BILL ANALYSIS
AB 1506
Page 1
Date of Hearing: July 7, 2009
ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS
Mary Hayashi, Chair
AB 1506 (Anderson) - As Amended: July 1, 2009
SUBJECT : State funds: registered warrants.
SUMMARY : Requires, as an urgency measure, a state agency to
accept from any person or entity a registered warrant (RW) or
other similar evidence of indebtedness issued by the State
Controller that is endorsed by that payee, at full face value,
for the payment of any obligations owed by that payee to that
state agency.
EXISTING LAW prescribes procedures for the issuance of RWs by
state government and provides that a registered warrant is
acceptable and may be used as security for the performance of
any public or private trust or obligation.
FISCAL EFFECT : Unknown
COMMENTS :
Purpose of this bill . According to the author's office,
"Existing law already allows the state to distribute IOUs.
According to Government Code section 17203, 'Such RWs are
acceptable and may be used as security for the faithful
performance of any public or private trust or obligation or for
the performance of any act, including the use of such RWs by
banks and savings and loan associations as security for deposits
of funds of any county, municipal or public corporation,
district, political subdivision, or state agency.' This reminds
us of Wimpy's famous line, 'I'd gladly pay you Tuesday for a
hamburger today.' So, the inequity then is revealed by the
peoples' inability to use those instruments in a practical way."
Background . Warrants are the government equivalent of checks,
and are issued by the Controller to pay the State's obligations.
There are three types of warrants: RWs, registered
reimbursement warrants (RAWs), and registered refunding
warrants.
RWs: Normally, all warrants issued by the Controller are paid
AB 1506
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upon presentation. However, if after ranking all of the
state's obligations and setting aside all money that must be
earmarked, reserved, or otherwise set apart for higher ranking
obligations, the Controller determines that there are
insufficient funds to pay a warrant, the warrant will be
registered. In issuing these RWs, the state is promising to
pay their face value as soon as money is available. RWs bear
interest until they are paid.
Registered reimbursement warrants (RAWS) are sold by the
Controller to the public to raise funds in lieu of issuing
individual RWs to numerous creditors. RAWs are not due to be
paid by the state until their maturity date, which is
established by the Controller at the time the RAWs are issued.
Like RWs, they bear interest until they are paid. The
issuance of RAWs is quite rare and has only occurred seven
times since they were authorized in 1936.
Registered refunding warrants can be sold by the Controller to
the public to pay maturing RAWs. They have a maturity date,
and bear interest until paid.
The State Constitution mandates that education and debt service
have priority status for regular warrants. The State
Constitution, federal law and a court order require that State
payroll, CalPERS, CalSTRS, In-Home Supportive Services and
Medi-Cal providers also be paid with regular warrants. The
State may issue RWs for all other payments, including those to
private businesses, local governments, taxpayers receiving
income tax refunds and owners of unclaimed property.
Use of RWs . This bill requires a state agency to accept a RW
from any person or entity that is endorsed by that payee, at
full face value, for the payment of any obligations owed by that
payee to that state agency. Current law already supports the
transfer of RWs for various debt obligations for certain
circumstances.
RWs are presently considered legal investments for all trust
funds, insurance funds, savings and loans funds, and funds of
all counties, municipal corporations, districts, public
corporations, political subdivisions, or state agencies.
Further, state law expressly permits a taxpayer to pay a tax
liability, as specified, in whole or in part, by a check in an
amount not to exceed the amount of a RW, and government code
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declares "all warrants are payable in such coin or currency of
the United States as at the time of payment is legal tender for
the payment of public and private debts."
This bill would requires a state agency to accept from any
person or entity a RW "or other similar evidence of indebtedness
issued by the State Controller." Committee may consider the
necessity of greater detail in this legislation, as this is an
urgency statute and it is imperative that all state agencies,
individuals, and entities be immediately aware of the exact
repayment instruments that may be used and the proper procedure
for redemption.
Related legislation . AB 775 (Cook) of 2009 prohibits the
issuance of a registered warrant for the payment or repayment
for any program performed by any city, county, city and county,
or local governmental entity, as specified. This bill is
currently pending in the Assembly Committee on Local Governance.
SB 23 (Ashburn) of 2009 prohibits the issuance of a registered
warrant to make any payment for a personal income tax refund.
This bill is currently pending in the Senate Committee on Rules.
REGISTERED SUPPORT / OPPOSITION :
Support
California Association of Health Facilities
San Diego County Medical Society
Santee School District
The People's Advocate
Numerous individuals
Opposition
None on file.
Analysis Prepared by : Sarah Huchel / B. & P. / (916) 319-3301