Volume I, No. 22

May 13, 2009

Continuing State Allocation Board Approved Deferrals

By Duwayne Brooks

The May 6, 2009 Department of Finance (DOF) Budget Letter summarizes state bond proceeds available from the April 28, 2009 sale of state bonds. Public K-12 school projects will receive a total of $1.45 billion to fund Proposition 47, 55, and 1D projects. If the fund disbursement process for the April bond proceeds follows the same timeline as the disbursement process for the March bond proceeds, the April disbursements could occur in early to mid June 2009.

The DOF Budget Letter states that the bond proceeds are sufficient to pay the balance of outstanding obligations, and pay for estimated project needs going forward “until a subsequent bond sale.” However, the letter cautions that the condition of the Pooled Money Investment Account (PMIA) is still a concern, and additional cash needs will be primarily provided by up-front proceeds of future General Obligation bond sales.

The letter states that agencies are still not authorized to make any new awards, allocations, assignments or any other obligations of General Obligation bond funds for new projects and that further direction will be forthcoming with the release of the May Revision.

All except $9.8 million of the $1.45 billion K-12 disbursement comes from Build America Bonds (authorized by the America’s Recovery and Reinvestment Act), which only can be used for capital expenditures and can not be used for administrative or other non-capital expenditures. For purposes of Build America Bonds, capital expenditures mean a cost of a project to acquire, construct, or improve property, including land, buildings, and equipment with a life longer than one year. Capital expenditures also include design and planning costs related to the project and architectural, engineering, soil testing, environmental and similar costs incurred in the process of acquiring, constructing, improving, or adapting the property.