BILL ANALYSIS Ó SENATE TRANSPORTATION & HOUSING COMMITTEE BILL NO: ab 2731 SENATOR MARK DESAULNIER, CHAIRMAN AUTHOR: perea VERSION: 8/28/14 Analysis by: Eric Thronson FISCAL: no Hearing date: August 29, 2014 URGENCY: YES SUBJECT: Fresno County maintenance of effort requirement DESCRIPTION: This bill clarifies the action that Fresno County must take in order to defer the county's 2010 transportation maintenance of effort payment until 2020. ANALYSIS: Should the state collect a sales tax on gasoline, existing law divides the distribution of the revenues from this tax between various entities and purposes. For example, existing law requires the State Controller to apportion by formula 40 percent of these revenues to the state's cities and counties for transportation purposes. In order to be eligible to receive these state revenues, however, cities and counties must maintain their existing commitment of local funds for street, road, and highway purposes. This requirement is often referred to as a maintenance of effort (MOE) requirement. Due to the economic downturn at the time, Fresno County was unable to meet its MOE requirement in fiscal year 2009-2010. To remedy this situation, Senate Bill 524 (Cogdill), Chapter 716, Statutes of 2010, deferred until 2015 Fresno County's $5.5 million MOE payment for 2010 to its Local Road Fund. This statute enabled Fresno County to receive its portion of revenues from the sales tax on gasoline without spending its required local funding. In 2010, the Legislature passed and the governor signed Assembly Bill 6 (Committee on Budget), Chapter 11, Statutes of 2010 in the 8th extraordinary session, which became known as the "Gas Tax Swap." The gas tax swap eliminated, effective July 1, 2010, the sales tax on gasoline and replaced it with an increase in the gasoline excise tax designed to generate an equivalent AB 2731 (PEREA) Page 2 amount of revenue. Among other things, the gas tax swap specifically stated that these new excise tax revenues are not subject to the requirements placed on revenues generated from the sales tax on gasoline. In June of this year, the Legislature passed and the governor signed Senate Bill 853 (Committee on Budget and Fiscal Review), Chapter 27, Statutes of 2014. In part, this budget trailer bill delayed until January 30, 2020, Fresno County's required MOE payment as long as the county continues to provide medical services to indigent individuals and undocumented individuals consistent with the eligibility and benefit provisions in effect in the 2013-14 fiscal year. This bill amends SB 853 to clarify the action Fresno County must take in order to defer the 2010 MOE payment until 2020. Specifically, this bill requires Fresno County to expend no less than $5.5 million to provide specialty medical services in conjunction with federally qualified health clinics, or other federally funded clinics, to indigent individuals, including but not limited to, those individuals who are ineligible for full-scope Medi-Cal. If Fresno County spends the $5.5 million on healthcare services, it would then have until 2020 to repay the $5.5 million to its Local Road Fund. In addition, this bill is an urgency measure which means it takes effect immediately once the governor signs it into law. COMMENTS: 1.Purpose . According to proponents of the measure, this bill is necessary because some Fresno County supervisors are interpreting SB 853 to mean that the county must provide identical levels of care to that provided in 2013-14. The state recently changed the formula for reimbursing counties for medical services provided to indigent patients. This funding change has resulted in significant budget pressure in Fresno County, and some county supervisors have suggested that they are unwilling to spend at the same level as 2013-14 for indigent healthcare. In a letter to the Assembly Daily Journal clarifying the intent of SB 853, Assemblymember Perea states that Fresno County is not expected to bear medical costs in excess of the $5.5 million made available by delaying the MOE payment. Mr. AB 2731 (PEREA) Page 3 Perea's letter also states that the language in SB 853 is not intended to jeopardize the county's fiscal health. Once the $5.5 million is spent on indigent health care, Fresno County should be considered in compliance with state law. This bill explicitly defines the intent described in Assemblymember Perea's letter and makes clear Fresno County's obligation necessary to receive an additional five-year deferment of its 2009-10 MOE payment. 2.What does this bill accomplish ? As stated earlier, this bill allows Fresno County to defer a $5.5 payment to its Local Road Fund if the county spends at least that amount on indigent health care. Either way, Fresno County will spend $5.5 million. It appears that the original intent of SB 853 was to grant Fresno County some relief from a mandatory payment only if the county chooses to spend that money instead on health care costs. This bill, however, creates little incentive for Fresno County to spend the money on healthcare, as doing so in the coming year only means it will have to pay the same amount again within the next five years to its Local Road Fund. If the county instead chooses to repay the Local Road Fund this year, it will be out from under that future obligation. It seems unclear whether this bill, or the original language in SB 853, can accomplish its intended aim. 3.29.10 hearing . This bill passed out of the Senate Insurance Committee on June 26, 2014. The author amended this bill on the Senate Floor on August 18 and then on August 28, 2014, replacing the existing language related to insurance reporting requirements with the bill's current contents. Because this is a new bill, the Senate Rules Committee referred this bill back to this committee for a hearing under Senate Rule 29.10. At today's hearing, the committee may, with a majority vote, (1) hold the bill; or (2) return the bill as approved by the committee to the Senate Floor. Assembly Votes are not relevant. POSITIONS: (Communicated to the committee before noon on Thursday, August 28, 2014.) SUPPORT: None received. OPPOSED: None received. AB 2731 (PEREA) Page 4