BILL ANALYSIS Ó Senate Appropriations Committee Fiscal Summary Senator Kevin de León, Chair SB 335 (Yee) - Governor's Budget: report on state agency contracts for services. Amended: As Introduced Policy Vote: GO 9-2 Urgency: No Mandate: No Hearing Date: May 23, 2013 Consultant: Mark McKenzie SUSPENSE FILE. AS PROPOSED TO BE AMENDED. Bill Summary: SB 335 would require the Governor to submit an annual report that includes specified information regarding current and proposed state agency contracts for services with a value of over $5,000, upon implementation of the FI$Cal Project. Fiscal Impact: Unknown contract costs, estimated in the hundreds of thousands, to build requirements into the FI$Cal Project to ensure the system has capacity to report specified information on contracting (General/Special Funds). Likely minor costs to various state agencies to compile and report specified information to the Governor's Office, assuming the FI$Cal Project has the built in capacity to report contracting information upon implementation (General/Special Funds). Unknown costs to the Department of Finance (DOF) to develop and establish new accounting rules governing the reporting of service contract information. (General) One-time costs of approximately $50,000 to the Department of General Services (DGS) to develop and publish revisions to the State Contracting Manual (General). Ongoing costs to DGS of $100,000 to $200,000 annually to provide training and assistance to buyers and budgeting/accounting personnel for state agencies (General). Background: Existing law requires the Governor to submit to the Legislature within the first 10 days of each calendar year, a proposed budget for the next fiscal year, as specified. The SB 335 (Yee) Page 1 Governor's proposed budget must contain itemized statements for recommended state expenditures and estimated state revenues. Proposed Law: SB 335 would require the Governor to submit a report to the Legislature with the Budget that contains the following information on current and proposed contracts for services exceeding $5,000, organized by agency or budget category: A description of the contract and services being purchased. The name of the agency contracting for services. The effective date and expiration date of the contract. Annual amounts paid under the contract, by funding source, to the contractor in the current and past fiscal years, as well as amounts proposed for payment to the contractor in the Governor's Budget, and future fiscal years. The total projected cost of the contract, by funding source, for all fiscal years during which the contract will be in effect. Whether the contract was sole source procurement. The report would also provide the total cost of subcontracting for services for each fund and agency or comparable budget category, and all information must be made available to the public on the state's website in a searchable and sortable format. Related Legislation: Numerous bills have been introduced over the past 10 years that were intended to enhance reporting on state contracting activities, none of which were ultimately enacted. Of particular note are the following bills that were substantially similar to this bill: SB 786 (Oropeza) 2007-08 Session; SB 1331 (Oropeza) 2007-08 Session; AB 983 (Ma) 2007-08 Session; AB 239 (Horton) 2005-06 Session; and SB 1638 (Romero) 2003-04 Session. Staff Comments: The Department of General Services (DGS) indicates that state agencies reported information to DGS in the State Contract and Procurement Registration System (SCPRS) in 2011-12 regarding 10,329 service contracts valued at over $5,000. This system does not capture any contracting information from the state universities, the Lottery Commission, the Public Employee Retirement System, and the State Teacher's Retirement System. Contracting data that is reported to the SB 335 (Yee) Page 2 SCPRS includes department names, contractor names, contract amounts, and contract descriptions. Staff notes that information on proposed contracts is not reported because the data entry happens after contracts are awarded. Staff notes that it would not be feasible to provide all of the information specified in the bill, particularly with respect to proposed contracts. For instance, identification of a contractor and subcontractors, timelines for the contract, funding sources for a project, and annual amounts paid would not be known for proposed contracts included prior to the approval of the Budget and the awarding of a contract. As such, any reporting related to proposed contracts would be incomplete. The Department of Finance (DOF) was unable to provide a fiscal estimate for its costs to comply with SB 335, but state departments will incur significant costs, likely in excess of $500,000 annually in the aggregate, to compile and report the required information to DOF. In addition, DOF would need to develop and maintain a database to store information received from departments, and these costs will likely exceed $500,000. PROPOSED AMENDMENTS would delete the requirement that a report on state contracting be included in the Governor's Budget, and instead require the Governor to submit an annual report on current and proposed contracts for services upon implementation of the FI$Cal Project.