BILL ANALYSIS Ó ------------------------------------------------------------ |SENATE RULES COMMITTEE | AB 103| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ THIRD READING Bill No: AB 103 Author: Assembly Budget Committee Amended: 7/11/11 in Senate Vote: 27 PRIOR VOTES NOT RELEVANT SUBJECT : Budget Trailer Bill: Cash Management Loans SOURCE : Author DIGEST : This bill makes statutory changes relating to State funds and cash-flow borrowing. Senate Floor Amendments of 7/11/11 delete the previous version of the bill concerning taxes and revenues and places current language concerning state funds and cash-flow borrowing. ANALYSIS : The bill does the following: 1.Creates the State Agency Investment Fund . This bill creates a new special fund for the receipt of deposits from state agencies with moneys not currently required by law to be deposited in the Pooled Money Investment Account. While not limited to these entities, the University of California, the California State University, the California Community Colleges, and the Judicial Council are listed as potential depositors. CONTINUED AB 103 Page 2 2.Provides favorable interest earnings for voluntary deposits. Since deposits into the fund would be voluntary for the public institutions of higher learning and the Judicial Council, a favorable interest rate is offered to incentivize deposits. The interest rate would be set at the Pooled Money Investment Account rate plus an enhanced amount. The total interest rate is intended to be higher than what the entities are currently receiving from their deposits elsewhere, but lower than the interest rate the State would pay for Revenue Anticipation Notes (RANs), which is external cash-flow borrowing. The special rate would be set by the Director of Finance in consultation with the Treasurer and through discussion with the depositors. 3.Provides for new cash-flow borrowing and budget savings. Funds in the State Agency Investment Fund would be deemed borrowable by the General Fund for cash-flow purposes. By creating this new borrowable, the annual amount of external borrowing, or RAN borrowing, can be reduced. Because the interest rate paid for the State Agency Investment Fund will be less than the RAN interest rate, the State will realize General Fund savings from reduced interest costs. 4.Limits deposits into the State Agency Investment Fund. This bill limits deposits from an agency to amounts of no less than $500 million, and limits cumulative deposits to no more than $10 billion from all depositors. 5.Roles of the Director of Finance and Treasurer. The terms and conditions of the deposits into the State Agency Investment Fund would be set by the Director of Finance in consultation with the Treasurer. This consultation is exempt from the requirements of the Administrative Procedure Act. The funds deposited would be invested by the Treasurer in investments authorized under current law for the Pooled Money Investment Account. 6.Funds continuously appropriated for repayment of deposits. The funds in the State Agency Investment Fund would be continuously appropriated for repayment by the Controller of the principal and interest subject to the CONTINUED AB 103 Page 3 terms set the Director of Finance in consultation with the Treasurer. FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes Local: No The bill would have the following fiscal impact: Provides new cash-flow borrowing from State funds : The Administration believes this bill would create additional cash-flow borrowables from State funds in the range of $1.7 billion. Annual external cash-flow borrowing, or RANs, can range up to $10 billion, so the resulting reduction to external cash-flow borrowing in the range of $1.7 billion would be significant. General Fund savings : These provisions would reduce General Fund interest costs by the degree that interest provided for the State Agency Investment Fund is less than interest charged for RANs. The General Fund savings would likely be in the low millions of dollars. DLW:nl 7/11/11 Senate Floor Analyses SUPPORT/OPPOSITION: NONE RECEIVED **** END **** CONTINUED