BILL ANALYSIS �
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UNFINISHED BUSINESS
Bill No: SB 1033
Author: Senate Budget and Fiscal Review Committee
Amended: 6/25/12
Vote: 21
PRIOR VOTES NOT RELEVANT
ASSEMBLY FLOOR : Not available
SUBJECT : 2012-13 Budget Trailer Bill: State Cash
Management
SOURCE : Author
DIGEST : 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.
Assembly Amendments delete the Senate version of the bill
and insert the above language.
ANALYSIS : 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
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additional means to assure cash flow continuity by
establishing a new account for voluntary participation by
local governments.
This bill includes the following key changes necessary to
implement the Cash Management related provisions of the
2012 Budget Act. This 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.
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.
Comments
According to the Senate Budget and Fiscal Review Committee,
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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.
FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes
Local: No
According to the Senate Budget and Fiscal Review Committee
staff, access to the funds in this account would simply
displace the need for other short term borrowing actions.
As a result, this bill would result in no additional fiscal
impacts on the state other than those related to short-term
borrowing.
DLW:n 6/26/12 Senate Floor Analyses
SUPPORT/OPPOSITION: NONE RECEIVED
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