LOS ANGELES -- California's Assembly last week approved a process to review and provide advice on the state's general obligation bond issuance, but the bill has been amended to avoid creating a new debt commission.
"We would assume [prospects for passage in the Senate] are very good," especially since the Assembly approved the bill 63 to 0, said Hal Geiogue, assistant state treasurer.
Kathleen Brown, the state treasurer, spearheaded the legislation to improve control and oversight of California's GO bond sales. The bill, AB 48, initially called for creating the state's first-ever Bond Efficiency Commission.
Before passing the bill last week, however, certain legislators asked for changes to scrap the idea of a new commission.
Instead, the bill gives responsibility for reviewing GO bonds to the existing California Debt Advisory Commission. The state's center for information on public debt issuance, the advisory commission collects and analyzes information on debt issuance by local and state public agencies, provides technical assistance, and researches policy issues.
Mr. Geiogue said several factors influenced legislators' requests to drop creation of a separate debt commission.
The state's budget situation, marked by a record $14.3 billion deficit, made it "a poor climate to create new commissions" of any sort, Mr. Geiogue said.
In addition, the advisory commission has "almost the same composition of membership" that the proposed debt commission would have had, Mr. Geiogue said. Ms. Brown, for example, already heads the advisory commission. Other members include state officials, legislators, and local government officers.
Finally, given the advisory commission's current tasks, the review of state GO debt "would not be an inappropriate function," Mr. Geiogue said.
"The key to us was the substance," he continued, adding that the treasurer supports the amended bill because it still accomplishes what she wanted.
But even if the Senate passess the bill, it remains uncertain of Gov. Pete Wilson will sign it.
"We didn't like the bill going in,' said Richard Ray, program budget manager of the California Department of Finance.
Thomas Hayes, the state's finance director, said last fall during the treasurer's campaign that he opposed creating a new layer of government to oversee GO bond issuance. Ms. Brown defeated Mr. Hayes in the election last November.
Mr. Ray said the amendments to the bill may satisfy some of the administration's concerns. "We just need a little more time" to study the changes, he said, adding that the finance department has been preoccupied with pressing budget issues in recent weeks.
Steve Juarez, executive secretary of the advisory commission, said "we would need a slight increase in our staffing" to handle the additional responsibility. The commission's existing reserves should be adequate to handle added staffing, but the Legislature must agree to appropriate the funds, Mr. Juarez said.
He said the Senate might want to consider addressing the funding issue when it reviews the bill. The advisory commission receives fees based on a percentage of the principal amount of bond issues sold in the state.
Ms. Brown has argued that the state needs a coherent and systematic process for placing GO bonds on the ballot, and for linking capital outlay and infrastructure needs with the amount of GO debt that should be authorized or can be prudently issued.
Under the proposed legislation, the debt advisory commission would forecast the level of GO debt that can be issued on an annual basis. It would also study related issues, including providing an estimated range of new GO debt that may -- in commission's opinion -- be prudently approved by voters.
The commission would consider various criteria, including the impact of GO bond policies on California's triple-A rating.