BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 1457
                                                                  Page  1

          Date of Hearing:  April 9, 2003

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                              Darrell Steinberg, Chair

             AB 1457 (Utilities and Commerce Committee) - As Introduced:   
                                 February 21, 2003 

          Policy Committee:                              Utilities and  
          Commerce     Vote:                            14-0

          Urgency:     Yes                  State Mandated Local Program:  
          No     Reimbursable:               

           SUMMARY  

          This bill:

          1)Appropriates $2.5 million from the California High Cost Fund-A  
            Administrative Committee Fund (CHCFA ACF) to the Public  
            Utilities Commission (PUC) to reimburse of small independent  
            telephone corporations serving rural and small metropolitan  
            areas for unpaid claims for June 2002.

          2)Prohibits the PUC from raising any fee, charge or rate as a  
            result of the above reimbursements.

           FISCAL EFFECT  

          One-time special fund cost of $2.5 million to provide the  
          reimbursements.

           COMMENTS 

           1)Background  .  The CHCFA was established to advise the PUC on  
            the development, implementation and administration of a  
            program to make transfer payments to small independent  
            telephone corporations in order to provide fair and equitable  
            local exchange services in high-cost rural and small  
            metropolitan areas.  Funding for this program was originally  
            under the control of the PUC, however, SB 669 (Polanco) -  
            Chapter 677, Statutes of 1999, established the CHCFA ACF-along  
            with separate funds for five other public purpose  
            telecommunication programs-within the State Treasury, and made  
            expenditure of those funds subject to the state budget  








                                                                  AB 1457
                                                                  Page  2

            process.  Subsequently, a trailer bill to the 2001 Budget Act  
            [SB 742 (Escutia)] required the PUC, starting October 1, 2001,  
            to transfer all revenues collected henceforth and all  
            unexpended prior collections for these public purpose programs  
            from the PUC to the State Controller.  

           2)Purpose  .  This bill reimburses 17 small independent telephone  
            companies that receive payments through the CHCFA ACF and have  
            not been reimbursed by the PUC for their June 2002 claims.   
            This problem arose because the funds were previously  
            administered by the PUC on a cash accounting basis but, upon  
            transfer into the State Treasury, are now administered on an  
            accrual accounting basis.  This change was not taken into  
            account when funding for the program was appropriated in the  
            2001 Budget Act, resulting in insufficient moneys available in  
            the fund to pay claims for the last month of that fiscal year.  
             Moreover, this problem was not identified in time to use the  
            deficiency process provided in Budget Control Section 27.   
            This bill is an urgency measure so that the companies can be  
            reimbursed at the earliest possible time.  Further delay in  
            providing these funds will only increase interest charges on  
            the principal amount owed to these companies.

           Analysis Prepared by  :    Chuck Nicol / APPR. / (916) 319-2081