BILL ANALYSIS Ó AB 392 Page 1 CONCURRENCE IN SENATE AMENDMENTS AB 392 (Jones-Sawyer) As Amended June 5, 2013 Majority vote ----------------------------------------------------------------- |ASSEMBLY: |75-0 |(May 9, 2013) |SENATE: |33-0 |(July 1, 2013) | ----------------------------------------------------------------- Original Committee Reference: L. GOV. 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. 3)Deletes a cross-reference to the reporting requirement removed by this bill. The Senate amendments make conforming changes. 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. AB 392 Page 2 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 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. 7)Allows the Director of Finance upon receipt of the report to authorize the augmentation of the amount available for expenditure to reimburse costs mandated by the state. FISCAL EFFECT : According to the Senate Appropriations Committee, pursuant to Senate Rule 28.8, negligible state costs. COMMENTS : 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, AB 392 Page 3 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 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. 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. The Legislature 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. 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 AB 392 Page 4 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. This bill also deletes 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 the report, deleted by this bill, to authorize the augmentation of the amount available for expenditure to reimburse costs mandated by the state. 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. 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. 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. AB 392 Page 5 Analysis Prepared by : Misa Yokoi-Shelton / L. GOV. / (916) 319-3958 FN: 0001287