BILL ANALYSIS 1
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SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
DEBRA BOWEN, CHAIRWOMAN
AB 84 - Cogdill Hearing Date:
June 10, 2003 A
As Amended: June 2, 2003 FISCAL B
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DESCRIPTION
Current law authorizes the California Public Utilities Commission
(CPUC) to collect fees from railroad corporations to pay for rail
safety investigation and enforcement actions.
Current law specifies the fees paid by railroad corporations must
be used solely for state-funded railroad investigation and
enforcement activities of the CPUC.
Current law requires the CPUC to submit a budget to the
Legislature each January detailing its planned expenditures of the
railroad fees for the next fiscal year.
This bill requires the Bureau of State Audits (BSA) to either
conduct or hire an independent auditor to conduct regular audits
of how the Commission spends the user fees it collects from
railroads.
This bill requires the audits to be conducted annually for the
first three years (2004/05, 2005/06, and 2006/07) and biennially
thereafter.
This bill specifies the CPUC must reimburse the BSA for the cost
of each audit, and specifies the cost of each audit may not exceed
$125,000.
BACKGROUND
In 1991, following a number of rail accidents, including a train
derailment causing nineteen thousand gallons of highly toxic
pesticide to leak into the Sacramento River near Dunsmuir, the
Legislature passed SB 152, Chapter 767, Statutes of 1991,
directing the CPUC to collect fees from railroads to improve
railroad safety.
By the mid-1990's, concerns were raised that the fees collected by
the CPUC for weren't being used solely for rail safety programs.
As a result, the Legislature passed SB 546 (Killea), Chapter 123,
Statutes of 1993, to require a portion of the fees to be used for
an annual audit of the CPUC's railroad fee expenditures. From
1993 to 1995, the CPUC was required to conduct the audits, and
from 1996 until the measure sunsetted in 2000, the BSA was
required to conduct the audits.
In 2002, the CPUC merged the Rail Safety and Carrier Division into
a new Consumer Protection and Safety Division. Even though the
law specifically requires railroad fees (totaling about $3 million
for the current fiscal year) to be used for rail safety, the
railroad industry has raised a concern that the CPUC may not be
capable of adequately segregating its rail safety expenditures as
a result of the reorganization.
COMMENTS
1)Side-Stepping JLAC . The Joint Legislative Audit Committee
(JLAC) was created for the purpose of reviewing state agencies
and programs and, where necessary, requesting the BSA to conduct
audits of specific agencies or programs. Traditionally,
legislators submit audit requests to JLAC, which then decides
what audits, if any, the BSA should be directed to conduct.
This bill side-steps the JLAC review process and statutorily
requires BSA to conduct or contract for an independent audit of
the CPUC's rail safety program annually for the first three
years and every other year thereafter. The author and the
committee may wish to consider whether it's appropriate to avoid
the JLAC process and statutorily require the BSA to audit one
specific CPUC program indefinitely.
2)Statutory Audits Take Priority . As noted above, the BSA
conducts two basic types of audits - those mandated by statute
and those it's directed by JLAC to conduct.
Statutorily-mandated audits take precedence over JLAC-directed
audit requests. BSA is in the middle of conducting about 19
audits, 14 of which have been ordered by JLAC. Today, JLAC is
considering seven additional audit requests made by members of
the Legislature, and may review other requests made before the
end of the legislative session. The author and committee may
wish to consider whether it's appropriate for the audit mandated
by this bill to take precedence over all JLAC-directed audit
requests.
3)Bang for the Buck. The CPUC administers many programs created
and funded by user fees collected from transportation,
telecommunication, energy and water utilities. None of those
programs are required by statute to be audited on a regular
basis by the BSA or an independent auditor. In its most recent
audit of the railroad safety program in 1999, the BSA found not
only that the CPUC was correctly spending the money collected
from transportation and railroad companies for authorized
purposes, but also that other fee payers were actually
subsidizing the railroad safety regulation program. The audit
found the CPUC was unable use railroad fees to allow the rail
safety program to pay for its share of overhead costs, such as
rental and building-related costs.
AB 1658 (Utilities & Commerce Committee), Chapter 1005, Statutes
of 1999, corrected this problem by allowing the CPUC to use
railroad fees to pay appropriate overhead costs needed to
operate the rail safety program.
There were only two anomalies indicated in the BSA 1999 audit.
First, the CPUC identified an error in its cash balance when it
upgraded its accounting system. Second, the CPUC failed to
properly allocate overhead expenditures among its non-railroad
funds. Neither of these issues had any affect on the rail
safety program, nor did they result in railroad fees being spent
for unauthorized purposes. Considering the lack of any
identified problems in the rail safety program, the author and
the committee may wish to consider whether the ongoing $125,000
this bill requires to be spent to audit one specific CPUC
program is an appropriate expenditure of General Fund or general
CPUC money.
4)Audit Cost . This bill caps the cost of each audit at $125,000,
a figure to be adjusted for inflation in the out years. The
author and committee may wish to consider whether this cap will
cover the cost of each audit and if it doesn't, what happens?
Will the CPUC be left with an incomplete audit or one that isn't
as thorough as it would have been had the cost not been
artificially capped?
5)Who Pays? The bill specifies the CPUC must reimburse the BSA
for the cost of the audits but doesn't specify which funds the
CPUC should use to pay for the audit. The author and the
committee may wish to consider whether this bill should be
amended to ensure the audits are funded exclusively through the
approximately $3 million in user fees paid by the railroads.
The following language accomplishes that goal:
On Page 4, Line 22 after "reimburse the Bureau of State
Audits for the cost of the audits" insert:
from the fees paid by railroad corporations to the commission
pursuant to this section.
ASSEMBLY VOTES
Assembly Floor (73-0)
Assembly Appropriations Committee (24-0)
Assembly Utilities and Commerce Committee
(14-0)
POSITIONS
Sponsor:
Union Pacific
United Transportation Union
Support:
California State Employees Association
Railroad Safety Inspectors
The California Railroad Industry
Oppose:
None on file
Jennie Bretschneider
AB 84 Analysis
Hearing Date: June 10, 2003