BILL ANALYSIS Ó
------------------------------------------------------------
|SENATE RULES COMMITTEE | AB 112|
|Office of Senate Floor Analyses | |
|1020 N Street, Suite 524 | |
|(916) 445-6614 Fax: (916) | |
|327-4478 | |
------------------------------------------------------------
THIRD READING
Bill No: AB 112
Author: Assembly Budget Committee
Amended: 6/8/11 in Senate
Vote: 21
PRIOR VOTES NOT RELEVANT
SUBJECT : Budget Act of 2011: support of state
government
SOURCE : Author
DIGEST : This bill amends the 2010-11 Budget Act to
appropriate $48 million of $840 million in federal American
Recovery and Reinvestment Act stimulus funds to cover the
Employment Development Department's administration costs
for the Alternate Base Period program for three fiscal
years, beginning in 2012-13 and through 2014-15.
Senate Floor Amendments of 6/8/11 delete the prior version
of the bill which stated the intent of the Legislature to
enact statutory changes relating to the 2011 Budget Act.
ANALYSIS : When implemented by the Employment Development
Department (EDD) in April 2012, the Alternate Base Period
(ABP) project provides the necessary programming changes to
provide an ABP for individuals who do not monetarily
qualify for an Unemployment Insurance (UI) claim using the
current base period year by allowing workers to qualify for
a UI claim by using an alternate base period based on the
CONTINUED
AB 112
Page
2
most recent four completed calendar quarters at the time of
filing a claim. The Administration estimates this change
allows 26,000 unemployed individuals per year to qualify
for approximately $69 million in UI benefits up to three
months earlier than would be possible under the existing
base period, including such workers as seasonal or low-wage
workers or workers whose employment and layoffs were more
recent.
The implementation of the ABP project also qualifies
California to receive $840 million in federal American
Recovery and Reinvestment Act (ARRA) stimulus funds. These
funds may be used for repayment of the state's federal loan
related to the UI Fund insolvency or for funding of certain
administrative costs within EDD.
Since 2009, the state has consistently paid more in UI
benefits than it has collected in revenues. To continue
payment of benefits despite this shortfall, the state has
obtained quarterly loans from the federal government which
now total around $11 billion. Beginning in September 2011,
the state will begin to make required annual interest
payments on this loan to the federal government. Absent
specific action by the Legislature before June 30, 2011,
and upon receipt of the $840 million in federal stimulus
funds, these funds will be applied to the state's
outstanding loan balance.
This bill sets aside $48 million of these stimulus funds to
cover the EDD's administration costs for the ABP program
for three fiscal years, beginning in 2012-13 and through
2014-15. To reserve a portion of these funds for state
administration, however, the state must be able to receive
the funds and set up the subaccount during a period in
which the state can sustain UI benefit payments without
utilizing federal loan funds. The anticipated "non-loan"
period begins in the early days of May 2011, when the
highest annual UI revenues are received. These funds may
last through mid-July, at which point borrowing must
restart. Therefore, this action to appropriate the $48
million in federal stimulus funds must be taken no later
than June 30, 2011.
Absent this bill to fund the new $16 million full-year ABP
AB 112
Page
3
program administration costs beginning in 2012-13 from the
federal stimulus funds, the EDD would be required to absorb
the costs since this additional workload is not currently
funded by the federal UI grant. Under this scenario, the
Administration indicates that EDD Tax Branch staff will
most likely be redirected to ABP program support, which
could result in a revenue loss of $7.7 million to the
General Fund.
The 2011-12 ABP program administration costs will be
absorbed within existing resources as the program will only
operate for a few months late in the fiscal year.
FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes
Local: No
PQ:do 6/8/11 Senate Floor Analyses
SUPPORT/OPPOSITION: NONE RECEIVED
**** END ****