BILL ANALYSIS Ó SB 106 Page 1 Date of Hearing: June 10, 2013 ASSEMBLY COMMITTEE ON APPROPRIATIONS Mike Gatto, Chair SB 106 (Monning) - As Amended: May 16, 2013 Policy Committee: Veterans AffairsVote: 10-0 Urgency: Yes State Mandated Local Program: No Reimbursable: SUMMARY As proposed to be amended, this bill: 1)Makes minor clarifications to current law authorizing the California Department of Veterans Affairs (CalVet) to enter into financial agreements to receive cash advances to the California Central Coast State Veterans Cemetery at Fort Ord Endowment Fund (fund) for the purpose of funding initial planning and design and submitting a grant proposal to the U.S. Department of Veterans Affairs (USDVA). 2)Makes minor clarifications to the fund regarding the maintenance and operation of the cemetery, specifically, that the Endowment Fund is adequate to cover each year's costs for the next 10 years, rather than for the 10-year period in total. 3)Specifies that funds contributed to the Endowment Fund shall be returned to the donor if the cemetery is not funded by the USDVA. FISCAL EFFECT No direct state cost. The endowment fund is currently authorized to accept a funding advance or loan to help the state complete its initial planning and application required by the federal government (at a cost of about $2 million) for a grant that would cover plans and full construction (an estimated $26 million). There are virtually no funds in the endowment fund, however, though potential donations of about $200,000 are in the offing, pending the state's application to the USDVA. SB 106 Page 2 Current law explicitly states there is no liability on the part of the state for an advance or a loan, should the federal grant fail to materialize. This bill makes that intention extra explicit. (The state's future fiscal exposure for a veterans' cemetery is limited to maintenance and operational costs, which would likely be in the range of $500,000 annually, more than half of which would likely be covered by burial fees, with the balance covered by the GF and endowment fund contributions.) While this bill seeks to safeguard the GF, at the time this analysis was prepared, the Senate version of the 2013-14 budget bill contained $2.5 million (GF) for preliminary planning for the cemetery. The budget proposal requires this amount to be repaid within two years, presumably if and when USDVA funds are approved. It is not clear, however, whether the state would be repaid in full, as federal reimbursement procedures cover up to 100% of the loan, and may not cover all expenditures. The budget augmentation and the existing authorization to accept an advance or loan to complete the federal application and begin preliminary plans are parallel components of a two-prong plan to commence cemetery construction. The advance/loan plan is fading, as no funding is forthcoming in the shape of a loan or advance. GF budget augmentation is now the goal. In either case, the state's application to the USDVA must be submitted by July 1. COMMENTS 1)Rationale . AB 1842 (Monning), Statutes of 2012, authorized CDVA to enter into financial agreements to receive cash advances to the California Central Coast State Veterans Cemetery at Fort Ord Endowment Fund to fund initial planning and design and to submit a grant proposal to the USDVA. Any such agreement requires Department of Finance review, with no state repayment exposure. According to the author, this bill responds to a request from the Governor's Office for minor clarifying amendments to make it abundantly clear the state is not required to make any payment on the authorized cash advances or loans. This bill also clarifies the requirement that the Endowment Fund have sufficient income for each of the next 10 years, and adds "net SB 106 Page 3 of all other revenue sources" to the requirement. 2)Background . In 1991, Fort Ord was announced for closure by the United States Base Realignment and Closure Commission. Prior to closure, FORA set aside 204 acres for a veterans' cemetery. Legislation enacted in 2006 created an endowment fund to support cemetery planning and design. When the endowment is sufficiently funded to design and plan the cemetery, CDVA can apply to the USDVA for a cemetery grant, which will cover the costs of construction and any planning and design work. 3)Author's amendments specify that funds contributed to the Endowment Fund shall be returned to the donor if the cemetery is not funded by the USDVA. 4)Prior Legislation . a) AB 629 (Monning), Statutes of 2011, authorizes CalVet to contract with the Fort Ord Reuse Authority (FORA), rather than the Department of General Services (DGS), for design and construction of a state-owned and operated veterans' cemetery at Fort Ord. b) AB 1757 (Monning), Statutes of 2010, requires CalVet to design and construct a state-owned and operated veterans cemetery at Ford Ord. The design and construction of the cemetery may not move forward until a determination was made that 100% of the funds necessary for planning and design were raised. c) AB 3035 (Laird), Statutes of 2006, established the California Central Coast State Veterans Cemetery at Fort Ord Endowment Fund for the receipt of donations of personal property, including cash or other gifts, to be used for maintenance of the cemetery. Analysis Prepared by : Geoff Long / APPR. / (916) 319-2081