BILL ANALYSIS �
AB 1887
Page 1
Date of Hearing: April 26, 2012
ASSEMBLY COMMITTEE ON RULES
Nancy Skinner, Chair
AB 1887 (Portantino) - As Introduced: February 22, 2012
SUBJECT : Legislative funds.
SUMMARY : Imposes new limits on the Legislature's discretion in
using its operating funds and adds new requirements to audits of
legislative funds. Specifically, this bill :
1)Makes appropriations for contingent expenses of the Senate and
Assembly available for expenditure for one year after the date
upon which the appropriations become available.
2)Transfers any unexpended balance of the appropriations to the
General Fund following the last day of the period of
availability.
3)States the intent that the transferred funds, upon
appropriation, shall be appropriated to the Student Aid
Commission for expenditure in administering the Cal Grant
program.
4)Requires moneys in the legislative operating funds to be
expended for a legislative purpose of the house and prohibits
transfer to a state agency unless expressly authorized by
statute.
5)Requires the Controller to conduct audits of legislative funds
for the 2012-13 and 2013-14 fiscal years and, thereafter,
requires the Joint Rules Committee to contract for independent
audits to be conducted in accordance with guidelines
established by the Controller and generally accepted auditing
standards established by the American Institute of Certified
Public Accountants (AICPA).
EXISTING LAW :
1)Requires all appropriations for contingent expenses of the
Senate and Assembly to be deposited into the Senate Operating
Fund and the Assembly Operating Fund, respectively.
2)Makes appropriations deposited in those operating funds
AB 1887
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continuously available without regard to fiscal years, except
for appropriations made at extraordinary sessions for the
expense of those sessions, which shall be available for
expenditure for one year after the appropriation becomes
available for expenditure.
3)Requires the Joint Rules Committee to annually contract for an
independent audit of funds of the Legislature to be conducted
in accordance with generally accepted auditing standards
established by the AICPA and requires reports on the audits to
be made public by November 30 of each year for the previous
fiscal year ending June 30.
FISCAL EFFECT : Unknown
COMMENTS :
1)Author's Statement of Purpose: According to the author's
office, the bill is designed to accomplish two goals. First,
the author believes that AB 1887 "will provide for openness
and complete accountability by requiring that an outside
agency, the State Controller, to conduct �sic] a complete
review of the legislature's fiscal matters." Second, the
author believes that it undercuts the budget process to allow
the two branches of the Legislature to make their own
decisions to cut their budgets and transfer funds to assist
other agencies. To solve this perceived problem, the author
wants (a) to require the Legislature to return unexpended
funds at the end of each year and (b) to permit transfers to
other agencies only when a statute is passed and signed to
authorize the transfer.
2)Background: For over sixty years, legislative funds generally
have been continuously available without regard to fiscal year
in part to reflect that the Legislature is a separate branch
of government, which is also the case for various judicial
branch funds. Thus, the Legislature must secure funding
through the same process of appropriation that other state
agencies follow, but thereafter manages its own resources. AB
1887 seeks to alter that mechanism and subject the Legislature
to greater control by the executive branch.
AB 1887
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3)Comparison with Other State Agencies: Most state
appropriations are subject to statutory provisions which allow
funds to remain available for two years after the year of
appropriation to allow for payment of encumbrances, in essence
making the funds available for three years. This reflects the
reality that while a cost may be incurred during a fiscal
year, the final payment may not be due until after the fiscal
year is over. This bill would appear to intend that the State
Controller assess the cash balance in legislative operating
funds on July 1 of a new fiscal year and transfer to the
General Fund any funds remaining in those operating funds.
This raises two questions: Why would the Legislature be
subject to a standard more stringent than other state
agencies? Is this standard even workable, as it would leave
the Legislature without funds to cover bills incurred in May
or June of one fiscal year, but only billed or due in July or
August of the succeeding fiscal year, or even later?
4)Budgetary Flexibility: During the current budget crisis which
has now extended over several years, the Assembly and, to a
lesser extent, the Senate have imposed strict budgetary limits
on staff salaries, travel, equipment purchases, and various
other costs. The goal has been to keep legislative operating
costs down and provide some relief to other important state
programs. This has allowed the Assembly to provide almost $84
million in support to programs such as California State
University (CSU), University of California (UC), Cal-FIRE,
Employment Development Department (EDD), Department of
Education, Department of Veterans Affairs, and others.
Similarly, the Senate provided $4.8 million to Cal-FIRE in
2009-10. Current law has allowed the Legislature to target
these funds where they are most needed. For example, when the
unemployment insurance claims backlog became of grave concern
to families suddenly out of work, EDD received more than $13
million over a two-year period. The Assembly has also been
able to provide $8 million in support to UC and CSU during the
last five extremely challenging budget cycles, as well as $14
million to support child care programs subject to substantial
cuts. Cal-FIRE alone has received almost $35 million in
support between the two houses during years of particular
challenge.
Without the flexibility allowed under current law, these funds
could not have been moved to areas of greatest need. AB 1887
would require the full legislative process to enact a statute
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before a transfer could be made. This could hinder efforts to
meet an urgent need, such as at Cal-FIRE or during the job
crisis to assist EDD. And, while AB 1887 states its intent
that the unused funds go to the Cal Grant program, this
provision is only a statement of intent since funds would be
available to the program only upon appropriation from the
General Fund.
5)Independent Audits: Current law requires the Legislature to
contract for independent audits of specified legislative
funds. Audits are to be conducted in accordance with
generally accepted auditing standards established by the
AICPA. AB 1887 would instead have the Controller conduct the
audits for the next two fiscal years. Thereafter, the audits
would again be done through legislative contracts with
independent auditors, but would also require that the audits
be done in accordance with guidelines established by the
Controller. The State Controller is not considered to be an
independent auditor of the Legislature under the AICPA
standards used in AB 1887. Since the Legislature determines
the Controller's budget, the AICPA standards would not permit
the Controller to be the auditor of legislative funds. The
same can be said of the provision requiring the Controller to
adopt new standards to be followed by outside auditors. In
addition, the bill gives no specifics regarding what those
guidelines are to address.
REGISTERED SUPPORT / OPPOSITION :
Support
None on file.
Opposition
None on file.
Analysis Prepared by : Diane Griffiths/ RLS. / (916) 319-2800