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DREYFUS CASH MANAGEMENT
DREYFUS GOVERNMENT CASH MANAGEMENT
DREYFUS GOVERNMENT PRIME CASH MANAGEMENT
DREYFUS MUNICIPAL CASH MANAGEMENT PLUS
DREYFUS CALIFORNIA AMT-FREE MUNICIPAL CASH MANAGEMENT
DREYFUS NEW YORK AMT-FREE MUNICIPAL CASH MANAGEMENT
DREYFUS NEW YORK MUNICIPAL CASH MANAGEMENT
DREYFUS TAX EXEMPT CASH MANAGEMENT
DREYFUS TREASURY & AGENCY CASH MANAGEMENT
DREYFUS TREASURY PRIME CASH MANAGEMENT
COMBINED STATEMENT OF ADDITIONAL INFORMATION
JUNE 1, 2011
As Revised DECEMBER 1, 2011
(For Institutional Shares, Agency Shares, Administrative Shares, Classic Shares, Investor Shares, Participant Shares, Premier Shares, Service Shares and Select Shares*)
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Ticker Symbols:
Institutional Investor Administrative Participant Service Select Agency Premier Classic
Dreyfus Cash Management DICXX DVCXX DACXX DPCXX DMCXX
Dreyfus Government Cash Management DGCXX DGVXX DAGXX DPGXX DGMXX
Dreyfus Government
Prime Cash Management DIPXX DVPXX DAPXX DGPXX DRPXX
Dreyfus Treasury & Agency
Cash Management DTRXX DTVXX DTAXX DTPXX DSRXX DTSXX DYAXX DYPXX
Dreyfus Treasury Prime Cash
Management DIRXX DVRXX DARXX DPRXX DSAXX
Dreyfus Municipal Cash Management Plus DIMXX DVMXX DAMXX DMPXX DRAXX
Dreyfus New York
Municipal Cash Management DIYXX DVYXX DAYXX DPYXX DNCXX
Dreyfus Tax Exempt Cash Management DEIXX DEVXX DEAXX DEPXX DYEXX
Dreyfus California AMT-Free
Municipal Cash Management DIIXX DAIXX DFAXX DFPXX DRMXX
Dreyfus New York AMT-Free
Municipal Cash Management DYIXX DYVXX DDVXX DHPXX DLCXX
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This Statement of Additional Information, which is not a prospectus, supplements and should be read in conjunction with the current Prospectuses dated June 1, 2011 for each class of shares of each Fund listed above (each, a "Fund"), as each Prospectus may be revised from time to time. To obtain a copy of the Prospectus for a class of shares of a Fund, please call your financial adviser, or write to the Fund at 144 Glenn Curtiss Boulevard, Uniondale, New York 11556-0144, or, in the case of institutional investors, call one of the following numbers:
Outside New York State -- Call Toll Free 1-800-346-3621
In New York State -- Call 1-718-895-1650
Individuals or entities for whom institutions may purchase or redeem Fund shares may write to a Fund at the above address or call toll free 1-800-554-4611 (1-800-645-6561 for Classic Shares) to obtain a copy of a Fund Prospectus.
The
most recent Annual Report and Semi-Annual Report to Shareholders for each Fund
are separate documents supplied with this Statement of Additional Information,
and the financial statements, accompanying notes and report of the independent
registered public accounting firm appearing in the Annual Report are
incorporated by reference into this Statement of Additional Information.
Each Fund is a separate investment portfolio, each with operations
and results which are unrelated to those of each other Fund. Dreyfus
Government Cash Management and Dreyfus Government Prime Cash Management are
separate series of Dreyfus Government Cash Management Funds (the
"Company") and Dreyfus California AMT-Free Municipal Cash Management,
Dreyfus New York AMT-Free Municipal Cash Management and Dreyfus Tax Exempt Cash
Management are separate series of Dreyfus Tax Exempt Cash Management Funds (the
"Trust"). This combined Statement of Additional Information has been
provided for investors' convenience to provide investors with the opportunity
to consider eleven investment choices in one document.
__________
*
Agency Shares are offered by each Fund,
except
Dreyfus New York AMT-Free
Municipal Cash Management. Premier Shares, Service Shares, and Select Shares
are offered only by Dreyfus Treasury & Agency Cash Management. Classic
Shares are offered only by Dreyfus New York AMT-Free Municipal Cash Management.
TABLE OF CONTENTS
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Page
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Description of the Funds
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B-4
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Management of the Funds
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B-26
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Management Arrangements
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B-35
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How to Buy Shares
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B-39
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Service Plans (Agency Shares, Administrative Shares, Classic Shares, Investor Shares,
Participant Shares, Premier Shares, Service Shares and Select Shares Only)
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B-42
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Shareholder Services Plans (Institutional Shares Only)
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B-44
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How to Redeem Shares
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B-45
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Determination of Net Asset Value
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B-46
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Shareholder Services
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B-47
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Dividends, Distributions and Taxes
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B-49
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Portfolio Transactions
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B-49
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Information About the Funds
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B-52
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Counsel and Independent Registered Public Accounting Firm
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B-54
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Appendix A
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B-55
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Appendix B
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B-56
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Appendix C (Dreyfus New York Municipal Cash Management and Dreyfus New York
AMT-Free Municipal Cash Management )
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B-60
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Appendix D (Dreyfus California AMT-Free Municipal Cash Management)
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B-70
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Appendix E
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B-109
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Description of the Funds
Dreyfus Cash Management,
Dreyfus Government Cash Management Funds, and Dreyfus Tax Exempt Cash
Management Funds were formed originally as Maryland corporations on December 6,
1984, February 1, 1984, and January 27, 1984, respectively, and commenced
operations in March 1985. On May 22, 1987, each of these Funds reorganized as
a Massachusetts business trust. Dreyfus New York Municipal Cash Management,
Dreyfus Municipal Cash Management Plus, Dreyfus Treasury & Agency Cash
Management, and Dreyfus Treasury Prime Cash Management are Massachusetts
business trusts that commenced operations on November 4, 1991, October 15, 1990,
September 4, 1986, and December 27, 1988, respectively.
Each Fund is an open-end
management investment company, known as a money market mutual fund. Each Fund,
other than Dreyfus New York Municipal Cash Management, Dreyfus New York
AMT-Free Municipal Cash Management, and Dreyfus California AMT-Free Municipal
Cash Management, is a diversified fund, which means that, with respect to 75%
of its total assets, the Fund will not invest more than 5% of its assets in the
securities of any single issuer nor hold more than 10% of the outstanding
voting securities of any single issuer (other than, in each case, securities of
other investment companies, and securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities). Each of Dreyfus New York
Municipal Cash Management, Dreyfus New York AMT-Free Municipal Cash Management,
and Dreyfus California AMT-Free Municipal Cash Management is a non-diversified
fund, which means that the proportion of the Fund's assets that may be invested
in the securities of a single issuer is not limited by the Investment Company
Act of 1940, as amended (the "1940 Act"). Each Fund’s portfolio is
structured within the confines of Rule 2a-7 under the 1940 Act.
The Dreyfus Corporation (the
"Manager" or "Dreyfus") serves as each Fund's investment
adviser.
MBSC Securities Corporation
(the "Distributor") is the distributor of each Fund's shares.
Certain
Portfolio Securities
The following information
supplements (except as noted) and should be read in conjunction with the
relevant Fund's Prospectuses.
U.S. Treasury
Securities
. (Dreyfus Cash Management, Dreyfus Government Cash Management,
Dreyfus Government Prime Cash Management, Dreyfus Treasury & Agency Cash
Management, and Dreyfus Treasury Prime Cash Management (collectively, the
"Taxable Funds")) Each Taxable Fund may invest in U.S. Treasury
securities which include Treasury Bills, Treasury Notes and Treasury Bonds that
differ in their interest rates, maturities and times of issuance. Treasury
Bills have initial maturities of one year or less; Treasury Notes have initial
maturities of one to ten years; and Treasury Bonds generally have initial
maturities of greater than ten years.
U.S. Government
Securities
. (Dreyfus Cash Management, Dreyfus Government Cash Management,
Dreyfus Government Prime Cash Management, and Dreyfus Treasury & Agency
Cash Management) Each of these Funds may invest, in addition to U.S. Treasury
securities, in securities issued or guaranteed by the U.S. Government or its
agencies or instrumentalities. Some obligations issued or guaranteed by U.S.
Government agencies and instrumentalities are supported by the full faith and
credit of the U.S. Treasury; others by the right of the issuer to borrow from
the U.S. Treasury; others by discretionary authority of the U.S. Government to
purchase certain obligations of the agency or instrumentality; and others only
by the credit of the agency or instrumentality. These securities bear fixed,
floating or variable rates of interest. Interest may fluctuate based on
generally recognized reference rates or the relationship of rates. While the
U.S. Government currently provides financial support to such U.S.
Government-sponsored agencies or instrumentalities, no assurance can be given
that it will always do so, since it is not so obligated by law. Dreyfus
Treasury & Agency Cash Management may invest only
in
securities issued or guaranteed by the U.S. Government or its agencies or
instrumentalities supported by the full faith and credit of the U.S. Treasury.
Bank Obligations
.
(Dreyfus Cash Management) The Fund may purchase certificates of deposit
("CDs"), time deposits ("TDs"), bankers' acceptances and
other short-term obligations issued by domestic banks, foreign subsidiaries or
foreign branches of domestic banks, domestic and foreign branches of foreign
banks, domestic savings and loan associations and other banking institutions.
CDs are negotiable certificates
evidencing the obligation of a bank to repay funds deposited with it for a
specified period of time.
TDs are non-negotiable deposits
maintained in a banking institution for a specified period of time (in no event
longer than seven days) at a stated interest rate.
Bankers' acceptances are credit
instruments evidencing the obligation of a bank to pay a draft drawn on it by a
customer. These instruments reflect the obligation both of the bank and the
drawer to pay the face amount of the instrument upon maturity. The other
short-term obligations may include uninsured, direct obligations bearing fixed,
floating or variable interest rates.
The Fund may invest in TDs and
CDs issued by domestic banks, foreign subsidiaries or foreign branches of
domestic banks, and domestic and foreign branches of foreign banks. The Fund
is authorized to purchase CDs issued by banks, savings and loan associations
and similar institutions with less than $1 billion in assets, the deposits of
which are insured by the Federal Deposit Insurance Corporation
("FDIC"), provided the Fund purchases any such CD in a principal amount
of no more than an amount that would be fully insured by the Bank Insurance
Fund or the Savings Association Insurance Fund administered by the FDIC.
Interest payments on such a CD are not insured by the FDIC. The Fund would not
own more than one such CD per such issuer.
Domestic commercial banks
organized under Federal law are supervised and examined by the Comptroller of
the Currency and are required to be members of the Federal Reserve System and
to have their deposits insured by the FDIC. Domestic banks organized under
state law are supervised and examined by state banking authorities but are
members of the Federal Reserve System only if they elect to join. In addition,
state banks whose CDs may be purchased by the Fund are insured by the FDIC
(although such insurance may not be of material benefit to the Fund, depending
on the principal amount of the CDs of each bank held by the Fund) and are
subject to Federal examination and to a substantial body of Federal law and
regulation. As a result of Federal and state laws and regulations, domestic
branches of domestic banks whose CDs may be purchased by the Fund generally,
among other things, are required to maintain specified levels of reserves and
are subject to other supervision and regulation designed to promote financial
soundness. However, not all of such laws and regulations apply to the foreign
branches of domestic banks.
CDs held by the Fund, other
than those issued by banks with less than $1 billion in assets as described
above, do not benefit materially, and time deposits do not benefit at all, from
insurance from the Bank Insurance Fund or the Savings Association Insurance
Fund administered by the FDIC.
Obligations of foreign branches
and foreign subsidiaries of domestic banks, and domestic and foreign branches
of foreign banks may be general obligations of the parent banks in addition to
the issuing branch, or may be limited by the terms of a specific obligation and
governmental regulation. Such obligations are subject to different risks than
are those of domestic banks. These risks include foreign economic and
political developments, foreign governmental restrictions that may adversely
affect payment of principal and interest on the obligations, foreign exchange
controls and foreign withholding and other taxes on interest income. Foreign
branches and subsidiaries are not necessarily subject to the same or similar
regulatory requirements that apply to domestic banks, such as mandatory reserve
requirements, loan limitations, and accounting,
auditing and financial recordkeeping requirements. In addition, less
information may be publicly available about a foreign branch of a domestic bank
or about a foreign bank than about a domestic bank.
Obligations of U.S. branches of foreign banks may be general obligations of the parent bank in addition to
the issuing branch, or may be limited by the terms of a specific obligation or
by Federal or state regulation as well as governmental action in the country in
which the foreign bank has its head office. A domestic branch of a foreign
bank with assets in excess of $1 billion may or may not be subject to reserve
requirements imposed by the Federal Reserve System or by the state in which the
branch is located if the branch is licensed in that state.
In addition, Federal branches
licensed by the Comptroller of the Currency and branches licensed by certain
states ("State Branches") may be required to: (1) pledge to the
regulator, by depositing assets with a designated bank within the state, a
certain percentage of their assets as fixed from time to time by the
appropriate regulatory authority; and (2) maintain assets within the state in
an amount equal to a specified percentage of the aggregate amount of
liabilities of the foreign bank payable at or through all of its agencies or
branches within the state.
In view of the foregoing
factors associated with the purchase of CDs and TDs issued by foreign branches
or foreign subsidiaries of domestic banks, or by foreign branches or domestic
branches of foreign banks, the Manager carefully evaluates such investments on
a case‑by‑case basis.
Commercial Paper
.
(Dreyfus Cash Management) The Fund may purchase commercial paper consisting of
short-term, unsecured promissory notes issued to finance short-term credit
needs. The commercial paper purchased by each Fund will consist only of direct
obligations issued by domestic and foreign entities. The other corporate
obligations in which the Fund may invest consist of high quality, U.S.
dollar-denominated short-term bonds and notes (including variable amount master
demand notes).
Floating and Variable Rate
Obligations
. (Dreyfus Cash Management and Tax Exempt Funds) Each of these
Funds may purchase floating and variable rate demand notes and bonds, which
permit the holder to demand payment of principal at any time, or at specified
intervals, in each case upon not more than 30 days' notice. Variable rate
demand notes include master demand notes which are obligations that permit the
Fund to invest fluctuating amounts, at varying rates of interest, pursuant to
direct arrangements between the Fund, as lender, and the borrower. These
obligations permit daily changes in the amounts borrowed. Because these
obligations are direct lending arrangements between the lender and borrower, it
is not contemplated that such instruments generally will be traded, and there
generally is no established secondary market for these obligations, although
they are redeemable at face value, plus accrued interest. Accordingly, where
these obligations are not secured by letters of credit or other credit support
arrangements, the Fund's right to redeem is dependent on the ability of the
borrower to pay principal and interest on demand.
Frequently, such obligations
are secured by letters of credit or other credit support arrangements provided
by banks. Changes in the credit quality of banks and other financial
institutions that provide such credit or liquidity enhancements to the Fund's
portfolio securities could cause losses to the Fund and affect its share
price. Each obligation purchased by the Fund will meet the quality criteria
established for the purchase of Municipal Obligations.
Asset-Backed Securities
.
(Dreyfus Cash Management) The Fund may purchase asset-backed securities, which
are securities issued by special purpose entities whose primary assets consist
of a pool of mortgages, loans, receivables or other assets. Payment of
principal and interest may depend largely on the cash flows generated by the
assets backing the securities and, in certain cases, supported by letters of
credit, surety bonds or other forms of credit or liquidity enhancements. The
value of these asset-backed
securities also may be
affected by the creditworthiness of the servicing agent for the pool of assets,
the originator of the loans or receivables or the financial institution
providing the credit support.
Repurchase Agreements
.
