BILL ANALYSIS
Bill No: AB
727
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Roderick D. Wright, Chair
2009-2010 Regular Session
Staff Analysis
AB 727 Author: Nielsen
As Introduced: February 25, 2009
Hearing Date: June 23, 2009
Consultant: Art Terzakis
SUBJECT
Prompt Payment Act: Resource Conservation Districts
DESCRIPTION
AB 727 makes resource conservation districts (RCDs)
eligible for specified late payment penalties, pursuant to
the state's Prompt Payment Act, when state agencies are
delinquent in making contract payments to RCDs.
EXISTING LAW
Existing law, the Prompt Payment Act, requires state
agencies to pay properly submitted, undisputed invoices
within 45 calendar days of initial receipt. If the
requirement is not met, state departments must
automatically calculate and pay the appropriate late
payment penalties as specified in Government Code Section
927, et seq. The penalty rate is 0.25% per calendar day if
the contractor is a small business or the Pooled Money
Investment Account (PMIA) rate plus 1% (not to exceed 15%)
for all other businesses.
BACKGROUND
Purpose of AB 727: According to the author's office,
current law treats Resource Conservation Districts (RCDs)
in several 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
AB 727 (Nielsen) continued
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code they are treated as quasi-state entities, as an
extension of the state itself. Due to this complex and
ultimately ambiguous nature of treatment of RCDs, they 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, of payments not being made for
several years with no penalty to the state.
As noted above, existing law 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 1% above the PMIA rate for all other
businesses. This measure would simply include RCDs within
the prompt payment provisions applicable to small
businesses.
Arguments in Support: Proponents state that late payments
to RCDs around the state continue to hamper districts'
ability to administer state contracts and since RCDs do not
receive funding for basic capacity, they do not have
adequate cash reserves to front money to their contractors
while waiting for payment from the state agencies that have
funded the projects.
Proponents of this measure note that RCDs across the state
are completing millions of dollars of conservation and
restoration work. Proponents emphasize that RCDs need to
receive timely reimbursement on invoices for state-funded
projects to assure that this good work continues.
Arguments in Opposition: Opponents express sympathy to the
plight of RCDs when invoices are slow to be paid, however
given the State's current fiscal situation and the
potential costs associated with this measure, opponents do
not believe the timing is right to afford RCDs this
prioritization.
Resource Conservation Districts (RCDs): 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
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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 approximately 103 RCDs, most of
which are funded largely through state and federal grants.
PRIOR/RELATED LEGISLATION
SB 643 (Denham) 2009-10 Session. Would add "disabled
veteran business enterprise" (DVBE) to the definition of
small business, found within the California Prompt Payment
Act so that certified DVBEs receive the same prompt payment
protections afforded other California small businesses.
(Held in Senate Appropriations - suspense file)
SB 553 Wiggins) 2009-10 Session. Would make substantive,
clarifying and technical changes to the California Prompt
Payment Act in order to create clarity and equity for
nonprofits with respect to late payments for contracts and
grants. (Held in Senate Appropriations - suspense file)
AB 2992 (La Malfa) 2007-08 Session. Identical to AB 727
(Nielsen) of 2009. (Vetoed by Governor on the basis that
the delay in passing the 2008-2009 State Budget forced him
to prioritize bills and only sign bills that met his
standard of "highest priority for California.")
SB 159 (Wyland) 2007-08 Session. Identical to SB 643
(Denham) of 2009. (Died in Assembly Appropriations
Committee)
SUPPORT: As of June 19, 2009:
California Association of Resource Conservation Districts
California Special Districts Association
Contra Costa Resource Conservation District
Counties of Colusa and Siskiyou
Glenn County Resource Conservation District
Honey Lake Valley Resource Conservation District
Inland Empire Resource Conservation District
Marin Resource Conservation District
Mission Resource Conservation District
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Napa County Resource Conservation District
Regional Council of Rural Counties
Resource Conservation District Ventura County
San Jacinto Basin Resource Conservation District
Shasta Valley Resource Conservation District
Sotoyome Resource Conservation District
Tahoe Resource Conservation District
Tehama County Resource Conservation District
Western Shasta Resource Conservation District
Wildscape Restoration
OPPOSE: As of June 19, 2009:
Department of Fish and Game
State Water Resources Control Board
FISCAL COMMITTEE: Senate Appropriations Committee
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