BILL ANALYSIS                                                                                                                                                                                                    




                     SENATE GOVERNANCE & FINANCE COMMITTEE
                            Senator Lois Wolk, Chair
          

          BILL NO:  AB 392                      HEARING:  6/12/13
          AUTHOR:  Jones-Sawyer                 FISCAL:  Yes
          VERSION:  6/5/13                      TAX LEVY:  No
          CONSULTANT:  Weinberger               

                         STATE MANDATED LOCAL PROGRAMS
          

          Lets the State Controller use the most cost effective  
          allocation method for payment when the state budget  
          appropriates $1,000 or less for state-mandated program  
          reimbursement.


                           Background and Existing Law  

          In 1979, the voters amended the California Constitution,  
          requiring 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.  The  
          Commission is a quasi-judicial body which decides test  
          claims alleging that the Legislature or a state agency  
          imposed a state-mandated local program.  If the Commission  
          identifies a state-mandated program, it adopts parameters  
          and guidelines defining what activities will be reimbursed,  
          and adopts statewide cost estimates.

          After receiving the adopted parameters and guidelines for a  
          mandate, the State Controller's Office (SCO) issues  
          claiming instructions to guide local agencies and school  
          districts in claiming reimbursable costs.  The SCO  
          receives, pays, and audits reimbursement claims from local  
          agencies and school districts.  The SCO can reduce  
          reimbursement claims it deems excessive or unreasonable.

          The State Constitution requires the Legislature to either  
          appropriate funds in the budget bill to pay all outstanding  
          claims for a mandate, or suspend or repeal the mandate  
          (Proposition 1A, 2004).  This requirement does not apply to  
          school and employee relations mandates.  When the state  
          budget appropriates an amount that is insufficient to pay  
          all mandate reimbursement claims approved by the SCO, state  
          law requires the SCO to prorate claims in a specified  




          AB 392 -- 6/5/13 -- Page 2


          manner (AB 1668, McAllister, 1986).

          To reimburse the costs of state mandated school programs,  
          recent state budgets have typically appropriated only one  
          thousand dollars per program.  SCO staff notes that  
          prorating the thousands of small payments that result from  
          such small appropriations is inefficient and costly.  The  
          SCO wants the flexibility to pay mandate claims in a more  
          cost-effective manner when the state budget only  
          appropriates one thousand dollars or less for  
          reimbursements.  The SCO also wants the Legislature to  
          repeal a duplicative reporting requirement relating to  
          prorated mandate claims.

           
                                   Proposed Law  

          Assembly Bill 392 requires the State Controller to  
          determine the most cost-effective allocation method for  
          reimbursing approved claims for the costs of state-mandated  
          local programs when the state budget allocates one thousand  
          dollars or less for a program.

          AB 392 repeals a requirement that the Controller must  
          report to the Director of Finance and the Chairperson of  
          specified legislative committees whenever the Controller  
          finds it necessary to prorate claims.


                               State Revenue Impact
           
          No estimate.


                                     Comment  

           Purpose of the bill  .  When the state budget appropriates an  
          amount that is insufficient to pay all claims for a state  
          mandate, the SCO must prorate the payments it makes to  
          claimants.  When the budget appropriates $1,000 or less to  
          pay claims for a mandate, the administrative costs of  
          prorating hundreds of claims can far exceed the total value  
          of the reimbursements.  The SCO cites one state mandated  
          local program for which it was forced to prorate $1,000 of  
          appropriated state funds among 520 eligible claimants.  At  
          an estimated average cost of $22 per claim, this process  
          cost the SCO more than $11,000 to process payments that  





          AB 392 -- 6/5/13 -- Page 3


          ranged from $1 to $10 for each of the 520 claimants.  This  
          is not an isolated example.  SCO staff notes that the  
          Budget Act of 2009 appropriated $1,000 to reimburse mandate  
          claims for each of 39 school district programs.  The SCO  
          issued 1,861 warrants for claims related to those 39  
          programs, of which 1,626 were for less than five dollars.   
          AB 392 saves taxpayers money by preventing SCO staff and  
          local government staff from spending time processing state  
          mandate reimbursement payments that are worth less, in  
          total, than the administrative costs that they generate.  


                                 Assembly Actions  

          Assembly Local Government Committee:  9-0
          Assembly Appropriations Committee:17-0
          Assembly Floor:                    75-0
                         Support and Opposition  (6/6/13)

           Support  :  State Controller John Chiang.

           Opposition  :  Unknown.