BILL ANALYSIS                                                                                                                                                                                                    Ó




                   Senate Appropriations Committee Fiscal Summary
                           Senator Christine Kehoe, Chair

                                          AB 983 (Perea)
          
          Hearing Date: 08/25/2011        Amended: 07/01/2011
          Consultant: Brendan McCarthy    Policy Vote: EQ 6-0
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          BILL SUMMARY: AB 983 makes several changes to the laws governing 
          the state's program for providing grants and loans for safe 
          drinking water projects, including allowing certain 
          disadvantaged communities to receive grants for up to 100 
          percent of project costs.
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                            Fiscal Impact (in thousands)

           Major Provisions         2011-12      2012-13       2013-14     Fund
           
          Grant implementation and          Absorbable within existing 
          resources              Special *
             payment processing                                       

          Cost pressure due to   Unknown, likely in the hundreds of 
          Special *
             increased grant amounts           thousands per year

          * Safe Drinking Water State Revolving Fund.
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          STAFF COMMENTS: SUSPENSE FILE. 

          Under current law, the Department of Public Health provides 
          grants and loans to fund safe drinking water projects from the 
          Safe Drinking Water State Revolving Fund (Revolving Fund). The 
          Revolving Fund is supported with federal funds, repayment of 
          prior loans, state funds and other fund sources. Current law 
          requires the Department to give priority for funding to projects 
          that serve disadvantaged communities, authorizes grants for up 
          to 80 percent of total project costs, and requires that between 
          15 percent and 30 percent of program funds be used for grants. 
          The Department provides about $200 to $300 million per year in 
          grants and loans under the program.









          AB 983 (Perea)
          Page 1


          AB 983 makes several changes to the operation of the Revolving 
          Fund program. The bill requires the Department to process 
          payment requests and make payments within 30 days.  The bill 
          requires the Department to give priority to projects that 
          include consolidation with a small community water system to 
          improve drinking water quality. The bill authorizes the 
          Department to provide up to 100 percent of project costs through 
          grants (rather than loans) to small community water systems that 
          serve disadvantaged communities. Finally, the bill authorizes 
          the Department to extend loan terms to 30 years for 
          disadvantaged communities.

          According to the Department, the administrative costs to 
          expedite payments and comply with the other requirements of the 
          bill can be absorbed within existing resources. 

          This bill will likely result in cost pressures on the Revolving 
          Fund, because additional funds will be provided as grants rather 
          than loans. This will reduce the amount of funds available to 
          other loan applicants and in the long-run will reduce loan 
          repayment revenues into the Revolving Fund. The extent of this 
          cost pressure is unknown and will depend on particular project 
          applications. Based on the number and size of loans made to 
          disadvantaged communities in past years, the shift in funding 
          from loans to grants may be in the hundreds of thousands per 
          year, with commensurate cost pressures on the fund.