BILL ANALYSIS �
Bill No: SB
120
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Roderick D. Wright, Chair
2011-2012 Regular Session
Staff Analysis
SB 120 Author: Anderson
As Amended: March 14, 2011
Hearing Date: April 26, 2011
Consultant: Art Terzakis
SUBJECT
State Funds: registered warrants
DESCRIPTION
SB 120 is an urgency measure that requires a state agency
to accept a registered warrant (RW), or other similar
evidence of indebtedness issued by the State Controller,
for payment of any state obligation.
EXISTING LAW
Existing law prescribes procedures for the issuance of
registered warrants and provides that a registered warrant
is acceptable and may be used as security for the
performance of any public or private trust or obligation.
BACKGROUND
Warrants are the government equivalent of checks, and are
issued by the Controller to pay the state's obligations.
There are three types of warrants: registered warrants
(RWs), registered reimbursement warrants (RAWs), and
registered refunding warrants.
The State Constitution mandates that education and debt
service have priority status for regular warrants. The
state Constitution, federal law and a court order require
that state payroll, the California Public Employees
Retirement System, the California State Teachers Retirement
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System, In-Home Supportive Services and Medi-Cal providers
also be paid with regular warrants. The State may issue
RWs for all other payments, including those to private
businesses, local governments, taxpayers receiving income
tax refunds and owners of unclaimed property.
A RW is a "promise to pay," or an IOU, that is issued by
the State when there are not enough funds to pay all of its
General Fund obligations. RWs bear interest and are
redeemable by the State Treasury only when the General Fund
has sufficient money. RWs are presently considered legal
investments for all trust funds, insurance funds, savings
and loan funds, and funds of all counties, municipal
corporations, districts, public corporations, political
subdivisions, or state agencies. Further, state law
expressly permits a taxpayer to pay a tax liability, as
specified, in whole or in part, by a check in an amount not
to exceed the amount of a RW, and the law declares "all
warrants are payable in such coin or currency of the U.S.
as at the time of payment is legal tender for the payment
of public and private debts."
Currently, under Government Code Section 17280.1, the
Franchise Tax Board has authority to accept RWs in
satisfaction of taxpayer obligations to the State. In July
2009, the Board of Equalization voted to accept RWs in
satisfaction of obligations associated with tax programs it
administers. The Employment Development Department (EDD)
also began accepting RWs in August 2009. The Department of
Motor Vehicles (DMV) and most other agencies, however, did
not accept RWs in lieu of cash.
Government Code Section 17203 provides that RWs issued by
the State are acceptable and may be used as security for
the performance of any public or private trust obligation
or for the performance of any act, including the use of
such RWs by banks and savings and loan associations as
security deposits of funds of any county, municipal or
public corporation, district, political subdivision, or
state agency.
Purpose of SB 120: This measure would require all state
agencies to accept RWs and other forms of indebtedness from
any person or entity (at full face value) as payments for
obligations owed the state. According to the author's
office, this measure is a taxpayers' rights measure that
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addresses an inequity in current law, whereby the state may
issue IOUs in lieu of warrants, but is not required to
accept these IOUs for obligations owed to the state.
Staff Comments: 1. Committee staff is unclear what the
term "other similar evidence of indebtedness" issued by the
Controller refers to (page 2, lines 4-5).
2. SB 120 is similar to AB 1506 (Anderson) of 2010 which
was vetoed by the Governor (veto message cited under
"related legislation" listing.) AB 1506 would have
required all state departments, upon a specified
determination made by the State Controller's Office, to
accept RWs, in lieu of cash payments.
PRIOR/RELATED LEGISLATION
SB 11 (Anderson) 2011-12 Session. Would prohibit a state
entity from assessing a fine, interest, or penalty on a
debt owed to the state for the payee of a RW if the debt
owed to the state was imposed between January 1, 2006 and
December 31, 2009 and would change the due date of a state
debt to 30 days after the payable date of registered
warrants. (Pending in this Committee)
SB 506 (Simitian) 2011-12 Session. Among other things,
would provide a procedure whereby a RW may be issued for
the payment of principal or interest due on a state bond.
