BILL ANALYSIS
Bill No: AB
2541
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Dean Florez, Chair
2005-2006 Regular Session
Staff Analysis
AB 2541 Author: Matthews
As Amended: May 26, 2006
Hearing Date: June 27, 2006
Consultant: Art Terzakis
SUBJECT
Claims Against the State
DESCRIPTION
AB 2541 makes the following substantive changes to the
California Prompt Payment Act:
1. Includes "grants" within the Prompt Payment Act and
requires a state agency that awards a grant, as defined,
to make payment to the person or business that is the
recipient of the grant on the date required by the grant,
and within 45 days of the state agency's receipt of an
undisputed invoice, or be subject to a late payment
penalty.
2. Defines "grant" to mean a solicited or unsolicited
proposal of a state agency to furnish assistance to a
nonprofit service organization so that the organization
may carry out its own program to provide public services.
Also, specifies that the term shall not include the
procurement of goods or services for a state agency nor
the acquisition, construction, alteration, improvement,
or repair of real property for a state agency.
3. Defines "nonprofit service organization" as a nonprofit
entity that is organized to provide services to the
public.
4. Makes other minor code maintenance and conforming
AB 2541 (Matthews) continued
Page 2
changes.
EXISTING LAW
Existing law, the California Prompt Payment Act, requires a
state agency that acquires property or services pursuant to
a contract with a business to make payment on the date
required by the contract, and within 45 days of the state
agency's receipt of an undisputed invoice or be subject to
a late payment penalty of 0.25% per day if the contractor
is a small business, or 1% above the Pooled Money
Investment Account rate for all other businesses.
BACKGROUND
According to the author's office, the California Budget Act
of 2003 abolished the Office of Criminal Justice Planning
(OCJP). The OCJP administered most of the victim services
grants in the state. The duties and obligations of the
OCJP were transferred to and assumed by the Office of
Emergency Services (OES). Soon thereafter, funding issues
arose concerning all programs funded by the Criminal
Justice Division of OES, especially for victim services
programs. These victim services programs were not
receiving reimbursements from either federal or state grant
programs in a timely manner.
The author's office notes that numerous small businesses
and non-profit organizations especially victim services
programs regularly see payment delays extending as long as
nine months after submission of invoices. The author's
office claims that this is due in part to inconsistency
with regard to how state agencies define the term
"contract" and the lack of accountability in those systems.
The author's office indicates that in the past year,
several Rape Crisis Centers nearly closed their doors as a
result of delayed reimbursements, in some cases as much as
$97,000 (34% of one center's annual budget). Some centers
were forced to layoff as much as 60% of their staff in
order to continue to provide services to their community.
According to the author's office, this measure is intended
to close a loophole in the current statute to help assure
AB 2541 (Matthews) continued
Page 3
claimants - both grantees and contractors - that state
agencies will fulfill contractual obligations in a timely
manner.
SUPPORT: As of June 23, 2006:
California Coalition Against Sexual Assault (co-sponsor)
A Woman's Place of Merced County (co-sponsor)
Asian Pacific Community Counseling
California Partnership to End Domestic Violence
Lake Family Resource Center
National Asian Pacific American Families Against Substance
Abuse
Santa Barbara Rape Crisis Center
Shasta County Women's Refuge
South Lake Tahoe Women's Center
Southeast Asian Assistance Center
15 Employees of the YWCA of Silicon Valley Rape Crisis
Center
and, numerous private individuals
OPPOSE: None on file as of June 23, 2006.
FISCAL COMMITTEE: Senate Appropriations Committee
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