BILL ANALYSIS
AB 564
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB 564 (Portantino and Bonnie Lowenthal)
As Amended June 10, 2010
Majority vote
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|ASSEMBLY: | |May 18, 2009 |SENATE: |28-4 |(June 28, |
| | | | | |2010) |
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(vote not relevant)
Original Committee Reference: TRANS.
SUMMARY : Restricts the amount of compensation that a director,
officer, or employee of a substance abuse treatment facility may
receive from public sources and requires these compensation
restrictions to be included in the terms of any public contract
that uses public funds to provide drug treatment, as specified.
The Senate amendments delete the Assembly version of this bill,
and instead:
1)Limit the maximum amount of public funds that may be used for
compensation of a full-time director, officer or employee of
any corporation providing substance abuse treatment in the
state to the salary limitation established by the federal
government, as specified.
2)Require the maximum amount in 1) above to be prorated for any
person working less than full time.
3)Prohibit public funds from being used for compensation for any
director, officer, or employee who collects rent from a
substance abuse treatment facility unless that person
certifies that he or she is in compliance with federal
regulations relating to cost principles for nonprofit
organizations.
4)Require that the restrictions on executive compensation
imposed in this bill of any corporation providing substance
abuse treatment in the state be included as a term of any
state contract entered into to provide drug treatment services
if, under that contract, public funds are to be used to
provide treatment.
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5)Delete legislative intent language referring to the Substance
Abuse and Crime Prevention Act of 2000 (SACPA), also known as
Prop 36.
EXISTING LAW :
1)Establishes SACPA, approved by voters in 2000 as Proposition
36, to require that non-violent drug possession offenders and
parolees receive drug treatment instead of incarceration and
eligible parolees receive community-based treatment for a
non-violent drug possession violation of parole.
2)Establishes the Department of Alcohol and Drug Programs (DADP)
to develop and implement a statewide plan to alleviate
problems related to alcohol abuse and license treatment
facilities that provide a broad range of services in a
supportive environment for adults who are addicted to alcohol
or drugs.
3)Requires DADP to conduct periodic audits of the expenditures
made by any county that is funded, in whole or in part, with
funds provided by SACPA.
4)Specifies that SACPA may only be amended by a two-thirds vote
of the Legislature, provided the amendments further the Act
and are consistent with its purposes.
AS PASSED BY THE ASSEMBLY , this bill revised the definition of a
"local street or road," under the speed trap law, for the City
of Pasadena.
FISCAL EFFECT : According to the Senate Appropriations
Committee, the effect of this bill would be minor and absorbable
for counties since most of them currently include this type of
restriction on executive payment in their substance abuse
treatment program contracts.
COMMENTS : According to the author, the Senate amendments are
intended to ensure that money directed by the voters for drug
treatment should be used for that purpose and not to provide
large salaries to the executives of large drug treatment
facilities. As evidence of the need for this bill, the author
points to a June 2009 article in the Los Angeles Times which
reported that Tarzana Treatment Center, a nonprofit drug
treatment center based in Los Angeles, is, by far, the largest
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user of public funds for drug treatment in Los Angeles County
and draws 85% of its revenues from public programs. According
to the article, Tarzana's top executives have made it a
lucrative operation for themselves, with compensation and
business arrangements that are highly unusual in the industry.
The article reported that the chief operating officer, Albert
Senella, earned $428,057 in 2007 while other executives were
also paid very high salaries, received deferred compensation,
and collected rent from buildings they own that are used by
Tarzana as treatment sites. The author argues that California
law currently lacks restrictions on the proper use of public
dollars designated for substance abuse treatment and this bill
would protect public dollars intended for specific purposes
under SACPA from being spent on excessive executive
compensation.
SACPA requires that first or second time non-violent adult drug
offenders who use, possess, or transport illegal drugs for
personal use receive drug treatment in lieu of incarceration.
SACPA also establishes the Substance Abuse Treatment Trust Fund
(SATTF), which requires the transfer of money from the General
Fund (GF) commencing in fiscal year (FY) 2000-01 and ending in
2005-06 for allocation to counties according to a specified
distribution formula. Counties use SATTF funds to provide drug
treatment, vocational training, family counseling, and other
services. SATTF funds may also be used to contract with private
drug treatment service providers that are licensed or certified
by the state. In many counties, such contracts represent most
or all of SATTF fund use.
SACPA programs received GF transfers of $60 million in start-up
funding in FY 2000-01, and $120 million annually from FY 2001-02
through FY 2005-06. In the subsequent years, the Legislature
appropriated $120 million in FY 2006-07, $100 million in FY
2007-08, and $90 million in FY 2008-09. The FY 2009-10 Budget
did not provide an appropriation for SACPA programs and instead
eliminated $90 million from the SATTF. It is unclear why this
bill only imposes compensation restrictions on public programs
that provide substance abuse treatment. It may be appropriate
to broaden the scope of this bill to apply these restrictions to
other health grant programs that are also administered by the
state.
Federal policies governing executive compensation are
restrictive with regard to federally-awarded grants.
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Specifically, there are salary cap limitations imposed for FY
2009 by the Omnibus Appropriations Act, 2009 Public Law 111-8.
This bill prescribes salary cap restrictions that apply to
grants made by the National Institute of Health and the Agency
for Healthcare Research and Quality, and to grants, cooperative
agreements, or contracts awarded by the Substance Abuse and
Mental Health Services Administration. Executive salary is
limited to an amount that is no greater than the Executive Level
I of the Federal Executive Pay Scale, which, as of January 1,
2009, is $196,700 annually.
Generally, the federal government does not restrict the amount
of rent that can be charged when real property is owned by an
executive of an entity that receives a grant. However, to
ensure that grantees are incurring costs that are appropriate
for reimbursement, it relies on a combination of widely accepted
accounting principles, federal regulations, and specific cost
principles and requirements as prescribed in the Office of
Management and Budget (OMB) Circular A-122, which is aimed at
nonprofit organizations only. This bill requires an executive
who collects rent from a substance abuse treatment facility to
certify that he or she complies with OMB Circular A-122 in order
to receive compensation from public funds. However, it does not
describe how this certification would take place.
The California Association of Addiction Recovery Resources
writes in support of this bill, stating that it will help to
curb the potential for abuse of public funds by some individuals
in the alcohol and drug treatment field by setting a reasonable
salary cap and prohibiting executives from "double-dealing" in
real estate unless within the confines of federal OMB cost
principles governing nonprofits.
The California Association of Alcohol and Drug Program
Executives (CAADPE) opposes this bill because they do not
believe that it will achieve its intended goal of ensuring that
public funds are expended in the most efficient manner. They
contend that it will instead result in less government
efficiency. CAADPE also objects to this bill on procedural
grounds as they note that this bill has not been fully vetted
through the legislative committee process because it received
its only policy hearing in the Senate, which, they argue, is not
enough time for adequate public discourse and for legislators to
make informed decisions. Lastly, CAADPE questions the need for
a separate state compensation standard since the federal
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government already has standards governing executive
compensation for its grantees.
This bill was substantially amended in the Senate and the
Assembly-approved version of this bill was deleted. This bill,
as amended in the Senate, is inconsistent with Assembly actions
and the provisions of this bill, as amended in the Senate, have
not been heard in an Assembly policy committee.
Analysis Prepared by : Cassie Rafanan / HEALTH / (916)
319-2097
FN: 0004943