BILL ANALYSIS Ó SENATE COMMITTEE ON APPROPRIATIONS Senator Ricardo Lara, Chair 2015 - 2016 Regular Session SB 1029 (Hertzberg) - California Debt and Investment Advisory Commission: accountability reports ----------------------------------------------------------------- | | | | | | ----------------------------------------------------------------- |--------------------------------+--------------------------------| | | | |Version: April 27, 2016 |Policy Vote: GOV. & F. 7 - 0 | | | | |--------------------------------+--------------------------------| | | | |Urgency: No |Mandate: Yes | | | | |--------------------------------+--------------------------------| | | | |Hearing Date: May 9, 2016 |Consultant: Mark McKenzie | | | | ----------------------------------------------------------------- This bill meets the criteria for referral to the Suspense File. Bill Summary: SB 1029 would require state and local agencies to submit an annual report to the California Debt and Investment Advisory Committee (CDIAC) that includes debt issuances, outstanding debt, and use of proceeds over the reporting period, as specified. The bill would also require CDIAC to track and report on all state and local outstanding debt until it is fully repaid or redeemed. Fiscal Impact: Unknown reimbursable state-mandated local costs, in the millions annually, to compile and report additional information on outstanding debt to CDIAC. (General Fund) -----See staff comments----- CDIAC administrative costs of approximately $393,000 annually SB 1029 (Hertzberg) Page 1 of ? for three new positions to receive, review, process, and include reported data on an estimated 15,500 debt issuances in its database. (California Debt and Investment Advisory Commission Fund) CDIAC indicates that any one-time costs for systems upgrades would be minor and absorbable. Staff notes that there could be future cost pressures to the extent the bill authorizes CDIAC to develop alternative reporting methods for data collection. CDIAC indicates it would absorb any future costs for these upgrades. (California Debt and Investment Advisory Commission Fund) Background: Existing law establishes CDIAC within the State Treasurer's Office to support and improve public finance practices by providing public officials with information, analysis, and training. CDIAC collects, maintains, and provides comprehensive information on all state and local debt authorization and issuance, and serves as a statistical clearinghouse for all state and local debt issues. Existing law requires CDIAC to make this information readily available upon request by any public official or any member of the public. Any state or local agency that issues debt must submit both a "report of proposed debt issuance" at least 30 days prior to issuing debt, and a "report of final sale" within 21 days of the date of sale of the debt, as specified. Existing law authorizes CDIAC to require information it considers appropriate to be included in those reports. Existing law also requires local agencies to annually submit information on their financial transactions to the State Controller's Office (SCO). These financial transactions reports include specified information regarding local agency debt, including the principal amount of debt issues outstanding at the time of the report, the amount of debt authorized by a bond act or other appropriate authorization relevant to the issue that remains authorized but unissued, and a list of purposes and amounts expended for each purpose in the prior fiscal year from the proceeds of the issue. Proposed Law: SB 1029 (Hertzberg) Page 2 of ? SB 1029 would require CDIAC to track and report on all state and local debt authorization and issuance until fully repaid or redeemed, and require state and local agencies to submit an annual report for any issue of debt that is outstanding at any time during the fiscal year reporting period. The report must be submitted within seven months of the end of the reporting period (July 1 through June 30) and include the following information: Debt authorized during the reporting period, including amounts authorized at the beginning, amounts issued during, amounts authorized but unissued at the end, and debt authority that has expired during the reporting period. Debt outstanding during the reporting period, including the principal balance at the beginning, principal paid during, and principal outstanding at the end of the reporting period. Use of proceeds of issued debt during the reporting period, including proceeds available at the beginning, proceeds spent and purposes for which they were spent during, and proceeds remaining at the end of the reporting period. The bill authorizes CDIAC to develop an alternate reporting method, if technology permits and the alternate method is in furtherance of the bill's data collection purposes. The bill also requires a state or local agency that submits a report on proposed debt issuance to CDIAC to include in the report a certification that it has adopted local debt policies concerning the use of debt and that the contemplated debt issuance is consistent with those policies. A local debt policy must include the purposes for which debt proceeds may be used, the types of debt that may be issued, the relationship between the debt and an issuer's capital improvement program or budget, the policy goals related to the issuer's planning objectives, and internal control procedures that the issuer has implemented to ensure that debt proceeds will be used for intended purposes. Staff Comments: Under current law, state and local agencies must report specified information to CDIAC when they propose to issue and sell debt. In addition, cities, counties, special SB 1029 (Hertzberg) Page 3 of ? districts, and certain local transportation entities must include specified information on local agency debt issues in their annual financial transactions reports, including information on outstanding authorized debt and expenditures during the fiscal year. Schools currently submit specified information, including data on bond debt issues, in annual financial reports to the California Department of Education. This bill would expand the duties of state and local agencies, including schools, by requiring them to annually report information on outstanding debt to CDIAC until that debt is fully repaid, thereby imposing a state-mandated local program. State costs to reimburse local agencies would be contingent upon the filing of a successful claim with the Commission on State Mandates (Commission), and would depend upon the specific duties that the Commission deems reimbursable. If a successful claim is filed, staff estimates that state reimbursement costs could be in the millions annually, considering the bill's requirements would apply to over 5,000 local entities, including school districts, and the minimum claim amount is $1,000. CDIAC estimates that the bill would apply to approximately 15,500 existing reportable debt issues. State reimbursement costs would be higher initially, since local agencies would need to compile and report specified information to CDIAC on outstanding debt, but ongoing costs would decrease in future years as reporting and data collection mechanisms would be in place and reports would only need to be updated to reflect annual activity. Staff notes that any local costs to adopt local debt policies would not be reimbursable since they would only apply to proposed debt issues. Since the issuance of debt is a discretionary action, any associated duties are not likely to be deemed state-reimbursable by the Commission. -- END -- SB 1029 (Hertzberg) Page 4 of ?