BILL ANALYSIS Ó SB 82 Page 1 SENATE THIRD READING SB 82 (Budget and Fiscal Review Committee) As Amended March 14, 2011 2/3 vote. Urgency SENATE VOTE :Vote not relevant SUMMARY : Makes various changes to state laws in the area of cash management and cash deferrals in order to ensure adequate cash availability during 2011-12. Specifically, this bill : 1)Authorizes deferrals in General Fund (GF) payments starting in July 2011, October 2011, and March 2012, except as specified below. The deferrals can be made for each of these dates no more than 60 days, 90 days, and 60 days, respectively. These deferrals may be triggered off or repaid early in whole or in part if the State Treasurer, State Controller, and Director of Finance determine sufficient cash reserves are available. The deferrals can be moved forward to the prior month or delayed to the subsequent month; however, the Joint Legislative Budget Committee must be notified before changes can be made. In addition to the deferral criteria outlined above, certain GF payments are subject to additional payment-specific criteria listed below: a) Permits up to three deferrals of payments to the federal government for Supplementary Security Income/State Supplementary Payments (SSI/SSP) benefits; and, b) Permits deferral of social services and other payments to cities, counties, and local governments not to exceed $1 billion. Deferrals of Mental Health Services Act payments are not counted towards the $1 billion. This may include deferral of California Work Opportunity and Responsibility to Kids (CalWORKs) assistance payments and other social services costs. The Administration has stated that it does not anticipate resulting delays to beneficiaries' receipt of assistance payments. Payments to counties or cities with a population less than 50,000 shall not be deferred. 2)Authorizes the following specific deferral plan for K-12 education payments: a) Both the July 2011, and August 2011 payments of $1.4 SB 82 Page 2 billion shall be deferred; b) The October 2011 payment of $2.4 billion shall be deferred; c) In September 2011, $700 million of the July deferral shall be paid; d) In January 2012, $4.5 billion from the remaining July, August, and October deferrals shall be paid; and, e) In March 2012, $1.4 billion shall be deferred and paid in April 2012. 3)Includes a hardship waiver process for Local Educational Agencies (LEAs) who might not be able to meet financial obligations if payments are deferred. In order to be eligible for a hardship waiver, LEAs would need to qualify for an emergency apportionment. Expenditure obligations required for payments of tax and revenue anticipation notes (TRANs) or other short-term debt issued for cashflow purposes in 2010-11 are also to be considered for qualification of hardship. 4)Modifies higher-education payments to smooth payment over the fiscal year, specifically: a) For the University of California (UC), authorizes the state to pay only one-twelfth (1/12) of the UC's annual appropriation each month between July 2011 and April 2012. After April 2012, there are no limitations on payments within the UC's appropriations limit. b) For the California State University (CSU), authorizes the state to pay only one-twelfth (1/12) of the CSU's annual appropriation each month between July 2011 and April 2012. After April 2011, there are no limitations on payments within the CSU's appropriations limit. 5)Includes specific changes to other deferrals and adjustments, specifically: a) For transportation, due to the approval of Proposition 22 on the November 2010 ballot, repeals the section that authorizes the deferral of apportionments to local SB 82 Page 3 governments for the Highway Users Tax Account (HUTA) revenues. Deferrals of the local share of gasoline excise tax revenue are now prohibited by the Constitution; b) For the CSU, in addition to the payment smoothing authorizes deferral of a $250 million payment to the CSU with repayment mandated in April 2012; and, c) For California Community Colleges, authorizes the deferral of a $200 million payment from July 2011 to October 2011, and the deferral of a $100 million payment from March 2012 to May 2012. Includes a hardship clause to exempt those community college districts that cannot raise funds to cover their necessary expenses during those time periods. 6)Authorizes borrowing from additional special funds for cashflow needs. This bill adds four new special funds to those eligible for cashflow borrowing. Most special funds are already eligible for cashflow borrowing, except where prohibited by the Constitution. The new funds are the Education Protection Account, the Local Revenue Fund 2011, the Immediate and Critical Needs Account of the State Court Facilities Construction Fund, and the Hospital Quality Assurance Revenue Fund. 7)Adds an urgency clause allowing this bill to take effect immediately upon enactment. Analysis Prepared by : Mark Ibele / BUDGET / (916) 319-2099 FN: 0000062