(Pending in this Committee)
AB 1044 (Butler) 2011-12 Session. Would require the BOE to
accept RWs from a taxpayer with any tax, surcharge, or fee
obligation owed when the RW has been paid directly to that
tax, surcharge, or fee payer. (Pending in Assembly Rev &
Tax Committee)
AB 1506 (Anderson) 2009-10 Session. Similar to SB 120
(Anderson) of 2011-would have required all state
departments, upon a specified determination made by the
State Controller's Office, to accept RWs, in lieu of cash
payments. (Vetoed - Governor's message stated, "IOUs place
enormous financial strains on recipients who are unable to
use them to pay their own obligations, including debts owed
to the state. However, requiring state departments to
accept IOUs in lieu of cash payments defeats the purpose of
issuing IOUs in the first place. It would exacerbate the
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state's cash crisis and would accelerate the possibility of
the state defaulting on its debt service and payroll
obligations.)
SBX3 23 (Ashburn) 2009-10 Session. Would have prohibited
the State Controller from issuing a RW for the purpose of
making payments for a refund of taxes imposed under the
Personal Income Tax Law. (Held in Senate Rules Committee)
SUPPORT: As of April 22, 2011:
California State Controller John Chiang
Acclamation Insurance Management Services
American Federation of State, County and Municipal
Employees (AFSCME)
Board of Directors, Borrego Water District
Boardmember Darrell Beck, Ramona Municipal Water District
Boardmember George Runner, California State Board of
Equalization
Brett Almquist, On The Border Mexican Grill & Cantina
California Chapter of the American Fence Association
California Fence Contractors' Association
City Attorney Jan I. Goldsmith, City of San Diego
Congressman Brian Bilbray, U.S. House of Representatives
Councilmember Deborah Pauly, City of Villa Park
Councilmember Ernest Ewin, City of La Mesa
Councilmember Kelly Bennett, City of Murrieta
Councilmember Melissa Melendez, City of Lake Elsinore
Councilmember Merrilee Boyack, City of Poway
Councilmember Rick Gibbs, City of Murrieta
Councilmember Robin Hastings, City of Moreno Valley
Councilmember Steve Castaneda, City of Chula Vista
Deputy Mayor Jerome Stocks, City of Encinitas
Donna T. Gebhart, Gebhart & Associates
Engineering Contractors' Association
Executive Director Mark R. Klaus, Home of Guiding Hands
Fallbrook Healthcare District Board of Directors
Flasher Barricade Association
Frank Lang, Lang Richert & Patch
General Manager Ralph D. McIntosh, Ramona Municipal Water
District
Governing Board President Robert Shield, Grossmont Union
High School District
Howard Jarvis Taxpayers Association
Independent Waste Oil Collectors and Transporters
John Gibson, Hamann Companies
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Marin Builders' Association
Mark Hoffman, Foothills Christian Church
Mayor Don Higginson, City of Poway
Mayor Gary Capata, City of Laguna Niguel
Mayor James Bond, City of Encinitas
Mayor Leroy Mills, City of Cypress
Mayor Pro Tempore Brad Reese, City of Villa Park
Mayor Pro Tempore Doug McAllister, City of Murrieta
Mayor Randon K. Lane, City of Murrieta
President & C.E.O. Alan G. Hutcheson, Dantel
President William C. Young, El Cajon Grading & Engineering
Co.,Inc.
Ramona Municipal Water District Board of Directors
Research Director Chuck Flacks, San Diego Workforce
Partnership
Riverside County Farm Bureau, Inc.
San Diego County Board of Supervisors
San Diego County Fire Chiefs Association
San Diego County Medical Society
State Building and Construction Trades Council of
California, AFL-CIO
Student Trustee Charles L. Taylor III, Cuyamaca College
The Arc and United Cerebral Policy in California
The Associated Builders and Contractors of California
The City of Escondido
The City of Moreno Valley
The Food and Beverage Association
The Helix Water District
The Southwest California Legislative Council
Trabuco Canyon Water District
Trustee Bob Duff, La Mesa-Spring Valley School District
Trustee John Norman, San Jacinto Unified School District
Vice Chair Michelle Steel, California State Board of
Equalization
Waste Management
OPPOSE: None on file as of April 22, 2011.
FISCAL COMMITTEE: Senate Appropriations Committee
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