BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
AB 1289 (Davis) - Court facilities: delinquent payments.
Amended: July 3, 2012 Policy Vote: Judiciary 4-0
Urgency: No Mandate: No
Hearing Date: August 6, 2012
Consultant: Jolie Onodera
This bill meets the criteria for referral to the Suspense File.
Bill Summary: AB 1289 would modify penalty provisions related to
delinquent transfers of court fees to the State Court Facilities
Construction Fund (SCFCF), as specified, and would revise the
formula for calculating the penalty. This bill would authorize
the State Controller to permit a county, city, or court to pay
the interest or penalty amounts under a payment schedule if the
amount would cause a hardship to that entity. This bill would
apply the changes to all delinquent payments for which the
Controller has not issued a final audit before January 1, 2013.
Fiscal Impact: Likely near-term ongoing decreases in penalty
revenues to the SCFCF. Calculating penalties using the average
monthly LAIF rate over the period of delinquency rather than the
current statutory rate of 1.5 percent per month (18 percent per
year) would likely decrease penalty revenues to the fund, the
degree of which would depend on the duration of the delinquency
and the corresponding LAIF rate, which is currently 0.36
percent, over that time period. Penalty revenues to the SCFCF
totaled about $465,000 in 2011. Utilizing the average monthly
LAIF rate over the most recent five-year period would yield a
rate of 1.615 percent per year, resulting in a reduced level of
revenue collections of $423,000 (Special Fund). This does not
reflect the potential additional delay in revenue collections
associated with payment plans that may be permitted under the
provisions of this bill.
To the extent the revised penalty calculation methodology leads
to more accurate and timely remittances of court fines than
otherwise would have been remitted or were under-remitted due to
miscalculations or misunderstandings of current law could
potentially offset in part the reduction in revenues to both
funds.
AB 1289 (Davis)
Page 1
Background: Under existing law, a state court construction
penalty is levied upon every fine, penalty, and forfeiture
imposed and collected for all criminal offenses and all parking
offenses for which a fine or penalty is imposed. Existing law
requires a county to transmit the fees and penalties collected
for the SCFCF to the Controller no later than 45 days after the
end of the month in which the funds were collected.
Existing law provides that upon receipt of a delinquent payment,
the Controller is required to calculate a penalty on the
delinquent payment by multiplying the amount of the delinquent
payment at a daily rate equivalent to 1.5 percent per month (18
percent per annum) for the number of days the payment is
delinquent. Penalties calculated on delinquent payments must be
paid to the Controller no later than 45 days after the end of
the month in which the penalty was calculated. All delinquent
payment penalties are deposited in the SCFCF. Existing law
requires a court to reimburse a county general fund in an amount
equal to the delinquent payment penalty, if the penalty imposed
resulted from a court's failure to deposit money with the county
treasurer in a timely manner.
Existing law establishes the SCFCF for the improvement of court
facilities to further reasonable access to the courts and
judicial process throughout the state. The SCFCF is funded by
various civil and criminal fees, fines, penalties, and
surcharges. The funds are available upon appropriation by the
Legislature for the planning, design, construction,
rehabilitation, leasing, or acquisition of court facilities.
Existing law also establishes the Immediate and Critical Needs
Account (ICNA) of the SCFCF, which supports the most critically
needed construction and renovation of courthouses and provides
limited funding for facility modifications.
Proposed Law: This bill would modify penalty provisions related
to delinquent transfers of court fees to the SCFCF, as
specified, and would revise the formula for calculating the
penalty. Specifically, this bill:
Provides that interest or penalty payments on any delinquent
transfers of funds to the SCFCF and ICNA be made by the entity
(county, city, or court) responsible for the error or other
action that caused the failure to pay, as determined by the
Controller in notice provided to the responsible party.
AB 1289 (Davis)
Page 2
Requires the remittance of payments to be accompanied by a
remittance advice identifying the collection month and the
appropriate account in the SCFCF or the ICNA to which it is to
be deposited. Any remittance made later than this time shall
be considered delinquent and subject to specified interest and
penalties.
Requires the Controller, upon receipt of any delinquent
payment, to do the following:
o Calculate the interest on the delinquent payment by
multiplying the amount of the delinquent payment at a daily
rate equivalent to the rate of return on money deposited in
the Local Agency Investment Fund (LAIF) from the date the
payment was originally due to either 30 days after the date
of the issuance by the Controller of the final audit report
concerning the failure to pay or the date of payment by the
entity responsible for the delinquent payment, whichever
comes first. In calculating the interest, the Controller is
required to apply the average monthly LAIF rate over the
period of delinquency.
o Calculate a penalty at a daily rate equivalent to 11/2
percent per month from the date 30 days after the date of
the issuance by the Controller of the final audit report
concerning the failure to pay.
Requires interest or penalty amounts calculated to be paid
by the county, city and county, or court to the SCFCF or the
ICNA, whichever is appropriate, no later than 45 days after
the end of the month in which the interest or penalty was
calculated. Payments are to be made by the entity responsible
for the error or other action that caused the failure to pay,
as determined by the Controller in a notice given to that
party by the Controller.
Requires the Controller to permit a county, city and county,
or court to pay the interest or penalty amounts according to
a payment schedule in the event of a large interest or
penalty amount that causes a hardship to the paying entity.
Provides that the party responsible for the error or other
action that caused the failure to pay may include, but is not
limited to, the party that collected the funds who is not the
party responsible for remitting the funds to the SCFCF or
ICNA, if the collecting party failed or delayed providing the
remitting party with sufficient information needed by the
remitting party to distribute the funds.
Provides the changes made shall apply to all delinquent
payments for which the Controller has not issued a final
AB 1289 (Davis)
Page 3
audit before January 1, 2013.
Related Legislation: SB 539 (Margett) Chapter 435/2007 similarly
modified the penalty provisions with respect to delinquent
payments to the Trial Court Trust Fund.
Staff Comments: The provisions of this bill will likely result
in near-term ongoing decreases in penalty revenues to the SCFCF.
Calculating penalties using the average monthly LAIF rate over
the period of delinquency rather than the current statutory rate
of 1.5 percent per month (18 percent per year) would likely
decrease penalty revenues to the fund, the degree of which would
depend on the duration of the delinquency and the corresponding
LAIF rate, which is currently 0.36 percent, over that time
period. Penalty revenues to the SCFCF totaled about $465,000 in
2011. Utilizing the average monthly LAIF rate over the most
recent five-year period would yield a rate of 1.615 percent,
resulting in a reduced level of revenue collections of $423,000
(Special Fund). This does not reflect the potential additional
delay in revenue collections associated with payment plans that
may be permitted under the provisions of this bill. To the
extent the LAIF rate fluctuates upward in the future would
result in a smaller impact on revenue collections. Historically,
the LAIF rate was as high as 12.4 percent in 1981, but has
declined steadily over the last 30 years to its current low of
0.36 percent as of June 2012.
To the extent the modifications to the penalty calculation
formula lead to more accurate and timely remittances of court
fines than otherwise would not have been remitted or were
under-remitted due to miscalculations or misunderstandings of
current law. This could potentially result in increased revenues
to both funds.
The State Controller's Office has indicated the provisions of
this bill will result in a minor and absorbable workload impact.