payment deferrals, cash management provisions, and
improvements to collection of accounts receivable that have been
adopted as part of the 2009-10 Conference Budget package.
Specifically, this bill :
1)Revises the K-12 School Payment Schedule. Changes the
scheduled flow of all state payments to K-12 local educational
agencies (LEAs) to five percent in July, 5% in August, and 9%
in each month thereafter (September through June).
2)Enacts K-12 Inter-Year Payment Deferrals . Authorizes a $1.7
billion deferral of K-12 principal apportionment payments to
(LEAs) from 2009-10 to 2010-11. Commencing in 2009-10, this
includes $678.6 million in April payments and $1.0 billion in
June payments that will be shifted to August of the next
fiscal year.
3)Enacts K-12/Community College Payment Deferrals for the
Quality Education Improvement Act (QEIA). Requires that $450
million in K-12 payments and $48 million in Community Colleges
payments pursuant to the QEIA will be released no sooner than
October 8 of each year. According to current practice, 80% of
QEIA payments are made in July and 20% are made in January of
each year.
4)Provides for K-12 Intra-Year Payment Deferrals. Shifts $1
billion in K-12 revenue limit apportionment payments to LEAs
from October to December of 2009 and shifts an additional $1
billion in apportionment payments from November 2009 to
January 2010. Hardship exceptions are provided for school
districts, county offices of education and charter schools
that are unable to meet expenditure obligations for the period
that payments are deferred.
5)Defers up to $750 million in General Fund (GF) payments to the
University of California (UC) that otherwise would have been
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dispersed from the State Treasury for the months of July, 2009
through September, 2009. Of this amount, $250 million will be
repaid to the UC in October 2009; the remaining payments will
be repaid no earlier than April 2010 and no later than June
30, 2010 (as determined by the Director of Finance). This
amount is in additional to the $500 million cash deferral
enacted by the Legislature in 2008, thus shifting
approximately $1.25 billion in payments throughout the fiscal
year.
6)Defers $290 million in GF payments to the California State
University (CSU) that otherwise would have been dispersed from
the State Treasury for the month of July, and instead makes
this payment in October, 2009.
7)Increases, by $115 million the amount of Community College
General Apportionment payments that are deferred from April,
May, and June 2009 to July 2010. With this additional
deferral, the state will be deferring a total of $655 million
in Community College payments from one fiscal year to the
next.
8)Defers Proposition 42 transportation payments. Defers the
October 2009 and January 2010 Proposition 42 allocations to
cities and counties, with full repayment on May 31, 2010. The
amount of each quarter's deferral is approximately $144
million. The Proposition 42 funding is for improvements to
local streets and roads.
9)Continues the authority to borrow lottery funds for cash-flow
purposes. Current law allows cash-flow borrowing from certain
lottery funds. However, this authority has a sunset date of
September 30, 2009. The sunset date is associated with a
proposal to securitize future lottery revenues, which was
rejected by voters in the May 2009 election. Since future
lottery funds are not available for securitization, the
current sunset on cash-flow borrowing is no longer necessary.
The Administration estimates up to $360 million in lottery
funds may be available for cash-flow borrowing in 2009-10.
Internal borrowing of this type saves GF interest costs by
reducing the amount of more-expensive external borrowing.
10)Authorizes state agencies to impose a reasonable fee for the
actual cost of its collections of past due accounts. Increase
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the amount of debt which state agencies can discharge from
collections activity from $250 to $500. The Administration
believes this will increase revenue collection by focusing
staff resources on larger receivables. The Administration
estimates these changes will increase GF revenues by $4.4
million.
11)Revises the Prompt Payment Act. Requires that late payment
penalties be paid to the claimant if payment in not issued
within 45 calendar days from the state agency receipt of an
undisputed invoice. Under currently law, late payment
penalties are triggered by the same 45 day period but also if
a state agency fails to submit a correct claim schedule to the
Controller by the required payment approval date, or if the
Controller fails to make a payment with 15 calendar days of
receipt of the claim schedule from the state agency. This
bill would only apply the late payment penalties if the 45 day
period has passed. Also clarifies that payments made with
registered warrants (state IOUs) qualify as payments under the
Prompt Payment Act. However, registered warrants will pay
interest as provided by law.
12)Urgency Clause: Declares this bill take effect immediately
as an urgency statute.
Analysis Prepared by : Daniel Rabovsky / BUDGET / (916)
319-2099
FN: 0001544