BILL ANALYSIS
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|SENATE RULES COMMITTEE | AB 2541|
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THIRD READING
Bill No: AB 2541
Author: Matthews (D)
Amended: 8/7/06 in Senate
Vote: 21
SENATE GOVERNMENTAL ORG. COMMITTEE : 8-1, 6/27/06
AYES: Florez, Denham, Battin, Chesbro, Margett, Romero,
Soto, Vincent
NOES: McClintock
SENATE APPROPRIATIONS COMMITTEE : 13-0, 8/7/06
AYES: Murray, Aanestad, Alarcon, Alquist, Ashburn, Battin,
Dutton, Escutia, Florez, Ortiz, Poochigian, Romero,
Torlakson
ASSEMBLY FLOOR : 80-0, 5/30/06 - See last page for vote
SUBJECT : Claims against the state
SOURCE : California Coalition Against Sexual Assault
A Womans Place of Merced County
DIGEST : This bill requires the state to pay a penalty
for the late payment of a grant and makes other changes to
the California Prompt Payment Act.
ANALYSIS : Existing law, the California Prompt Payment
Act (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
CONTINUED
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days of the state agency's receipt of an undisputed invoice
or be subject to a late payment penalty of 0.25 percent per
day if the contractor is a small business, or one percent
above the Pooled Money Investment Account rate for all
other businesses.
This bill makes the following substantive changes to the
Act:
1. Includes "grants" within the 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" as a signed final agreement between any
state agency and a local government agency or
organization authorized to accept grant funding for
victim services or prevention programs administered by
any state agency. Any such grant is a contract and
subject to this bill.
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
changes.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee:
Fiscal Impact (in thousands)
Major Provisions 2006-07 2007-08
2008-09 Fund
Expansion of late $38 $75
$75General/
payment penalties*
Special
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* Potentially less to the extent any grant within
the estimated $20 million of grants is more than
$500,000 and thus not eligible for penalty payments.
SUPPORT : (Verified 8/10/06)
California Coalition Against Sexual Assault (co-source)
A Woman's Place of Merced County (co-source)
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
YWCA of Silicon Valley Rape Crisis Center employees
OPPOSITION : (Verified 8/10/06)
Department of Finance
ARGUMENTS IN SUPPORT : 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.
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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 percent of one center's annual budget). Some
centers were forced to layoff as much as 60 percent of
their staff in order to continue to provide services to
their community.
According to the author's office, this bill is intended to
close a loophole in the current statute to help assure
claimants, both grantees and contractors, that state
agencies will fulfill contractual obligations in a timely
manner.
ARGUMENTS IN OPPOSITION : The Department of Finance
states that this bill:
"Could cause overpayments to grantees due to limiting
the time needed by departments to review, audit, and
validate grant claims.
"Would increase the processing, handling, and
disbursement costs for those claims that are entitled
to late penalties.
"Would require departments to pay a penalty rate
greater than 91% per annum, to organizations, the same
rate that is paid to certified small business.
"Would increase late payment penalty costs of state
funds for federal grants during Budget impasse. The
federal government does not allow the use of federal
funds to pay late payment penalties to businesses or
grantees. However, during Budget impasse, departments
don't generally receive vendor claims. Since many
grants are federally funded and the grant period may
coincide with the federal fiscal year (i.e. October
through September), grant claims received during a
Budget stalemate (e.g. July, August, and September) and
that are chargeable to the State's new fiscal year,
cannot be paid until Budget enactment."
ASSEMBLY FLOOR :
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AYES: Aghazarian, Arambula, Baca, Bass, Benoit, Berg,
Bermudez, Blakeslee, Bogh, Calderon, Canciamilla, Chan,
Chavez, Chu, Cogdill, Cohn, Coto, Daucher, De La Torre,
DeVore, Dymally, Emmerson, Evans, Frommer, Garcia,
Goldberg, Hancock, Harman, Haynes, Jerome Horton, Shirley
Horton, Houston, Huff, Jones, Karnette, Keene, Klehs,
Koretz, La Malfa, La Suer, Laird, Leno, Leslie, Levine,
Lieber, Lieu, Liu, Matthews, Maze, McCarthy, Montanez,
Mountjoy, Mullin, Nakanishi, Nation, Nava, Negrete
McLeod, Niello, Oropeza, Parra, Pavley, Plescia, Richman,
Ridley-Thomas, Sharon Runner, Ruskin, Saldana, Salinas,
Spitzer, Strickland, Torrico, Tran, Umberg, Vargas,
Villines, Walters, Wolk, Wyland, Yee, Nunez
TSM:mel 8/11/06 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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