BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  SB 112
                                                                  Page  1

          Date of Hearing:  June 15, 2011

                       ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
                                Cameron Smyth, Chair
                      SB 112 (Liu) - As Amended:  March 7, 2011

           SENATE VOTE :  40-0
           
          SUBJECT  :  State mandates: claiming instructions.

           SUMMARY  :  Requires any amendment of the parameters and 
          guidelines boilerplate language for purposes of state 
          reimbursement of any claim relating to a statute or executive 
          order that does not increase or decrease reimbursable costs to 
          limit the eligible filing period commencing with the fiscal year 
          in which the amended parameters and guidelines were adopted.  
          Specifically, 
           this bill  :   

          1)Requires any amendment of the parameters and guidelines 
            boilerplate language for purposes of state reimbursement of 
            any claim relating to a statute or executive order that does 
            not increase or decrease reimbursable costs to limit the 
            eligible filing period commencing with the fiscal year in 
            which the amended parameters and guidelines were adopted.  

          2)Increases from 60 to 90 days the time period the State 
            Controller (Controller) has, after receiving the adopted 
            parameters and guidelines, a reasonable reimbursement 
            methodology from the Commission on State Mandates 
            (Commission), or notification from the Department of Finance, 
            to issue claiming instructions for each mandate that requires 
            state reimbursement to assist local agencies and school 
            districts in claiming costs to be reimbursed.

          3)Increases from 60 to 90 days the time period the Controller 
            has, after receiving amended parameters and guidelines, an 
            amended reasonable reimbursement methodology from the 
            Commission or other information necessitating a revision of 
            the claiming instructions, to prepare and issue revised 
            claiming instructions for mandates that require state 
            reimbursement that have been established by the Commission, or 
            after any decision or order of the Commission, or after any 
            action by the Legislature.









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           EXISTING LAW  :

          1)Authorizes a local agency, school district, or the state to 
            file a written request with the Commission to amend the 
            parameters and guidelines, including a request to amend the 
            boilerplate language.

          2)Defines boilerplate language to mean the language in the 
            parameters and guidelines that is not unique to the 
            state-mandated program that is the subject of the parameters 
            and guidelines.

          3)Requires the Controller, no later than 60 days after receiving 
            the adopted parameters and guidelines, a reasonable 
            reimbursement methodology from the Commission, or notification 
            from the Department of Finance, to issue claiming instructions 
            for each mandate that requires state reimbursement to assist 
            local agencies and school districts in claiming costs to be 
            reimbursed.

          4)Requires the Controller, within 60 days after receiving 
            amended parameters and guidelines, an amended reasonable 
            reimbursement methodology from the Commission or other 
            information necessitating a revision of the claiming 
            instructions, to prepare and issue revised claiming 
            instructions for mandates that require state reimbursement 
            that have been established by the Commission, or after any 
            decision or order of the Commission, or after any action by 
            the Legislature.

           FISCAL EFFECT  :  Unknown

           COMMENTS  :   

          1)In 1979, voters amended the California Constitution, requiring 
            the state to reimburse local agencies for the costs of new 
            state mandated local programs or higher levels of service.  In 
            1984, the Legislature created the Commission, a quasi-judicial 
            body that decides local agencies' test claims for 
            reimbursement.  If the Commission identifies a state-mandated 
            program from the test claim, the Commission adopts parameters 
            and guidelines, defines what activities will be reimbursed, 
            and adopts statewide cost estimates.

