BILL ANALYSIS Ó
SENATE COMMITTEE ON BUDGET AND FISCAL REVIEW
Mark Leno, Chair
Bill No: SB 95
Author: Budget and Fiscal Review
As Amended: January 30, 2012
Consultant: Brian Annis
Fiscal: Yes
Hearing Date: February 2, 2012
Subject: State cash resources.
Summary: The bill would increase the availability of
various funds that could be used as borrowable resources
for the state's General Fund for cash flow purposes. This
in an Administration-supported bill and would increase
borrowable funds by an estimated $865 million. This
legislation is necessary to carry-out the requirements of
the 2011 Budget Act.
Background:
Most state special funds are eligible for cashflow
borrowing and the Controller uses these cash resources to
manage General Fund obligations in months where General
Fund revenues are low and General Fund expenditures are
high. Cashflow borrowing is distinguished from budgetary
borrowing - budgetary borrowing involves funds being used
across fiscal years and is scored as positive General Fund
revenues when borrowed and negative General Fund revenues
when repaid. Cashflow borrowing does not affect the budget
directly, although it indirectly benefits the budget by
reducing the need for more-costly external cashflow
borrowing. Stronger cash reserves also benefit the budget
by improving the State's credit rating and reducing other
borrowing costs, such as for general obligation bonds.
Cashflow borrowing does not affect the programs supported
by special funds, as the funds are repaid with interest and
as needed for special-fund expenditures. In recent years,
the Legislature has approved multiple bills to increase the
number of special funds that are eligible for cashflow
borrowing - most recently SB 82 (Chapter 12, Statutes of
2011) opened up four additional special funds for cashflow
borrowing.
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Proposition 22 of 2010 placed new restrictions on revenue
derived from motor vehicle fuels. The state discontinued
cashflow borrowing of funds related to motor vehicle fuels
after the passage of Proposition 22. This bill would
provide new cashflow benefits to transportation projects in
the case of late budgets and delayed bond sales, and this
bill would resume cashflow borrowing from these funds to
the General Fund. By offering these new benefits for
transportation finance, this bill would further the purpose
of Proposition 22.
Proposed Law: Specifically, this bill :
1.Specifies that existing language that authorizes cashflow
borrowing from special funds in Government Code section
16310 is controlling, and would notwithstand other code
sections that limit this borrowing. Government Code
section 16310 continues to exclude from cashflow
borrowing the following: the Local Agency Investment
Fund; bond funds; retirement funds; and other funds
restricted in the Constitution, bond indentures, or by
case law.
2.Authorizes the Director of Finance to designate up to 15
percent of the cash balances in the Highway Users Tax
Account, Transportation Investment Fund, Motor Vehicle
Fuel Account, Transportation Revolving Account and the
State Highway Account be available for contingency
interim financing for critical state highway and local
road projects that would otherwise be financed by General
Obligation bonds. This authority would aid
transportation projects in the case of a delayed bond
sale.
3.Sanctions the Controller to receive and duly account for
moneys received by the Condemnations Deposits Fund,
maintained by the Treasurer's Office, to use such funds
for cash flow loans to the General Fund. This fund holds
court-ordered deposits in eminent domain proceedings
pending resolution of the litigation. These amendments
make the funds borrowable for cashflow, and make no
change to eminent domain proceedings.
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4.Allows the Controller to use funds in the Transportation
Investment Fund, the Motor Vehicle Fuel Account, the
Transportation Revolving Account, the State Highway
Account, and the Highway Users Tax Account for cash flow
loans to the General Fund as long as such loans would not
interfere with the purpose of creating those funds.
Interest would be computed based on the earnings rate of
the fund.
5.Permits an exemption from the current prohibition against
encumbrance without specific statutory authorization,
with respect to moneys appropriated from the Highway
Users Tax Account, and moneys apportioned or transferred
from that account. These amendments would allow the
Controller to transfer the funds in the Highway Users Tax
Account to cities and counties, or to the State Highway
Account without delay in the case of a late budget. This
change would provide greater cashflow certainty for
transportation projects.
6.Provides an appropriation to the Controller of $1,000 for
administrative costs and specified the bill is related to
the Budget Bill. This bill would take effect immediately
pursuant subdivision (e) of Section 12 of Article IV of
the California Constitution.
Fiscal Effect: The bill will have no direct budgetary
impact but facilitate and ease cash flow requirements
within the budget year by increasing the amount of
borrowable resources from internal funds. An estimated $865
million will become available for General Fund borrowing
for cash flow purposes during 2011-12. By increasing
General Fund cashflow resources, this bill would improve
the State's fiscal condition and may provide indirect
budget benefits from reducing external cashflow borrowing
and improving the State's credit ratings.
Support: California State Council of Laborers.
Opposed: None on file.
Comments: The bill includes various provisions that
further transportation goals and facilitate the completion
of projects. This bill, therefore, furthers the purpose
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of Proposition 22. This bill improves the State's fiscal
conditional by increasing borrowable resources to better
manage cashflow.
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