(Dreyfus Cash Management, Dreyfus Government Cash Management, and Dreyfus
Treasury & Agency Cash Management) Each of these Funds may enter into
repurchase agreements. In a repurchase agreement, the Fund buys, and the
seller agrees to repurchase, a security at a mutually agreed upon time and
price. The repurchase agreement thereby determines the yield during the
purchaser's holding period, while the seller's obligation to repurchase is
secured by the value of the underlying security. The Fund's custodian or
sub-custodian engaged in connection with tri-party repurchase agreement
transactions will have custody of, and will segregate, securities acquired by such
Fund under a repurchase agreement. In connection with its third-party
repurchase transactions, the Fund will engage only eligible sub-custodians that
meet the requirements set forth in Section 17(f) of the 1940 Act. Repurchase
agreements are considered by the staff of the Securities and Exchange
Commission ("SEC") to be loans by the Fund that enters into them.
Repurchase agreements could involve risks in the event of a default or
insolvency of the other party to the agreement, including possible delays or
restrictions upon a Fund's ability to dispose of the underlying securities.
Each of these Funds may engage in repurchase agreement transactions that are
collateralized by U.S. Government securities (which are deemed to be
"collateralized fully" pursuant to the 1940 Act) or, except with
respect to Dreyfus Treasury & Agency Cash Management and Dreyfus Government
Cash Management, collateralized by securities other than U.S. Government
securities, such as corporate bonds, asset-backed securities and privately-issued
mortgage-related securities, of investment grade or below investment grade
credit quality ("credit collateral"). Repurchase agreement
transactions engaged in by Dreyfus Treasury & Agency Cash Management will
be collateralized only by U.S. Treasury securities and securities issued by the
Government National Mortgage Association. Transactions that are collateralized
fully enable the Fund to look to the collateral for diversification purposes
under the 1940 Act. Conversely, transactions secured with credit collateral
require the Fund to look to the counterparty to the repurchase agreement for
determining diversification. Because credit collateral is subject to certain
credit and liquidity risks that U.S. Government securities are not subject to,
the amount of collateral posted in excess of the principal value of the
repurchase agreement is expected to be higher in the case of repurchase
agreements secured with credit collateral compared to repurchase agreements
secured with U.S. Government securities. Fixed income securities rated
Baa/BBB or higher by Moody's Investors Service, Inc. ("Moody's"),
Standard & Poor's Ratings Services ("S&P") or Fitch Ratings
("Fitch") are known as investment grade bonds. Investment grade and
below investment grade bonds involve degrees of credit risks, which relate to
the likelihood that the bond issuer will pay interest and repay principal on a
timely basis. Fixed income securities rated Ba/BB or lower by Moody's, S&P
and Fitch are regarded as below investment grade (i.e., "junk" bonds)
and are considered speculative in terms of the issuer's creditworthiness. In
an attempt to reduce the risk of incurring a loss on a repurchase agreement,
the Fund will require that additional securities be deposited with it if the
value of the securities purchased should decrease below resale price.
Municipal Obligations
.
(Dreyfus Municipal Cash Management Plus, Dreyfus Tax Exempt Cash Management,
Dreyfus New York Municipal Cash Management, Dreyfus New York AMT-Free Municipal
Cash Management and Dreyfus California AMT-Free Municipal Cash Management
(collectively, the "Tax Exempt Funds")) As a fundamental policy,
each Tax Exempt Fund normally invests at least 80% of the value of its net
assets (plus any borrowings for investment purposes) in debt securities issued
by states, territories and possessions of the United States and the District of
Columbia and their political subdivisions, agencies and instrumentalities, or
multistate agencies or authorities, and certain other specified securities, the
interest from which is, in the opinion of bond counsel to the issuer, exempt
from Federal and, with respect to Dreyfus New York Municipal Cash Management
and Dreyfus New York AMT-Free Municipal Cash Management, New York State and New
York City, and, with respect to Dreyfus California AMT-Free Municipal Cash
Management, California State, personal income taxes (collectively,
"Municipal Obligations"). If New York Municipal Obligations are at
any time unavailable for investment by Dreyfus New York Municipal Cash
Management or Dreyfus New York AMT-Free Municipal Cash Management, or, if
California Municipal Obligations are at any time
unavailable
for investment by Dreyfus California AMT-Free Municipal Cash Management, the
Fund will invest temporarily in other Municipal Obligations. Municipal
Obligations generally include debt obligations issued to obtain funds for
various public purposes as well as certain industrial development bonds issued
by or on behalf of public authorities. Municipal Obligations are classified as
general obligation bonds, revenue bonds and notes. General obligation bonds
are secured by the issuer's pledge of its full faith, credit and taxing power
for the payment of principal and interest. Revenue bonds are payable from the
revenue derived from a particular facility or class of facilities or, in some
cases, from the proceeds of a special excise or other specific revenue source,
but not from the general taxing power. Tax exempt industrial development
bonds, in most cases, are revenue bonds that do not carry the pledge of the
credit of the issuing municipality, but generally are guaranteed by the
corporate entity on whose behalf they are issued. Notes are short-term
instruments which are obligations of the issuing municipalities or agencies and
are sold in anticipation of a bond sale, collection of taxes or receipt of
other revenues. Municipal Obligations include municipal lease/purchase
agreements which are similar to installment purchase contracts for property or
equipment issued by municipalities. Municipal Obligations bear fixed, floating
or variable rates of interest.
For the purpose of
diversification under the 1940 Act, the identification of the issuer of
Municipal Obligations depends on the terms and conditions of the security.
When the assets and revenues of an agency, authority, instrumentality or other
political subdivision are separate from those of the government creating the
subdivision and the security is backed only by the assets and revenues of the
subdivision, such subdivision would be deemed to be the sole issuer.
Similarly, in the case of an industrial development bond, if the bond is backed
only by the assets and revenues of the non-governmental user, then such
non-governmental user would be deemed to be the sole issuer. If, however, in
either case, the creating government or some other entity guarantees a
security, such a guaranty would be considered a separate security and would be
treated as an issue of such government or other entity.
The yields on Municipal
Obligations are dependent on a variety of factors, including general economic
and monetary conditions, money market factors, conditions in the Municipal
Obligations market, size of a particular offering, maturity of the obligation
and rating of the issue.
Municipal Obligations include
certain private activity bonds (a type of revenue bond), the income from which
is subject to the alternative minimum tax (the "AMT"). Dreyfus
Municipal Cash Management Plus and Dreyfus New York Municipal Cash Management
may invest without limitation, and Dreyfus Tax Exempt Cash Management may
invest up to 20% of its assets, in such Municipal Obligations if the Manager
determines that their purchase is consistent with the Fund's investment
objective. Dreyfus California AMT-Free Municipal Cash Management and Dreyfus
New York AMT-Free Municipal Cash Management will not purchase Municipal
Obligations the income from which is subject to the AMT.
Derivative Products
.
(Tax Exempt Funds) Each Tax Exempt Fund may purchase various derivative
products whose value is tied to underlying Municipal Obligations. A Tax Exempt
Fund will purchase only those derivative products that are consistent with its
investment objective and policies and comply with the quality, maturity and
diversification standards of Rule 2a-7 under the 1940 Act. The principal types
of derivative products are described below.
1.
Tax Exempt Participation Interests
. Tax exempt participation
interests (such as industrial development bonds and municipal lease/purchase
agreements) give the Fund an undivided interest in a Municipal Obligation in
the proportion that the Fund's participation interest bears to the total
principal amount of the Municipal Obligation. Participation interests may have
fixed, floating or variable rates of interest and are frequently backed by an
irrevocable letter of credit or guarantee of a bank.
2.
Tender
Option Bonds
. Tender option bonds grant the holder an option to tender an
underlying Municipal Obligation at par plus accrued interest at specified
intervals to a financial institution that acts as a liquidity provider. The
holder of a tender option bond effectively holds a demand obligation that bears
interest at the prevailing short-term tax exempt rate.
3.
Custodial Receipts
. In a typical custodial receipt arrangement,
an issuer of a Municipal Obligation deposits it with a custodian in exchange
for two classes of custodial receipts. One class has the characteristics of a
typical auction rate security, where at specified intervals its interest rate
is adjusted and ownership changes. The other class's interest rate also is
adjusted, but inversely to changes in the interest rate of the first class.
4.
Structured Notes
. Structured notes typically are purchased in
privately negotiated transactions from financial institutions, and, therefore,
may not have an active trading market. When the Fund purchases a structured
note, it will make a payment of principal to the counterparty. Some structured
notes have a guaranteed repayment of principal while others place a portion (or
all) of the principal at risk. The possibility of default by the counterparty
or its credit provider may be greater for structured notes than for other types
of money market instruments.
Ratings of Municipal
Obligations
. (Tax Exempt Funds) Each Tax Exempt Fund may invest only in
those Municipal Obligations which are rated in one of the two highest rating
categories for debt obligations by at least two rating organizations (or one
rating organization if the instrument was rated by only one such organization)
or, if unrated, are of comparable quality as determined in accordance with
procedures established by the Fund's Board.
The average distribution of
investments (at value) in Municipal Obligations (including notes) by ratings
for the fiscal year ended January 31, 2011, computed on a monthly basis, for
each Tax Exempt Fund, was as follows:
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Dreyfus
Municipal
Cash
Management Plus
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Dreyfus
Tax Exempt Cash Management
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Dreyfus
New York Municipal Cash Management
|
Dreyfus
California AMT-Free Municipal Cash Management
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Dreyfus
New York AMT-Free Municipal Cash Management
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F-1+/F-1
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VMIG 1/MIG 1, P-1
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SP-1+/SP-1, A-1+/A-1
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91.5%
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95.3%
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79.9%
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98.1%
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83.6%
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F-2+/F-2
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VMIG 2/MIG 2, P-2
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SP-2+/SP-2, A-2+/A-2
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--
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--
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0.3%
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--
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--
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AAA/AAA
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Aaa/Aa/A
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AAA/AA/A
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3.6%
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4.6%
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12.0%
|
1.8%
|
2.4%
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Not Rated
|
Not Rated
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Not Rated
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4.9%*
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0.1%*
|
7.8%*
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0.1%*
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14.0%*
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100.0%
|
100.0%
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100.0%
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100.0%
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100.0%
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* Included in the Not Rated
category are securities which, while not rated, have been determined by the
Manager to be of comparable quality to securities in the VMIG 1/MIG 1 or
SP-1+/SP-1 rating categories.
If, subsequent to its purchase
by the Fund, (a) an issue of rated Municipal Obligations ceases to be rated in
the highest rating category by at least two rating organizations (or one rating
organization if the instrument was rated by only one such organization) or the
Fund's Board determines that it is no longer of comparable quality or (b) the
Manager becomes aware that any portfolio security not so highly rated or any
unrated security has been given a rating by any rating organization below the
rating organization's second highest rating category, the Fund's Board will reassess
promptly whether such security presents minimal credit risk and will cause the
Fund to take such action as it determines is in the best interest of the Fund
and its shareholders; provided that the reassessment required by clause (b) is
not
required if the portfolio security is disposed of
or matures within five business days of the Manager becoming aware of the new
rating and the Fund's Board is subsequently notified of the Manager's actions.
To the extent the ratings given
by Moody's, S&P or Fitch or such other for Municipal Obligations change as
a result of changes in such organizations or their rating systems, each Fund
will attempt to use comparable ratings as standards for its investments in
accordance with the investment policies described in the Funds' Prospectuses
and this Statement of Additional Information. The ratings of Moody's, S&P
and Fitch represent their opinions as to the quality of the Municipal
Obligations which they undertake to rate. It should be emphasized, however,
that ratings are relative and subjective and are not absolute standards of
quality. Although these ratings may be an initial criterion for selection of
portfolio investments, the Manager also will evaluate these securities and the
creditworthiness of the issuers of such securities based upon financial and
other available information.
As of June 1, 2011, the Board
had not designated any nationally recognized statistical ratings organization
whose credit ratings with respect to any obligor or security will be used by a
Fund to determine whether a security is an “eligible security” pursuant to Rule
2a-7.
Taxable Investments
.
(Tax Exempt Funds) From time to time, on a temporary basis other than for
temporary defensive purposes (but not to exceed 20% of the value of the Fund's
net assets) or for temporary defensive purposes, each Tax Exempt Fund may
invest in taxable short-term investments ("Taxable Investments")
consisting of: notes of issuers having, at the time of purchase, a quality
rating within the two highest grades of Moody's, S&P or Fitch; obligations
of the U.S. Government, its agencies or instrumentalities; commercial paper
rated not lower than P-1 by Moody's, A-1 by S&P or F-1 by Fitch; CDs of
U.S. domestic banks, including foreign branches of domestic banks, with assets
of $1 billion or more; TDs; bankers' acceptances and other short-term bank
obligations; and repurchase agreements in respect of any of the foregoing.
Dividends paid by the Fund that are attributable to income earned by the Fund
from Taxable Investments will be taxable to investors. Except for temporary
defensive purposes, at no time will more than 20% of the value of the Fund's
net assets be invested in Taxable Investments and, with respect to Dreyfus Tax
Exempt Cash Management, Municipal Obligations the interest from which gives
rise to a preference item for the purpose of the AMT. If the Fund purchases
Taxable Investments, it will value them using the amortized cost method and
comply with the provisions of Rule 2a-7 relating to purchases of taxable
instruments. When Dreyfus New York Municipal Cash Management or Dreyfus New
York AMT-Free Municipal Cash Management has adopted a temporary defensive
position, including when acceptable New York Municipal Obligations are
unavailable for investment by Dreyfus New York Municipal Cash Management or
Dreyfus New York AMT-Free Municipal Cash Management, in excess of 20% of each
such Fund's assets may be invested in securities that are not exempt from New
York State and New York City income tax. When Dreyfus California AMT-Free
Municipal Cash Management has adopted a temporary defensive position, including
when acceptable California Municipal Obligations are unavailable for investment
by Dreyfus California AMT-Free Municipal Cash Management, in excess of 20% of
such Fund's assets may be invested in securities that are not exempt from California State income tax. Under normal market conditions, none of the Funds anticipate
that more than 5% of the value of its total assets will be invested in any one
category of Taxable Investments.
Illiquid Securities
.
(All Funds) Each Fund may invest up to 5% of the value of its net assets in
securities as to which a liquid trading market does not exist, provided such
investments are consistent with the Fund's investment objective. These
securities may include securities that are not readily marketable, such as
securities that are subject to legal or contractual restrictions on resale, and
repurchase agreements providing for settlement in more than seven days after
notice. As to these securities, the Fund is subject to a risk that should the
Fund desire to sell them when a ready buyer is not available at a price the
Fund deems representative of their value, the value of the Fund's net assets
could be adversely affected.
Investment Techniques
The following information
supplements (except as noted) and should be read in conjunction with the
relevant Fund's Prospectuses. A Tax Exempt Fund's use of certain of the
investment techniques described below may give rise to taxable income.
Borrowing Money
. (All
Funds) Each of Dreyfus Cash Management, Dreyfus Government Cash Management,
Dreyfus Treasury & Agency Cash Management, Dreyfus New York Municipal Cash
Management, Dreyfus California AMT-Free Municipal Cash Management and Dreyfus
New York AMT-Free Municipal Cash Management is permitted to borrow to the
extent permitted under the 1940 Act, which permits an investment company to
borrow in an amount up to 33-1/3% of the value of its total assets. Each of
these Funds, however, currently intends only to borrow money from banks for
temporary or emergency (not leveraging) purposes. Each other Fund may borrow
money from banks for temporary or emergency (not leveraging) purposes in an
amount up to 15% of the value of its total assets (including the amount
borrowed) valued at the lesser of cost or market, less liabilities (not
including the amount borrowed) at the time the borrowing is made. While such
borrowings exceed 5% of the value of a Fund's total assets, the Fund will not
make any additional investments.
Lending Portfolio Securities
.
