BILL ANALYSIS
AB 727
Page 1
Date of Hearing: April 29, 2009
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Kevin De Leon, Chair
AB 727 (Nielsen) - As Introduced: February 26, 2009
Policy Committee: Business and
Professions Vote: 9 - 0
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill expands the definition of small businesses in the
California Prompt Payment Act to include Resource Conservation
Districts (RCDs). This expansion allows RCDs to be paid the
higher level of penalty payment if the state fails to pay them
any required payments in a timely manner
FISCAL EFFECT
1)Any delay in the implementation of the annual budget would
result in a GF penalty cost for the state under this
legislation.
2)Using this year's budget delay as an example, if a budget were
signed by September 23 (85 days into the start of the fiscal
year) for every $5 million in delayed RCD payments, the
penalty cost for this legislation would be $500,000 in GF.
COMMENTS
1)Purpose . According to the author's office, current law treats
Resource Conservation Districts (RCDs) in different ways. In
some parts of the code RCDs are treated as non-profit entities
that the state contracts with to perform certain projects, and
in other parts of the code they are treated as quasi-state
entities, as an extension of the state itself. Due to this
AB 727
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complex and ambiguous treatment, RCDs do not have a clear set
of rules under which they are to be paid for projects that
they perform for the state. This leads, in some cases, to
payments not being made for several years with no penalty to
the state. Under this legislation, RCDs would be eligible for
a 0.25% per day payment penalty for all payments that are
delayed beyond 45 days.
2)The Prompt Payment Act requires the state to pay amounts due
on the date specified in a contract or within 45 days of a
properly submitted, undisputed invoice, or pay a penalty of
0.25% per day if the contractor is a small business or non
profit organization, or 1% above the Pooled Money Investment
Account rate for all other businesses.
3)Resource Conservation Districts . RCDs emerged during the 1930s
as a way to prevent the soil erosion problems of the Dust Bowl
from recurring. Formed as independent local liaisons between
the federal government and landowners, conservation districts
have always worked closely with the USDA Natural Resources
Conservation Service (formerly the Soil Conservation Service).
In California, RCDs are special districts organized under the
state Public Resources Code. Each district has a locally
elected or appointed volunteer board of directors made up of
landowners in that district. RCDs address a wide variety of
conservation issues such as forest fuel management, water and
air quality, wildlife habitat restoration, soil erosion
control, and conservation education. California has 103 RCDs,
most of which are funded largely through state and federal
grants.
4)Related Legislation . This bill is virtually identical to AB
2992 (La Malfa) from 2008 that was vetoed due to the late
passage of the 2008-09 budget. In the message the governor
wrote, "I am only signing bills that are the highest priority
for California. This bill does not meet that standard and I
cannot sign it at this time."
In 2008, SB 983 (Correa) would have expanded the definition of
small businesses in the California Prompt Payment Act to
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include disabled veteran business enterprises (DVBE). This
expansion allows DVBEs, regardless of size, to be paid the
higher level of penalty payment if the state fails to pay them
any required payments in a timely manner. That bill was held
on this committee's suspense file.
Analysis Prepared by : Julie Salley-Gray / APPR. / (916)
319-2081