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
          
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          |Version: April 27, 2016         |Policy Vote: GOV. & F. 7 - 0    |
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          |Urgency: No                     |Mandate: Yes                    |
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          |Hearing Date: May 9, 2016       |Consultant: Mark McKenzie       |
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          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  







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            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:  








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            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  








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          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.




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