(Dreyfus Government Cash Management and Dreyfus Government Prime Cash
Management) Each of these Funds may lend securities from its portfolio to
brokers, dealers and other financial institutions needing to borrow securities
to complete certain transactions. In connection with such loans, the Fund
remains the owner of the loaned securities and continues to be entitled to
payments in amounts equal to the interest, dividends or other distributions payable
on the loaned securities. The Fund also has the right to terminate a loan at
any time. The Fund may call the loan to vote proxies if a material issue
affecting the Fund's investment is to be voted upon. Loans of portfolio
securities may not exceed 33-1/3% (20% as to Dreyfus Government Cash
Management) of the value of the Fund's total assets (including the value of all
assets received as collateral for the loan). The Fund will receive collateral
consisting of cash or U.S. Treasury securities, which will be maintained at all
times in an amount equal to at least 100% of the current market value of the
loaned securities. If the collateral consists of securities, the borrower will
pay the Fund a loan premium fee. If the collateral consists of cash, the Fund
will reinvest the cash and pay the borrower a pre-negotiated fee or
"rebate" from any return earned on the investment. The Fund may
participate in a securities lending program operated by The Bank of New York
Mellon, as lending agent (the
″
Lending
Agent
″
). The
Lending Agent will receive a percentage of the total earnings of the Fund
derived from lending its portfolio securities. Should the borrower of the
securities fail financially, the Fund may experience delays in recovering the
loaned securities or exercising its rights in the collateral. Loans are made
only to borrowers that are deemed by the Manager to be of good financial
standing. In a loan transaction, the Fund will also bear the risk of any
decline in value of securities acquired with cash collateral. A Fund will
minimize this risk by limiting the investment of cash collateral to high
quality short term instruments of the type in which the Fund may invest or,
except for Dreyfus Government Prime Cash Management, repurchase agreements.
Forward Commitments
.
(All Funds) Each Fund may purchase portfolio securities on a forward
commitment or when-issued basis, which means that delivery and payment take
place in the future after the date of the commitment to purchase. The payment
obligation and the interest rate receivable on a forward commitment or
when-issued security are fixed when the Fund enters into the commitment, but
the Fund does not make payment until it receives delivery from the
counterparty. The Fund will commit to purchase such securities only with the
intention of actually acquiring the securities, but the Fund may sell these
securities before the settlement date if it is deemed advisable. The Fund will
segregate permissible liquid assets at least equal at all times to the amount
of the purchase commitment.
Securities purchased on a
forward commitment or when-issued basis are subject to changes in value
(generally changing in the same way, i.e., appreciating when interest rates
decline and depreciating when interest rates rise) based upon the public's
perception of the creditworthiness of the issuer and
changes,
real or anticipated, in the level of interest rates. Securities purchased on a
when-issued basis may expose the Fund to risks because they may experience such
fluctuations prior to their actual delivery. Purchasing securities on a
forward commitment or when-issued basis can involve the additional risk that
the yield available in the market when the delivery takes place actually may be
higher than that obtained in the transaction itself. Purchasing securities on
a forward commitment or when-issued basis when the Fund is fully or almost
fully invested may result in greater potential fluctuation in the value of the
Fund's net assets and its net asset value per share.
Stand-By Commitments
.
(Tax Exempt Funds) Each Tax Exempt Fund may acquire "stand-by
commitments" with respect to Municipal Obligations held in its portfolio.
Under a stand-by commitment, the Fund obligates a broker, dealer or bank to
repurchase, at the Fund's option, specified securities at a specified price
and, in this respect, stand-by commitments are comparable to put options. The
exercise of a stand-by commitment, therefore, is subject to the ability of the
seller to make payment on demand. The Fund will acquire stand-by commitments
solely to facilitate its portfolio liquidity and does not intend to exercise
its rights thereunder for trading purposes. The Fund may pay for stand-by
commitments if such action is deemed necessary, thus increasing to a degree the
cost of the underlying Municipal Obligation and similarly decreasing such
security's yield to investors. Gains realized in connection with stand-by
commitments will be taxable.
Interfund
Borrowing and Lending Program.
(Dreyfus Cash Management, Dreyfus Government Cash
Management, and Dreyfus Treasury & Agency Cash Management only)
Pursuant to an exemptive order issued by the SEC, the Fund
may lend money to, and/or borrow money from, certain other funds advised by
Dreyfus or its affiliates. All interfund loans and borrowings must comply with
the conditions set forth in the exemptive order, which are designed to ensure
fair and equitable treatment of all participating funds. The Fund’s
participation in the Interfund Borrowing and Lending Program must be consistent
with its investment policies and limitations. The Fund will borrow through the Interfund
Borrowing and Lending Program only when the costs are equal to or lower than
the costs of bank loans, and will lend through the Program only when the
returns are higher than those available from an investment in repurchase
agreements. Interfund loans and borrowings are normally expected to extend
overnight, but can have a maximum duration of seven days. Loans may be called
on one day’s notice. Any delay in repayment to a lending fund could result in a
lost investment opportunity or additional borrowing costs.
Certain Investment
Considerations and Risks
General
. Each Fund
attempts to increase yields by trading to take advantage of short-term market
variations. This policy is expected to result in high portfolio turnover
but should not adversely affect the Funds since the Funds usually do not pay
brokerage commissions when purchasing short-term obligations. The value
of the portfolio securities held by a Fund will vary inversely to changes in
prevailing interest rates. Thus, if interest rates have increased from
the time a security was purchased, such security, if sold, might be sold at a
price less than its cost. Similarly, if interest rates have declined from
the time a security was purchased, such security, if sold, might be sold at a
price greater than its purchase cost. In either instance, if the security
was purchased at face value and held to maturity, no gain or loss would be
realized.
Bank Securities
.
(Dreyfus Cash Management) To the extent of the Fund's investments are
concentrated in the banking industry, the Fund will have correspondingly
greater exposure to the risk factors which are characteristic of such
investments. Sustained increases in interest rates can adversely affect the
availability or liquidity and cost of capital funds for a bank's lending
activities, and a deterioration in general economic conditions could increase
the exposure to credit losses. In addition, the value of and the investment
return on the Fund's shares could be affected by economic or regulatory
developments in or related to the banking industry, which industry also is
subject to the effects of competition within the banking industry as well as
with other types of financial institutions. The Fund,
however,
will seek to minimize its exposure to such risks by investing only in debt
securities which are determined to be of the highest quality.
Foreign Securities
.
(Dreyfus Cash Management) The Fund may invest in securities issued by foreign
subsidiaries or foreign branches of domestic banks, domestic and foreign
branches of foreign banks and commercial paper issued by foreign issuers.
Accordingly, the Fund may be subject to additional investment risks with respect
to those securities that are different in some respects from those incurred by
a money market fund which invests only in debt obligations of U.S. domestic
issuers, although such obligations may be higher yielding when compared to the
securities of U.S. domestic issuers. Such risks include possible future
political and economic developments, seizure or nationalization of foreign
deposits, imposition of foreign withholding taxes on interest income payable on
the securities, establishment of exchange controls or adoption of other foreign
governmental restrictions which might adversely affect the payment of principal
and interest on these securities.
Investing in Municipal
Obligations
. (Tax Exempt Funds) Each Tax Exempt Fund may invest more than
25% of the value of its total assets in Municipal Obligations which are related
in such a way that an economic, business or political development or change
affecting one such security also would affect the other securities; for
example, securities the interest upon which is paid from revenues of similar
types of projects. As a result, the Tax Exempt Funds may be subject to greater
risk as compared to municipal money market funds that do not follow this
practice.
Certain municipal
lease/purchase obligations in which each Tax Exempt Fund may invest may contain
"non-appropriation" clauses which provide that the municipality has
no obligation to make lease payments in future years unless money is
appropriated for such purpose on a yearly basis. Although "non-appropriation"
lease/purchase obligations are secured by the leased property, disposition of
the leased property in the event of foreclosure might prove difficult. In
evaluating the credit quality of a municipal lease/purchase obligation that is
unrated, the Manager will consider, on an ongoing basis, a number of factors
including the likelihood that the issuing municipality will discontinue
appropriating funds for the leased property.
Certain provisions in the
Internal Revenue Code of 1986, as amended (the "Code"), relating to
the issuance of Municipal Obligations may reduce the volume of Municipal
Obligations qualifying for Federal tax exemption. One effect of these
provisions could be to increase the cost of the Municipal Obligations available
for purchase by the Fund and thus reduce available yield. Shareholders should
consult their tax advisers concerning the effect of these provisions on an
investment in the Fund. Proposals that may restrict or eliminate the income
tax exemption for interest on Municipal Obligations may be introduced in the
future. If any such proposal were enacted that would reduce the availability
of Municipal Obligations for investment by the Fund so as to adversely affect
Fund shareholders, the Fund would reevaluate its investment objective and
policies and submit possible changes in the Fund's structure to shareholders
for their consideration. If legislation were enacted that would treat a type
of Municipal Obligation as taxable, the Fund would treat such security as a
permissible Taxable Investment within the applicable limits set forth herein.
Investing in New York Municipal Obligations
. (Dreyfus New York Municipal Cash Management and
Dreyfus New York AMT-Free Municipal Cash Management) Since Dreyfus New York
Municipal Cash Management and Dreyfus New York AMT-Free Municipal Cash
Management are concentrated in securities issued by New York or entities within
New York, an investment in one of these Funds may involve greater risk than
investments in certain other types of municipal money market funds. You should
consider carefully the special risks inherent in these Funds' investment in New
York Municipal Obligations. You should review the information in
"Appendix C" which provides a brief summary of special investment considerations
and risk factors relating to investing in New York Municipal Obligations.
Investing
in California Municipal Obligations
. (Dreyfus California AMT-Free
Municipal Cash Management) Since Dreyfus California AMT-Free Municipal Cash
Management is concentrated in securities issued by California or entities
within California, an investment in the Fund may involve greater risk than
investments in certain other types of municipal money market funds. You should
consider carefully the special risks inherent in the Fund's investment in
California Municipal Obligations. You should review the information in
"Appendix D" which provides a brief summary of special investment
considerations and risk factors relating to investing in California Municipal
Obligations.
Simultaneous Investments
.
(All Funds) Investment decisions for each Fund are made independently from
those of the other investment companies advised by the Manager. If, however,
such other investment companies desire to invest in, or dispose of, the same
securities as a Fund, the Manager will ordinarily seek to aggregate (or
"bunch") orders that are placed or received concurrently for more
than one investment company and available investments or opportunities for
sales will be allocated equitability to each investment company. In some cases,
this procedure may adversely affect the size of the position obtained for or
disposed of by the Fund or the price paid or received by the Fund.
Investment
Restrictions
Each Fund's investment
objective is a fundamental policy, which cannot be changed without approval by
the holders of a majority (as defined in the 1940 Act) of the Fund's
outstanding voting securities. In addition, the Funds have adopted certain
investment restrictions as fundamental policies and certain other investment
restrictions as non-fundamental policies, as described below.
Dreyfus Cash Management
.
Dreyfus Cash Management has adopted investment restrictions numbered 1 through 9
as fundamental policies. Investment restrictions numbered 10 through 12 are
not fundamental policies and may be changed by vote of a majority of the Fund's
Board members at any time.
Except as otherwise
permitted by the 1940 Act, or interpretations or modifications by, or exemptive
or other relief from, the SEC or other authority with appropriate jurisdiction,
and disclosed to investors, the Fund may not:
1.
Borrow money, except to the extent permitted under the 1940 Act (which
currently limits borrowing to no more than 33-1/3% of the value of the Fund’s
total assets).
2.
Sell securities short or purchase securities on margin.
3.
Write or purchase put or call options or combinations thereof.
4.
Underwrite the securities of other issuers.
5.
Purchase or sell real estate, real estate investment trust securities,
commodities, or oil and gas interests.
6.
Lend any securities or make loans to others,
except to the extent permitted under the 1940 Act (which currently limits such
loans to no more than 33-1/3% of the value of the Fund's total assets), and
except as otherwise permitted by interpretations or modifications by, or
exemptive or other relief from, the SEC or other authority with appropriate
jurisdiction, and disclosed to investors. For purposes of this Investment
Restriction, the purchase of debt obligations (including acquisitions of loans,
loan participations or other forms of debt instruments) and the entry into
repurchase agreements shall not constitute loans by the Fund. Any loans of
portfolio securities will be made according to guidelines established by the
SEC and the Fund's Board.
7.
Invest more than 15% of its assets in the obligations of any one bank,
or invest more than 5% of its assets in the obligations of any other issuer,
except that up to 25% of the value of the Fund's
total
assets may be invested without regard to any such limitations. Notwithstanding
the foregoing, to the extent required by the rules of the SEC, the Fund will
not invest more than 5% of its assets in the obligations of any one bank.
8.
Invest less than 25% of its assets in securities issued by banks or
invest more than 25% of its assets in the securities of issuers in any other
industry, provided that there shall be no limitation on the purchase of
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities. Notwithstanding the foregoing, for temporary defensive
purposes the Fund may invest less than 25% of its assets in bank obligations.
9.
Invest in companies for the purpose of exercising control.
10.
Purchase securities of other investment
companies, except to the extent permitted under the 1940 Act.
11.
Pledge, hypothecate, mortgage or otherwise encumber its assets, except
to the extent necessary to secure permitted borrowings.
12.
Enter into repurchase agreements providing for settlement in more than
seven days after notice or purchase securities which are illiquid if, in the
aggregate, more than 5% of the value of the Fund's net assets would be so
invested.
* * * *
Dreyfus Government Cash
Management
. Under normal circumstances, Dreyfus Government Cash Management
invests solely in securities issued or guaranteed as to principal and interest
by the U.S. Government or its agencies or instrumentalities, and repurchase
agreements. The Fund has adopted a policy to provide its shareholders with at
least 60 days' prior notice of any change in its policy to so invest its
assets. In addition, Dreyfus Government Cash Management has adopted investment
restrictions numbered 1 through 9 as fundamental policies. Investment
restrictions numbered 10 through 12 are not fundamental policies and may be
changed by vote of a majority of the Company's Board members at any time.
Except as otherwise permitted by the 1940 Act, or
interpretations or modifications by, or exemptive or other relief from, the SEC
or other authority with appropriate jurisdiction, and disclosed to investors,
the Fund may not:
1.
Purchase common stocks, preferred stocks, warrants or other equity
securities, or purchase corporate bonds or debentures, state bonds, municipal
bonds or industrial revenue bonds.
2.
Borrow money, except to the extent permitted under the 1940 Act (which
currently limits borrowing to no more than 33-1/3% of the value of the Fund’s
total assets).
3.
Sell securities short or purchase securities on margin.
4.
Write or purchase put or call options or combinations thereof.
5.
Underwrite the securities of other issuers.
6.
Purchase or sell real estate, real estate investment trust securities,
commodities, or oil and gas interests.
7.
Lend any securities or make loans to others,
except to the extent permitted under the 1940 Act (which currently limits such
loans to no more than 33-1/3% of the value of the Fund's total assets), and
except as otherwise permitted by interpretations or modifications by, or
exemptive or other relief
from, the SEC or other
authority with appropriate jurisdiction, and disclosed to investors. For
purposes of this Investment Restriction, the purchase of debt obligations
(including acquisitions of loans, loan participations or other forms of debt
instruments) and the entry into repurchase agreements shall not constitute
loans by the Fund. Any loans of portfolio securities will be made according to
guidelines established by the SEC and the Fund's Board.
8.
Invest more than 25% of its total assets in the securities of issuers in
any single industry, provided that there shall be no such limitation on
investments in obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities.
9.
Invest in companies for the purpose of exercising control.
10.
Purchase securities of other investment
companies, except to the extent permitted under the 1940 Act.
11.
Pledge, hypothecate, mortgage or otherwise encumber its assets, except
to the extent necessary to secure permitted borrowings.
12.
Enter into repurchase agreements providing for settlement in more than
seven days after notice or purchase securities which are illiquid, if, in the
aggregate, more than 5% of the value of the Fund's net assets would be so
invested.
* * * *
Dreyfus Government Prime
Cash Management
. Under normal circumstances, Dreyfus Government Prime Cash
Management invests solely in securities issued or guaranteed as to principal
and interest by the U.S. Government or its agencies or instrumentalities. The
Fund has adopted a policy to provide its shareholders with at least 60 days'
prior notice of any change in its policy to so invest its assets. In addition,
Dreyfus Government Prime Cash Management has adopted investment restrictions
numbered 1 through 6 as fundamental policies. Investment restrictions numbered
7 through 11 are not fundamental policies and may be changed by vote of a
majority of the Company's Board members at any time. The Fund may not:
1.
