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