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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