Borrow money, except to the extent permitted under the 1940 Act (which
currently limits borrowings to up to 33-1/3% of the value of the Fund's total
assets).
2.
Purchase securities on margin.
3.
Act as underwriter of securities of other issuers, except to the extent
the Fund may be deemed an underwriter under the Securities Act of 1933, as
amended, by virtue of disposing of portfolio securities.
4.
Purchase or sell real estate, real estate investment trust securities,
commodities, or oil and gas interests, but the Fund may purchase and sell
securities that are secured by real estate or issued by companies that deal in
real estate.
5.
Make loans to others, except through the purchase of debt obligations
referred to in the Prospectus. However, the Fund may lend its portfolio
securities in an amount not to exceed 33-1/3% of the value of its total
assets. Any loans of portfolio securities will be made in accordance with
guidelines established by the SEC and the Company's Board.
6.
Invest more than 25% of its total assets in the securities of issuers in
any single industry, provided that there shall be no such limitation on
investments in obligations issued or guaranteed by the U.S. Government, it
agencies or instrumentalities.
7.
Purchase common stocks, preferred stocks, warrants or other equity
securities.
8.
Write or purchase put or call options or combinations thereof, except
that the Fund may purchase and sell "obligations with puts attached"
in accordance with its stated investment policies.
9.
Pledge, hypothecate, mortgage or otherwise encumber its assets, except
to the extent necessary to secure permitted borrowings.
10.
Enter into repurchase agreements.
11.
Purchase securities which are illiquid if, in the aggregate, more than 5%
of the value of the Fund's net assets would be so invested.
* * * *
Dreyfus Treasury &
Agency Cash Management
. Under normal circumstances, Dreyfus Treasury &
Agency Cash Management invests solely in securities issued or guaranteed as to
principal and interest by the U.S. Government and repurchase agreements
collateralized by such securities. The Fund has adopted a policy to provide
its shareholders with at least 60 days' prior notice of any change in its
policy to so invest its assets. In addition, Dreyfus Treasury & Agency
Cash Management has adopted investment restrictions numbered 1 through 8 as
fundamental policies. Investment restrictions numbered 9 through 11 are not
fundamental policies and may be changed by vote of a majority of the Fund's
Board members at any time.
Except as otherwise
permitted by the 1940 Act, or interpretations or modifications by, or exemptive
or other relief from, the SEC or other authority with appropriate jurisdiction,
and disclosed to investors, the Fund may not:
1.
Purchase common stocks, preferred stocks, warrants or other equity
securities, or purchase corporate bonds or debentures, state bonds, municipal
bonds or industrial revenue bonds.
2.
Borrow money, except to the extent permitted under the 1940 Act (which
currently limits borrowing to no more than 33-1/3% of the value of the Fund’s
total assets).
3.
Sell securities short or purchase securities on margin.
4.
Write or purchase put or call options or combinations thereof.
5.
Purchase or sell real estate, real estate investment trust securities,
commodities, or oil and gas interests.
6.
Lend any securities or make loans to others,
except to the extent permitted under the 1940 Act (which currently limits such
loans to no more than 33-1/3% of the value of the Fund's total assets), and
except as otherwise permitted by interpretations or modifications by, or
exemptive or other relief from, the SEC or other authority with appropriate
jurisdiction, and disclosed to investors. For purposes of this Investment Restriction,
the purchase of debt obligations (including acquisitions of loans, loan
participations or other forms of debt instruments) and the entry into
repurchase agreements shall not constitute loans by the Fund. Any loans of
portfolio securities will be made according to guidelines established by the
SEC and the Fund's Board.
7.
Invest more than 25% of its total assets in the securities of issuers in
any single industry, provided that there shall be no such limitation on
investments in obligations issued or guaranteed by the U.S. Government.
8.
Invest in companies for the purpose of exercising control.
9.
Invest in securities of other investment companies, except as they may
be acquired as part of a merger, consolidation or acquisition of assets.
10.
Pledge, hypothecate, mortgage or otherwise encumber its assets, except
to the extent necessary to secure permitted borrowings.
11.
Enter into repurchase agreements providing for settlement in more than
seven days after notice or purchase securities which are illiquid, if, in the
aggregate, more than 5% of the value of the Fund's net assets would be so
invested.
* * * *
Dreyfus Treasury Prime Cash
Management
. Under normal circumstances, Dreyfus Treasury Prime Cash
Management invests solely in securities issued or guaranteed as to principal
and interest by the U.S. Government. The Fund has adopted a policy to provide
its shareholders with at least 60 days' prior notice of any change in its
policy to so invest its assets. In addition, Dreyfus Treasury Prime Cash
Management has adopted investment restrictions numbered 1 through 10 as
fundamental policies. Investment restrictions numbered 11 and 12 are not
fundamental policies and may be changed by vote of a majority of the Fund's
Board members at any time. The Fund may not:
1.
Purchase common stocks, preferred stocks, warrants or other equity
securities, or purchase corporate bonds or debentures, state bonds, municipal
bonds or industrial revenue bonds.
2.
Borrow money, except from banks for temporary or emergency (not
leveraging) purposes in an amount up to 15% of the value of the Fund's total
assets (including the amount borrowed) based on the lesser of cost or market,
less liabilities (not including the amount borrowed) at the time the borrowing
is made. While borrowings exceed 5% of the value of the Fund's total assets,
the Fund will not make any additional investments.
3.
Sell securities short or purchase securities on margin.
4.
Write or purchase put or call options or combinations thereof.
5.
Underwrite the securities of other issuers.
6.
Purchase or sell real estate, real estate investment trust securities,
commodities, or oil and gas interests.
7.
Make loans to others except through the purchase of debt obligations
referred to in the Prospectus.
8.
Invest more than 25% of its total assets in the securities of issuers in
any single industry, provided that there shall be no such limitation on
investments in obligations issued and guaranteed by the U.S. Government.
9.
Invest in companies for the purpose of exercising control.
10.
Invest in securities of other investment companies, except as they may
be acquired as part of a merger, consolidation or acquisition of assets.
11.
Pledge, hypothecate, mortgage or otherwise encumber its assets, except
to the extent necessary to secure permitted borrowings.
12.
Enter into repurchase agreements providing for settlement in more than
seven days after notice or purchase securities which are illiquid if, in the
aggregate, more than 5% of the value of the Fund's net assets would be so
invested.
* * * *
Dreyfus Municipal Cash
Management Plus
. It is a fundamental policy that Dreyfus Municipal Cash
Management Plus normally invest at least 80% of its net assets (plus any
borrowings for investment purposes) in Municipal Obligations (or other
instruments with similar economic characteristics). In addition, Dreyfus
Municipal Cash Management Plus has adopted investment restrictions numbered 1
through 10 as fundamental policies. Investment restriction number 11 is not a
fundamental policy and may be changed by vote of a majority of the Fund's Board
members at any time. The Fund may not:
1.
Purchase securities other than Municipal Obligations and Taxable
Investments as those terms are defined above and in the Fund's Prospectus.
2.
Borrow money, except from banks for temporary or emergency (not leveraging)
purposes in an amount up to 15% of the value of the Fund's total assets
(including the amount borrowed) based on the lesser of cost or market, less
liabilities (not including the amount borrowed) at the time the borrowing is
made. While borrowings exceed 5% of the value of the Fund's total assets, the
Fund will not make any additional investments.
3.
Pledge, hypothecate, mortgage or otherwise encumber its assets, except
to secure borrowings for temporary or emergency purposes.
4.
Sell securities short or purchase securities on margin.
5.
Underwrite the securities of other issuers, except that the Fund may bid
separately or as part of a group for the purchase of Municipal Obligations
directly from an issuer for its own portfolio to take advantage of the lower purchase
price available.
6.
Purchase or sell real estate, real estate investment trust securities,
commodities or commodity contracts, or oil and gas interests, but this shall
not prevent the Fund from investing in Municipal Obligations secured by real
estate or interests therein.
7.
Make loans to others, except through the purchase of qualified debt
obligations and the entry into repurchase agreements referred to above and in
the Fund's Prospectus.
8.
Invest more than 5% of its assets in the obligations of any issuer,
except that up to 25% of the value of the Fund's total assets may be invested,
and securities issued or guaranteed by the U.S. Government or its agencies or
instrumentalities may be purchased, without regard to any such limitation.
9.
Invest more than 25% of its total assets in the securities of issuers in
any single industry; provided that there shall be no such limitation on the
purchase of Municipal Obligations and, for temporary defensive purposes,
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities.
10.
Invest in securities of other investment companies, except as they may
be acquired as part of a merger, consolidation or acquisition of assets.
11.
Enter into repurchase agreements providing for settlement in more than
seven days after notice or purchase securities which are illiquid if, in the
aggregate, more than 5% of the value of the Fund's net assets would be so
invested.
Notwithstanding investment
restrictions numbered 1, 3 and 6, the Fund reserves the right to enter into
interest rate futures contracts and municipal bond index futures contracts, and
any options that may be offered in respect thereof, subject to the restrictions
then in effect of the SEC and the Commodity Futures Trading Commission and to
the receipt or taking, as the case may be, of appropriate consents, approvals
and other actions from or by those regulatory bodies. In any event, no such
contracts or options will be entered into until a general description of the
terms thereof are set forth in a subsequent prospectus and statement of
additional information, the Registration Statement with respect to which has
been filed with the SEC and has become effective.
For purposes of investment
restriction number 9, industrial development bonds, where the payment of
principal and interest is the ultimate responsibility of companies within the
same industry, are grouped together as an "industry."
* * * *
Dreyfus Tax Exempt Cash
Management
. It is a fundamental policy that Dreyfus Tax Exempt Cash
Management normally invest at least 80% of its net assets (plus any borrowings
for investment purposes) in tax exempt Municipal Obligations (or other
instruments with similar economic characteristics). In addition, Dreyfus Tax
Exempt Cash Management has adopted investment restrictions numbered 1 through 9
as fundamental policies. Investment restrictions numbered 10 through 12 are
not fundamental policies and may be changed by vote of a majority of the
Trust's Board members at any time. The Fund may not:
1.
Purchase securities other than Municipal Obligations and Taxable
Investments as those terms are defined above and in the Fund's Prospectus.
2.
Borrow money, except from banks for temporary or emergency (not
leveraging) purposes in an amount up to 15% of the value of the Fund's total
assets (including the amount borrowed) based on the lesser of cost or market,
less liabilities (not including the amount borrowed) at the time the borrowing
is made. While borrowings exceed 5% of the value of the Fund's total assets,
the Fund will not make any additional investments.
3.
Sell securities short or purchase securities on margin.
4.
Underwrite the securities of other issuers, except that the Fund may bid
separately or as part of a group for the purchase of Municipal Obligations
directly from an issuer for its own portfolio to take advantage of the lower
purchase price available.
5.
Purchase or sell real estate, real estate investment trust securities,
commodities or commodity contracts, or oil and gas interests, but this shall
not prevent the Fund from investing in Municipal Obligations secured by real
estate or interests therein.
6.
Make loans to others, except through the purchase of qualified debt
obligations and the entry into repurchase agreements referred to above and in
the Fund's Prospectus.
7.
Invest more than 15% of its assets in the obligations of any one bank,
or invest more than 5% of its assets in the obligations of any other issuer,
except that up to 25% of the value of the Fund's total assets may be invested,
and securities issued or guaranteed by the U.S. Government or its agencies or
instrumentalities may be purchased, without regard to any such limitations.
Notwithstanding the foregoing, to the extent required by the rules of the SEC,
the Fund will not invest more than 5% of its assets in the obligations of any
one bank, except that up to 25% of the value of the Fund's total assets may be
invested without regard to such limitation.
8.
Invest more than 25% of its total assets in the securities of issuers in
any single industry; provided that there shall be no such limitation on the
purchase of Municipal Obligations and, for temporary defensive purposes,
securities issued by banks and obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.
9.
Purchase more than 10% of the voting securities of any issuer (this
restriction applies only with respect to 75% of the Fund's assets) or invest in
companies for the purpose of exercising control.
10.
Invest in securities of other investment companies, except as they may
be acquired as part of a merger, consolidation or acquisition of assets.
11.
Pledge, hypothecate, mortgage or otherwise encumber its assets, except
to the extent necessary to secure permitted borrowings.
12.
Enter into repurchase agreements providing for settlement in more than
seven days after notice or purchase securities which are illiquid, if, in the
aggregate, more than 5% of the value of the Fund's net assets would be so
invested.
Notwithstanding investment
restrictions numbered 1, 5 and 11, the Fund reserves the right to enter into
interest rate futures contracts, and municipal bond index futures contracts,
and any options that may be offered in respect thereof, subject to the
restrictions then in effect of the SEC and the Commodity Futures Trading
Commission and to the receipt or taking, as the case may be, of appropriate
consents, approvals and other actions from or by those regulatory bodies. In
any event, no such contracts or options will be entered into until a general
description of the terms thereof are set forth in a subsequent prospectus and
statement of additional information, the Registration Statement with respect to
which has been filed with the SEC and has become effective.
For purposes of investment
restriction number 8, industrial development bonds, where the payment of
principal and interest is the ultimate responsibility of companies within the
same industry, are grouped together as an "industry."
* * * *
Dreyfus New York Municipal
Cash Management.
It is a fundamental policy that Dreyfus New York Municipal
Cash Management normally invest at least 80% of its net assets (plus any
borrowings for investment purposes) in New York Municipal Obligations (or other
instruments with similar economic characteristics). In addition, Dreyfus New
York Municipal Cash Management has adopted investment restrictions numbered 1
through 8 as fundamental policies. Investment restriction number 9 is not a
fundamental policy and may be changed by vote of a majority of the Fund's Board
members at any time.
Except as otherwise permitted
by the 1940 Act, or interpretations or modifications by, or exemptive or other
relief from, the SEC or other authority with appropriate jurisdiction, and
disclosed to investors, the Fund may not:
1.
Purchase securities other than Municipal Obligations and Taxable
Investments as those terms are defined above and in the Fund's Prospectus.
2.
Borrow money, except to the extent permitted under the 1940 Act (which
currently limits borrowing to no more than 33-1/3% of the value of the Fund’s
total assets).
3.
Pledge, hypothecate, mortgage or otherwise encumber its assets, except
to secure borrowings for temporary or emergency purposes.
4.
Sell securities short or purchase securities on margin.
5.
Underwrite the securities of other issuers, except that the Fund may bid
separately or as part of a group for the purchase of Municipal Obligations
directly from an issuer for its own portfolio to take advantage of the lower
purchase price available.
6.
Purchase or sell real estate, real estate investment trust securities, commodities
or commodity contracts, or oil and gas interests, but this shall not prevent
the Fund from investing in Municipal Obligations secured by real estate or
interests therein.
7.
Lend any securities or make loans to others,
except to the extent permitted under the 1940 Act (which currently limits such
loans to no more than 33-1/3% of the value of the Fund's total assets), and
except as otherwise permitted by interpretations or modifications by, or
exemptive or other relief from, the SEC or other authority with appropriate
jurisdiction, and disclosed to investors. For purposes of this Investment
Restriction, the purchase of debt obligations (including acquisitions of loans,
loan participations or other forms of debt instruments) and the entry into
repurchase agreements shall not constitute loans by the Fund. Any loans of
portfolio securities will be made according to guidelines established by the
SEC and the Fund's Board.
8.
Invest more than 25% of its total assets in the securities of issuers in
any single industry; provided that there shall be no such limitation on the
purchase of Municipal Obligations and, for temporary defensive purposes,
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities.
9.
Purchase securities of other investment
companies, except to the extent permitted under the 1940 Act.
