BILL ANALYSIS AB 1473 Page 1 Date of Hearing: May 19, 1999 ASSEMBLY COMMITTEE ON APPROPRIATIONS Carole Migden, Chairwoman AB 1473 (Hertzberg) - As Amended: April 21, 1999 Policy Committee: Consumer Protection Vote: 6-0 Urgency: Yes State Mandated Local Program:NoReimbursable: SUMMARY : This bill: 1)Requires the Governor to submit a three-year capital expenditure plan in conjunction with his or her annual budget. The plan would include all proposed projects to be financed over the period that would be funded wholly or in part by the state and would identify the fund source for every project. 2)Deletes the existing requirement for the Department of Finance (DOF) to prepare a report on the state's ten-year need to finance infrastructure. FISCAL EFFECT : The initial three-year plan would probably cost the DOF at least $200,000 to produce and print. Subsequent plans would probably cost at least $100,000. Costs to departments should be absorbable. (State agencies currently prepare five-year capital outlay plans for state-owned facilities. The bill would also require identification of all local government projects that the state would propose to fund in whole or in part over the three-year period. The DOF would have to prioritize departmental submittals into the statewide expenditure plan and identify the fund source for every project.) COMMENTS : Purpose . According to the sponsor of the measure, the AB 1473 Page 2 California Business Roundtable, AB 1473 will "require state policymakers to undertake a comprehensive review of California's capital facilities needs, establish a clear set of priorities, and adopt an annual plan to serve as a budget blueprint for financing those priorities over the next decade." The sponsor notes that historically "neither the Administration nor the Legislature has evaluated statewide facilities needs and investments in a rational, comprehensive fashion." The Business Roundtable believes that AB 1473 offers such a plan. Current Practice . Pursuant to requirements in the State Administrative Manual, state agencies that are requesting funding for capital outlay projects are also required to submit five-year capital outlay plans to the DOF and to the Legislative Analyst. Plans are not submitted for local infrastructure that is funded by the state. Related Legislation . There are two other capital outlay planning bills in the Assembly which require the DOF to submit a multi-year capital outlay plan as a supplement to the Governor's Budget. Both bills require a five-year plan rather than the three-year plan proposed by AB 1473. 1)AB 500 (Corbett) also requires state departments to submit five-year capital outlay plans, with specified information. The DOF statewide plan is to be a compilation of the departmental plans. This bill is almost identical to AB 907 (Vasconcellos) of 1996, which was vetoed by Governor Wilson. 2)AB 636 (Migden) is similar to AB 500, but is more detailed regarding the type of information required in departmental plans and in the statewide plan. This bill also requires identification of local infrastructure that the administration would propose to fund (on a program, rather than a project-specific basis), and prioritization of department's five-year capital outlay proposals as opposed to the compilation required under AB 500. LAO Report . In December 1998, the Legislative Analyst's Office released a report entitled Overhauling the State's Infrastructure Planning and Financing Process, which identified the following problems: 1)Infrastructure investment has not been treated as a problem in and of itself. AB 1473 Page 3 2)Current agency and Finance capital outlay plans are inadequate. 3)Programmatic goals for capital outlay are often lacking. 4)There are no criteria for setting statewide priorities. 5)No stable funding source for infrastructure exists, but for highway construction/renovation. 6)State and local funding responsibilities are not fully articulated. 7)Local infrastructure plans are even worse than the state's. The report then detailed a series of recommended actions the state should take to improve our infrastructure planning and financing process: 1)Develop and implement a capital outlay plan for each state program that identifies needs based on the long-term goals and objectives of each program. 2)Determine which local infrastructure programs the state will continue to fund and obtain information on needs for those programs. 3)Prepare an integrated plan based on statewide priority-setting criteria. Provide steady and stable funding for the state's infrastructure plan. 4)Establish appropriate legislative committees to develop and oversee policies regarding the prioritization, financing, and implementation of the state's infrastructure plan. 5)Dedicate six percent of annual General Fund revenues to infrastructure investment. 6)Utilize more "pay as you go" financing, as opposed to debt financing. The LAO notes that states such as Washington and Minnesota have implemented changes similar to their recommendations. Analysis Prepared by : Chuck Nicol / APPR. / (916)319-2081