BILL ANALYSIS Ó
SB 106
Page 1
SENATE THIRD READING
SB 106 (Monning)
As Amended June 11, 2013
2/3 vote. Urgency
SENATE VOTE :37-0
VETERANS AFFAIRS 10-0 APPROPRIATIONS 15-0
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|Ayes:|Muratsuchi, Chávez, |Ayes:|Gatto, Harkey, Bigelow, |
| |Atkins, Brown, Eggman, | |Bocanegra, Ian Calderon, |
| |Fox, Grove, Melendez, | |Campos, Donnelly, Eggman, |
| |Salas, Yamada | |Gomez, Hall, Linder, Pan, |
| | | |Quirk, Wagner, Weber |
|-----+--------------------------+-----+--------------------------|
| | | | |
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SUMMARY : Clarifies that any so-called cash advances to the Fort
Ord Endowment Fund (Endowment Fund) are not obligations of the
General Fund and requires the Department of Veterans Affairs
(Department) to develop and submit a State Veterans Cemetery
Grant Program application under certain conditions as specified.
Specifically, this bill :
1)States that the Department may enter into any financial
agreement to receive cash advances in the Endowment Fund,
provided that the agreement does not require the state to
repay or make payments on cash advances and the agreement is
reviewed and approved by the Department of Finance.
2)Mandates that upon the determination of the Controller, after
consultation with the Secretary of Veterans Affairs, that the
Endowment Fund has adequate principal to yield sufficient
investment earnings in each year for the next 10 years, from
the date of the determination, to fully fund the respective
year's administrative and oversight costs, net of all other
estimated revenue sources, and to fund the estimated costs of
developing and submitting the State Veterans Cemetery Grant
Program application, the Department shall develop and submit a
State Veterans Cemetery Grant Program application to the
United States Department of Veterans Affairs for the
establishment of a veterans cemetery.
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3)Directs the Department to consider cashflow needs when
providing estimates to the Controller in making the above
determination.
4)Mandates that if the application to the Grant Program is not
submitted or is denied, the amounts donated to the Endowment
Fund will be refunded within six months of the grant funding
denial or other equivalent announcement that the project is
not moving forward, as specified. Amounts remaining in the
Endowment Fund shall be returned to the General Fund within
six months.
5)Contains an urgency clause, directing that this bill go into
effect immediately.
6)Declares that the reason for the urgency clause is to meet the
deadline of July 1, 2013, established by the United States
Department of Veterans Affairs (USDVA) as a result of federal
sequestration. This deadline requires the Department to
submit its application for millions of dollars in federal
funds to cover the cost of building the California Central
Coast State Veterans Cemetery at Fort Ord.
EXISTING LAW :
1)Creates the Endowment Fund in the State Treasury.
2)Mandates that money in the Endowment Fund shall be allocated,
upon appropriation by the Legislature, to the Department for
the annual administrative and oversight costs of the veterans
cemetery and to generate funding through interest for the
veterans cemetery.
3)Directs that money in the Endowment Fund shall first be
invested with the goal of achieving capital appreciation to
create a balance sufficient to generate ongoing earnings to
cover the estimated annual oversight and maintenance costs
associated with the veterans cemetery.
4)Directs that upon the determination of the Controller that the
Endowment Fund balance has attained the goal of generating
ongoing earnings to cover the estimated annual oversight and
maintenance costs associated with the veterans cemetery; money
in the Endowment Fund shall be invested to generate earnings
to fund annual oversight and maintenance costs associated with
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the veterans cemetery.
5)Specifies that the Endowment Fund may consist of donations
from public and private entities, partnerships between public
and private entities, fees, cash advances, and transfers from
the state General Fund as may be specified by law.
6)Authorizes the Department to enter into any financial
agreement to receive cash advances in the Endowment Fund,
provided that no obligations of repayment are made to the
state and the agreement is reviewed and performed in
consultation with the Department of Finance.
7)Directs that to the extent possible, donations made in-kind to
the Endowment Fund shall be monetized so as to offset the
ongoing administrative and oversight costs.
