BILL ANALYSIS                                                                                                                                                                                                    �



                                                                  SB 79
                                                                  Page  1


          (  Without Reference to File  )


          SENATE THIRD READING
          SB 79 (Budget and Fiscal Review Committee)
          As Amended  July 11, 2011
          Majority Vote.  Budget Bill Appropriation Takes Effect 
          Immediately 

           SENATE VOTE  :Vote not relevant  
           
           SUMMARY  :  The bill provides the necessary statutory changes 
          relating to state funds and cash-flow borrowing necessary for 
          the 2011-12 Budget Act.  Specifically,  this bill:
           
          1)Creates the State Agency Investment Fund (SAIF) in the State 
            Treasury.  The SAIF will receive moneys from state agencies 
            not currently required by law to be deposited in the Pooled 
            Money Investment Account (PMIA).  State agencies includes any 
            state office, officer, department, division, bureau, board, 
            commission, organization, or agency, including, but not 
            limited to, the University of California, the California State 
            University, the California Community Colleges, and the 
            Judicial Council.  

           2)Specifies that each agency shall deposit not less than $500 
            million and that the total amount of moneys from all sources 
            deposited in the SAIF shall not exceed $10 billion, and:

             a)   Terms and conditions of investment including size of 
               deposit, length of time of deposit, and availability of 
               fund withdrawals would be set by the Director of Finance in 
               consultation with the treasurer; and,

             b)   Moneys would be used for investments authorized by 
               existing statutory authority relating to the PMIA and would 
               be borrowable by the General Fund (GF) for cash flow 
               purposes.  Repayment of borrowing would be a priority 
               payment of the GF.

          3)Establishes that the rate of interest paid by the SAIF would 
            consist of a base rate (equal to the rate paid for PMIA 
            investments), plus an enhanced amount.  The enhanced amount 
            would be determined by the Director of Finance, in 








                                                                  SB 79
                                                                  Page  2


            consultation with the Treasurer, and added to the base amount. 
             Funds in the SAIF would be continuously appropriated for 
            repayment by the State Controller.

          4)Adds an appropriation allowing this bill to take effect 
            immediately upon enactment.

           FISCAL IMPACT  :  By creating a new fund for the deposit of cash 
          by state agencies, the state can reduce its external borrowing 
          by an amount up to $1.7 billion.  This will add additional 
          flexibility for cash flow management and result in savings equal 
          to the differential between borrowing from SAIF and borrowing 
          through the credit markets through the issuance of Revenue 
          Anticipation Notes (RANs).

           COMMENTS:   It is anticipated that the interest rate paid on the 
          SAIF would fall between the PMIA rate and the prevailing rate 
          paid on external borrowing through the issuance of RANs.  The 
          state would realize some GF saving based on the interest rate 
          "break," and state agencies will receive an enhanced return over 
          what they would receive from the PMIA.  Savings from this 
          initiative are dependent on the actual amount invested in the 
          fund, and the extent to which these amounts can off-set more 
          expensive external borrowing.


           Analysis prepared by:     Mark Ibele / BUDGET / (916) 319-2099


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