BILL ANALYSIS
Bill No: AB
1506
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Roderick D. Wright, Chair
2009-2010 Regular Session
Staff Analysis
AB 1506 Author: Anderson
As Amended: March 17, 2010
Hearing Date: June 22, 2010
Consultant: Art Terzakis
SUBJECT
State Funds: registered warrants
DESCRIPTION
AB 1506 is an urgency measure that requires state agencies
to accept Registered Warrants (RWs) or similar evidence of
indebtedness issued by the state for the payment of
obligations owed them. Specifically, this measure:
1)Requires a state agency to accept from a person or entity
a RW or other similar evidence of indebtedness issued by
the State Controller (Controller) that is endorsed by
that payee, at full face value, for payment of any
obligation owed by that payee to that state agency, if
the Controller determines that the following conditions
are satisfied:
a) Acceptance of RWs will not jeopardize the ability
of the state to issue regular warrants for education,
debt service, state payroll, pensions, In-Home
Supportive Services, Medi-Cal providers, or any other
payment required by federal law, the State
Constitution, or court orders; and,
b) Acceptance of RWs will not result in a "net cost"
to the state, as specified.
2)Prohibits a state agency from accepting a RW for
obligations owed by a payee for payments subject to
immediate deposit standards, as specified.
3)Requires the Controller to submit a report to the Joint
Legislative Budget Committee with the following
AB 1506 (Anderson) continued
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information by September 1 following the conclusion of a
fiscal year in which state agencies accept RWs or similar
evidence of indebtedness:
a) The number and amount of RWs or other forms of
indebtedness accepted by state agencies; and,
b) The effect of accepting RWs on the state's cash
flow and financial well being, including net costs or
savings, and any impacts on state payments required by
federal law, the State Constitution, or court orders.
4) Contains a July 1, 2012 sunset provision.
AB 1506 (Anderson) continued
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EXISTING LAW
Existing law prescribes procedures for the issuance of
registered warrants 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.
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.
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, the California Public Employees
Retirement System, the California State Teachers Retirement
System, 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.
A registered warrant (RW) is a "promise to pay," or an IOU,
that is issued by the State when there are not enough funds
to pay all of its General Fund obligations. RWs bear
interest and are redeemable by the State Treasury only when
the General Fund has sufficient money. 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 declares
"all warrants are payable in such coin or currency of the
U.S. as at the time of payment is legal tender for the
payment of public and private debts."
Currently, under Government Code Section 17280.1, the
Franchise Tax Board has authority to accept RWs in
satisfaction of taxpayer obligations to the State. In July
2009, the Board of Equalization voted to accept RWs in
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satisfaction of obligations associated with tax programs it
administers. The Employment Development Department (EDD)
also began accepting RWs in August 2009. The Department of
Motor Vehicles (DMV) and most other agencies, however, did
not accept RWs in lieu of cash.
This measure would require all state agencies to accept RWs
and other forms of indebtedness (at full face value) as
payments for obligations owed the state after certain
determinations are made by the State Controller. These
include: (1) acceptance of RWs will not jeopardize the
ability of the state to issue regular warrants for
education, debt service, state payroll, pensions, In-Home
Supportive Services, Medi-Cal providers, or any other
payment required by federal law, the California
Constitution, or a court order and (2) acceptance of RWs
will not result in a net cost to the state.
According to the author's office, this measure is a
taxpayers' rights measure that addresses an inequity in
current law, whereby the state may issue IOUs in lieu of
warrants, but is not required to accept these IOUs for
obligations owed to the state.
Staff Comments: Committee staff raises the following
concerns: If the State Controller is unable to make a
determination that acceptance of RWs will result in a cost
savings would such action put a stop to those agencies that
are already accepting RWs? Additionally, Committee staff
is unclear what the term "other similar evidence of
indebtedness" issued by the Controller refers to (page 2,
line 6). Furthermore, would the scope of this proposal
create unmanageable risk and be administratively difficult
for agencies and the State Controller to implement?
In a letter dated July 9, 2009, the State Controller
expressed support for this measure as amended July 1, 2009.
As of today's hearing, the State Controller's Office still
supports the overall concept of this measure, however, the
Controller's staff has expressed concern with the
amendments that were adopted in the Assembly Appropriations
Committee on August 31, 2009. Specifically, the August
31st amendments create additional workload for the
Controller's Office.
SUPPORT: As of June 18, 2010:
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Acclamation Insurance Management Services
AFSCME Local 2620
Alliance Consulting Engineers, Inc.
Alpine Mountain Empire Chamber of Commerce
Associated Builders and Contractors of California
Associated Builders and Contractors, Inc. (San Diego
Chapter)
Associated General Contractors of America (San Diego
Chapter)
Beaumont Unified School District
Bilbray, Brian P. - Member of Congress, 50th District
Board of Equalization
Borrego Springs Chamber of Commerce
Borrego Water District
Buena Park, City of
Bourdette & Partners
California Association of Health Facilities
California Chapter of the American Fence Association
California Fence Contractors' Association
Cajon Valley Union School District
Century Design Inc.