Notwithstanding investment
restrictions numbered 1, 3 and 6, the Fund reserves the right to enter into
interest rate futures contracts, and municipal bond index futures contracts, and
any options that may be offered in respect thereof, subject to the restrictions
then in effect of the SEC and the Commodity Futures Trading Commission and to
the receipt or taking, as the case may be, of appropriate consents, approvals
and other actions from or by those regulatory bodies. In any event, no such
contracts or options will be entered into until a general description of the
terms thereof are set forth in a subsequent prospectus and statement of
additional information, the Registration Statement with respect to which has
been filed with the SEC and has become effective.
For purposes of investment
restriction number 8, industrial development bonds, where the payment of
principal and interest is the ultimate responsibility of companies within the
same industry, are grouped together as an "industry."
* * * *
Dreyfus California AMT-Free
Municipal Cash Management.
It is a fundamental policy that Dreyfus
California AMT-Free Municipal Cash Management normally invest at least 80% of
its net assets
(plus any borrowings for investment
purposes) in California Municipal Obligations (or other instruments with
similar economic characteristics). In addition, Dreyfus California AMT-Free
Municipal Cash Management has adopted investment restrictions numbered 1 through
7 as fundamental policies. Investment restrictions numbered 8 through 11 are
not fundamental policies and may be changed by vote of a majority of the
Trust's Board members at any time. The Fund may not:
1.
Invest more than 25% of the value of its total assets in the securities
of issuers in any single industry, provided that there shall be no limitation
on the purchase of Municipal Obligations (other than Municipal Obligations
backed only by assets and revenues of non-governmental issuers) and obligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities.
2.
Invest in physical commodities or commodities contracts, except that the
Fund may purchase and sell options, forward contracts, futures contracts,
including those related to indices, and options on futures contracts or indices
and enter into swap agreements and other derivative instruments.
3.
Purchase, hold or deal in real estate, or oil, gas or other mineral
leases or exploration or development programs, but the Fund may purchase and
sell securities that are secured by real estate or issued by companies that
invest or deal in real estate or real estate investment trusts and may acquire
and hold real estate or interests therein through exercising rights or remedies
with regard to such securities.
4.
Borrow money, except to the extent permitted under the 1940 Act (which
currently limits borrowing to no more than 33-1/3% of the value of the Fund's
total assets).
5.
Lend any securities or make loans to others,
except to the extent permitted under the 1940 Act (which currently limits such
loans to no more than 33-1/3% of the value of the Fund's total assets), and
except as otherwise permitted by interpretations or modifications by, or
exemptive or other relief from, the SEC or other authority with appropriate
jurisdiction, and disclosed to investors. For purposes of this Investment
Restriction, the purchase of debt obligations (including acquisitions of loans,
loan participations or other forms of debt instruments) and the entry into repurchase
agreements shall not constitute loans by the Fund. Any loans of portfolio
securities will be made according to guidelines established by the SEC and the
Fund's Board.
6.
Act as an underwriter of securities of other issuers, except that the
Fund may bid separately or as part of a group for the purchase of Municipal
Obligations directly from an issuer for its own portfolio to take advantage of
the lower purchase price available, and except to the extent the Fund may be
deemed an underwriter under the Securities Act of 1933, as amended, by virtue
of disposing of portfolio securities.
7.
Issue any senior security (as such term is defined in Section 18(f) of
the 1940 Act), except insofar as the Fund may be deemed to have issued a senior
security by reason of borrowing money in accordance with the Fund's borrowing
policies. For purposes of this Investment Restriction, collateral, escrow, or
margin or other deposits with respect to the making of short sales, the
purchase or sale of futures contracts or options, and the writing of options on
securities are not deemed to be an issuance of senior security.
8.
Purchase securities on margin, except for use of short-term credit
necessary for clearance of purchases and sales of portfolio securities, but the
Fund may make margin deposits in connection with transactions in options,
forward contracts, futures contracts, and options on futures contracts, and
except that effecting short sales will be deemed not to constitute a margin
purchase for purposes of this Investment Restriction.
9.
Enter into repurchase agreements providing for settlement in more than
seven days after notice or purchase securities that are illiquid, if, in the
aggregate, more than 5% of the value of the Fund's net assets would be so
invested.
10.
Purchase securities of other investment companies, except to the extent
permitted under the 1940 Act.
11.
Pledge, mortgage or hypothecate its assets, except to the extent
necessary to secure permitted borrowings and to the extent related to the
purchase of securities on a when-issued, forward commitment or delayed-delivery
basis and the deposit of assets in escrow in connection with writing covered
put and call options and collateral and initial or variation margin
arrangements with respect to permitted transactions.
If a percentage restriction is
adhered to at the time of investment, a later change in percentage resulting
from a change in values or assets will not constitute a violation of such
restriction. With respect to Investment Restriction No. 4, however, if
borrowings exceed 33-1/3% of the value of the Fund's total assets as a result
of changes in values or assets, the Fund must take steps to reduce such
borrowings at least to the extent of such excess.
For purposes of investment
restriction number 1, industrial development bonds, where the payment of
principal and interest is the ultimate responsibility of companies within the
same industry, are grouped together as an "industry."
* * * *
Dreyfus New York AMT-Free
Municipal Cash Management.
It is a fundamental policy that Dreyfus New
York AMT-Free Municipal Cash Management normally invest at least 80% of its net
assets (plus any borrowings for investment purposes) in New York Municipal
Obligations (or other instruments with similar economic characteristics). In
addition, Dreyfus New York AMT-Free Municipal Cash Management has adopted
investment restrictions numbered 1 through 7 as fundamental policies.
Investment restrictions numbered 8 through 11 are not fundamental policies and
may be changed by vote of a majority of the Trust's Board members at any time.
The Fund may not:
1.
Invest more than 25% of the value of its total assets in the securities
of issuers in any single industry, provided that there shall be no limitation
on the purchase of Municipal Obligations (other than Municipal Obligations
backed only by assets and revenues of non-governmental issuers) and obligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities.
2.
Invest in physical commodities or commodities contracts, except that the
Fund may purchase and sell options, forward contracts, futures contracts,
including those related to indices, and options on futures contracts or indices
and enter into swap agreements and other derivative instruments.
3.
Purchase, hold or deal in real estate, or oil, gas or other mineral
leases or exploration or development programs, but the Fund may purchase and
sell securities that are secured by real estate or issued by companies that
invest or deal in real estate or real estate investment trusts and may acquire
and hold real estate or interests therein through exercising rights or remedies
with regard to such securities.
4.
Borrow money, except to the extent permitted under the 1940 Act (which
currently limits borrowing to no more than 33-1/3% of the value of the Fund's
total assets).
5.
Lend any securities or make loans to others,
except to the extent permitted under the 1940 Act (which currently limits such
loans to no more than 33-1/3% of the value of the Fund's total assets), and
except as otherwise permitted by interpretations or modifications by, or
exemptive or other relief
from, the SEC or other
authority with appropriate jurisdiction, and disclosed to investors. For
purposes of this Investment Restriction, the purchase of debt obligations
(including acquisitions of loans, loan participations or other forms of debt
instruments) and the entry into repurchase agreements shall not constitute
loans by the Fund. Any loans of portfolio securities will be made according to
guidelines established by the SEC and the Fund's Board.
6.
Act as an underwriter of securities of other issuers, except that the
Fund may bid separately or as part of a group for the purchase of Municipal
Obligations directly from an issuer for its own portfolio to take advantage of
the lower purchase price available, and except to the extent the Fund may be
deemed an underwriter under the Securities Act of 1933, as amended, by virtue
of disposing of portfolio securities.
7.
Issue any senior security (as such term is defined in Section 18(f) of
the 1940 Act), except insofar as the Fund may be deemed to have issued a senior
security by reason of borrowing money in accordance with the Fund's borrowing
policies. For purposes of this Investment Restriction, collateral, escrow, or
margin or other deposits with respect to the making of short sales, the
purchase or sale of futures contracts or options, and the writing of options on
securities are not deemed to be an issuance of senior security.
8.
Purchase securities on margin, except for use of short-term credit
necessary for clearance of purchases and sales of portfolio securities, but the
Fund may make margin deposits in connection with transactions in options,
forward contracts, futures contracts, and options on futures contracts, and
except that effecting short sales will be deemed not to constitute a margin
purchase for purposes of this Investment Restriction.
9.
Enter into repurchase agreements providing for settlement in more than
seven days after notice or purchase securities that are illiquid, if, in the aggregate,
more than 5% of the value of the Fund's net assets would be so invested.
10.
Purchase securities of other investment companies, except to the extent
permitted under the 1940 Act.
11.
Pledge, mortgage or hypothecate its assets, except to the extent necessary
to secure permitted borrowings and to the extent related to the purchase of
securities on a when-issued, forward commitment or delayed-delivery basis and
the deposit of assets in escrow in connection with writing covered put and call
options and collateral and initial or variation margin arrangements with
respect to permitted transactions.
If a percentage restriction is
adhered to at the time of investment, a later change in percentage resulting
from a change in values or assets will not constitute a violation of such
restriction. With respect to Investment Restriction No. 4, however, if
borrowings exceed 33-1/3% of the value of the Fund's total assets as a result
of changes in values or assets, the Fund must take steps to reduce such
borrowings within three business days at least to the extent of such excess.
For purposes of investment
restriction number 1, industrial development bonds, where the payment of
principal and interest is the ultimate responsibility of companies within the
same industry, are grouped together as an "industry."
* * * *
All Funds
. If a
percentage restriction is adhered to at the time of investment by a Fund, a
later increase or decrease in percentage resulting from changes in values or
assets will not constitute a violation of that Fund's restriction.
Management of the Funds
Board of the Funds
Board's
Oversight Role in Management
. The Board's role in management of each Fund
is oversight. As is the case with virtually all investment companies (as
distinguished from operating companies), service providers to the Fund,
primarily the Manager and its affiliates, have responsibility for the
day-to-day management of the Fund, which includes responsibility for risk
management (including management of investment performance and investment risk,
valuation risk, issuer and counterparty credit risk, compliance risk and
operational risk). As part of its oversight, the Board, acting at its
scheduled meetings, or the Chairman, acting between Board meetings, regularly
interacts with and receives reports from senior personnel of service providers,
including the Manager's Chief Investment Officer (or a senior representative of
his office), the Fund's and the Manager's Chief Compliance Officer and
portfolio management personnel. The Board's audit committee (which consists of
all Board members) meets during its scheduled meetings, and between meetings
the audit committee chair maintains contact, with the Fund's independent
registered public accounting firm and the Fund's Chief Financial Officer. The
Board also receives periodic presentations from senior personnel of the Manager
or its affiliates regarding risk management generally, as well as periodic
presentations regarding specific operational, compliance or investment areas,
such as business continuity, anti-money laundering, personal trading,
valuation, credit, investment research and securities lending. The Board has
adopted policies and procedures designed to address certain risks to the Fund.
In addition, the Manager and other service providers to the Fund have adopted a
variety of policies, procedures and controls designed to address particular
risks to the Fund. Different processes, procedures and controls are employed
with respect to different types of risks. However, it is not possible to
eliminate all of the risks applicable to the Fund, and the Board's risk
management oversight role is subject to inherent limitations.
Board Composition and Leadership Structure
. The 1940 Act
requires that at least 40% of the Fund's Board members not be "interested
persons" (as defined in the 1940 Act) of the Fund and as such are not
affiliated with the Manager ("Independent Board members"). To rely
on certain exemptive rules under the 1940 Act, a majority of the Fund's Board
members must be Independent Board members, and for certain important matters,
such as the approval of investment advisory agreements or transactions with
affiliates, the 1940 Act or the rules thereunder require the approval of a
majority of the Independent Board members. Currently, each of the Fund's Board
members, except Isabel Dunst, but including the Chairman of the Board, are
Independent Board members. The Board could, in the future, determine to add additional
Board members who are not Independent Board members. The Board has determined
that its leadership structure, in which the Chairman of the Board is not
affiliated with the Manager, is appropriate in light of the services that the
Manager and its affiliates provide to the Fund and potential conflicts of
interest that could arise from these relationships.
Information About Each Board Member's
Experience, Qualifications, Attributes or Skills
. Board members of the
Funds, together with information as to their positions with the Funds,
principal occupations and other board memberships for the past five years, are
shown below.
Name
(Age)
Position
with Funds
|
Principal
Occupation
During
Past 5 Years
|
Other
Board Memberships and Affiliations
|
Joseph S. DiMartino (67)
Chairman of the Board
|
Corporate Director and Trustee
|
CBIZ (formerly, Century Business
Services, Inc.), a provider of outsourcing functions for small and medium
size companies,
Director
(1997 - present)
Sunair Services Corporation, a provider
of certain outdoor-related services to homes and businesses,
Director
(2005
- 2009)
The
Newark Group, a provider of a national market of paper recovery facilities,
paperboard mills and paperboard converting plants,
Director
(2000-2010)
|
|
|
|
David
W. Burke (75)
Board Member
|
Corporate
Director and Trustee
|
N/A
|
|
|
|
Isabel Dunst (64)*
Board Member
|
Partner, Hogan Lovells LLP
|
N/A
|
|
|
|
Robin A. Melvin (47)
Board Member
|
Director, Boisi Family Foundation, a private family
foundation that supports youth-serving organizations that promote the self
sufficiency of youth from disadvantaged circumstances (1995 - present)
Senior Vice President, Mentor, a national non-profit
youth mentoring organization (1992 - 2005)
|
N/A
|
|
|
|
Philip L. Toia (78)
Board Member
|
Private Investor
|
N/A
|
|
|
|
Roslyn M. Watson (61)
Board Member
|
Principal, Watson Ventures,
Inc., a real estate investment company (1993-present)
|
N/A
|
|
|
|
Benaree
Pratt Wiley (65)
Board
Member
|
Principal, The Wiley Group, a firm
specializing in strategy and business development (2005 – present)
|
CBIZ (formerly, Century
Business Services, Inc.), a provider of outsourcing functions for small and
medium size companies,
Director
(2008 - present)
|
_______________________________
*
Ms. Dunst is considered to be an “interested person” under the 1940 Act because
her law firm provides legal services to The Bank of New York Mellon Corporation
(“BNY Mellon”) and certain of its affiliates, but not the Manager.
Each Board member
has been a Board member of other Dreyfus mutual funds for at least ten years.
Additional information about each Board member follows (supplementing the
information provided in the table above) that describes some of the specific
experiences, qualifications, attributes or skills that each Board member
possesses which the Board believes has prepared them to be effective Board
members. The Board believes that the significance of each Board member's
experience, qualifications, attributes or skills is an individual matter
(meaning that experience that is important for one Board member may not have
the same value for another) and that these factors are best evaluated at the
board level, with no single Board member, or particular factor, being
indicative of board effectiveness. However, the Board believes that Board
members need to have the ability to critically review, evaluate, question and
discuss information provided to them, and to interact effectively with Fund
management, service providers and counsel, in order to exercise effective
business judgment in the performance of their duties; the Board believes that
its members satisfy this standard. Experience relevant to having this ability
may be achieved through a Board member's educational background; business,
professional training or practice (
e.g
., medicine, accounting or law),
public service or academic positions; experience from service as a board member
(including the Board of the Fund) or as an executive of investment funds,
public companies or significant private or not-for-profit entities or other
organizations; and/or other life experiences. The charter for the Board's nominating
committee contains certain other factors considered by the committee in
identifying and evaluating potential Board member nominees. To assist them in
evaluating matters under federal and state law, the Board members are counseled
by their own independent legal counsel, who participates in Board meetings and
interacts with the Manager, and also may benefit from information provided by
the Manager's counsel; counsel to the Fund and to the Board have significant
experience advising funds and fund board members. The Board and its committees
have the ability to engage other experts as appropriate. The Board evaluates
its performance on an annual basis.
·
Joseph S. DiMartino
- Mr. DiMartino has been the Chairman
of the Board of the funds in the Dreyfus Family of Funds for over 15 years.
From 1971 through 1994, Mr. DiMartino served in various roles as an employee of
Dreyfus (prior to its acquisition by a predecessor of BNY Mellon in August 1994
and related management changes), including portfolio manager, President, Chief
Operating Officer and a Director. He ceased being an employee or Director of
Dreyfus by the end of 1994. From July 1995 to November 1997, Mr. DiMartino
served as Chairman of the Board of The Noel Group, a public buyout firm; in
that capacity, he helped manage, acquire, take public and liquidate a number of
operating companies. From 1986-2010, Mr. DiMartino was a Director of The
Muscular Dystrophy Association.
