BILL ANALYSIS                                                                                                                                                                                                    




                   Senate Appropriations Committee Fiscal Summary
                           Senator Christine Kehoe, Chair

                                           643 (Denham)
          
          Hearing Date:  5/11/2009        Amended: As Introduced
          Consultant:  Bob Franzoia       Policy Vote: G O 12-0
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          BILL SUMMARY: SB 643 would include a disabled veteran business  
          enterprise, as defined under the California Disabled Veteran  
          Business Enterprise (DVBE) Program, among the entities to whom  
          higher penalties are payable under the California Prompt Payment  
          Act.
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          ____
                            Fiscal Impact (in thousands)

           Major Provisions         2009-10      2010-11       2011-12     Fund
           Expanded state late    Unknown, minor to major costs  
          annuallyGeneral/
          payment penalties      to pay late payment penalties    Special*
                                 
          * Service Revolving Fund, other special funds
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          ____

          STAFF COMMENTS: This bill meets the criteria for referral to the  
          Suspense File.
          
          Under the Prompt Payment Act, state agencies that acquire  
          property or services pursuant to a contract with a business are  
          required to make payment on the date required by the contract,  
          and within 45 days of the state agency's receipt of an  
          undisputed invoice or be subject to a late payment penalty of  
          0.25 percent per day of the amount due if the contractor is a  
          small business, or one percent above the Pooled Money Investment  
          Account rate for all other businesses.  

          Late payment penalties have been increasing from $1.8 million to  
          $3.8 million (19,230 payments) annually over the past five  
          fiscal years.  While the State Controller's Office (SCO)  
          processes late payments and reports pursuant to Government Code  
          927.9, it does so on behalf of state agencies that have the  
          initial responsibility of ensuring grant payments are made on  
          time.  At this time, there is no central database of grants.   










          Specific information on late payment penalties is difficult to  
          obtain because not all payment information is provided to the  
          SCO in formats that can be readily aggregated.

          For purposes of illustration, if a payment of a $5,000  
          undisputed invoice from a certified DVBE firm was delayed ten  
          days beyond an agency's or department's payment due date, under  
          current law, penalties would cost the agency or department an  
          additional $6.05 in late payment penalties.  Under this bill,  
          the penalties would be calculated at 0.0025 and would cost $125  
          for the same number of days.   If $5,000,000 in contacts was  
          delayed ten days, the late penalty payment would be $125,000  
          ($5,000,000 x 0.0025 x 10).