WASHINGTON - The California Legislature, in a surprise move before adjourning this month, approved a bill authorizing state Treasurer Kathleen Brown to consolidate the state's hundreds of vendor lease contracts into master lease offerings.
But the state's powerful vendor leasing industry, which succeeded in killing the bill in past legislative sessions, has sympathizers within the administration who may prevail upon Gov. Pete Wilson to veto the bill, state sources said. The governor has until the end of the month to decide.
The state currently finances about $100 million of equipment purchases a year through small vendor lease financings, which typically carry high interest rates between 13% and 14%.
The bill, as drafted by state Assemblyman Rusty Areias, D-Gilroy, is aimed at saving the state up to $50 million over five years by combining those piecemeal and often taxable financings into larger tax-exempt offerings.
Ms. Brown's authority to sponsor master lease offerings would be greatly expanded because the bill lowers the threshold for such financings from $10 million to $100,000. The bill would require her to work with the state's Department of General Services, which currently manages vendor financings.
The Legislature, after five years of inconclusive debate, took a renewed interest in the bill last month because of its potential to save money in the midst of the state's budget crisis, said Jody Fuji, legislative assistant to Mr. Areias.
While the bill had passed the Assembly in past years, it previously was shot down in the Senate under a heavy lobbying barrage by the leasing industry.
But the bill's detractors apparently were thwarted this year by the publication of several newspaper editorials favorable to it, including one in The Sacramento Bee the morning the Senate was scheduled to act on the bill.
The Bee editorial said the bill could save the state a lot of money. And it accused IBM Corp., Pacificorp Capital Inc., and other firms, which have dominated the state's vendor leasing business in past years, of trying to bury the bill once again.
When the Senate took up the bill later that day, the anticipated opposition never materialized, Ms. Fuji said. Sen. Ralph Dills, D-Gardena, who previously tacked amendments onto the bill deleting its new authority for Ms. Brown, did not offer them this time around, Ms. Fuji added.
As a result, the bill easily passed the Senate and made a final pass through the Assembly just before the Legislature adjourned at the beginning of the month. But now that it is sitting on the governor's desk, its troubles are not over, Ms. Fuji said.
The Department of General Services has come out openly against the bill, and is encouraging the governor to veto it, according to state sources.
In a letter to Mr. Areias last month, General Services Director John Lockwood said the department is opposed to the bill's extension of authority over small equipment lease financings to the treasurer's office.
"This is a substantial transfer of power to the treasurer, and would ultimately give the treasurer the final decision on these transactions. We request that this section be amended back to how it reads in current law," he wrote.
Mr. Lockwood's suggested revisions are almost identical to the industry-sponsored amendments offered by Sen. Dills, which killed the bill in the Senate in previous years, Ms. Fuji said. Mr. Lockwood could not be reached for comment.
A key figure who could sway the governor's decision over the bill is Department of Finance Director Thomas Hayes, Ms. Fuji said. Previously during his term as state treasurer, Mr. Hayes supported the master leasing bill. But since he was defeated by Ms. Brown and joined the administration, he has been cooler toward it, she said.
In an attempt to cull Mr. Hayes' support, Mr. Areias has offered to push some housekeeping amendments next year, which would clarify that the General Services Department should maintain most of its control over the vendor leasing program, Ms. Fuji said. "Right now, that's our best hope" for getting the administration's assent, she commented.
But a spokesman for Ms. Brown said the Finance Department is actually recommending a veto of the bill on the grounds that it would create a costly new bureaucracy to carry out the master lease financing.
A Finance Department spokesman said the department is publicly neutral on the bill, but he acknowledged that it has made a recommendation to the governor. In any case, he maintained, the governor is likely to give more weight to the General Services Department's wishes.