·
David W. Burke
– Mr. Burke was previously a member of the
Labor-Management Committee for the U.S. Department of Commerce, Executive
Secretary to the President's Advisory Committee on Labor-Management Policy,
Secretary to the Governor of the State of New York and Chief of Staff for
Senator Edward M. Kennedy. In addition, Mr. Burke previously served as the
President of CBS News and as the Chairman of the federal government's
Broadcasting Board of Governors, which oversees the Voice of America, Radio
Free Europe, Radio Free Asia and other U.S. government-sponsored international
broadcasts. Mr. Burke also was a Vice President and Chief Operating Officer of
Dreyfus (prior to its acquisition by a predecessor of BNY Mellon in August 1994
and related management changes).
·
Isabel Dunst
– Ms. Dunst has been practicing law for
almost 40 years. Half of her career was spent at the U.S. Department of Health
and Human Services, including serving as the Deputy General Counsel of that
agency, the senior career legal position. Ms. Dunst has been a partner for approximately
20 years in the Washington based international law firm of Hogan Lovells, which
she joined in 1990.
·
Robin A. Melvin
– Ms. Melvin is currently a Director of
the Boisi Family Foundation, a private family foundation that supports
organizations serving the needs of youth from disadvantaged
circumstances.
In that role she also manages the Boisi Family Office, providing the primary
interface with all investment managers, legal advisors and other service
providers to the family. She has also served in various roles with MENTOR, a
national non-profit youth mentoring advocacy organization, including Executive
Director of the New York City affiliate, Vice President of the national
affiliate network, Vice President of Development, and, immediately prior to her
departure, Senior Vice President in charge of strategy. Prior to that, Ms.
Melvin served as an investment banker with Goldman Sachs Group, Inc.
·
Philip L. Toia
– From 1984 through 1997, Mr. Toia served
in various roles as an employee of Dreyfus. During this time he
directed
the organization of the fixed-income research group, investor relations,
organized
the bank wholesaling group, and
served
as a
director and officer of subsidiaries of Dreyfus. Upon the acquisition of
Dreyfus by a predecessor of BNY Mellon, Mr. Toia took on additional duties as
Vice Chairman for Administration and Operations, including being responsible
for fund accounting, fund legal, information systems and human resources. He
also served as a member of the Board.
He ceased all roles at Dreyfus
by 1997. Before
Dreyfus, Mr. Toia served as Group Executive for
Public Finance at Chase Manhattan Bank, managing its investment banking group
and its tax-exempt underwriting, trading and sales departments. He also served
on Board of Directors of Chase Manhattan Bank, Delaware. In addition, from
1975 through 1977, Mr. Toia served as Deputy Mayor for Finance for the City of New York.
·
Roslyn M. Watson
– In addition to her tenure as a Board
member of various Dreyfus mutual funds, or their predecessor funds, Ms. Watson
has been a business entrepreneur in commercial and residential real estate for
over 15 years. Ms. Watson currently serves as President and Founder of Watson
Ventures, Inc. a real estate development investment firm, and her current board
memberships include American Express Bank, FSB, SBLI USA Mutual Life Insurance
Company, Inc., The Hyams Foundation, Inc., Pathfinder International and Simmons College. Previously, she held various positions in the public and private sectors,
including General Manager for the Massachusetts Port Authority. She has
received numerous awards, including the Woman of Achievement award from the
Boston Big Sister Association and the Working Woman of the Year Award from
Working Woman Magazine.
·
Benaree Pratt Wiley
– In addition to her tenure as a Board
member of various Dreyfus mutual funds, Ms. Wiley has been a business
entrepreneur and management consultant for over 18 years. Ms. Wiley is a
Principal of The Wiley Group, a firm specializing in personnel strategy, talent
management and leadership development primarily for global insurance and
consulting firms. Prior to that, Ms. Wiley served as the President and Chief
Executive Officer of The Partnership, Inc., a talent management organization for
multicultural professionals in the greater Boston region. Ms. Wiley currently
serves on the board of Blue Cross Blue Shield of Massachusetts and is chair of
the advisory board of PepsiCo African-American, and she has served on the
boards of several public companies and charitable organizations.
Additional Information About
the Board and its Committees
. Board members are elected to serve for an
indefinite term. Each Fund has standing audit, nominating and compensation
committees, each comprised of its Board members who are not "interested
persons" of the Fund, as defined in the 1940 Act. The function of the
audit committee is (i) to oversee the Fund's accounting and financial reporting
processes and the audits of the Fund's financial statements and (ii) to assist
in the Board's oversight of the integrity of the Fund's financial statements,
the Fund's compliance with legal and regulatory requirements and the
independent registered public accounting firm's qualifications, independence
and performance. The Fund's nominating committee is responsible for selecting
and nominating persons as members of the Board for election or appointment by
the Board and for election by shareholders. In evaluating potential nominees,
including any nominees recommended by shareholders, the committee takes into
consideration various factors, listed in the nominating committee charter,
including character and integrity, business and
professional
experience, and whether the committee believes the person has the ability to
apply sound and independent business judgment and would act in the interest of
the Fund and its shareholders. The nominating committee will consider
recommendations for nominees from shareholders submitted to the Secretary of
the Fund, c/o The Dreyfus Corporation, Legal Department, 200 Park Avenue, 8
th
Floor East, New York, New York 10166, which includes information regarding the
recommended nominee as specified in the nominating committee charter. The
function of the compensation committee is to establish the appropriate
compensation for serving on the Board. Each Fund also has a standing evaluation
committee comprised of any one Board member. The function of the evaluation
committee is to assist in valuing the Fund's investments. Each Fund's audit
committee met three times, while its nominating committee and compensation
committee did not meet, during the fiscal year ended January 31, 2011. The
evaluation committees also did not meet during the last fiscal year.
The table below indicates the
dollar range of each Board member's ownership of Fund shares and shares of
other funds in the Dreyfus Family of Funds for which he or she is a Board
member, in each case as of December 31, 2010.
|
Shares of any
of the Funds
|
Aggregate Holding of Funds in the
Dreyfus Family of Funds for
which Responsible as a Board Member
|
Joseph
S. DiMartino
|
None
|
Over
$100,000
|
David
W. Burke
|
None
|
Over
$100,000
|
Isabel
Dunst
|
None
|
None
|
Robin
A. Melvin
|
None
|
$50,001-$100,000
|
Philip
L. Toia
|
None
|
$1-$10,000
|
Rosalyn
M. Watson
|
None
|
$10,001 - $50,000
|
Benaree
Pratt Wiley
|
None
|
Over
$100,000
|
As of December 31, 2010, none
of the Board members or their immediate family members owned securities of the
Manager, the Distributor or any person (other than a registered investment
company) directly or indirectly controlling, controlled by or under common
control with the Manager or Distributor.
Currently, each Fund typically
pays its Board members its allocated portion of an annual retainer of $35,000
and a fee of $4,000 per meeting (with a minimum of $500 per meeting and per
telephone meeting) attended for the Funds in the Dreyfus Family of Funds, and
reimburses them for their expenses. The Chairman of the Board receives an
additional 25% of such compensation. Emeritus Board members are entitled to
receive an annual retainer of one-half the amount paid as a retainer at the
time the Board member became Emeritus and a per meeting attended fee of
one-half the amount paid to Board members. The aggregate amounts of
compensation payable to each Board member by each Fund for the fiscal year
ended January 31, 2011, and by all funds in the Dreyfus Family of Funds for
which such person was a Board member (the number of portfolios of such funds is
set forth in parenthesis next to each Board member's total compensation) during
the year ended December 31, 2010, were as follows:
Name of Board
Member and Fund
|
Aggregate Compensation
from the Fund*
|
Total Compensation
from the Funds and Fund Complex Paid to Board Member (**)
|
|
|
|
Joseph S. DiMartino
|
|
$1,060,250 (192)
|
|
|
|
Dreyfus Cash Management
|
$20,493
|
|
Dreyfus
Government Cash Management Funds***
|
$19,169
|
|
Dreyfus
Treasury & Agency Cash Management
|
$ 8,675
|
|
Dreyfus
Treasury Prime Cash Management
|
$14,101
|
|
Dreyfus
Municipal Cash Management Plus
|
$ 781
|
|
Dreyfus
Tax Exempt Cash Management Funds****
|
$ 2,705
|
|
Dreyfus
New York Municipal Cash Management
|
$ 549
|
|
|
|
|
David W. Burke
|
|
$491,500 (83)
|
|
|
|
Dreyfus
Cash Management
|
$16,459
|
|
Dreyfus
Government Cash Management Funds***
|
$15,299
|
|
Dreyfus
Treasury & Agency Cash Management
|
$ 6,947
|
|
Dreyfus
Treasury Prime Cash Management
|
$11,265
|
|
Dreyfus
Municipal Cash Management Plus
|
$ 622
|
|
Dreyfus
Tax Exempt Cash Management Funds****
|
$ 2,168
|
|
Dreyfus
New York Municipal Cash Management
|
$ 432
|
|
|
|
|
Isabel P. Dunst
|
|
$48,000 (11)
|
|
|
|
Dreyfus
Cash Management
|
$12,815
|
|
Dreyfus
Government Cash Management Funds***
|
$12,160
|
|
Dreyfus
Treasury & Agency Cash Management
|
$ 5,421
|
|
Dreyfus
Treasury Prime Cash Management
|
$ 8,813
|
|
Dreyfus
Municipal Cash Management Plus
|
$ 486
|
|
Dreyfus
Tax Exempt Cash Management Funds****
|
$ 1,692
|
|
Dreyfus
New York Municipal Cash Management
|
$ 347
|
|
|
|
|
Robin A. Melvin
+++
|
|
$143,750 (39)
|
|
|
|
Dreyfus
Cash Management
|
$ 9,496
|
|
Dreyfus
Government Cash Management Funds***
|
$ 9,171
|
|
Dreyfus
Treasury & Agency Cash Management
|
$ 4,053
|
|
Dreyfus
Treasury Prime Cash Management
|
$ 6,620
|
|
Dreyfus
Municipal Cash Management Plus
|
$ 366
|
|
Dreyfus
Tax Exempt Cash Management Funds****
|
$ 1,263
|
|
Dreyfus
New York Municipal Cash Management
|
$ 260
|
|
|
|
|
Warren B. Rudman
++
|
|
$133,195.11 (29)
|
|
|
|
Dreyfus
Cash Management
|
$ 8,630
|
|
Dreyfus
Government Cash Management Funds***
|
$ 8,085
|
|
Dreyfus
Treasury & Agency Cash Management
|
$ 3,915
|
|
Dreyfus
Treasury Prime Cash Management
|
$ 5,940
|
|
Dreyfus
Municipal Cash Management Plus
|
$ 328
|
|
Dreyfus
Tax Exempt Cash Management Funds****
|
$ 1,236
|
|
Dreyfus
New York Municipal Cash Management
|
$ 230
|
|
|
|
|
Philip L. Toia
|
|
$128,500 (26)
|
|
|
|
Dreyfus
Cash Management
|
$16,395
|
|
Dreyfus
Government Cash Management Funds***
|
$15,333
|
|
Dreyfus Treasury & Agency Cash Management
|
$ 6,940
|
|
Dreyfus
Treasury Prime Cash Management
|
$11,284
|
|
Dreyfus
Municipal Cash Management Plus
|
$ 623
|
|
Dreyfus
Tax Exempt Cash Management Funds****
|
$ 2,165
|
|
Dreyfus
New York Municipal Cash Management
|
$ 437
|
|
|
|
|
Roslyn M. Watson
+++
|
|
$153,250 (45)
|
|
|
|
Dreyfus
Cash Management
|
$12,077
|
|
Dreyfus
Government Cash Management Funds***
|
$11,588
|
|
Dreyfus
Treasury & Agency Cash Management
|
$ 5,165
|
|
Dreyfus
Treasury Prime Cash Management
|
$ 8,346
|
|
Dreyfus
Municipal Cash Management Plus
|
$ 463
|
|
Dreyfus
Tax Exempt Cash Management Funds****
|
$ 1,609
|
|
Dreyfus
New York Municipal Cash Management
|
$ 329
|
|
|
|
|
Benaree Pratt Wiley
|
|
$356,000 (71)
|
|
|
|
Dreyfus
Cash Management
|
$15,271
|
|
Dreyfus
Government Cash Management Funds***
|
$14,246
|
|
Dreyfus
Treasury & Agency Cash Management
|
$ 6,420
|
|
Dreyfus
Treasury Prime Cash Management
|
$10,458
|
|
Dreyfus
Municipal Cash Management Plus
|
$ 575
|
|
Dreyfus
Tax Exempt Cash Management Funds****
|
$ 2,005
|
|
Dreyfus
New York Municipal Cash Management
|
$ 406
|
|
|
|
|
|
|
|
|
___________________________
|
(*) Amount does not include
the cost of office space, secretarial services and health benefits for the
Chairman and expenses reimbursed to Board members for attending Board
meetings, which amounted in the aggregate to $7,814.
|
|
(**) Represents the number
of separate portfolios comprising the investment companies of the Fund
complex, including the Funds, for which the Board member serves
.
|
|
(***) Includes Dreyfus
Government Cash Management and Dreyfus Government Prime Cash Management.
|
|
(****) Includes Dreyfus Tax
Exempt Cash Management, Dreyfus New York AMT-Free Municipal Cash Management,
and Dreyfus California AMT-Free Municipal Cash Management.
|
(++)
Emeritus Board member as
of May 18, 2010.
|
(+++)
Ms. Melvin and Ms. Watson
became Board members as of April 1, 2010. As such, Ms. Melvin and Ms. Watson
received no
compensation from the
Funds for periods prior thereto.
|
Officers of the Funds
BRADLEY J. SKAPYAK,
President
. Chief Operating Officer and a
director of the Manager since June 2009. From April 2003 to June 2009, Mr.
Skapyak was the head of the Investment Accounting and Support Department of the
Manager. He is an officer of 75 investment companies
(comprised
of 167 portfolios) managed by the Manager. He is 52 years old and has been an
employee of the Manager since February 1988.
J. CHARLES CARDONA,
Executive Vice
President
. Vice Chair and a Director of the Manager, Executive Vice
President of the Distributor, President of Dreyfus Institutional Services
Division, and an officer of 12 other investment companies (comprised of 19 portfolios)
managed by the Manager. He is 55 years old and has been an employee of the
Manager since February 1981.
JAMES WINDELS,
Treasurer
.
Director-Mutual Fund Accounting of the Manager, and an officer of 76 investment
companies (comprised of 192 portfolios) managed by the Manager. He is 52 years
old and has been an employee of the Manager since April 1985.
MICHAEL A. ROSENBERG,
Vice President
and Secretary
. Assistant General Counsel of BNY Mellon, and an officer of 76
investment companies (comprised of 192 portfolios) managed by the Manager. He
is 51 years old and has been an employee of the Manager since October 1991.
KIESHA
ASTWOOD,
Vice President and Assistant Secretary
. Counsel of BNY Mellon,
and an officer of 76 investment companies (comprised of 192 portfolios) managed
by the Manager. She is 38 years old and has been an employee of the Manager
since July 1995.
JAMES
BITETTO,
Vice President and Assistant Secretary
. Senior Counsel of BNY
Mellon and Secretary of the Manager, and an officer of 76 investment companies
(comprised of 192 portfolios) managed by the Manager. He is 44 years old and
has been an employee of the Manager since December 1996.
JONI LACKS CHARATAN,
Vice President and
Assistant Secretary
. Senior Counsel of BNY Mellon, and an officer of 76
investment companies (comprised of 192 portfolios) managed by the Manager. She
is 55 years old and has been an employee of the Manager since October 1988.
JOSEPH M. CHIOFFI,
Vice President and
Assistant Secretary
. Senior Counsel of BNY Mellon, and an officer of 76
investment companies (comprised of 192 portfolios) managed by the Manager. He
is 49 years old and has been an employee of the Manager since June 2000.
