30 CHILDREN'S HOSPITAL PROGRAM

On November 2, 2004, the voters approved Proposition 61, which established the Children's Hospital Program. The purpose of the Children's Hospital Program is to improve the health and welfare of California's critically ill children by providing a stable and ready source of funds for capital improvement projects for children's hospitals. Proposition 61 designated the California Health Facilities Financing Authority (CHFFA) as the administering agency and authorized CHFFA to grant $750 million to eligible children's hospitals. Funding for this program is provided through the issuance of general obligation bonds. CHFFA developed, through regulations, selection criteria and a process for awarding grants. Applications and funding will be available through 2014, or until program funding is exhausted. In the event funding is not exhausted by 2014, CHFFA will amend the regulations to extend the program. As of June 30, 2006, CHFFA has disbursed $70.5 million to six hospitals.

40 HEALTH FACILITIES GRANTS AND LOANS

CHFFA provides assistance in funding or refinancing by making loans to health institutions, by direct purchase and leaseback of the health facility by CHFFA, or by a health institution acting as an agent for CHFFA. CHFFA can determine the location and character of any proposed project and can solicit state and federal mortgage insurance for any funded project. To qualify for funding, the project must be a health facility, operated by a private nonprofit corporation or association, city, city and county, county or hospital district. Numerous statutes enacted between 1983 and 2002 broadened the types of facilities that may be financed by CHFFA.

Prior to September 30, 1998, CHFFA was authorized to have outstanding at any one point-in-time up to $5.999 billion in revenue bonds. Pursuant to Chapter 1035, Statutes of 1998, there is no longer a limitation on bonds outstanding. As of June 30, 2006, bonds and notes in the amount of $18.8 billion have been issued and $7.4 billion were outstanding.

The Federal Tax Reform Act of 1986 does not restrict health facility bonds in terms of the state's "private activity" bond limit. Bonds issued under this program are not a debt or liability or a pledge of faith and credit of the taxing power of the state or any of its political subdivisions. The full faith and credit of the participating institutions are pledged to the payment of bonds.

Chapter 99, Statutes of 2000 established the Cedillo-Alarcon Community Clinic Investment Act of 2000, which authorized CHFFA to award grants to eligible primary care clinics for capital outlay projects. Funds of approximately $50 million were disbursed. In 2004, as part of the Anthem-Well Point merger, $35 million dollars was committed to healthcare facilities that provide service to underserved communities throughout California. Distribution of these funds was to be accomplished through the process that was established by the Cedillo-Alarcon Community Clinic Investment Act of 2000. In 2005, the Insurance Commissioner entered into an MOU with CHFFA authorizing them to dispense the funds to clinics. Also, Chapter 493, Statutes of 2005 amended the Cedillo-Alarcon Community Clinic Act of 2000 which authorized CHFFA to disburse appropriated additional funding to eligible clinics using selection criteria developed through regulations. As of June 30, 2006, funds have not been disbursed.

Chapter 478, Statutes of 2002, extends CHFFA's ability to provide grants for capital projects not only to community clinics, but also to small health facilities currently eligible under CHFFA's statute. The legislation also allows CHFFA to use its fund balance to make such grants.