BILL ANALYSIS �
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: AB 1235 HEARING: 6/26/13
AUTHOR: Gordon FISCAL: Yes
VERSION: 5/24/13 TAX LEVY: No
CONSULTANT: Ewing
LOCAL OFFICIALS' FINANCIAL MANAGEMENT TRAINING
Requires local agencies, as specified, to provide financial
management training to members of their legislative bodies.
Background and Existing Law
The California Constitution, and state law, including the
Ralph M. Brown Act and the Political Reform Act, establish
standards for the operations of the legislative bodies of
local agencies. The Ralph M. Brown Act requires that
legislative bodies of local agencies meet, deliberate, and
vote in open session, with specified exceptions. The
Political Reform Act prohibits local officials from
participating in decisions which affect their material
interests and establishes disclosure requirements.
In 2005, the Legislature passed AB 1234 (Salinas, 2005),
requiring members of local agencies' legislative bodies to
participate in ethics training, if those agencies offer
compensation or expense reimbursement to their board
members.
Consistent with AB 1234, some public officials indicate
that comparable training in financial management practices
will result in more informed local officials, and improved
fiscal controls and financial decisions.
Proposed Law
Assembly Bill 1235 requires members of local agencies'
legislative bodies to participate annually in financial
management training, if those agencies offer compensation
or expense reimbursement to their board members. AB 1235
defines financial management training, as including
AB 1235 -- 5/24/13 -- Page 2
training on laws and best practices relating to:
Revenue sources;
Debt instruments;
Budget monitoring;
Financial policies;
Financial reporting, including audit requirements;
Long-term financial planning;
Cash management and investments;
Capital financing, and
Debt management.
AB 1235 requires an entity that develops curricula to meet
this requirement to consult with the offices of the State
Treasurer and the State Controller on the sufficiency and
accuracy of the content.
AB 1235 requires local agencies that require financial
management training to maintain, on file for five years,
and subject to public disclosure, records indicating the
local officials who received training, the dates, and
providers of that training.
AB 1235 declares financial management training to be a
matter of statewide concern, and as such, the requirements
of AB 1235 would apply to charter cities and charter
counties.
State Revenue Impact
No estimate.
Comments
1. Purpose of the bill . Assembly Bill 1235 would ensure
that local officials receive essential training in sound
and legally required financial management practices,
including training on long-term financial planning, budget
monitoring, investments, capital financing, and debt
management. Maintaining sound financial management
practices is paramount to securing and retaining public
trust in the operations of public agencies. AB 1235 would
ensure that local officials entrusted with local agency
finances have the training relevant to their public
service.
AB 1235 -- 5/24/13 -- Page 3
2. Local control . California's local agencies are
governed by locally elected boards, which are accountable
to their electors. Training in financial management
practices is readily available through statewide
associations representing local agencies, public and
private colleges and universities, industry trade groups,
and other sources. Local agencies in California range from
small special districts with less than $100,000 in annual
revenues to Los Angeles County, which manages more than $15
billion annually. While undoubtedly there are exceptions,
most local agencies are well managed. It is unclear that
an across-the-board training requirement will improve
financial management practices in agencies needing
improvement.
3. Standards versus incentives . Improved financial
management practices can help assure best use of limited
public resources and bolster public confidence in the
operations of local agencies. Yet those local agencies
working to improve their practices are unlikely to find
value in a new directive, while those resistant to change
are equally unlikely to benefit. As an alternative, the
state could establish an incentive-based strategy that
rewards excellence, recognizes and evaluates innovation and
encourages continued improvement in financial management.
That strategy might include establishing best-practices for
financial management, budget and expenditure transparency,
long-range planning, debt utilization and related financial
responsibilities, including training. Consistent with best
practices, the State could promote a certification or
related model, creating incentives for local agencies that
meet and exceed standards. Incentives might include
market-based recognition, through bond markets, civil
service and exempt hiring policies, as well as public
recognition. To create incentives for improved financial
management, the Committee may wish to direct staff to
explore incentive-based models that could be used to more
clearly define best practices in financial management,
communicate to the public which agencies are utilizing best
practices, and promote market-based rewards for using
best-practices.
4. Technical amendment . Language in AB 1235 refers to
"Laws and commonly excepted best practices?" The Committee
may wish to consider amending AB 1235 to delete "excepted"
and add "accepted" on page 2, line 22.
AB 1235 -- 5/24/13 -- Page 4
Assembly Actions
Assembly Local Government Committee7-2
Assembly Appropriations 12-5
Assembly Floor 56-19
Support and Opposition (6/20/13)
Support : California Special District Association.
Opposition : Association of California Water Agencies;
Desert Water Agency, El Dorado Irrigation District; League
of California Cities; Newhall County Water District;
Orchard Dale Water District; Rowland Water District.