BILL NUMBER: AB 1624 ENROLLED
BILL TEXT
PASSED THE SENATE OCTOBER 7, 2010
PASSED THE ASSEMBLY OCTOBER 7, 2010
AMENDED IN SENATE OCTOBER 6, 2010
AMENDED IN ASSEMBLY APRIL 19, 2010
INTRODUCED BY Committee on Budget (Blumenfield (Chair))
JANUARY 11, 2010
An act to amend Section 22954 of the Education Code, and to add
and repeal Sections 16327 and 16327.5 of the Government Code,
relating to state finance, and declaring the urgency thereof, to take
effect immediately.
LEGISLATIVE COUNSEL'S DIGEST
AB 1624, Committee on Budget. State finance.
(1) Existing law, until September 1, 2011, enacts a cash
management plan to authorize the Controller, Treasurer, and Director
of Finance to defer General Fund payments for up to 60 or 90 days, as
specified, beginning July 2010, for specific entities, including
county offices of education, public schools, and charter schools,
subject to certain conditions. Existing law provides a process by
which county offices of education, public schools, and charter
schools may receive payments that would otherwise be deferred if
certain determinations are made and the Department of Finance is
notified on or before May 17, 2010. Existing law also provides for
the deferral of specified apportionments from the Highway Users Tax
Account in the Transportation Tax Fund to cities, counties, and
cities and counties from July 2010 to March 2011, inclusive.
This bill would require the Controller, Treasurer, and Director of
Finance to implement and carry out a cash management plan to meet
specified goals concerning a short-term General Fund cash shortage
until sufficient external borrowing for the 2010-11 fiscal year may
be secured. In implementing and carrying out this plan, the bill
would state that these officials have all of the applicable
constitutional and statutory authority available to them, including,
but not limited to, specific authority granted by enactments in the
2009-10 8th Extraordinary Session. The bill would, until January 1,
2011, specifically authorize the deferral of specific kindergarten
and grades 1 to 12, inclusive, apportionment and categorical
payments, community college apportionments, and Cal Grant payments.
The bill would prioritize repayments of these deferrals if external
borrowing is secured in the amount of $3,200,000,000 or more. The
bill would also revise the payment schedule for transfers to the
Supplemental Benefit Maintenance Account in the Teachers' Retirement
Fund.
(2) This bill would declare that it is to take effect immediately
as an urgency statute.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. It is the intent of the Legislature, due to the late
enactment of the 2010 Budget Act, to recognize that it may not be
possible for the state to meet all General Fund payment obligations
and maintain a prudent General Fund cash reserve, as determined by
the Controller, until an external cashflow borrowing has been
secured. As a result, to the extent necessary to protect the state's
credit ratings and to assist the state with managing its cashflow to
make its priority payments to mitigate the possibility of issuing
registered warrants, the state shall delay nonpriority payments,
including tax refunds and Department of Social Services payments for
the CalWORKs program and its administration by counties, and other
payment delays specified in this act.
SEC. 2. Section 22954 of the Education Code is amended to read:
22954. (a) Notwithstanding Section 13340 of the Government Code,
a continuous appropriation is hereby annually made from the General
Fund to the Controller, pursuant to this section, for transfer to the
Supplemental Benefit Maintenance Account in the Teachers' Retirement
Fund.
(b) Except as reduced pursuant to subdivision (c), the total
amount of the appropriation for each year shall be equal to 2.5
percent of the total of the creditable compensation of the fiscal
year ending in the immediately preceding calendar year upon which
members' contributions are based for purposes of funding the
supplemental payments authorized by Section 24415, as reported
annually to the Director of Finance, the Chairperson of the Joint
Legislative Budget Committee, and the Legislative Analyst pursuant to
Section 22955.5.
(c) Beginning with the 2008-09 fiscal year, the appropriation in
subdivision (b) shall be reduced in accordance with the following
schedule:
2008-09.................$66,386,000
2009-10.................$70,000,000
2010-11.................$71,000,000
2011-12 and each fiscal year
thereafter..............$72,000,000
(d) Transfers made to the Supplemental Benefit Maintenance
Account, pursuant to subdivision (a) shall be made on October 15 and
April 15 of each fiscal year with each payment to be 50 percent of
the annual appropriation.
