BILL NUMBER:  SB 866
  VETOED	DATE: 10/19/2010




To the Members of the California State Senate:

I am returning Senate Bill 866 without my signature.

This bill would create a securitization mechanism for mandate costs
accrued prior to 2004, where a joint powers authority (JPA) may
purchase mandate claim receivables, with the proceeds of its bonds or
other revenues.  This bill would establish a payment schedule
beginning in 2011-12 through 2020-21.  This bill would also require
the state to pay two percent interest annually, as specified.
Finally, this bill would prioritize these types of transactions above
revenue anticipation notes (RANS) and lease revenue debt service
payments.

The payment of pre-2004 mandate claims is required in the State
Constitution and current legislation requires the final payment in
2020-21. Based on existing statutes, the state has the ability to
make payment when General Fund is available.  This bill would require
payment on a specified schedule, thus reducing fiscal flexibility.
Additionally, as specified in this measure, the priority payment
order would place these transactions above RANS and lease revenue
debt service payments which may create concerns for investors
jeopardizing the ability of the state to issue such debt or could
significantly increase the state's cost of borrowing.  Given the
current fiscal situation, I cannot sign this bill which requires
payment on a specified schedule, increases the cost through higher
interest payments, and changes the priority order for transactions.

For these reasons I cannot sign this bill.

Sincerely,



Arnold Schwarzenegger