BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 392
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          CONCURRENCE IN SENATE AMENDMENTS
          AB 392 (Jones-Sawyer)
          As Amended  June 5, 2013
          Majority vote
           
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          |ASSEMBLY:  |75-0 |(May 9, 2013)   |SENATE: |33-0 |(July 1, 2013) |
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           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.









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          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, 








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          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  








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          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.

           








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          Analysis Prepared by  :    Misa Yokoi-Shelton / L. GOV. / (916)  
          319-3958 


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