BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                      



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          |SENATE RULES COMMITTEE            |                   AB 106|
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                                 THIRD READING


          Bill No:  AB 106
          Author:   Assembly Budget Committee
          Amended:  3/14/11 in Senate
          Vote:     27 - Urgency

           
          PRIOR VOTES NOT RELEVANT


           SUBJECT  :    Budget Act of 2011:  Cash Management

           SOURCE  :     Author


           DIGEST  :    This bill provides the necessary statutory 
          changes in the area of cash management and cash deferrals 
          in order to ensure sufficient cash reserves during the 
          2011-12 fiscal year.

           Senate Floor Amendments  of 3/14/11 delete the prior version 
          of the bill and insert the current language relating to 
          cash management.

           ANALYSIS  :    This trailer bill contains the following major 
          amendments related to cash management.  Most of the payment 
          deferrals proposed for 2011-12, are similar to deferrals 
          approved last year for 2010-11.

          1.   Scheduled Deferrals - General  .  Authorizes General Fund 
              payments to be deferred starting in July 2011, October 
              2011, and March 2012, except as specified below.  The 
              deferrals can be made for no more than 60 days, 90 days 
              and 60 days, respectively.   These deferrals may be 
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              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.  The deferrals can be moved forward to 
              the prior month or delayed to the subsequent month.  
              However, the Joint Legislative Budget Committee must be 
              notified before changes can be made.  The following 
              General Fund payments are subject 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.  
                 Deferrals of Mental Health Services Act payments are 
                 not counted towards the $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 
                 less than 50,000 shall not be deferred.

          2.   Scheduled Deferrals - K-12 Education  
               A.     Schedules a specific deferral plan for payments 
                 to K-12 local educational agencies (LEAs) :  
                         Both July and August 2011 payments of $1.4 
                   billion shall be deferred.
                         The October 2011 payment of $2.4 billion 
                   shall be deferred.
                         In September 2011, $700 million of the July 
                   deferral shall be paid.
                         In January 2012, $4.5 billion from the 
                   remaining July, August, and October deferrals 
                   shall be paid.
                         In March 2012, $1.4 billion shall be 
                   deferred and paid in April 2012.








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               A.     Includes a hardship waiver process for LEAs who 
                 might not be able 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.  Required payments of 
                 temporary revenue anticipation notes or other 
                 short-term debt issued for cash flow purposes in 
                 2010-11 shall be considered expenditure obligations. 
                  

          3.   Payment Smoothing  .  Modifies higher-education payments 
              to smooth payment over the fiscal year.  

                A.     University of California (UC)  - Authorizes the 
                 State to pay only one-twelfth (1/12) of the UC's 
                 annual appropriation each month between July 2011 
                 and April 2012.  After April 2012, there are no 
                 limitations on payments within the UC's 
                 appropriations limit.

                B.     California State University (CSU)  - Authorizes 
                 the State to pay only one-twelfth (1/12) of the 
                 CSU's annual appropriation each month between July 
                 2011 and April 2012.  After April 2011, there are no 
                 limitations on payments within the CSU's 
                 appropriations limit.  

          4.   Other Deferrals and Adjustments . 
                A.     Transportation  .  Due to the approval of 
                 Proposition 22 on the November 2010 ballot, repeals 
                 the section that authorizes the deferral of 
                 apportionments to local governments for the Highway 
                 Users Tax Account revenues.  Deferrals of the local 
                 share of gasoline excise tax revenue are now 
                 prohibited by the Constitution. 

                B.     CSU  .  In addition to the payment smoothing, 
                 authorizes deferral of a $250 million payment to the 
                 CSU with repayment mandated in April 2012.

                C.     California Community Colleges  - Authorizes the 
                 deferral of a $200 million payment from July 2011 to 
                 October 2011.  Authorizes the deferral of a $100 
                 million payment from March 2012 to May 2012.  







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

          5.   Authorize Cashflow Borrowing from additional Special 
              Funds  .    This bill adds four special funds to those 
              eligible for cashflow borrowing.  Most special funds 
              are already eligible for cashflow borrowing, except 
              where prohibited by the Constitution.  The funds are 
              the Education Protection Account, the Local Revenue 
              Fund 2011, the Immediate and Critical Needs Account of 
              the State Court Facilities Construction Fund, and the 
              Hospital Quality Assurance Revenue Fund.

           FISCAL EFFECT  :    Appropriation:  Yes   Fiscal Com.:  Yes   
          Local:  No


          DLW:kc  3/15/11   Senate Floor Analyses 

                       SUPPORT/OPPOSITION:  NONE RECEIVED

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