BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                      



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                              UNFINISHED BUSINESS


          Bill No:  SB 79
          Author:   Senate Budget and Fiscal Review Committee
          Amended:  7/11/11
          Vote:     21

           
          SENATE VOTES NOT RELEVANT

           ASSEMBLY FLOOR  :  46-27, 07/11/11 - See last page for vote


           SUBJECT  :    State funds

           SOURCE  :     Author


           DIGEST  :    This bill provides the necessary statutory 
          changes relating to state funds and cash-flow borrowing 
          necessary for the 2011-12 Budget Act.

           Assembly Amendments  delete the Senate version of the bill 
          which expressed the intent of the Legislature to enact 
          statutory changes to the Budget Act of 2011 and instead 
          places the current language into the bill concerning state 
          funds.

           ANALYSIS  :    This bill:

          1.Creates the State Agency Investment Fund (SAIF) in the 
            State Treasury. The SAIF will receive moneys from state 
            agencies not currently required by law to be deposited in 
            the Pooled Money Investment Account (PMIA).  State 
            agencies includes any state office, officer, department, 
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            division, bureau, board, commission, organization, or 
            agency, including, but not limited to, the University of 
            California, the California State University, the 
            California Community Colleges, and the Judicial Council. 

          2.Specifies that each agency shall deposit not less than 
            $500 million and that the total amount of moneys from all 
            sources deposited in the SAIF shall not exceed $10 
            billion, and: 

             A.   Terms and conditions of investment including size 
               of deposit, length of time of deposit, and 
               availability of fund withdrawals would be set by the 
               Director of Finance in consultation with the 
               treasurer; and, 

             B.   Moneys would be used for investments authorized by 
               existing statutory authority relating to the PMIA and 
               would be borrowable by the General Fund (GF) for cash 
               flow purposes.  Repayment of borrowing would be a 
               priority payment of the GF. 

          1.Establishes that the rate of interest paid by the SAIF 
            would consist of a base rate (equal to the rate paid for 
            PMIA investments), plus an enhanced amount.  The enhanced 
            amount would be determined by the Director of Finance, in 
            consultation with the Treasurer, and added to the base 
            amount.  Funds in the SAIF would be continuously 
            appropriated for repayment by the State Controller. 

          2.Adds an appropriation allowing this bill to take effect 
            immediately upon enactment. 

           Comments
           
          It is anticipated that the interest rate paid on the SAIF 
          would fall between the PMIA rate and the prevailing rate 
          paid on external borrowing through the issuance of Revenue 
          Anticipation Notes.  The state would realize some GF saving 
          based on the interest rate "break," and state agencies will 
          receive an enhanced return over what they would receive 
          from the PMIA.  Savings from this initiative are dependent 
          on the actual amount invested in the fund, and the extent 
          to which these amounts can off-set more expensive external 

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          borrowing. 

           FISCAL EFFECT  :    Appropriation:  Yes   Fiscal Com.:  Yes   
          Local:  No

          By creating a new fund for the deposit of cash by state 
          agencies, the state can reduce its external borrowing by an 
          amount up to $1.7 billion.  This will add additional 
          flexibility for cash flow management and result in savings 
          equal to the differential between borrowing from SAIF and 
          borrowing through the credit markets through the issuance 
          of Revenue Anticipation Notes. 


           ASSEMBLY FLOOR :  46-27, 07/11/11
          AYES:  Alejo, Allen, Ammiano, Atkins, Block, Blumenfield, 
            Bonilla, Bradford, Brownley, Buchanan, Butler, Charles 
            Calderon, Campos, Carter, Cedillo, Chesbro, Davis, 
            Dickinson, Eng, Feuer, Fong, Fuentes, Galgiani, Gatto, 
            Gordon, Hall, Hayashi, Hill, Huber, Hueso, Huffman, Lara, 
            Bonnie Lowenthal, Ma, Mendoza, Monning, Pan, Perea, V. 
            Manuel Pérez, Skinner, Solorio, Torres, Wieckowski, 
            Williams, Yamada, John A. Pérez
          NOES:  Achadjian, Bill Berryhill, Conway, Cook, Donnelly, 
            Fletcher, Beth Gaines, Garrick, Grove, Hagman, Halderman, 
            Harkey, Jeffries, Jones, Knight, Logue, Mansoor, Miller, 
            Morrell, Nestande, Nielsen, Norby, Olsen, Silva, Smyth, 
            Valadao, Wagner
          NO VOTE RECORDED:  Beall, Furutani, Gorell, Roger 
            Hernández, Mitchell, Portantino, Swanson


          DLW:nl  7/12/11   Senate Floor Analyses 

                       SUPPORT/OPPOSITION:  NONE RECEIVED

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