BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 392
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          Date of Hearing:  April 10, 2013

                       ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
                           K.H. "Katcho" Achadjian, Chair
              AB 392 (Jones-Sawyer) - As Introduced:  February 15, 2013
           
          SUBJECT  :  State mandates: prorated claims.

           SUMMARY  :  Makes changes to the allocation method and reporting  
          requirement for prorated state mandate claims.  Specifically,  
           this bill  :

          1)Requires the State Controller to determine the most  
            cost-effective allocation method if $1,000 or less is  
            appropriated for a state mandated program.

          2)Removes reporting requirements for the State Controller to  
            report prorated claims to the Department of Finance, the  
            Chairperson of the Joint Legislative Budget Committee, and the  
            Chairperson of the Budget Committee in each house of the  
            Legislature.

           EXISTING LAW  :

          1)Requires the state, under the California Constitution, to  
            provide a subvention of funds whenever it mandates that a  
            local government undertake a new program or higher level of  
            service.

          2)Allows local governments to apply to the Commission on State  
            Mandates for reimbursement of state-mandated local costs. 

          3)Requires the Legislature, if the claimant is a local  
            government, to either appropriate funds in the annual Budget  
            Act for the full payable amount that has not been previously  
            paid, or to suspend the mandate.

          4)Requires that the reimbursement amount to local agencies and  
            school districts for costs mandated by the state be  
            appropriated to the State Controller for disbursement.

          5)Requires the Controller, if the amount allocated by the Budget  
            Act is not sufficient to pay all claims approved by the  
            Controller, to prorate claims in proportion to the dollar  
            amount of approved claims timely filed and on hand at the time  








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            of proration.

          6)Requires the Controller to submit the following reports:

             a)   Requires the Controller to report prorated claims to the  
               Department of Finance, the Chairperson of the Joint  
               Legislative Budget Committee, and the Chairperson of the  
               respective Budget Committee in each house of the  
               Legislature.  

             b)   Requires the Controller to report to the Joint  
               Legislative Budget Committee and fiscal committees by  
               October 31 of each fiscal year a summary of the total  
               amount of claims paid per fiscal year and the amount of  
               mandate deficiencies or surpluses. 

             c)   Requires the Controller to report to the Joint  
               Legislative Budget Committee and fiscal committees, and the  
               Director of Finance by April 30 of each fiscal year a  
               summary of the total amount of unpaid claims and any  
               mandate deficiencies or surpluses by fiscal year submitted  
               before April 1.

           FISCAL EFFECT  :  Unknown

           COMMENTS  :

          1)In 1979, Proposition 4 amended the California Constitution by  
            adding Article XIII B, 
          Section 6, which requires the state to reimburse local  
            governments for the cost of new programs or higher levels of  
            service mandated by the Legislature or any state agency.  In  
            1984, the Legislature created the Commission on State  
            Mandates, a quasi-judicial agency, 
          as the entity that decides test claims alleging that the  
            Legislature or a state agency imposed 
          a reimbursable state-mandated local program.  Once the  
            Commission hears a test claim and determines that the  
            governmental action constituted a reimbursable state mandate,  
            it then determines the amount to be subvened for the program.   
            Following the mandate determination, local agencies and school  
            districts may file reimbursement claims with the State  
            Controller to be reimbursed for the state-mandated programs.  

            The Controller pays and audits these claims, and can reduce  








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            reimbursement claims that are determined to be excessive or  
            unreasonable.  While Article XIII B of the California  
            Constitution requires the state to provide a subvention of  
            funds whenever it mandates a local government undertake a new  
            program or higher level of service, it does not require the  
            Legislature to appropriate the necessary funds in the annual  
            Budget Act.

          2)If this appropriation is not sufficient to reimburse all of  
            the claims approved by the Controller, current law requires  
            the Controller to prorate claims in proportion to the dollar  
            amount of approved claims filed timely and on hand at the time  
            of proration.  This bill requires the Controller to determine  
            the most cost-effective allocation method if $1,000 or less is  
            appropriated for a state mandated program.  Under the  
            provisions of this bill, if $1,000 or less is appropriated for  
            a state mandated program, the Controller would no longer be  
            required to proportionally reimburse claims between multiple  
            eligible claimants with approved claims.

          3)The Committee may wish to ask the sponsor what criteria will  
            be used in determining which eligible claimants will take  
            priority for reimbursement of the limited appropriation  
            available at that time.  This bill is sponsored by State  
            Controller John Chiang.

          4)This bill also deletes reporting requirements that require the  
            Controller to report prorated claims to the Department of  
            Finance, the Chair of the Joint Legislative Budget Committee,  
            and the Chair of the Budget Committees in the Assembly and  
            Senate.  Supporters of the bill argue that these reporting  
            requirements are duplicative and existing law already requires  
            the Controller to produce an annual report by October 31 which  
            contains the same information about prorated claims.  Current  
            law requires the Controller to summarize, by state mandate,  
            the total amount of claims paid per fiscal year and the amount  
            of mandate deficiencies or surpluses in a report submitted to  
            the Joint Legislative Budget Committee and fiscal committees.   


          5)The Committee may wish to request that the author and sponsor  
            work with the Department of Finance on amending a code section  
            that contains a cross reference to the report that is being  
            deleted by this bill, specifically Government Code 17613.   
            Existing law allows the Director of Finance upon receipt of  








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            the report, deleted by this bill, to authorize the  
            augmentation of the amount available for expenditure to  
            reimburse costs mandated by the state.  

          6)According to the author, "When an appropriation is  
            substantially less than the total costs claimed, specifically  
            when the appropriation is $1,000 or less, the current payment  
            process is inefficient and time-consuming, and results in  
            payments to local entities that amount to less than the cost  
            of processing the payment."  The sponsor points to the Budget  
            Act of 2009 in which $1,000 was appropriated for the Mandate  
            Reimbursement Process program for school districts.  The  
            Controller's office cites 795 eligible claims totaling $16.4  
            million that were approved.  After offsetting claims for  
            accounts receivable owed to the state, the Controller's Office  
            issued 761 warrants ranging from $1 to $6.  The sponsor argues  
            that these small payments still require extensive staff time  
            and resources expended by both his office and school  
            districts.

          7)While the provision of current law amended by this bill  
            includes references to local agencies, according to the  
            Controller's office, in practice the distribution of funds  
            when there is an appropriation of $1,000 or less for a state  
            mandated program has only been made to school districts and  
            community colleges.  In November 2004, voters approved  
            Proposition 1A, which requires the Legislature to appropriate  
            funds in the annual budget to either pay outstanding mandate  
            claims, suspend the mandate, or repeal the mandate.   
            Proposition 1A applies to local governments only and does not  
            include school districts or community colleges.
                
            8)Support arguments  :  Supporters argue that this bill allows the  
            Controller to use an allocation method that promotes  
            efficiency and cost savings.  

           Opposition arguments  :  None on file

           REGISTERED SUPPORT / OPPOSITION  :

           Support 
           
          State Controller John Chiang [SPONSOR]

           Opposition 








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          None on file
           
          Analysis Prepared by  :    Misa Yokoi-Shelton / L. GOV. / (916)  
          319-3958