20250AB__264097AMD INTRODUCED 2026-02-20 AMENDED_ASSEMBLY 2026-04-09 AMENDED_SENATE 2026-06-18 2025 AB AMD Introduced by Assembly Member Hadwick (Coauthors: Assembly Members Alanis and Ellis) (Coauthors: Senators Niello and Seyarto) LEAD_AUTHOR ASSEMBLY Hadwick COAUTHOR ASSEMBLY Alanis COAUTHOR ASSEMBLY Ellis COAUTHOR SENATE Niello COAUTHOR SENATE Seyarto

An act to amend

Section 17558.5 of the Government Code, relating to state mandates. state mandates Commission on State Mandates: state mandates. Existing law creates the Commission on State Mandates and establishes procedures for implementing the requirement in the California Constitution that the state reimburse local agencies and school districts for certain costs mandated by the state.

Existing law makes a reimbursement claim for actual costs filed by a local agency or school district subject to the initiation of an audit by the Controller and authorizes the Controller to make a field review of a claim after it has been submitted but before it has been reimbursed. Existing law requires the Controller to notify the claimant in writing within days after issuance of a remittance advice of any adjustment to a claim for reimbursement that results from an audit or review.

This bill would, instead, require the Controller to notify the claimant in writing within days of any adjustment that results from an audit or review. The bill would also allow a local agency or school district, upon receipt of the notice, to elect, at its discretion, to have the Controller offset any reduced reimbursement, as prescribed, or to adjust the payment of claims. MAJORITY NO YES NO NO NO NO NO NO NO NO The people of the State of California do enact as follows:

SECTION

Section 17558.5 of the Government Code is amended to read: 17558.5. (

a) A reimbursement claim for actual costs filed by a local agency or school district pursuant to this

chapter is subject to the initiation of an audit by the Controller no later than three years after the date that the actual reimbursement claim is filed or last amended, whichever is later. However, if no funds are appropriated or no payment is made to a claimant for the program for the fiscal year for which the claim is filed, the time for the Controller to initiate an audit shall commence to run from the date of initial payment of the claim. In any case, an audit shall be completed not later than two years after the date that the audit is commenced. (

b) The Controller may conduct a field review of any claim after the claim has been submitted, before reimbursement of the claim. (

c) The Controller shall notify the claimant in writing within days of adjustment to a claim for reimbursement that results from an audit or review. The notification shall specify the claim components adjusted, the amounts adjusted, interest charges on claims adjusted to reduce the overall reimbursement to the local agency or school district, and the reason for the adjustment.

Remittance advices and other notices of payment action shall not constitute notice of adjustment from an audit or review. (d)<xhtml:span class="EnSpace"/>The Controller shall allow a local agency or school district, at the sole discretion of the local agency or school district, to do any of the following:</xhtml:p>"?> (

d) Upon receiving the notification described in subdivision (c), a local agency or school district may elect, at its discretion, to have the Controller do either of the following before the local agency or school district remits funds to the Controller:

(1) Offset any reduced reimbursement identified in subdivision (

c) on or after January 1, 2027, from any balances of unpaid claims for reimbursement of state-mandated local costs in chronological order beginning with the earliest claim, attributed to that local agency or school district, whether appropriated or not, if those unpaid claims exist. This paragraph shall only apply to claim adjustments that occur after January 1, 2027.

(2) Adjust the payment of claims pursuant to subparagraph (

C) of paragraph (2) of subdivision (

d) of

Section 17561. (3)<xhtml:span class="EnSpace"/>Remit funds to the Controller. </xhtml:p>"?> (

e) If the local agency or school district does not exercise its selection option in subdivision (

d) by notifying the Controller within days of receiving the adjustment notification pursuant to subdivision (c), the Controller shall first attempt to offset any reduced reimbursement pursuant to paragraph (1) of subdivision (d). If an unpaid reimbursement claim does not exist, the Controller shall adjust the payment of claims pursuant to paragraph (2) of subdivision (d). (

f) The interest rate charged by the Controller on reduced claims shall be set at the Pooled Money Investment Account rate and shall be imposed on the dollar amount of the overpaid claim from the time the claim was paid until overpayment is satisfied. (

g) This

section does not limit the adjustment of payments if inaccuracies are determined to be the result of the intent to defraud, or if a delay in the completion of an audit is the result of willful acts by the claimant or inability to reach agreement on terms of final settlement.