BILL ANALYSIS Ó ------------------------------------------------------------ |SENATE RULES COMMITTEE | AB 106| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 445-6614 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ THIRD READING Bill No: AB 106 Author: Assembly Budget Committee Amended: 3/14/11 in Senate Vote: 27 - Urgency PRIOR VOTES NOT RELEVANT SENATE BUDGET & FISCAL REVIEW COMMITTEE : 11-5, 3/16/11 AYES: Leno, Alquist, DeSaulnier, Evans, Liu, Lowenthal, Rubio, Simitian, Wright, Hancock, Wolk NOES: Huff, Emmerson, Fuller, Anderson, La Malfa 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. CONTINUED AB 106 Page 2 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 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 CONTINUED AB 106 Page 3 remaining July, August, and October deferrals shall be paid. In March 2012, $1.4 billion shall be deferred and paid in April 2012. 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. CONTINUED AB 106 Page 4 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. 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 3/17/11 Senate Floor Analyses SUPPORT/OPPOSITION: NONE RECEIVED **** END **** CONTINUED