BILL ANALYSIS                                                                                                                                                                                                    




                   Senate Appropriations Committee Fiscal Summary
                           Senator Christine Kehoe, Chair

                                          AB 221 (Carter)
          
          Hearing Date: 08/25/2011        Amended: As Introduced
          Consultant: Mark McKenzie       Policy Vote: T&H 8-1
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          ____
          BILL SUMMARY: AB 221 would authorize the Department of Housing 
          and Community Development (HCD) to redirect specified general 
          obligation bond funds dedicated to the Emergency Housing 
          Assistance Program (EHAP) for expenditure on supportive housing 
          under the Multifamily Housing Program (MHP).
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                            Fiscal Impact (in thousands)

           Major Provisions         2011-12      2012-13       2013-14     Fund
           Bond fund redirection  Significant cost pressures to the extent 
          Bond*
                                 HCD uses EHAP funds for supportive 
                                 housing under MHP
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          * Potential shift from the Emergency Housing Assistance Fund to 
          the Housing Rehabilitation Loan Fund
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          ____

          STAFF COMMENTS:  SUSPENSE FILE. 
          
          The Housing and Emergency Shelter Trust Fund Act of 2002 
          (Proposition 46) authorized the issuance of $2.1 billion in 
          general obligation bonds for various housing programs, including 
          $195 million for the Supportive Housing Program under MHP and 
          $195 million for EHAP.  The Housing and Emergency Shelter Trust 
          Fund Act of 2006 (Proposition 1C) authorized the issuance of 
          $2.85 billion in general obligation bond funds for housing 
          programs, including $195 million for the Supportive Housing 
          Program and $50 million for capital development grants under 
          EHAP.  The Supportive Housing Program funds the construction, 
          rehabilitation, or preservation of rental homes with 
          complementary supportive services, such as drug and alcohol 
          treatment, mental health counseling, and workforce training, for 
          persons who have a disability and are homeless or at risk of 
          becoming homeless.  EHAP provides grants for the rehabilitation, 








          AB 221 (Carter)
          Page 1


          renovation, expansion, and site acquisition capital costs of 
          emergency shelters and transitional homes for homeless persons.

          AB 221 would authorize HCD to use Proposition 46 and 1C bond 
          funds that are dedicated to EHAP for the Supportive Housing 
          Program under the MHP.  The bill is intended to allow HCD the 
          flexibility to make funding available for supportive housing 
          projects if the demand for such programs exceeds demand for EHAP 
          projects.

          In February of this year, the Governor directed HCD to hold bond 
          debts at its existing level and instituted a "pause" on the 
          issuance of any new bonds.  As a result, HCD cancelled all open 
          and unawarded Notices of Funding Availability (NOFAs) for 
          Proposition 46 and 1C bond programs.  After the release of the 
          Governor's May Revision of the 2011-12 Budget, the "bond pause" 
          was lifted and HCD received authority to release NOFAs and 
          approve new awards.

          Since the passage of Proposition 46 in 2002, HCD has received 
          $320 million in applications and made $211 million in awards 
          under EHAP.  In May of 2010, HCD issued a NOFA soliciting 
          applications to awarded up to $40 million in EHAP funding, but 
          only awarded $20 million.  Staff notes that HCD is scheduled to 
          issue a NOFA for the final $20 million that remains in 
          Proposition 1C EHAP funds on August 15, 2011, and expects to 
          make awards by the end of the year, before this bill takes 
          effect.  Applications for EHAP funds have generally exceeded 
          available funds, although demand may be impacted by reductions 
          in available federal and local funding for operating costs 
          associated with shelters funded under EHAP.  Allocations for the 
          MHP-Supportive Housing Program have also typically been 
          oversubscribed.

          HCD indicates that its administrative costs associated with 
          allocating EHAP funds for MHP-Supportive Housing projects would 
          be minor and absorbable if they exercised the authority provided 
          in the bill.  Staff notes that any shifts in allocations from 
          EHAP to the MHP-Supportive Housing Program would create cost 
          pressures on the Emergency Housing Assistance Fund to the extent 
          that any Proposition 46 and Proposition 1C bonds are available 
          when the bill becomes operative.  

          Both Proposition 46 and 1C contain a provision that authorizes 








          AB 221 (Carter)
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          the Legislature to "amend provisions of law related to programs 
          to which funds are, or have been allocated?for the purpose of 
          improving the efficiency and effectiveness of the program, or 
          for the purpose of furthering the goals of the program."  Staff 
          notes, however, that this bill would amend provisions of the 
          Bond Acts themselves, rather than the program enabling statutes. 
           The authorization to use bond funds approved by the voters for 
          use on a specific program to be allocated to another program may 
          be construed as being contrary to the will of the voters.

          Staff notes that this bill is identical to AB 2536 (Carter), 
          which was vetoed by Governor Schwarzenegger with the following 
          message:

               This bill would change the use of housing bonds contrary to 
               the intent of the voters in approving Proposition 1C. These 
               funds were intended to help some of the most vulnerable 
               Californians by funding the construction of emergency 
               shelters that also provide supportive service. It is not 
               consistent with the intent of the voters to redirect these 
               funds to provide services to families in permanent housing.