KATHLEEN DENICHOLAS,
Vice President and Assistant Secretary
.
Senior Counsel of BNY Mellon, and an officer of 76 investment companies
(comprised of 192 portfolios) managed by the Manager. She is 36 years old and
has been an employee of the Manager since February 2001.
JANETTE E. FARRAGHER,
Vice President and
Assistant Secretary
. Assistant General Counsel of BNY Mellon, and an
officer of 76 investment companies (comprised of 192 portfolios) managed by the
Manager. She is 48 years old and has been an employee of the Manager since
February 1984.
JOHN B. HAMMALIAN,
Vice President and
Assistant Secretary
. Managing Counsel of
BNY Mellon,
and an officer
of 76 investment companies (comprised of 192 portfolios) managed by the
Manager. He is 47 years old
and has been an employee of the Manager
since February 1991.
M. CRISTINA MEISER,
Vice President and Assistant Secretary
.
Senior Counsel of BNY Mellon, and an officer of 76 investment companies
(comprised of 192 portfolios) managed by the Manager. She is 41 years old and
has been an employee of the Manager since August 2001.
ROBERT R. MULLERY,
Vice President and
Assistant Secretary
. Managing Counsel of BNY Mellon, and an officer of 76
investment companies (comprised of 192 portfolios) managed by the Manager. He
is 59 years old and has been an employee of the Manager since May 1986.
JEFF
PRUSNOFSKY,
Vice President and Assistant Secretary
.
Managing
Counsel of BNY Mellon, and an
officer of 76 investment companies (comprised of 192 portfolios) managed by the
Manager. He is 45 years old and has been an employee of the Manager since
October 1990.
RICHARD CASSARO,
Assistant Treasurer.
Senior Accounting Manager – Money Market and Municipal Bond Funds of the
Manager, and an officer of 76 investment companies (comprised of 192
portfolios) managed by the Manager. He is 52 years old and has been an
employee of the Manager since September 1982.
GAVIN C. REILLY,
Assistant Treasurer.
Tax
Manager of the Investment Accounting and Support Department of the Manager, and
an officer of 76 investment companies (comprised of 192 portfolios) managed by
the Manager. He is 42 years old and has been an employee of the Manager
since April 1991.
ROBERT S. ROBOL
,
Assistant Treasurer
. Senior
Accounting Manager – Fixed Income Funds of the Manager, and an officer of 76
investment companies (comprised of 192 portfolios) managed by the Manager. He
is 47 years old and has been an employee of the Manager since October 1988.
ROBERT SALVIOLO
,
Assistant Treasurer
. Senior
Accounting Manager – Equity Funds of the Manager, and an officer of 76
investment companies (comprised of 192 portfolios) managed by the Manager. He
is 44 years old and has been an employee of the Manager since June 1989.
ROBERT SVAGNA
,
Assistant Treasurer
. Senior
Accounting Manager – Equity Funds of the Manager, and an officer of 76
investment companies (comprised of 192 portfolios) managed by the Manager. He
is 44 years old and has been an employee of the Manager since November 1990.
STEPHEN J. STOREN,
Anti-Money
Laundering Compliance Officer since May 2011
. Chief Compliance Officer of
the Distributor, and the Anti-Money Laundering Compliance Officer of
72
investment
companies (comprised of 188 portfolios) managed by the Manager. He is 56 years
old and has been an employee of the Distributor since October 1999.
JOSEPH W. CONNOLLY,
Chief Compliance
Officer.
Chief Compliance Officer of the Manager and The Dreyfus Family of
Funds (76 investment companies, comprised of 192 portfolios). From November
2001 through March 2004, Mr. Connolly was first Vice-President, Mutual Fund
Servicing for Mellon Global Securities Services. In that capacity, Mr. Connolly
was responsible for managing Mellon’s Custody, Fund Accounting and Fund
Administration services to third-party mutual fund clients. He is 53 years old
and has served in various capacities with the Manager since 1980, including
manager of the firm’s Fund Accounting Department from 1997 through October
2001.
The address of each Board member and officer of the Funds is 200 Park
Avenue, New York, New York 10166.
Board members and officers, as
a group, owned less than 1% of each Fund's shares outstanding on May 13, 2011.
Set forth in "Appendix
E" to this Statement of Additional Information are the shareholders known
by each Fund (as indicated) to own of record 5% or more of a Fund's
Institutional Shares, Agency Shares, Administrative Shares, Classic Shares, Investor
Shares, Participant Shares, Service Shares, Premier Shares or Select Shares (as
applicable) outstanding on May 13, 2011. A shareholder who beneficially owns,
directly or indirectly, more than 25% of the Fund's voting securities may be
deemed a "control person" (as defined in the 1940 Act) of the Fund.
Management
Arrangements
Investment Adviser
. The
Manager is a wholly-owned subsidiary of BNY Mellon, a global financial services
company focused on helping clients move and manage their financial assets,
operating in 34 countries and serving more than 100 markets. BNY Mellon is a
leading provider of financial services for institutions, corporations and high-net-worth
individuals, providing asset and wealth management, asset servicing, issuer
services, and treasury services through a worldwide client-focused team.
The Manager provides management
services pursuant to separate Management Agreements (respectively, the
"Agreement") between the Manager and each Fund. As to each Fund, the
Agreement is subject to annual approval by (i) such Fund's Board or (ii) vote
of a majority (as defined in the 1940 Act) of such Fund's outstanding voting
securities of the Fund, provided that in either event the continuance also is
approved by a majority of the Fund's Board members who are not "interested
persons" (as defined in the 1940 Act) of the Fund or the Manager, by vote
cast in person at a meeting called for the purpose of voting on such approval.
As to each Fund, the Agreement is terminable without penalty, on not more than
60 days' notice, by the Fund's Board or by vote of the holders of a majority of
such Fund's outstanding voting securities, or, on not less than 90 days'
notice, by the Manager. Each Agreement will terminate automatically, as to the
relevant Fund, in the event of its assignment (as defined in the 1940 Act).
The following
persons are officers and/or directors of the Manager: Jonathan Baum, Chair of
the Board and Chief Executive Officer; J. Charles Cardona, President and a
director; Diane P. Durnin, Vice Chair and a director; Christopher Sheldon,
Chief Investment Officer and a director; Bradley J. Skapyak, Chief Operating
Officer and a director; Dwight Jacobsen, Executive Vice President and a
director; Jeffrey D. Landau, Executive Vice President and a director; Patrice
M. Kozlowski, Senior Vice President-Corporate Communications; Gary E. Abbs,
Vice President-Tax; Jill Gill, Vice President-Human Resources; Joanne S. Huber,
Vice President-Tax; Anthony Mayo, Vice President-Information Systems; Kathleen
Geis, Vice President; John E. Lane, Vice President; Dean M. Steigauf, Vice
President; Gary Pierce, Controller; Joseph W. Connolly, Chief Compliance
Officer; James Bitetto, Secretary; and Robert G. Capone, Mitchell E. Harris and
Cyrus Taraporevala, directors.
The Manager manages each Fund's
portfolio of investments in accordance with the stated policies of the Fund,
subject to the approval of the Fund's Board. The Manager is responsible for
investment decisions, and provides each Fund with portfolio managers who are
authorized by the Board to execute purchases and sales of securities. The
portfolio managers of the Taxable Funds are Bernard Kiernan, Patricia A. Larkin,
James G. O'Connor, and Thomas Riordan. The portfolio managers of the Tax
Exempt Funds are Joseph Irace, Colleen Meehan, and Bill Vasiliou. The Manager
also maintains a research department with a professional staff of portfolio
managers and securities analysts who provide research services for each Fund
and for other funds advised by the Manager.
The Funds, the Manager and the
Distributor each have adopted a Code of Ethics, that permits its personnel,
subject to the Code of Ethics, to invest in securities that may be purchased or
held by a Fund. The Manager's Code of Ethics subjects its employees' personal
securities transactions to various restrictions to ensure that such trading
does not disadvantage any fund advised by the Manager. In that regard,
portfolio managers and other investment personnel of the Manager must preclear
and report their personal securities transactions and holdings, which are
reviewed for compliance with the Code of Ethics and are also subject to the
oversight of BNY Mellon's Investment Ethics Committee (the
"Committee"). Portfolio managers and other investment personnel of
the Manager who comply with the preclearance and disclosure procedures of the
Code of Ethics and the requirements of the Committee may be permitted to purchase,
sell or hold securities which also may be or are held in fund(s) they manage or
for which they otherwise provide investment advice.
The
Manager maintains office facilities on behalf of each Fund, and furnishes
statistical and research data, clerical help, accounting, data processing,
bookkeeping and internal auditing and certain other required services to the
Funds. The Manager may pay the Distributor for shareholder services from the
Manager's own assets, including past profits but not including the management
fee paid by the Funds. The Distributor may use part or all of such payments to
pay certain financial institutions (which may include banks), securities
dealers and other industry professionals (collectively, "Service
Agents") in respect of these services. The Manager also may make such
advertising and promotional expenditures, using its own resources, as it from
time to time deems appropriate.
In managing each Fund, Dreyfus
will draw upon BNY Mellon Cash Investment Strategies ("CIS"). CIS is
a division of Dreyfus that provides investment and credit risk management
services and approves all money market fund eligible securities for the Funds
and for other investment companies and accounts managed by Dreyfus or its
affiliates that invest primarily in money market instruments. CIS, through a
team of professionals who contribute a combination of industry analysis and
fund-specific expertise, monitors all issuers approved for investment by such
investment companies and other accounts by analyzing third party inputs, such
as financial statements and media sources, ratings releases and company
meetings, as well as internal research. CIS investment and credit
professionals also utilize inputs and guidance from BNY Mellon’s central Risk
Management Department (the “Risk Department”) as part of the investment
process. These inputs and guidance focus primarily on concentration levels and
market and credit risks and are based upon independent analysis done by the
Risk Department relating to fundamental characteristics such as the sector,
sovereign, tenor and rating of investments or potential investment. The Risk
Department also may perform stress and scenario testing on various money market
type portfolios advised by CIS or BNY Mellon and its other affiliates, and
provides various periodic and ad-hoc reporting to the investment and credit
professionals at CIS. In the event a security is removed from the
"approved" credit list after being purchased by the Fund, the Fund is
not required to sell that security.
BNY Mellon and
its affiliates, including Dreyfus and others involved in the management, sales,
investment activities, business operations or distribution of the Fund, are
engaged in businesses and have interests other than that of managing the Fund.
These activities and interests include potential multiple advisory,
transactional, financial and other interests in securities, instruments and
companies that may be directly or indirectly purchased or sold by the Fund and
the Fund's service providers, which may cause conflicts that could disadvantage
the Fund.
BNY Mellon and
its affiliates may have deposit, loan and commercial banking or other
relationships with the issuers of securities purchased by the Fund. BNY Mellon
has no obligation to provide to Dreyfus or the Fund, or effect transactions on
behalf of the Fund in accordance with, any market or other information,
analysis, or research in its possession. Consequently, BNY Mellon (including,
but not limited to, BNY Mellon’s central Risk Management Department) may have
information that could be material to the management of the Fund and may not
share that information with relevant personnel of Dreyfus. Accordingly,
Dreyfus has informed management of the Fund that in making investment decisions
it does not obtain or use material inside information that BNY Mellon or its
affiliates may possess with respect to such issuers.
Dreyfus will make investment
decisions for the Fund as it believes is in the best interests of the Fund.
Investment decisions made for the Fund may differ from, and may conflict with,
investment decisions made for other investment companies and accounts advised
by Dreyfus or BNY Mellon and its other affiliates. Actions taken with respect
to such other investment companies or accounts may adversely impact the Fund,
and actions taken by the Fund may benefit BNY Mellon or other investment
companies or accounts (including the Fund) advised by Dreyfus or BNY Mellon and
its other affiliates. Regulatory restrictions (including, but not limited to,
those related to the aggregation of positions among different other investment
companies and accounts) and internal BNY Mellon policies, guidance or
limitations (including, but not limited to, those related to the aggregation of
positions among all fiduciary
accounts managed or advised
by BNY Mellon and all its affiliates (including Dreyfus) and the aggregated
exposure of such accounts) may restrict investment activities of the Fund.
While the allocation of investment opportunities among the Fund and other investment
companies and accounts advised by Dreyfus or BNY Mellon and its other
affiliates may raise potential conflicts because of financial, investment or
other interests of BNY Mellon or its personnel, Dreyfus will make allocation
decisions consistent with the interests of the Fund and the other investment
companies and accounts and not solely based on such other interests.
Expenses
. All expenses
incurred in the operation of a Fund are borne by the Fund, except to the extent
specifically assumed by the Manager as described below. The expenses borne by
each Fund include, without limitation, the following: taxes, interest, loan
commitment fees, interest and distributions paid on securities sold short,
brokerage fees and commissions, if any, fees of Board members who are not
officers, directors or employees or holders of 5% or more of the outstanding
voting securities of the Manager, Securities and Exchange Commission fees and
state Blue Sky qualification fees, advisory fees, charges of custodians,
transfer and dividend disbursing agents' fees, certain insurance premiums,
industry association fees, outside auditing and legal expenses, costs of
independent pricing services, costs of maintaining the Fund's existence, costs
attributable to investor services (including, without limitation, telephone and
personnel expenses), costs of preparing and printing prospectuses and
statements of additional information for regulatory purposes and for
distribution to existing shareholders, costs of shareholder reports and corporate
meetings, and any extraordinary expenses. Each Fund bears certain expenses
with respect to its Agency Shares, Administrative Shares, Classic Shares,
Investor Shares, Participant Shares, Premier Shares, Service Shares and Select
Shares in accordance with separate written plans and also bears certain costs
associated with implementing and operating such plans. See "Service
Plans."
Each Fund pays the Manager a
management fee at the annual rate of 0.20% of the respective Fund’s average
daily net assets. For the fiscal years ended January 31, 2009, 2010, and 2011,
the management fee payable by each Fund to the Manager, the amounts waived by
the Manager (if any), and the net fee paid by each Fund were are follows:
|
|
Fund
|
|
|
|
|
|
|
|
Dreyfus
Cash Management
|
$62,187,427
|
$82,718,061
|
$61,558,398
|
Dreyfus
Government Cash Management
|
$52,231,595
|
$68,492,769
|
$45,085,399
|
Dreyfus
Government Prime Cash Management
|
$ 9,261,861
|
$13,309,718
|
$12,854,967
|
Dreyfus
Municipal Cash Management Plus
|
$ 2,445,806
|
$ 4,080,752
|
$
3,379,450
|
Dreyfus
New York Municipal Cash Management
|
$ 1,733,137
|
$ 2,046,262
|
$
1,848,388
|
Dreyfus
Tax Exempt Cash Management
|
$ 7,178,516
|
$12,430,939
|
$11,707,426
|
Dreyfus
Treasury & Agency Cash Management
|
$26,342,964
|
$34,882,886
|
$37,937,795
|
Dreyfus Treasury Prime Cash
Management
|
$44,204,494
|
$63,531,475
|
$53,471,494
|
Dreyfus California AMT-Free
Municipal Cash Management
|
$ 600,175
|
$ 552,100
|
$
632,979
|
Dreyfus New York AMT-Free
Municipal Cash Management
|
$ 424,008
|
$ 449,433
|
$
38,265*
|
|
|
Fund
|
|
|
|
|
|
|
|
Dreyfus
Cash Management
|
$ 5,173,263
|
$ 2,085,723
|
N/A
|
Dreyfus
Government Cash Management
|
$ 6,520,341
|
$ 1,815,322
|
N/A
|
Dreyfus
Government Prime Cash Management
|
$ 4,387,265
|
$ 664,907
|
$
24,149
|
Dreyfus
Municipal Cash Management Plus
|
$ 425,067
|
$ 452,177
|
N/A
|
Dreyfus
New York Municipal Cash Management
|
$ 408,454
|
$ 216,159
|
N/A
|
Dreyfus
Tax Exempt Cash Management
|
$ 631,649
|
$ 778,828
|
N/A
|
Dreyfus
Treasury & Agency Cash Management
|
$ 9,446,948
|
$ 1,295,846
|
$1,245,878
|
Dreyfus Treasury Prime Cash
Management
|
$34,440,396
|
$ 2,045,895
|
$4,518,677
|
Dreyfus California AMT-Free
Municipal Cash Management
|
$ 195,688
|
$ 188,282
|
$
158,678
|
Dreyfus New York AMT-Free
Municipal Cash Management
|
$ 330,767
|
N/A
|
$
933*
|
|
|
Fund
|
|
|
|
|
|
|
|
Dreyfus
Cash Management
|
$57,014,164
|
$80,632,338
|
$61,558,398
|
Dreyfus
Government Cash Management
|
$45,711,254
|
$66,677,447
|
$45,085,399
|
Dreyfus
Government Prime Cash Management
|
$ 4,874,596
|
$12,644,811
|
$12,830,818
|
Dreyfus
Municipal Cash Management Plus
|
$ 2,020,739
|
$ 3,628,575
|
$
3,379,450
|
Dreyfus
New York Municipal Cash Management
|
$ 1,324,683
|
$ 1,830,103
|
$
1,848,388
|
Dreyfus
Tax Exempt Cash Management
|
$ 6,546,867
|
$11,652,111
|
$11,707,426
|
Dreyfus
Treasury & Agency Cash Management
|
$16,896,016
|
$33,587,040
|
$36,691,917
|
Dreyfus Treasury Prime Cash
Management
|
$ 9,764,098
|
$61,485,580
|
$48,952,817
|
Dreyfus California AMT-Free
Municipal Cash Management
|
$ 404,487
|
$ 363,818
|
$
474,301
|
Dreyfus New York AMT-Free
Municipal Cash Management
|
$
93,241
|
$ 449,433
|
$
37,332*
|
________________________
*For the one-month fiscal
period ended January 31, 2009.