8)Specifies that earnings generated by the Endowment Fund shall
be retained by it.
9)Clarifies that money deposited in the Endowment Fund are
exempt from the requirements of Government Code Sections 11270
through 11277.
10)Directs the Treasurer to invest money in the Endowment Fund
after consultation with the Department in a manner that best
meets the goals of the Endowment Fund.
11)Specifies that if, through changes in state or federal law,
additional revenues are identified for the administration and
oversight of the cemetery, including increases in federal
burial allowances, so that the amount of annual revenue
exceeds the annual administrative and oversight costs, the
excess revenues shall be deposited in the Endowment Fund.
FISCAL EFFECT : According to the Assembly Appropriations
Committee:
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,
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however, though potential donations of about $200,000 are in the
offing, pending the state's application to the USDVA.
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 General Fund (GF) and endowment fund contributions.)
While this bill seeks to safeguard the GF, the current version
of the 2013-14 budget bill contains $1.5 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 : In 1991 the federal Base Realignment and Closure
Commission (BRAC) recommended that the United States Army post
at Ford Ord be inactivated. The fort was closed in 1994. Part of
the Base Reuse Plan includes building a veterans' cemetery.
Traditionally, veterans' cemeteries have been federal
responsibilities, but as the last century came to a close the
federal government enacted a cost saving measure by offering to
build cemeteries but let states pay the maintenance costs in
perpetuity as was done with the now completed Redding cemetery,
California's first.
The federal government has proposed the same agreement for the
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California Central Coast State Veterans Cemetery at Fort Ord,
saying the federal veterans' cemetery at Gustine in the Central
Valley is close enough and has enough room to relieve Washington
of any obligation to build a federal cemetery on the central
coast.
Under the federal Veterans Affairs State Cemetery Grants
Program, the federal government will fund up to 100% of the cost
of establishing, expanding, or improving state veterans'
cemeteries, including the acquisition of initial operating
equipment, if the state agrees to cover the administrative and
oversight costs in perpetuity.
Once completed, the cemetery will serve all veterans, but will
be most convenient for the approximately 100,000 veterans and
their families living within the 75-mile radius, an area that
includes the counties of Monterey, Santa Cruz, San Benito and
half of Santa Clara.
The estimated interment needs of that area's veteran population
are 5,600 burial and crypt sites for the initial 10 years. The
actual interment sites to be provided in this initial phase will
be approximately 2,800 burial and crypt sites.
The Phase I plan will develop 26 acres of the site. At a
minimum, the cemetery will provide approximately 11,500
gravesites in its 20-year build-out.
A federal grant program provides funds to build both initial and
follow-on phases, but the State of California is responsible for
maintaining the cemetery, using moneys from an endowment fund.
AB 3035 (Laird), Chapter 291, Statutes of 2006, established an
endowment to cover maintenance costs, prior to applying for
grant funding for construction.
The strategy has been to raise funds privately and/or sell the
Endowment Parcel, land designated by FORA, the City of Seaside
and the County of Monterey, to provide the required funding to
meet federal obligations. However, according to the author due
to the impact of sequestration, the USDVA has imposed a deadline
of July 1, 2013, for the Department to submit its
pre-application to the Veterans State Cemetery Grants Program to
maintain its position on the priority list for the cemetery
grant. Furthermore, the author states that if this deadline is
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not met, it is likely that California will not secure a position
on the priority list for upcoming years. This is the basis for
the urgency clause in the bill.
The author states that the second section of the bill, "?
contains language requested by the [Department of Finance] DOF
to clarify the principle amount required to be retained in the
Central Coast State Veterans Cemetery Endowment Fund in order to
pay for the annual operations and maintenance costs of the
Cemetery."
The most recent amendments to this bill were taken after the
bill was heard by the Assembly Veterans Affairs Committee. The
amendments are designed to refund donated or "cash advanced,"
and other money in the Endowment Fund to the source of the money
in the event that the cemetery project does not advance. Any
money left over in the Endowment Fund will then be returned to
the General Fund.
Analysis Prepared by : John Spangler / V. A. / (916) 319-3550
FN: 0001112