BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
AB 1044 (Butler)
Hearing Date: 08/15/2011 Amended: 05/11/2011
Consultant: Mark McKenzie Policy Vote: G&F 9-0
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BILL SUMMARY: AB 1044 would require the Board of Equalization
(BOE) to accept registered warrants as payment for any tax,
surcharge, or fee liability if the State Controller (SCO)
determines that acceptance of registered warrants will not
jeopardize the ability of the state to make certain payments or
result in a net cost to the state.
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Fiscal Impact (in thousands)
Major Provisions 2011-12 2012-13 2013-14 Fund
Revenue impacts unknown delay in cash receipts General/
Special
SCO determinations likely minor costs in a future fiscal
year General
BOE administrative costs no new costs, registered
warrants currently General
accepted as payment of liabilities
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STAFF COMMENTS:
In general, the SCO issues warrants (the equivalent of checks)
drawn from the General Fund to satisfy state obligations.
During periods of serious cash shortfalls, however, the state
may issue registered warrants if the SCO determines that there
are insufficient funds to pay a warrant after ranking all of the
state's obligations and setting aside all money for higher
ranking obligations. In this case, the warrant is registered,
and the state promises to pay the face value as soon as money is
available. Registered warrants bear interest at a fixed rate
from the date of registration to the date of maturity, or the
date upon which the State Treasurer advertises that they are
payable upon presentation. Existing law requires the Franchise
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Tax Board (FTB) to accept registered warrants as payment for
personal income, bank, and corporation tax liabilities.
Taxpayers who pay a liability with a registered warrant forego
any interest, as specified. The BOE is not required to accept
registered warrants as payment for any tax, surcharge, or fee
liability, but has acted administratively to accept state-issued
registered warrants as payment for liabilities in 1992 and again
in 2009.
AB 1044 would require BOE to accept registered warrants as
payment for any tax, fee, or surcharge liability if the SCO
determines that acceptance of the warrant will not result in a
net cost to the state, as specified, or jeopardize the ability
of the state to issue regular warrants for education, debt
service, state payroll, pensions, In-Home Supportive Services,
Medi-Cal providers, or other payments required by law.
Taxpayers that exercise this option would forego any interest
owed on the registered warrant unless it is redeemable at the
time the tax, fee, or surcharge liability is paid.
SCO administrative costs to make specified determinations prior
to allowing BOE to accept warrants would likely be minor. The
SCO notes that it is unlikely that all of the specified
conditions could be met to trigger the acceptance of warrants.
The BOE indicates that it would not incur any administrative
costs as a result of AB 1044 since procedures already exist to
allow taxpayers to pay liabilities with registered warrants.
Apart from minor SCO administrative costs to make specified
determinations, there would be no direct state costs associated
with this bill since registered warrants could only be accepted
by BOE if the SCO determined that the acceptance would not
result in a net cost to the state. AB 1044 would result in an
unknown delay in cash receipts, however, because the BOE would
be required to hold registered warrants in lieu of payment until
they can be redeemed. To the extent that registered warrants
are used to pay tax obligations that would otherwise be
deposited into the General Fund, this bill would exacerbate
state cashflow problems and may extend periods of redemption,
resulting in increased interest costs. In 2009, the BOE
received approximately $5 million in registered warrants from
500 taxpayers as payment for tax liabilities.
Staff notes that SB 120 (Anderson), which is currently in the
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Assembly Appropriations Committee, would require all state
departments to accept registered warrants, or other forms of
indebtedness, in lieu of cash payments. A similar bill, AB 1506
(Anderson), was vetoed by Governor Schwarzenegger in 2010.