BILL ANALYSIS
SB 864
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SENATE THIRD READING
SB 864 (Budget and Fiscal Review Committee)
As Amended October 7 2010
2/3 vote. Urgency
SENATE VOTE :Vote not relevant
SUMMARY : Makes new limited-term payment deferrals in
recognition that the state will experience cashflow pressures in
the period between enactment of the 2010 Budget Act, and the
completion of external cashflow borrowing. Specifically, this
bill :
1)Authorizes up to $5.5 billion of specific state payments that
can be deferred in October, November, and December of 2010.
2)Allows deferrals included in this bill to be cancelled or paid
early, as the State Controller, State Treasurer, and Director
of Finance deem appropriate to maintain cash reserves. Three
specific deferrals that can be made. These deferrals include:
a) Authorizes deferral of the October 27, 2010, K-12
education apportionment to no later than November 15, 2010
under certain conditions. The amount authorized for
deferral is estimated at $2.6 billion. If external
cashflow borrowing in excess of $3.2 billion is obtained
prior to the deferral or during the period of the deferral,
then respectively, the deferral will either not occur, or
be promptly paid. This deferral includes a hardship
exemption process for school districts to be excluded from
the deferral and paid as scheduled under current law.
b) Authorizes deferral of the October 27, 2010, K-12
education apportionment to no later than November 4, 2010.
The amount authorized for deferral is estimated at $300
million. Includes a hardship exemption process for school
districts to be excluded from the deferral and paid as
scheduled under current law.
c) Authorizes deferral of the October 27, 2010, community
college apportionment to no later than November 4, 2010.
The amount authorized for deferral is estimated at $536
million. If external cashflow borrowing in excess of $3.2
billion is obtained prior to the deferral or during the
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period of the deferral, then respectively, the deferral
will either not occur, or be promptly paid. Includes a
hardship exemption process for college districts to be
excluded from the deferral and paid as scheduled under
current law.
d) For the California State Teachers Retirement System
(CalSTRS) in 2010-11, defers the October payment 31 days
and accelerates the April payment 32 days to the
Supplemental Benefit Maintenance Account. This would
provide a $316 million cash benefit in the October-November
period, and on net, accelerate payments by 1 day.
e) Authorizes deferral of the July, August, September, and
October 2010 CalGrant payments to the University of
California and the California State University to no later
than December 10, 2010. The amount authorized for deferral
is estimated at $323 million.
1)Makes reference to existing constitutional and statutory
authority that the State Controller has available to defer
other payments, such as tax refunds and Department of Social
Services payments for the CalWORKs program and its
administration by counties. With the stated and unstated
existing authority, approximately $1.6 billion in additional
short-term payment deferrals could be made.
2)Urgency Clause. Declares this bill take effect immediately as
an urgency statute.
FISCAL EFFECT : This bill authorizes the deferral of up to $5.5
billion to address the State's short term cash needs.
COMMENTS : California typically secures a large short-term
borrowing within the fiscal year to address the cash flow needs
of the State. The Treasurer's Office has stated that it could
take several weeks for this cash borrowing to be secured. This
bill reduces the risk to the State's cash management position by
giving the Controller more tools to manage California's cash
while the external borrowing is secured.
Analysis Prepared by : Christian Griffith / BUDGET / (916)
319-2099
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