BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                      



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          |SENATE RULES COMMITTEE            |                   AB 103|
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                                 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.  

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           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 

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            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

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