BILL ANALYSIS Ó 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 _________________________________________________________________ ____ 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). _________________________________________________________________ ____ 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 ____________ * Potential shift from the Emergency Housing Assistance Fund to the Housing Rehabilitation Loan Fund _________________________________________________________________ ____ 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) Page 2 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.