BILL ANALYSIS �
SENATE COMMITTEE ON BUDGET AND FISCAL REVIEW
Mark Leno, Chair
Bill No: AB 1493
Author: Committee on Budget
As Amended: June 25, 2012
Consultant: Mark Ibele and Keely Bosler
Fiscal: Yes
Hearing Date: June 25, 2012
Subject: State Cash Management.
Summary: This is a trailer bill containing necessary
statutory and technical changes to implement the Budget Act
of 2012. This bill creates a fund within the State
Treasury to which local governments can voluntarily deposit
moneys to be used by the state for cash flow purposes.
Background: The state revenue pattern is substantially
different from the pattern of program expenditures. As a
result, there is a periodic need for the state to borrow
both internally, from other funds, and externally, through
the capital markets, to cover periods of cash shortage.
These borrowing methods enable the state to pay its
obligations in a timely fashion. This bill provides an
additional means to assure cash flow continuity by
establishing a new account for voluntary participation by
local governments.
Proposed Law: This bill includes the following key changes
necessary to implement the Cash Management related
provisions of the 2012 Budget Act. The bill includes the
following provisions:
1) Creates the Voluntary Investment Program Fund
within the State Treasury, for the receipt of
voluntary deposit by local governments.
2) Allows cities, counties, school districts or
special districts to deposit between $200 million and
$10 billion into the fund, upon approval by their
governing bodies. The bill specifies that deposit
amounts may not exceed the amount needed to address
actual or anticipated General Fund cash shortfalls.
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3) Directs deposits in the fund to be invested in the
Pooled Money Investment Account (PMIA), allows the
State Treasurer to use the fund for the state's cash
flow purposes, and specifies the continuous
appropriation of those funds.
4) Allows terms and conditions of the deposits to be
set by the Director of Finance in consultation with
the State Treasurer, with such terms to include:
a. Size of the deposit from a particular
local entity;
b. Length of time for the deposit;
c. Availability of funds for withdrawal;
d. Annual rate of interest to be paid,
except that interest is to be calculated based on
the PMIA rate, plus an enhanced amount determined
by the Director of Finance in consultation with
the State Treasurer.
Fiscal Effect: Access to the funds in this account would
simply displace the need for other short term borrowing
actions. As a result, this measure would result in no
additional fiscal impacts on the state other than those
related to short-term borrowing.
Support: Unknown
Opposed: Unknown
Comments: The ability of the state to use internal
borrowing results in reduced need for cash borrowing on the
capital markets and typically results in lower associated
costs than would otherwise prevail. The Voluntary
Investment Program Fund established in the bill would also
result in interest costs that would also be typically lower
than prevailing rates in the capital markets. By way of
this measure, the state would benefit from the somewhat
different revenue/expenditure pattern that prevails among
local governments and local governments would be afforded a
potential investment opportunity.
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