BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
1401 (Ma)
Hearing Date: 7/23/2009 Amended: 5/5/2009
Consultant: Bob Franzoia Policy Vote: Food & Ag 4-1
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BILL SUMMARY: AB 1401 would enact the California Transition to
Organics Act of 2009. This bill would establish outside the
State Treasury the Transition To Organics Fund (TTOF) which
would consist of moneys from federal, industry and citizen
sources. Expenditures of money from the TTOF would be limited
to providing financial assistance to persons who transition
their uncertified farms to certified organic farms and for
administrative expenses. The continuously appropriated TTOF
would be administrated by the Secretary of Food and Agriculture
who would be authorized to adopt regulations to carry out the
provisions of the act.
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Fiscal Impact (in thousands)
Major Provisions 2009-10 2010-11 2011-12 Fund
Transition To Organics Act
- administration/operations Unknown, likely minor costs
annually; Special*
potentially not reimbursed
- financial assistance Estimated $25 annually, based
on 100 Special*
applications for assistance
Transition To Organics Fund
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STAFF COMMENTS: The TTOF would receive money from unspecified
federal, industry, and citizen sources. These funds would be
expended on a first-come-first-served basis to provide financial
assistance to persons who are transitioning from uncertified
farms to certified organic farms. These persons may receive
reimbursement of 25 percent of the costs of obtaining that
certification with a maximum payment being $250. These
provisions suggest total certification costs of $1,000 when
making the transition to certified organic farm. If 100 persons
apply for these funds annually, this bill would have costs of
$25,000 annually.
This bill provides that the administrative and regulatory
expenses incurred by the secretary shall not exceed ten percent
of the total moneys deposited into the TTOF. However, since it
is speculative the TTOF will receive moneys, it is possible the
secretary will incur costs and not be reimbursed. Staff
recommends this bill be amended to require the Director of
Finance determine moneys sufficient to cover the secretary's
administrative or regulatory costs have been deposited in the
TTOF before the secretary incurs any such costs.
Government Code 16305 establishes the Centralized Treasury
System (CTS) to consolidate the state's financial resources
under the administration of the Treasurer, and requires the
Treasurer to safeguard public funds, to make safe and prudent
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AB 1401 (Ma)
investment and to maximize the return on the investment. To
preserve the system of checks and balances, the Treasurer cannot
maintain records which in their detail duplicate the accounting
records maintained by the Controller for these moneys.
The establishment of a fund within the Treasury does not hinder
access to the funds when needed and as needed, ensures that the
funds are safeguarded at all times, maximizes the return on the
investment for the fund, minimizes the cost of investment by
spreading such costs over thousands of participating funds, and
provides maximum liquidity through the Pooled Money Investment
Account (PMIA), without the fees that are typically imposed on
investments that are subject to withdrawals.
(Government Code 16305.3 authorizes the Director of Finance to
approve the deposit of funds outside of the Treasury. However,
such requests are normally to establish a zero balance account
whereby the funds are swept into the Treasurer's Demand Account
at
the end of the day. The purpose of this account is to allow the
requesting agency to track activities pertaining to their
account without commingling their funds with other state funds
as they come into the Treasury. Those requests are handled
administratively by sending a written request to the Department
of Finance Fiscal Systems and Consulting Unit. The Treasurer
receives copies of all such requests and recommends approval or
denial of the request.)
The establishment of a fund outside of the Treasury as proposed
by this bill decentralizes the CTS and reduces legislative
oversight. To address these concerns, and to limit restrictions
on internal borrowing, staff recommends the bill be amended as
follows:
46103. The Transition To Organics Fund is hereby created
in the State Treasury. The Transition To Organics Fund is not a
fund of the State Treasury. Transfers to the Transition To
Organics Fund may be deposited in the State Treasury, or in a
state depository bank approved by the Treasurer or other
depository approved by the Department of Finance .
Notwithstanding any other provision of law, the moneys in the
Transition to Organics Fund shall not be transferred to any
other fund or encumbered or expended for any purpose other than
as provided in this act. These funds shall be available upon
appropriation by the Legislature.