BILL ANALYSIS Ó AB 1668 Page 1 Date of Hearing: April 9, 2014 ASSEMBLY COMMITTEE ON APPROPRIATIONS Mike Gatto, Chair AB 1668 (Wieckowski) - As Introduced: February 12, 2014 Policy Committee: Higher EducationVote:12-0 Urgency: Yes State Mandated Local Program: No Reimbursable: SUMMARY This bill authorizes the California Educational Facilities Authority (CEFA) to accept loans from public or private sources in order to finance projects under the authority's purview. FISCAL EFFECT Any costs associated with increased workload related to the availability of additional financing alternatives will be absorbable. The authority is funded from administrative fees charged against financed facilities projects. For 2013-14, the authority's budget totals $740,000 and includes five positions. COMMENTS Background/Purpose . CEFA was established in 1973 within the State Treasurer's Office to assist private non-profit higher education institutions in the construction of educational facilities. Having authorization to issue tax-exempt bonds, CEFA can provide favorable conduit financing to such institutions. These bonds are backed by the participating institutions rather than by the state. Since the economic downturn in 2008, there has been a significant decrease in the number of municipal bond insurers and credit/liquidity providers that, coupled with federal changes to lending, has led to a substantial shift toward direct or private placement loans with private banks, facilitated by conduit issuers. These loans have cost advantages over bonds due to the absence of an underwriter and insurance fees. CEFA currently lacks the authority to accept these financing AB 1668 Page 2 instruments, and indicates that it recently has had to deny five institutions seeking to do private financing. Analysis Prepared by : Chuck Nicol / APPR. / (916) 319-2081