(e) Notwithstanding subdivision (d), for the 2010-11 fiscal year
only, the transfer that would have been made pursuant to subdivision
(d) on October 15, 2010, shall be made on November 15, 2010, and the
transfer that would have been made pursuant to subdivision (d) on
April 15, 2011, shall be made on March 14, 2011.
(f) The board may deduct from the annual appropriation made
pursuant to this section an amount necessary for the administrative
expenses of Section 24415.
(g) It is the intent of the Legislature in enacting this section
to establish the supplemental payments pursuant to Section 24415 as
vested benefits pursuant to a contractually enforceable promise to
make annual contributions from the General Fund to the Supplemental
Benefit Maintenance Account in the Teachers' Retirement Fund in order
to provide a continuous annual source of revenue for the purposes of
making the supplemental payments under Section 24415.
SEC. 3. Section 16327 is added to the Government Code, to read:
16327. (a) An effective cash management plan is needed upon
enactment of the Budget Act of 2010 to address a short-term General
Fund cash shortage until sufficient external cashflow borrowing for
the 2010-11 fiscal year may be secured. The goals of the cash
management plan described in this section are to accomplish the
following:
(1) Increase the state's ability to address this cash shortage in
a quick and responsible manner.
(2) Address rating agencies' and bond markets' concerns regarding
the state's ability to react effectively to cashflow pressures while
providing a higher level of certainty to bondholders.
(3) Preserve external borrowing capacity and affordability for the
state's infrastructure programs.
(4) Provide a higher level of predictability to affected programs
and entities where deferrals or delays are required.
(b) Nothing in this section or Section 16327.5 shall be construed
to affect in any way the timing or amount of payments of state
payroll, or to affect in any way any judicial proceeding related to
the timing or amount of state employee compensation. Nothing in this
section shall be construed to authorize the delay of debt service
payments, rental payments that support lease-revenue bonds,
reimbursements to local governments for certain reductions in ad
valorem property taxes, as required by Section 25.5 of Article XIII
of the California Constitution, or required payments for borrowings
secured by these repayment obligations, payments required under a
Funds Transfer Cooperative Agreement that are pledged to pay debt
service on state payment acceleration notes that were issued to
finance toll bridge seismic retrofit and replacement projects,
payments appropriated in any year to pay a court judgment pursuant to
the settlement agreement in Paterno v. State (2003) 113 Cal.App.4th
998, or payments to small vendors as defined in the California Prompt
Payment Act (Chapter 4.5 (commencing with Section 927) of Part 3 of
Division 3.6 of Title 1). Nothing in this section shall be construed
to affect the applicability of interest, late payment penalty, and
similar payment requirements under the California Prompt Payment Act
or Section 926.19 when payments to persons or entities specified in
those laws are delayed.
(c) Notwithstanding any other law, the deferrals authorized in the
cash management plan described in this section and Section 16327.5
are in addition to any payment delays, payment deferrals, or payment
schedules specified in other laws. Deferrals authorized in the cash
management plan described in this section and Section 16327.5 do not
replace, remove, or alter any previously implemented payment delays
or payment deferrals, and are not limited to the conditions specified
in Section 16326.
(d) The Controller, Treasurer, and Director of Finance shall
implement and carry out payment deferrals pursuant to a cash
management plan that meets the goals specified in subdivision (a) and
is in accordance with the intent expressed in subdivisions (b) and
(c). In implementing and carrying out this plan, these officials
shall have all of the applicable constitutional and statutory
authority available to them, including, but not limited to, the
authority granted by Chapter 10 of the 2009-10 Eighth Extraordinary
Session Section 16327.5.
(e) Activities by the Controller, Treasurer, and Director of
Finance to implement and carry out the cash management plan described
in this section and Section 16327.5 are hereby exempted from the
provisions of the Administrative Procedure Act (Chapter 3.5
commencing with Section 11340) of Part 1 of Division 3.
(f) Nothing in this section and Section 16327.5 shall affect the
Controller's existing authority to delay nonpriority claims
including, but not limited to, tax refunds and Department of Social
Services payments for the CalWORKs program and its administration by
counties. For purposes of this section, nonpriority claims include
those claims not otherwise required to be paid promptly pursuant to
the California Constitution, federal law, or court order.
