BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
AB 245 (Portantino)
Hearing Date: 07/11/2011 Amended: 05/11/2011
Consultant: Jacqueline Wong-HernandezPolicy Vote: Education 9-0
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BILL SUMMARY: AB 245 requires that the Department of Education
(CDE), on or after January 1, 2013, at the request of a child
care contractor, request the State Controller's Office (SCO)
make a payment via direct deposit into the contractor's account
at the financial institution of the contractor's choice.
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Fiscal Impact (in thousands)
Major Provisions 2011-12 2012-13 2013-14
Fund
CDE vendor payment system $200
$100 General
Electronic payments Potentially significant SCO start-up
fees paid by CDE; General
SCO workload Minor costs
recovered by fees General
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STAFF COMMENTS: This bill meets the criteria for referral to the
Suspense File.
This bill requires that the SCO make direct deposit payments, on
behalf of CDE, to child care contractors requesting that form of
payment. Currently, the SCO sends traditional check payments to
child care contractors on behalf of the CDE. In order to
implement this bill, the CDE must establish a process for
notifying child care contractors of this option, receiving
requests, and coordinating with the SCO to process electronic
payments. Upfront costs could be significant, and will depend on
the complexity of the system created, and whether it can be
managed by existing CDE staff. For example, a system in which
there is an annual window of time to request electronic payment,
AB 245 (Portantino)
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and those requests are processed in a batch, would be less
expensive than continually receiving and processing requests.
The CDE will also incur ongoing annual costs to manage this
process because it is, by nature, driven by requests from
individual contractors and is subject to turnover of
contractors. The CDE estimates that it would cost $200,000 to
establish the system and related procedures, and $100,000
ongoing to manage it in accordance with the necessary
interagency agreement it would enter into with the SCO.
The SCO currently processes the approximately 45,000 CDE
payments to child care contractors through a manual claims
process. The SCO workload is paid from the Pro Rata<1>. The SCO
also has an electronic funds transfer (EFT) process, in which 13
state agencies currently participate. Agencies can participate
in the SCO's EFT process, if they agree to the system and
responsibilities set up by the SCO. Legislation is not required
for an agency to elect to participate, but this bill would
require CDE participation.
The SCO charges an implementation fee of up to $50,000 depending
on the actual costs of incorporating the new agency. The SCO
also requires the agency to adhere to SCO's prescribed file
record layouts, establish a Zero Bank Account with the
Department of Finance, and build (as well as maintain) a payee
database with bank account information. Participating agencies
also enter into an interagency agreement with the SCO to handle
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<1> Pro Rata is the recovery of central service administrative
costs from special and non-governmental cost funds. The SCO
provides certain services such as, accounting, computing,
payroll services, banking, etc., to operating agencies
(departments) on a centralized basis. Pro Rata is a process that
identifies these central service administrative costs and
assigns them to benefited activities (functions) on a reasonable
and consistent basis. Each agency submits their past year actual
workload and expenditures and estimated budget year
expenditures. A unit cost is calculated for each workload
function for the past fiscal year and the budget year. These
unit costs are multiplied by the workload of the benefiting
department. All functions for each benefiting department are
summed and a report called "Detail by Function" for each
department is generated. Each department's total central service
administrative costs (for all functions) are allocated based
upon the department's funding sources.
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ongoing administration, and the agency is charged $.71 per
payment for any payments above what it was deemed to be
responsible for under the Pro Rata.