BILL ANALYSIS Bill No: AB 1148 SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION Senator Don Perata, Chair 1999-2000 Regular Session Staff Analysis AB 1148 Author: Dickerson As Amended: April 5, 1999 Hearing Date: July 13, 1999 Consultant: Art Terzakis {u SUBJECT u} Timber Harvesting: payments {u DESCRIPTION u} AB 1148 establishes the following parameters for the timely payment of federal timber harvesting funds to counties: 1. Requires the State Controller to turn over these federal funds within 20 working days of receiving them from the federal government. 2. Requires that transfer of these funds to counties be completed via electronic transfer when so requested by a county. 3. Requires the state to pay interest to eligible counties on these allocations for the period during which the funds were held by the state. 4. Requires the Controller to notify counties regarding anticipated payments as soon as possible after receiving information from the federal government. {u EXISTING LAW u} Under federal law, 25% of all money received during any fiscal year from each national forest in California for timber harvesting is paid twice annually by the U.S. Secretary of the Treasury to the state, to disburse to the counties in which the national forest is situated for roads AB 1148 (Dickerson) continued Page 2 and schools. State law requires that money received from the U.S. Secretary of the Treasury be deposited into the state Federal Trust Fund. These funds are then directed by the State Treasurer into the interest earning U.S. Forester's Reserve Fund until the State Controller allocates the money to eligible counties. Interest earned on the deposited funds is transferred to the General Fund and is {u not u} earmarked for any particular purpose. California law does not require that the state pay its counties any interest for the period of time that the state holds the federal funds before distribution. California law requires that the counties receiving the Forest Service's 25% revenue-sharing funds use 50% to improve public schools and 50% to improve roads. {u BACKGROUND u} {u Revenue-sharing payments to states and counties u} Federal compensation laws generally provide the states with wide latitude in retaining or distributing the land management agencies' revenue-sharing payments to the states. Since 1938, counties in California have received 25% of all funds collected for timber harvesting on National Forests in their county. Payment amounts have varied year to year, depending upon the amount of timber sold in any given year. In fiscal year 1997-98, $30.5 million was transferred to various counties in California. The money is sent from the United States Secretary of the Treasury to states for distribution. The state is responsible for receiving the federal revenue-sharing funds and for maintaining the funds until distribution. The funds are distributed twice annually (October and December) from the U.S. Secretary of the Treasury to the state. The state receives the money in the Federal Trust Fund and transfers it instantly to the United States Forester's Reserve Fund where it earns interest. The county must file a formal request for funds after they are received by the State. The State Controller then cuts the check and mails it to the appropriate county. {u Comparison with other states AB 1148 (Dickerson) continued Page 3 u} In September of 1998, Congressman Vic Fazio commissioned a United States General Accounting Office (GAO) report to compare California, Oregon and Washington's revenue-sharing payment process to states and counties. The GAO found that while the distribution systems of the three states are somewhat similar, numerous differences exist in the specific requirements of the state laws and the distribution methodologies and processes. The numerous differences in the state laws affected whether counties would receive funds at all, when the counties would receive the funds and the amount of funds that these counties would be receiving. The GAO report found that the state of Washington made its distributions within 2 workings days after the Forest Service deposited the funds in the state's interest-bearing account; California took about 10 working days; and Oregon took from 8 to 12 working days. With respect to payment of interest to counties, the GAO report found that Oregon law requires that the state pay interest to its counties for the period of time that the state holds the funds before distributing them to the counties. Washington law, however, requires that the state pay its counties interest only on the Forest Service's 25% revenue-sharing funds for the period of time that the state holds funds before distributing them. California law {u does not u} require the state to pay counties any interest for the period of time that the state holds the federal funds before distribution. {u Purpose of AB 1148 u} The author's office notes that timber harvesting revenue payments to California counties have become increasingly smaller in recent years as a result of more stringent environmental regulations. The author's office points out that this measure is intended to streamline the state process for distribution of revenue-sharing funds and assist "timber" counties that rely on those funds. This measure is also intended to ensure that counties receive interest monies that accrue when the state holds funds before distribution. The State Controller's Office estimates that approximately AB 1148 (Dickerson) continued Page 4 $100,000 to $150,000 in interest will be transferred to counties that otherwise would be transferred to the General Fund. {u SUPPORT: u} As of July 8, 1999: Tehama County Department of Education Central California Education Legislation Consortium (Fresno, CA) The Honorable Bill Dennison, Plumas County Supervisor Forest Counties School Coalition (Red Bluff, CA) Humboldt County Office of Education Mariposa County Unified School District Mendocino County Office of Education Modoc County Office of Education Placer County Office of Education Santa Barbara County Education Office Shasta County Office of Education Siskiyou County Office of Education Trinity County Office of Education Tulare County Office of Education Tuolumne County Superintendent of Schools Ventura County Superintendent of Schools Office Yuba County Office of Education {u OPPOSE: u} None on file as of July 8, 1999. {u FISCAL COMMITTEE: u} Senate Appropriations Committee **********