(g) Subject to the approval of the Director of Finance, entities
subject to the deferrals identified in paragraphs (1) or (2) of
subdivision (b) of Section 16327.5 may request a hardship waiver as
described in subparagraph (A), (B), or (C) of paragraph (1) of
subdivision (a) of Section 16326. These hardship waiver requests
shall be received by the Director of Finance no later than October
15, 2010.
(h) Subject to the approval of the Director of Finance, entities
subject to the deferrals identified in paragraph (3) of subdivision
(b) of Section 16327.5 may request a hardship waiver as described in
paragraph (3) of subdivision (a) of Section 16326. These hardship
waiver requests shall be received by the Director of Finance no later
than October 15, 2010.
(i) This section shall remain in effect only until January 1,
2011, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2011, deletes or extends
that date.
SEC. 4. Section 16327.5 is added to the Government Code, to read:
16327.5. (a) Notwithstanding any other law, and to the extent not
prohibited by federal law or the California Constitution, in order
to effectively manage state cash resources, the 2010-11 General Fund
payments not made due to budget impasse or projected to be made for
the programs or departments listed in subdivision (b) shall be
deferred, in whole or in part, as provided in subdivision (b).
Nothing in this section shall be construed to authorize the deferral
of the payments listed in subdivision (b) of Section 16327.
(b) The departments and programs subject to subdivision (a) are as
follows:
(1) To the extent an external cashflow borrowing has not been
secured in an amount of three billion two hundred million dollars
($3,200,000,000) or more, kindergarten and grades 1 to 12, inclusive,
October 2010 apportionments, shall be paid no later than November
15, 2010.
(2) Kindergarten and grades 1 to 12, inclusive, categorical
payments up to $300 million, due for the months of July, August,
September, and October 2010, shall be paid no later than November 4,
2010.
(3) To the extent an external cashflow borrowing has not been
secured in an amount of three billion two hundred million dollars
($3,200,000,000) or more, California Community Colleges October 2010
apportionments, including the July 2010 payment deferred to October
2010 pursuant to paragraph (3) of subdivision (a) of Section 16326,
shall be paid no later than November 4, 2010.
(4) Cal Grant payments to the University of California, for the
months of July, August, September, and October 2010, shall be paid no
later than December 10, 2010.
(5) Cal Grant payments to the California State University, for the
months of July, August, September, and October 2010, shall be paid
no later than December 3, 2010.
(c) After implementing any of the payment deferrals identified in
subdivision (b), the Controller, Treasurer, and Director of Finance
shall, at least weekly, jointly review and compare the actual General
Fund receipts and disbursements with the receipts and disbursements
contained in the most current published cashflow projections. After a
payment deferral has been implemented, to the extent that an
external cashflow borrowing is secured in the amount of three billion
two hundred million dollars ($3,200,000,000) or more, the payment
deferrals identified in paragraphs (1) and (3) of subdivision (b)
shall have first priority for payment upon being presented to the
Controller. If the Controller, Treasurer, and Director of Finance
determine sufficient cash is available to make these payments
deferrals, in whole or in part, prior to the receipt of sufficient
external cashflow borrowing, and maintain a prudent cash reserve, the
Controller shall make the deferred payment, in whole or in part, as
soon as possible. In making the determination that cash is sufficient
to make the payments, the Controller, Treasurer, and Director of
Finance shall also consider costs for state government, the scope of
any identified cash shortage, timing, achievability, legislative
direction, and the impact and hardship imposed on potentially
affected programs, entities, and related public services. At the end
of this short-term cash program, the Department of Finance shall
notify the Joint Legislative Budget Committee of the final deferred
amount and dates of payments by December 31, 2010.
(d) This section shall remain in effect only until January 1,
2011, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2011, deletes or extends
that date.
SEC. 5. This act is an urgency statute necessary for the immediate
preservation of the public peace, health, or safety within the
meaning of Article IV of the Constitution and shall go into immediate
effect. The facts constituting the necessity are:
Due to the projected insufficient cash balance, it is necessary to
defer certain payments so that all other General Fund payments can
be made.