          The Commission is working through a backlog of 51 test claims in 








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            addition to 192 other matters pending before the Commission, 
            such as proposed parameters and guidelines and requests to 
            review claiming instructions. Some of these matters date from 
            2002.  The mandate process is lengthy and complex:

             a)   Test claims.  After the new or higher level program is 
               implemented, a local agency has one year to submit a test 
               claim to the Commission.  The agency can submit a test 
               claim up to two years following the program, with a 20% 
               deduction of the first year's costs.

             b)   Parameters and guidelines.  If the Commission determines 
               a test claim is a reimbursable mandate, the local agency is 
               required to propose parameters and guidelines within 30 
               days.  Parameters and guidelines define what activities are 
               reimbursable.

             c)   Statewide cost estimate.  After the Commission adopts 
               parameters and guidelines, it estimates statewide costs.  
               These estimates are reported to the Legislature and form 
               the basis for how the Controller pays reimbursement claims. 
                

             d)   Claiming instructions.  After the Commission adopts the 
               parameters and guidelines, the Controller has 60 days to 
               issue claiming instructions.  If a program is ongoing, 
               these claiming instructions form the basis for the local 
               agency's annual reimbursement claims.  Before issuing 
               claiming instructions, the Controller's office researches 
               each claim and receives public comments from stakeholders.

             e)   Audits.  The Controller may audit a reimbursement claim 
               filed by a local agency or school district within three 
               years of the claim's filing or last amendment.  If the 
               Controller reduces a specific reimbursement claim via an 
               audit, the local agency may file an Incorrect Reduction 
               Claim with the Commission.

             f)   Reduction claims.  Local agencies can file incorrect 
               reduction claims, requests to amend the Commission's 
               parameters and guidelines, and requests to review claiming 
               instructions.  
          2)According to the author, the Controller, within 60 days, is 
            required to issue claiming instructions for each mandate that 
            requires state reimbursement with the Controller soliciting 








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            input from state agencies and interested parties before 
            issuing new or amended claiming instructions.  The author says 
            extending the timeline to 90 days would provide more 
            opportunities for input, further refine the process, and 
            result in more streamlined and cost-effective outcomes.  
            Additionally, the author says SB 112 would require any 
            amendment to boilerplate language that does not increase or 
            decrease the reimbursable cost to be limited to the eligible 
            filing period, commencing with the fiscal year in which the 
            guidelines were adopted.

          3)Following the Controller's action using a new auditing rule 
            that reduced reimbursement claims for school districts' four 
            state-mandated programs for 1998 to 2003, seven school 
            districts filed a lawsuit to declare the new set of parameters 
            and guidelines could not be applied because the Controller 
            used a regulation that did not conform to the Administrative 
            Procedure Act.  The court of appeal, in Clovis Unified School 
            District v. Chiang (2010) 188 Cal.App.4th 794, ruled in the 
            school districts' favor, saying the Controller had used an 
            invalid underground regulation when performing those audits, 
            but the Controller could re-audit the relevant reimbursement 
            claims based on the documentation requirements of the 
            parameters and guidelines and claiming instructions when the 
            mandate costs were incurred.

          After Clovis Unified, the Controller revised its parameters and 
            guidelines and its boilerplate language.  These changes 
            affected 37 programs: 21 local governments, 12 school 
            districts, and four community colleges.  Currently, if any 
            part of the parameters and guidelines are amended, the filing 
            period for reimbursement claims reopens.  Any local agency can 
            claim reimbursements for previously unclaimed expenses.  Local 
            agencies that may have forgotten to file reimbursement claims 
            for any previous fiscal year can file claims for costs 
            incurred for previous years.  

          SB 112 would limit a local agency's filing period when there is 
            an amendment to the boilerplate language and that amendment 
            does not increase or decrease reimbursable costs to the fiscal 
            year in which the amendment was adopted.  The Committee may 
            wish to consider whether reducing the opportunity for local 
            agencies to claim previously unclaimed expenses when 
            parameters and guidelines change would unfairly result in 
            local agencies footing the bill for years when reimbursement 








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            could help offset their costs.

          4)Support arguments: Supporters might argue this loophole 
            allowing parameters and guidelines to be reopened should be 
            closed so the filing period is not indefinite.

          Opposition arguments: Opposition might argue local agencies 
            should not be left footing the bill on a state mandate when 
            there is a revision to the parameters and guidelines.

           REGISTERED SUPPORT / OPPOSITION  :

           Support                         Opposition
           
          None on file                       None on file

           Analysis Prepared by  :    Jennifer Klein Baldwin / L. GOV. / 
          (916) 319-3958