BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 103
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          Date of Hearing:   May 7, 2012

                            ASSEMBLY COMMITTEE ON BUDGET
                               Bob Blumenfield, Chair
                 AB 103 (Budget Committee) - As Amended:  May 7, 2012
           
          SUBJECT  :   State Cash Resources

           SUMMARY  :  Provides the necessary statutory changes in the area 
          of cash management and cash deferrals in order to ensure 
          sufficient cash reserves during the 2012-13 fiscal year.  
          Specifically,  this bill  :  

          1)Authorizes General Fund payments to be deferred starting in 
            July 2012, October 2012, and March 2013, except as specified.  
            The deferrals can be made for no more than 60 days, 90 days, 
            and 60 days, respectively.   

          2)Allows for the deferrals to be triggered off or repaid early, 
            in whole or in part, at such time as the State Treasurer, 
            State Controller, and Director of Finance determine sufficient 
            cash reserves are available.  

          3)Allows the deferrals to be moved forward to the prior month or 
            delayed to the subsequent month.  The Joint Legislative Budget 
            Committee must be notified before changes can be made.  

          4)Subjects the following General Fund payments to the deferral 
            criteria outlined above along with the more detailed 
            payment-specific criteria listed below:
               
               a.     Supplementary Security Income/State Supplementary 
                 Payments   .  Permits   up to three deferrals   of payments to 
                 the federal government for Supplementary Security 
                 Income/State Supplementary Payments (SSI/SSP) benefits  .

                b.     Local Governments.   Permits deferral of social 
                 services and other payments to cities, counties, and 
                 local governments not to exceed $1 billion.  This may 
                 include deferral of  CalWORKs assistance payments and 
                 other social services costs.  The Administration has 
                 stated that it does not anticipate resulting delays to 
                 beneficiaries' receipt of assistance payments.   Payments 
                 to counties or cities with a population of less than 
                 50,000 shall not be deferred.  








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          5)Schedules a specific deferral plan for payments to K-12 local 
            educational agencies (LEAs) as follows:  
               a.     $1.2 billion shall be deferred in July 2012.

               b.     $600 million shall be deferred in August 2012.

               c.     $800 million shall be deferred in October 2012.

               d.     $700 million of the deferral made in July 2012 shall 
                 be paid in September 2012.

               e.     The remaining $1.9 billion of the deferrals made in 
                 July, August, and October 2012 shall be paid in January 
                 2013.

               f.      $900 million shall be deferred in March 2013 and 
                 repaid in its entirety in April 2013.

          6)Includes a hardship waiver process for LEAs who might not be 
            able to meet financial obligations if payments are deferred.  
            In order to be eligible for a hardship waiver, LEAs would need 
            to qualify for an emergency apportionment.  

          7)Requires the California Department of Education (CDE) to delay 
            certification of final June apportionment payments for 2011-12 
            to account for additional RDA-related property tax remittances 
            received through June 10, 2012.  Because June apportionment 
            payments are currently deferred until July, this change would 
            delay certification of the second principal apportionment from 
            July 2, 2012 to July 15, 2012.

          8)Modifies higher-education payments to smooth payment over the 
            fiscal year as follows: 
               
               a.     Authorizes the State to pay only one-twelfth (1/12) 
                 of the University of California (UC) annual appropriation 
                 each month between July 2012 and April 2013.  After April 
                 2013, there are no limitations on payments within the 
                 UC's appropriations limit.

               b.     Authorizes the State to pay only one-twelfth (1/12) 
                 of the California State University (CSU) annual 
                 appropriation each month between July 2012 and April 
                 2013.  After April 2013, there are no limitations on 








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                 payments within the CSU's appropriations limit.  

          9)Authorizes the following deferrals for California Community 
            Colleges:

               a.     Authorizes the deferral of a $150 million payment 
                 from July 2012 to December 2012.  

               b.     Authorizes the deferral of a $50 million payment 
                 from September 2012 to January 2013. 

               c.      Authorizes the deferral of $100 million from 
                 October 2012 to January 2013.  

          10)Includes a hardship clause to exempt community college 
            districts that cannot raise funds to cover their necessary 
            expenses during those time periods.

          11)Authorizes, in addition to the payment smoothing deferral of 
            a $250 million payment to the CSU with repayment mandated in 
            April 2013.
               
          12)Adds one special fund to those eligible for cash flow 
            borrowing.  Most special funds are already eligible for cash 
            flow borrowing, except where prohibited by the Constitution.  
            The fund is the Litigation Deposit Fund.

           FISCAL EFFECT  :  This bill continues a similar cash deferral 
          schedule employed by the state in the last two years.  This bill 
          helps the state avoid insolvency and ensure that payments are 
          made in a timely manner.  This avoids significant future costs 
          related to interest and damages that could be owed if the state 
          failed to pay its bills.  Furthermore, it also reduces the 
          state's external borrowing costs to a manageable level, thereby 
          saving the state millions of dollars in borrowing costs. 

           COMMENTS  :  Since 2010, the state has employed a version of the 
          intra-year deferrals of major cash payments to schools, 
          universities, and counties in an effort to conserve cash 
          resources and manage the external cash borrowing necessary to 
          ensure the solvency of the state.  
          
          Most of the payment deferrals proposed for 2012-13 are similar 
          to deferrals approved last year for 2011-12.  However, the 
          deferrals to K-12 schools are significantly less than they have 








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          been in prior budgets.

           REGISTERED SUPPORT / OPPOSITION  :   

           Support 
           
          None on file.

           Opposition 
           
          None on file.
           
          Analysis Prepared by  :    Misty Feusahrens / BUDGET / (916) 
          319-2099