BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
AB 750 (Hueso)
Hearing Date: 8/25/2011 Amended: 8/15/2011
Consultant: Maureen Ortiz Policy Vote: B&FI 5-2
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BILL SUMMARY: AB 750 creates a blue ribbon task force to
consider the viability of establishing the California Investment
Trust which would serve as a state bank.
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Fiscal Impact (in thousands)
Major Provisions 2011-12 2012-13 2013-14 Fund
Task force study ------unknown, potentially several
hundred thousand--- Private
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STAFF COMMENTS: SUSPENSE FILE. AS PROPOSED TO BE AMENDED.
Author's amendments delay the start of the task force one,
establish a fund for the receipt of private donations, and
clarify that all staffing will be funded by private funds.
AB 750 provides that the task force will be staffed by a
nonprofit corporation or other private organization that has
specific expertise in public finance and public institutions
models and other expertise necessary to provide the management,
information, analysis, review and reporting required in order to
meet the goals of the task force. The selection of the
organization to staff the task force must be agreed to by at
least two-thirds of the membership of the task force. However,
the bill does not specify a funding source for the other
necessities of the task force such as analysis preparation,
legal consultations, obtaining expert input on possible models,
general staffing, travel reimbursements, and the assessment of
the state's current network of public and private financial
resources. Consequently, it is likely that these expenses will
be paid from the General Fund.
Task force members will be reimbursed solely for the actual
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travel costs for attending meetings, and any costs by state
government officials will be paid by the respective government
entities. Additionally, AB 750 allows the task force to
consult with other individuals and to establish an advisory
committee to assist it in creating the report. Advisory
committee members will not receive any expense reimbursement.
AB 750 provides that the task force will be composed as follows:
a) The Secretary of Business, Transportation and Housing or his
or her designee.
b) The Senate Committee on Rules and the Speaker of the
Assembly shall each appoint one individual representing and
having a background in one or more areas of finance, including,
but not limited to, working in for-profit and nonprofit
financial and academic institutions, local government finances,
or economic development.
c) The Governor shall appoint three members representing and
having a background in one or more areas of finance, including
working in for-profit and nonprofit financial and academic
institutions, local government finances, or economic
development.
d) The Controller, Treasurer, and Governor, or their designees.
The Secretary of BT&H must convene the initial meeting of the
task force on or before February 1, 2012, and the task force
must report to the Legislature by December 1, 2012. The report
must recommend the viability of establishing the California
Investment Trust. If establishment is recommended, the report
must include information on the next steps toward formation
including the administrative structure of the trust, the capital
requirements necessary, and how that capital and operating costs
could be paid. The report must also include information on
whether the trust should be created as a separate entity or as a
possible expansion of the California Infrastructure and Economic
Development Bank, the Pooled Money Investment Account, the State
Treasury system, or the functions of any other state agency; the
manner in which the trust should be regulated; and, the extent
to which the trust should be allowed to compete with retail
banking establishments in California.
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The purpose of the task force will be to consider the viability
of establishing the California Investment Trust which would be
considered a state bank receiving deposits of state funds. The
task force will be required to assess the state's current
network of public and private financial resources, assess the
impact on government services, and to consider how a state trust
could be designed to do the following: 1) strengthen the
economic and community development needs, 2) provide greater
financial stability to business through its investments in other
financial institutions, 3) reduce the cost paid by state
government for banking services, and 4) generate earnings beyond
those necessary for continued operation of the trust which could
be used to supplement the General Fund.
Additionally, the task force will consider how a state bank
could support a strong private sector financial community that
would provide capital for businesses in California, and examine
various structures for organizing a trust. AB 750 requires the
task force to also consider options for integrating a state
trust model into the existing state financial resource network.
AB 750 contains Findings and Declarations stating that the
creation of the California Investment Trust could serve to more
effectively meet the financial needs of the state including, but
not limited to, the following:
a) Supporting the economic development of California by
increasing access to capital for businesses in the state.
b) Providing financing for housing development, public works
infrastructure, educational infrastructure, student loans, and
community quality of life products.
c) Providing stability to the local financial sector.
d) Reducing the cost paid by state government for banking
services.
e) Lending capital to banks, credit unions, and nonprofit
community development financial institutions to assist in
meeting their goals of increasing access to capital and
providing banking services.
Existing law authorizes the establishment and operation of
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state-chartered banks, credit unions, industrial loan companies,
and savings associations, all of which are overseen by the
California Department of Financial Institutions. Federally
chartered depository institutions and foreign depository
institutions also operate in California. In 1994, the
California Infrastructure and Economic Development Bank (I-Bank)
was established and is headed by a five-member Board of
Directors that includes the Secretary of BT&H, State Treasurer,
Secretary of the State and Consumer Services Agency, Director of
the Department of Finance or designee, and a Governor's
appointee. The I-Bank was created to promote economic
revitalization, enable future development, and encourage a
health climate for California jobs. The bank has broad
authority to issue tax-exempt and taxable revenue bonds, provide
financing to public agencies, provide credit enhancements,
acquire or lease facilities, and leverage state and federal
funds. Current programs include the Infrastructure State
Revolving Fund Program, 501(c)(3) Revenue Bond Program,
Industrial Development Revenue Bond Program, Exempt Facility
Revenue Bond Program and Governmental Bond Program.
AB 750 will study the viability of a state bank other than the
I-Bank. To date, North Dakota is the only state with a state
bank which was formed in 1919 with $2 million in capital and now
operates with more than $270 million in state capital.