BILL ANALYSIS
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UNFINISHED BUSINESS
Bill No: SB 65
Author: Senate Budget and Fiscal Review Committee
Amended: 9/4/09
Vote: 27 - Urgency
PRIOR SENATE VOTE NOT RELEVANT
ASSEMBLY FLOOR : Not available
SUBJECT : State finance
SOURCE : Author
DIGEST : Assembly Amendments delete the prior version of
the bill expressing the intent of the Legislature to enact
necessary statutory changes relating to the Budget Act of
2009. This bill now makes changes to bonding requirements,
as requested by the State Treasurer's Office, and provides
for additional deferrals of state payments to address the
cash crisis the state is in currently.
ANALYSIS :
This bill:
1. Increases from two percent to three percent, until June
30, 2013, the amount which may be appropriated for fees,
costs, and other similar expenses incurred in connection
with a credit enhancement of liquidity agreement linked
to a bond sale.
CONTINUED
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A. Without this provision, the State Treasurer will
be unable to extend existing debt and efficiently
handle the current cash situation.
2. Defers $250 million in payments to the University of
California System from February to no earlier than April
20th, but no later than May 31, 2010.
3. Defers $250 million in payments to the California State
University System from February to no earlier than April
20th, but no later than May 31, 2010.
4. Defers $150 million in payments to the California State
University System from March to no earlier than May 1st,
but no later than May 31, 2010.
5. Defers $100 million in payments to the California
Community College System from March 2009 to May 2010.
6. Modifies the deferral of Highway User Tax Account
payments such that July and August 2009 payments shall
be made in September 2009. Additionally, payments for
November 2009 through March 2010 shall be paid on, or
within two working days of, April 28, 2010.
A. Exempts counties with a population of less than
40,000 from the deferral.
B. Allows locals to utilize other fund reserves to
meet cash obligations during the deferral period.
7. Delays state SSI/SSP payment to the federal government
in February and March 2010 to no earlier than April
20th, but no later than May 31, 2010.
FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes
Local: No
The cash deferral provisions of this bill will reduce the
cost to the state by reducing the size of the Revenue
Anticipation Notes that must be issued, as well as reducing
the interest rate for those bonds. Near term interest
costs for this borrowing is likely increased by over $50
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million per year without these provisions.
The provisions affecting the State Treasurer's ability to
extend existing debt will save the state billions of
dollars. If these provisions are not approved, the State
Treasurer will be required to either:
1. Retire that debt at a cost of approximately $2 billion.
These funds will likely come from planned general
obligation bonds. These bond funds are intended to fund
projects throughout the state, and would have to be
diverted for this purpose instead.
2. Pay interest and other costs on these existing debts at
an increased rate with a current year cost of $150
million, 2010-11 costs of over $600 million, and
increasing interest costs each year there-after until
these debts are retired.
DLW:mw 9/10/09 Senate Floor Analyses
SUPPORT/OPPOSITION: NONE RECEIVED
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