SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: SB 112
AUTHOR: Liu
VERSION: 3/7/11
CONSULTANT: Lui
HEARING: 4/6/11
FISCAL: Yes
TAX LEVY: No
STATE MANDATE CLAIMS
Gives the State Controller’s more time to issue state mandate claiming instructions.
Amends the definition of boilerplate language.
Background and Existing Law
In 1979, voters amended the California Constitution, requiring the state to reimburse local agencies for the costs of new state mandated local programs or higher levels of service. In 1984, the Legislature created the Commission on State Mandates, a quasi-judicial body that decides local agencies' test claims for reimbursement. If the Commission identifies a state-mandated program from the test claim, the Commission adopts parameters and guidelines, defines what activities will be reimbursed, and adopts statewide cost estimates.
The Commission on State Mandates is working through a backlog of 242 test claims; some date from 2002. The mandate process is lengthy and complex:
 Test claims. After the new or higher level program is implemented, an agency has one year to submit a test claim to the Commission. The agency can submit a test claim up to two years following the program, with a 20% deduction of the first year’s costs.
 Parameters and guidelines. If the Commission determines that a test claim is a reimbursable mandate, the local agency must propose "parameters and guidelines” within 30 days. Parameters and guidelines define what activities are reimbursable.
 Statewide cost estimate. After the Commission adopts parameters and guidelines, it estimates statewide costs. These estimates are reported to the Legislature and form the basis for how the State Controller pays reimbursement claims.
 Claiming instructions. After the Commission adopts the parameters and guidelines, the Controller has 60 days to issue claiming instructions. If a program is ongoing, these claiming instructions form the basis for local

SB 112 -- 3/7/11 -- Page 2 agency’s annual reimbursement claims. Before issuing claiming instructions, the Controller’s office researches each claim and receives public comments from stakeholders.
 Reduction claims. Local agencies can file incorrect reduction claims, requests to amend the Commission on State Mandates' parameters and guidelines, and requests to review claiming instructions.
In 2010, the Clovis Unified School District won its court appeal against the State
Controller, who had reduced reimbursement claims for Clovis’ four statemandated programs for 1998 to 2003. The District argued that because the Controller used a different definition of source documents in performing the audit, the new set of parameters and guidelines could not be applied for the years 1998 to 2003.
After the Clovis case, the Controller revised its parameters and guidelines and its boilerplate language, text that is not unique to any claim. These changes affected
37 programs: 21 local governments, 12 school districts, and four community colleges. Currently, if any part of the parameters and guidelines are amended, the filing period for reimbursement claims re-opens. Any local agency can claim reimbursements for previously unclaimed expenses. Local agencies that may have forgotten to file reimbursement claims for any previous fiscal year can file claims for costs incurred for previous years.
Proposed Law
Senate Bill 112 extends the State Controller’s time limit to issue claiming instructions from 60 days to 90 days.
SB 112 tightens the definition of the Controller’s boilerplate language, referring to language that does not increase or decrease reimbursable cost. If the Controller amends the parameters and guidelines, the bill limits the eligible filing period for local agencies to the fiscal year in which the parameters and guidelines were adopted.
State Revenue Impact
No estimate.

SB 112 -- 3/7/11 -- Page 3
Comments
1. Purpose of the bill. SB 112 increases the time the State Controller can issue claiming instructions for a state reimbursable mandate from 60 days to 90 days after the Commission adopts parameters and guidelines. The 30-day extension gives the Controller more time to program e-filing reports, research the claim, write thorough claiming instructions, and receive public comments from state agencies and interested parties. In response to the 37 programs whose parameters and guidelines have been amended and could retroactively submit claims for unclaimed expenses, SB 112 tightens the definition of boilerplate language to prevent claimants from claiming costs incurred in previous fiscal years. SB 112 will not allow claimants to file new claims after the deadline has passed or to amend old claims to increase costs when the parameters and guidelines were used to update boilerplate language.
2. Missed deadlines = no responsibilities? The California Constitution entitles local agencies and school districts to compensation for their costs of state mandated programs. By reducing the opportunity for cities, counties, special districts, and school districts to claim previously unclaimed expenses when parameters and guidelines change, local agencies and school districts are stuck footing the bill for years when reimbursement could help offset their costs. Though local agencies should be responsible for filing claims on time, why should the state deplete local coffers without reimbursement?
3. Loose ends. The State Controller argues that the 37 cases of amended boilerplate language highlight an existing loophole for programs or agencies to retroactively claim older expenditures. However, because the Controller did not open up the claiming period for these programs, none used the perceived loophole.
The question remains of how many programs or agencies have actually profited from this loophole. Should the Legislature fix a problem that may exist only in outstanding circumstances?
4. A seven year itch. The Commission on State Mandates and State Controller have more than seven years of unpaid reimbursement claims. To address the backlog, the Commission, its 11-person staff, and the Controller have prioritized and consolidated claims and have settled lengthy reduction claims outside of the formal process. Would granting the State Controller an additional 30-day extension to issue claiming instructions hamper local agencies and school districts from receiving much-needed funds?
Support and Opposition (3/31/11)
Support: State Controller John Chiang.
Opposition: Unknown.