Chemists, Inc.
City of Costa Mesa
City of La Quinta staff
Clark Steel Fabricators Inc.
COEUS Technologies
Cordi and Associates
Custom Service Systems
Dalton, William - Mayor, City of Garden Grove
Desmond, Jim - Mayor, City of San Marcos
DNB Engineering, Inc.
Duff, Bob - Board Member, La Mesa-Spring Valley School
District
El Cajon, City of
El Cajon Grading & Engineering Co., Inc.
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SUPPORT: (continued)
Engineering Contractors' Association
England, Mary E. - Council Member, City of Lemon Grove
Escondido Chamber of Commerce
Escondido, City of
Ewin, Ernest - City of La Mesa Councilmember
Fallbrook Public Utilities District
Farnam, Scott - Mayor, City of Wildomar
Father Joe's Villages
Flasher/Barricade Association
Foley, Katrina - City of Costa Mesa Council Member
Folsom Technology Group
Food and Beverage Association of San Diego
Foothills Christian Church
Gafcon
Garden Grove, City of
Gate City Beverage Distributors
Gear Vendors, Inc.
General Personnel Management Inc.
Grossmont Healthcare District
Grossmont Union High School District
Hamann Companies
Harbor Distributing, LLC
Hart Optical Co.
Helix Electric, Inc.
Helix Water District
HGH Home of Guiding Hands
Hitzke Development Corporation
Howard Jarvis Taxpayers Association
Hunter, Duncan - Member of Congress, 52nd District
Independent Waste Oil Collectors and Transporters
Investor Equity Group
Irvine, City of
Jones, Brian W. - Vice Mayor, City of Santee
J-ROC Construction, Inc.
Julian Community Services District
Kelly International Development Corporation
Laguna Niguel, City of
Lakeside Chamber of Commerce
Lakeside Fire Protection District
Lakeside Union School District
La Mesa, City of
La Palma, City of
Leece, Wendy - Mayor Pro Tem, City of Costa Mesa
Lemon Grove, City of
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Lemon Grove School District
Leo Hamel Fine Jewelers
Leonard, Bill - Member, State Board of Equalization
Leucadia Wastewater District
SUPPORT: (continued)
Lewis, Bud - Mayor, City of Carlsbad
Lewis, Mark - Mayor, City of El Cajon
Madison Avenue Educational Center
Marin Builders' Association
McCay, Donald W. - Mayor, City of Buena Park
Metz, Doug - Coronado School Trustee
Midway City Sanitary District
Moreno Valley, City of
Morro Hills Community Services District
Moulton Niguel Water
Municipal Water District of Orange County
Neighborhood Market Association
Noah Homes
Nielsen, Mark - Mayor, City of San Juan Capistrano
North Coast Association of Residential Care Administrators
Oceanside Chamber of Commerce
Oceanside, City of
Orange County Board of Supervisors
Otay Water District
Palm Desert Chamber of Commerce
People's Advocate, Inc.
Pina Business Services
Pistoresi Chrysler - Dodge - Jeep
Pope, Tina - Board Member, Escondido Union High School
District
Prescott & Associates
Purl's Sheet Metal & Air Conditioning
Quest for Excellence
Ramona Unified School District
R2A Architecture
Rancho Santa Margarita, City of
Rancho San Diego Chamber of Commerce
RBA Raisin Bargaining Association
Redondo Beach Chamber of Commerce
RGP Prosthetic Research Center
Roberts, Ron - San Diego County Supervisor
Roel Construction Company
Royce & Company
Rural Economic Action League of San Diego County
St. Madeleine Sophie's Center
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San Diego County Board of Supervisors
San Diego County District Attorney
San Diego County Fire Chiefs Association
San Diego County Medical Society
San Diego East County Chamber of Commerce
San Diego Insurance Staffing
San Diego North Chamber of Commerce
San Diego Regional Center
San Diego Regional Chamber of Commerce
SUPPORT: (continued)
San Diego Workforce Partnership
San Juan Capistrano, City of
San Marcos Chamber of Commerce
Santee, City of
Santee School District
Solana Beach, City of
Southwest California Legislative Council
STAT Pharmaceuticals
State Building & Construction Trades Council of California
Summit Transmissions
Sunny Days Preschool
SureWest Communications
Synergy Solutions
TEAM XL
TLC Staffing
Tierrasanta Community Council
Trabuco Canyon Water District
United Agribusiness League
Vanguard Cleaning Systems, Inc.
Wade, Howard & Associates, CPAs LLP
Waste Management
Williams & Sons Masonry, Inc.
Winet, Rick - School Board Trustee, La Mesa Spring Valley
School District
Yorba Linda Water District
And, 1,500+ private citizens
OPPOSE: None on file as of June 18, 2010.
FISCAL COMMITTEE: Senate Appropriations Committee