BILL ANALYSIS
AB 564
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB 564 (Portantino)
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)
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|COMMITTEE VOTE: |18-0 |(August 24, 2010) |RECOMMENDATION: |concur |
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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
AB 564
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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.
5)Delete legislative intent language referring to the Substance
Abuse and Crime Prevention Act of 2000 (SACPA), also known as
Prop 36.
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 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 from being spent on excessive
executive compensation.
Federal policies governing executive compensation are restrictive
with regard to federally-awarded grants. Specifically, there are
salary cap limitations. Executive salary is limited to an amount
that is no greater than the Executive Level I of the Federal
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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 federal 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 government already has standards governing executive
compensation for its grantees.
Analysis Prepared by : Cassie Rafanan / HEALTH / (916) 319-2097
FN: 0006741