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AB 964

Commission on State Mandates: state mandates.

2025-2026 Regular Session Introduced by Heather Hadwick

AB 964 lets local agencies offset reduced reimbursements against unpaid claims instead of remitting funds, with clearer audit notices and PMIA-interest on overpayments.

In committee: Held under submission.
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Bill Summary · AB 964

AB 964 — Commission on State Mandates: state mandates (Hadwick)

Purpose / intent

AB 964 amends Government Code section 17558.5 to clarify and modify procedures governing audits, notifications, offsets, and repayments related to reimbursement claims filed by local agencies and school districts for state‑mandated costs. The bill is intended to (1) require more explicit written notice when an audit or review reduces a reimbursement claim, and (2) give claimants a choice — in specified circumstances — to offset reduced reimbursements against other unpaid claims instead of immediately remitting funds.

Key provisions (summary)

  • Amends Gov. Code § 17558.5.
  • Audit timing
    • Controller may initiate an audit no later than 3 years after a claim is filed or last amended (or, if no initial payment was made because no appropriation, from the date of initial payment).
    • An audit must be completed within 2 years of its commencement.
  • Field review
    • Controller may conduct a field review of any claim after submission and before reimbursement.
  • Notification of adjustments
    • Controller must notify the claimant in writing within 30 days of any adjustment resulting from an audit or review (replacing earlier language tied to issuance of a remittance advice).
    • Notice must specify which claim components and amounts were adjusted, interest charges on adjustments that reduce the overall reimbursement, and the reason for the adjustment.
    • Remittance advices and routine payment notices do not constitute this required notice.
  • Offset or remittance option
    • At the sole discretion of the local agency or school district, the claimant may either:
    • Offset any reduced reimbursement against any unpaid reimbursement claims attributed to the same claimant — whether appropriated or not — to the extent sufficient unpaid claims exist (as determined by the Controller); or
    • Remit funds to the Controller.
  • Interest on overpayments
    • Interest charged on reduced claims is set at the Pooled Money Investment Account (PMIA) rate, applied from the time the claim was paid until overpayment is satisfied.
  • Fraud/willfulness exception
    • Section does not limit adjustments where inaccuracies resulted from intent to defraud or where audit delays are caused by willful acts by the claimant or inability to reach settlement.

Who is affected

  • Local agencies and school districts that file reimbursement claims under the Commission on State Mandates process.
  • California State Controller’s Office (responsibilities for audits, notices, and determination of available unpaid claims).

Procedural status / timeline

  • Introduced: February 20, 2025.
  • Committee activity: Referred to Local Government and Education; amended and moved through committees (L. GOV, ED); re-referred to Appropriations. Last recorded action: In committee — Held under submission (May 23, 2025).
  • Fiscal committee review required; bill does not create a direct appropriation.

Potential impacts

  • Administrative: clearer and earlier written notice of audit adjustments should improve transparency for claimants.
  • Cash flow: allowing offsets against unpaid claims may reduce the need for immediate repayments by local entities, improving short‑term fiscal flexibility; Controller retains ability to require remittance.
  • Fiscal exposure: PMIA interest on overpayments may affect the amount owed when adjustments are required; the Controller’s determinations about “sufficient unpaid claims” will affect practical availability of offsets.

Sponsor: Author — Hadwick.

Compiled from official sources — confirm details with the bill’s official record.

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