BILL ANALYSIS �
AB 245
Page 1
Date of Hearing: May 4, 2011
ASSEMBLY COMMITTEE ON EDUCATION
Julia Brownley, Chair
AB 245 (Portantino) - As Amended: April 25, 2011
SUBJECT : Child care: contractors: electronic payment
SUMMARY : Requires, on and after January 1, 2013, all contracts
executed by the California Department of Education (CDE) with
public and private agencies for the delivery of child care and
development services or for any facility and administrative
costs related to the delivery of child care services to be paid
by the State Controller via direct deposit by electronic fund
transfer (EFT) into the contractor's account at the financial
institution of the contractor's choice. Specifies that
notwithstanding any other provision of law, the State Controller
shall make an agreement with one or more financial institutions
participating in the Automated Clearing House pursuant to the
local rules, and shall establish a program, for direct deposit
by electronic fund transfer of payments to contractors who
authorize the direct deposit thereof by electronic fund transfer
into the contractor's account at the financial institution of
the contractor's choice.
EXISTING LAW :
1)Establishes eligibility for child care services and child
development programs administered by the CDE and requires the
Superintendent of Public Instruction (SPI) to adopt rules and
regulations on eligibility, enrollment and priority of
services needed for implementation (Education Code (EC)
Section 8263).
2)Authorizes the Superintendent of Public Instruction to enter
into and execute local contractual agreements with any public
or private entity or agency for the delivery of child care and
development services or the furnishing of property,
facilities, personnel, supplies, equipment, and administrative
services related to the delivery of child care development
services. Specifies that prior to entering into or executing a
local agreement, the CDE shall obtain annual approval from the
Department of General Services and the Department of Finance
as to the form and general content thereof. Provides that the
agreements may only be made for the delivery of child care and
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development services, or the furnishing of property,
facilities, personnel, supplies, equipment, or administrative
services related thereto. (EC Section 8262)
FISCAL EFFECT : Unknown
COMMENTS : The CDE administers a child care and child
development system, maintaining over 2,800 funding agreements
with approximately 950 public and private agencies. Contractors
include school districts, county offices of education, cities,
colleges, other public entities, community-based organizations,
and private agencies. In fiscal year (FY) 2010-11, $2.669
billion was provided for child care and development programs
from state and federal funds, enrolling an estimated 415,715
children from birth through age 12. The FY 2011-12 budget
decreases the total funding by $500.7 million.
The author states, "The issue of how payments �are] being
delivered to child care contractors is not addressed in statute.
Therefore, Department of Education does not offer its
contractors the option to receive payments for services via
direct deposit or electronic fund transfer." This bill requires
the State Controller to make all child care and development
program payments via EFTs or direct deposit. The author argues
that EFT is efficient, safe, and less costly than mailing
checks. The author cites, as an example, the cost for the
federal government to print a check is $1.03 compared with 10.5
cents through direct deposit. The author further states that
the process of mailing checks can cause delay in receiving
payment when checks are lost in the mail or delivered to the
wrong address. In those situations, the contractor must contact
the CDE to stop payment on a check and reissue a new check,
which further delays payments to contractors for services they
have already provided.
According to the State Controller's Office (SCO), approximately
half of all payments made by the SCO are through direct
deposits, primarily for state payroll, state retirement programs
(Public Employees' Retirement System and State Teachers'
Retirement System), and personal income tax refunds.
In order for payments to be made through EFT, the requestor, in
this case, the CDE, must initiate the request for payments to be
made through EFT and submit required information, including
audit data, electronically. The audit data is information
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regarding the payments the SCO needs in order to verify that
payments are legitimate and accurate. The CDE must collect and
store the banking information, and once the SCO verifies the
audit data, the SCO can then make EFTs with the banking
information of the contractors provided by the CDE.
Over the last several years, the CDE has been working on
replacing its software program used to manage child care and
development contracts. Last year, the CDE issued a request for
proposal for a new software program to be paid with federal
funds that will allow the CDE to manage contracts and payments
more efficiently, including the ability to calculate and
generate payments to contractors; track agreement payment and
encumbrance information; generate local contract documents,
including making revisions to contracts; perform budgetary and
accounting functions; and implement an EFT process. Due to
higher than expected costs, the project has been suspended. The
CDE states that it would be difficult to implement EFT without
the new computer system.
As part of the Governor's fiscal year 2011-12 budget, the
Governor proposed to realign a number of programs by shifting
administration and funding for those programs, including child
care, from the state to counties. The proposal is still pending
in the Legislature as the budget has not yet passed. This bill
would be unnecessary if realignment that includes child care is
approved.
Committee amendments : The bill currently requires the SCO to
make all payments via EFT. It should not be a blanket
requirement for all payments in the event that a contractor is
unable to or chooses not to accept payment via EFT. Staff
recommends amending the bill to require the CDE to submit claims
to the SCO to be made through EFT if it is requested by the
contractor. Subdivision (b) of the bill directs the State
Controller to make an agreement with one or more financial
institutions participating in the Automated Clearing House and
establish a program for direct deposit by electronic fund
transfer of payments to contractors. This provision is not
necessary as the State Controller already has a direct deposit
system established. Staff recommends striking this provision.
Arguments in support . The California Alternative Payment
Program Association, the sponsor of the bill, states, "In the
lives of the providers we support in every district throughout
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California, any delay in receipt of monies creates hardships in
their ability to pay their bills. Just recently, the uncertainty
and delay in funding of CalWORKs Stage 3 created month's long
backlogs of monies owed to early care and education providers.
When the funding was then secured, the delay in actually getting
the dollars into the hands of the small business child care
providers took longer than it should have due to this process
not yet being in place."
REGISTERED SUPPORT / OPPOSITION :
Support
California Alternative Payment Program Association (sponsor)
American Federation of State, County and Municipal Employees
Valley Oak Children's Services
YMCA of the Central Bay Area
Opposition
None on file
Analysis Prepared by : Sophia Kwong Kim / ED. / (916) 319-2087