In addition, each Agreement
provides that if in any fiscal year the aggregate expenses of the Fund,
exclusive of taxes, brokerage, interest on borrowings and (with the prior
written consent of the necessary state securities commissions) extraordinary
expenses, but including the management fee, exceed 1-1/2% of the value of the
Fund's average net assets for the fiscal year, the Fund may deduct from the
payment to be made to the Manager under the Agreement, or the Manager will
bear, such excess expense. Such deduction or payment, if any, will be
estimated on a daily basis, and reconciled and effected or paid, as the case
may be, on a monthly basis.
The aggregate of the fees
payable to the Manager is not subject to reduction as the value of the Fund's
net assets increases.
Distributor
.
The Distributor, a wholly-owned subsidiary of the Manager, located at 200 Park Avenue, New York, New York 10166, serves as each Fund's distributor on a best
efforts basis pursuant to an agreement with the Fund which is renewable
annually. The Distributor also serves as distributor for the other funds in
the Dreyfus Family of Funds and the BNY Mellon Funds Trust.
The Manager or the Distributor
may provide cash payments out of its own resources to financial intermediaries
that sell shares of the Funds or provide other services. Such payments are
separate from any Rule 12b-1 fees or other expenses paid by the Funds to those
Service Agents. Because those payments are not made by shareholders or the
Funds, a Fund's total expense ratio will not be affected by any such payments.
These additional payments may be made to certain Service Agents, including
affiliates that provide shareholder servicing, sub-administration,
recordkeeping and/or sub-transfer agency services, marketing support and/or
access to sales meetings, sales representatives and management representatives
of the Service Agent. Cash compensation also may be paid from the Manager's or
the Distributor's own resources to Service Agents for inclusion of the Funds on
a sales list, including a preferred or select sales list or in other sales
programs. These payments sometimes are referred to as "revenue
sharing". From time to time, the Manager or the Distributor also may
provide cash or non-cash compensation to Service Agents in the form of:
occasional gifts; occasional meals, tickets or other entertainment; support for
due diligence trips; educational conference sponsorship; support for
recognition programs; and other forms of cash or non-cash compensation permissible
under broker-dealer regulations. In some cases, these payments or compensation
may create an incentive for a Service Agent to recommend or sell shares of the
Fund to investors. Investors should contact their Service Agent for details
about any payments the Service Agent may receive in connection with the sale of
Fund shares or the provision of services to the Funds.
Transfer and Dividend
Disbursing Agent and Custodian.
Dreyfus Transfer, Inc. (the "Transfer
Agent"), a wholly-owned subsidiary of the Manager, 200 Park Avenue, New
York, New York 10166, is each Fund's transfer and dividend disbursing agent.
Under a transfer agency agreement with each Fund, the Transfer Agent arranges
for the maintenance of shareholder account records for the Fund, the handling
of certain communications between shareholders and the Fund and the payment of
dividends and distributions payable by the Fund. For these services, the
Transfer Agent receives a monthly fee computed on the basis of the number of
shareholder accounts it maintains for the respective Fund during the month, and
is reimbursed for certain out-of-pocket expenses. The Fund also makes payments
to certain financial intermediaries, including affiliates, who provide
sub-administration, recordkeeping, and/or sub-transfer agency services to
beneficial owners of the Fund.
The Bank of New York Mellon (the
"Custodian"), an affiliate of the Manager, One Wall Street, New York, New York 10286, is each Fund's custodian. Under a custody agreement with each
Fund, the Custodian holds the Fund's securities and keeps all necessary
accounts and records. For its custody services, the Custodian receives a
monthly fee from the Fund based on the market value of the respective Fund's
assets held in custody and receives certain securities transactions charges.
How to Buy Shares
Each Fund offers multiple
classes of shares. Each Fund, other than Dreyfus New York AMT-Free Municipal
Cash Management, offers: Institutional Shares, Agency Shares, Administrative
Shares, Investor Shares and Participant Shares. Dreyfus Treasury & Agency
Cash Management also offers Premier Shares, Service Shares, and Select Shares.
Dreyfus New York AMT-Free Municipal Cash Management offers: Institutional
Shares, Administrative Shares, Classic Shares, Investor Shares and Participant
Shares. Each Fund's classes of shares are identical, except as to the services
offered to each class and the expenses borne by each class which may affect
performance. See "Service Plans."
The Funds are designed for
institutional investors, particularly banks, acting for themselves or in a
fiduciary, advisory, agency, custodial or similar capacity. Generally, an
investor may be required to
open a single master
account with the Fund for all purposes. In certain cases, the Fund may request
investors to maintain separate master accounts for shares held by the investor
(i) for its own account, for the account of other institutions and for accounts
for which the institution acts as a fiduciary, and (ii) for accounts for which the
investor acts in some other capacity. An institution may arrange with the
Transfer Agent for sub-accounting services and will be charged directly for the
cost of such services. Institutions purchasing Fund shares have agreed to
transmit copies of the relevant Fund's Prospectuses and all relevant Fund
materials, including proxy materials, to each individual or entity for whose
account the shares were purchased, to the extent required by law. Institutions
purchasing Fund shares on behalf of their clients determine which class of
shares is suitable for their clients.
The minimum initial investment
is $10,000,000, unless: (a) the investor has invested at least $10,000,000 in
the aggregate among any class of shares of any Fund, Dreyfus Institutional Cash
Advantage Fund; or (b) the investor has, in the opinion of the distributor’s
Dreyfus Investments Division, adequate intent and availability of funds to
reach a future level of investment of $10,000,000 among any class of shares of
the funds identified above. There is no minimum for subsequent purchases. The
initial investment must be accompanied by the Account Application. Share
certificates are issued only upon the investor's written request. No
certificates are issued for fractional shares.
Each Fund reserves the right to
reject any purchase order. The Funds will not establish an account for a
"foreign financial institution," as that term is defined in
Department of the Treasury rules implementing section 312 of the USA PATRIOT
Act of 2001. Foreign financial institutions include: foreign banks (including
foreign branches of U.S. depository institutions); foreign offices of U.S.
securities broker-dealers, futures commission merchants, and mutual funds;
non-U.S. entities that, if they were located in the United States, would be
securities broker-dealers, futures commission merchants or mutual funds; and
non-U.S. entities engaged in the business of currency dealer or exchanger or money
transmitter. The Funds will not accept cash, travelers’ checks, or money
orders as payment for shares.
Management understands that
some Service Agents and other institutions may charge their clients fees in
connection with purchases for the accounts of their clients. Service Agents
may receive different levels of compensation for selling different classes of
shares. As discussed under "Management Arrangements–Distributor,"
Service Agents may receive revenue sharing payments from the Manager or the
Distributor. The receipt of such payments could create an incentive for a Service
Agent to recommend or sell shares of a Fund instead of other mutual funds where
such payments are not received. Investors should contact their Service Agent
for details about any payments the Service Agent may receive in connection with
the sale of Fund shares or the provision of services to the Funds.
Fund shares may be purchased by
wire, by telephone or through a compatible automated interface or trading
system. All payments should be made in U.S. dollars and, to avoid fees and
delays, should be drawn only on U.S. banks. To place an order by telephone or
to determine whether their automated facilities are compatible with those of
the Funds, investors should call Dreyfus Cash Investment Services Division at
one of the telephone numbers listed on the cover. Holders of Classic Shares of
Dreyfus New York AMT-Free Municipal Cash Management who received their shares
in exchange for Classic Shares of the BNY Hamilton New York AMT-Free Municipal
Money Fund (“New York AMT-Free Predecessor Fund”) in connection with the
reorganization of the New York AMT-Free Predecessor Fund also may purchase
additional Classic Shares of Dreyfus New York AMT-Free Municipal Cash
Management by check, wire or Dreyfus
TeleTransfer
, or through Dreyfus-
Automatic
Asset Builder
®
, Dreyfus Payroll Savings Plan or Dreyfus Government
Direct Deposit Privilege as described under "Shareholder Services."
These services enable such investors to make regularly scheduled investments
and may provide these investors with a convenient way to invest for long-term
financial goals, but do not guarantee a profit and will not protect an investor
against loss in a declining market.
Fund shares are sold on a
continuous basis at the net asset value per share next determined after an
order in proper form and Federal Funds (monies of member banks in the Federal
Reserve System
which are held on deposit at a Federal
Reserve Bank) are received by the Custodian or other authorized entity to
receive orders on behalf of the Fund. If an investor does not remit Federal
Funds, its payment must be converted into Federal Funds. This usually occurs
within one business day of receipt of a bank wire and within two business days
of receipt of a check drawn on a member bank of the Federal Reserve System.
Checks drawn on banks which are not members of the Federal Reserve System may
take considerably longer to convert into Federal Funds. Prior to receipt of
Federal Funds, the investor's money will not be invested. Net asset value per
share of each class of shares is computed by dividing the value of the Fund's
net assets represented by such class (i.e., the value of its assets less
liabilities) by the total number of shares of such class outstanding. See
"Determination of Net Asset Value."
Each
fund’s n
et asset value
is calculated at
the following time on days the New York Stock Exchange, or the transfer agent
(as on Good Friday) as to Dreyfus Cash Management only, is open for regular
business:
Name of Fund
Eastern
Time
Dreyfus Cash Management 5:00
p.m.
Dreyfus Government Cash
Management 5:00
p.m.
Dreyfus Government Prime Cash
Management 3:00 p.m.
Dreyfus Treasury & Agency
Cash Management 5:00
p.m.
Dreyfus Treasury Prime Cash
Management 3:00
p.m.
Dreyfus Tax Exempt Cash
Management 1:00
p.m.
Dreyfus Municipal Cash
Management Plus 2:00
p.m.
Dreyfus New York Municipal
Cash Management 1:00
p.m.
Dreyfus New York AMT-Free
Municipal Cash Management 1:00 p.m.
Dreyfus California AMT-Free
Municipal Cash Management 1:00 p.m.
All
times are Eastern Standard time.
Orders placed in proper form
for a Fund with the Dreyfus Investments Division prior to the time indicated
above will become effective at the price determined at such time and shares so
purchased will receive the dividend declared on that day. Investment, exchange,
or redemption requests received in proper form after the time indicated above
will receive the share price determined on the next business day.
Using Federal Funds
.
The Transfer Agent or the Fund may attempt to notify the investor upon receipt
of checks drawn on banks that are not members of the Federal Reserve System as
to the possible delay in conversion into Federal Funds, and may attempt to
arrange for a better means of transmitting the money. If the investor is a
customer of a Service Agent and an order to purchase Fund shares is paid for
other than in Federal Funds, the Service Agent, acting on behalf of its
customer, will complete the conversion into, or itself advance, Federal Funds
generally on the business day following receipt of the customer order. The
order is effective only when so converted and received by the Custodian.
Dreyfus TeleTransfer
Privilege
. (Classic Shares only) Holders of Classic Shares of Dreyfus New
York AMT-Free Municipal Cash Management who received their shares in exchange
for Classic Shares of the New York AMT-Free Predecessor Fund in connection with
the reorganization of the New York AMT-Free Predecessor Fund may purchase
Classic Shares by telephone or online if such investor has checked the appropriate
box and supplied the necessary information on the Account Application or has
filed a Shareholder Services Form with the Transfer Agent. The proceeds will
be transferred between the bank account designated in one of these documents
and the investor's Fund account. Only a bank account maintained in a domestic
financial institution which is an Automated Clearing House ("ACH")
member may be so designated.
Dreyfus
TeleTransfer
purchase orders may be made at any time. To qualify to use the Dreyfus
TeleTransfer
Privilege, the initial payment for purchase of shares must be drawn on, and
redemption proceeds paid to, the same bank and account as are designated on the
Account Application or Shareholder
Services Form on
file. If the proceeds of a particular redemption are to be sent to an account
at any other bank, the request must be in writing and signature-guaranteed.
See "How to Redeem Shares—Dreyfus
TeleTransfer
Privilege."
Service Plans
(AGENCY SHARES, Administrative
Shares, CLASSIC SHARES, Investor Shares,
Participant Shares, Premier Shares, SERVICE SHARES, AND SELECT SHARES only)
Rule 12b-1 (the
"Rule") adopted by the SEC under the 1940 Act, provides, among other
things, that an investment company may bear expenses of distributing its shares
only pursuant to a plan adopted in accordance with the Rule. The Board of each
Fund has adopted a separate plan (the "Service Plan") with respect to
the Fund's Agency Shares, Administrative Shares, Investor Shares and
Participant Shares, and with respect to Dreyfus Treasury & Agency Cash
Management, the Fund's Premier Shares, Service Shares and Select Shares, and
with respect to Dreyfus New York AMT-Free Municipal Cash Management, the Fund's
Classic Shares, pursuant to which the Fund pays the Distributor for distributing
such classes of shares, for advertising and marketing and for providing certain
services to shareholders of the respective class of shares. These services
include answering shareholder inquiries regarding the Fund and providing
reports and other information, and services related to the maintenance of
shareholders accounts ("Servicing"). Under the Service Plan, as to
each relevant class, the Distributor may make payments to Service Agents in
respect to these services. Generally, the Service Agent may provide holders of
Agency Shares, Administrative Shares, Classic Shares, Investor Shares,
Participant Shares, Premier Shares, Service Shares or Select Shares a
consolidated statement, checkwriting privileges, automated teller machine
access, and bill paying services. The amount paid under the Service Plan for
Servicing is intended to be a "service fee" as defined under the
Conduct Rules of the Financial Industry Regulatory Authority
("FINRA"), and at no time will such amount exceed the maximum amount
permitted to be paid under the FINRA Conduct Rules as a service fee. The fees
payable under the Service Plan are payable without regard to actual expenses
incurred. The Board believes that there is a reasonable likelihood that each
Fund's Service Plan will benefit such Fund and the holders of its Agency
Shares, Administrative Shares, Classic Shares, Investor Shares, Participant
Shares, Premier Shares, Service Shares and Select Shares, as the case may be.
A quarterly report of the
amounts expended under each Service Plan, and the purposes for which such
expenditures were incurred, must be made to the respective Board for its
review. In addition, each Service Plan provides that it may not be amended to
increase materially the costs which holders of Agency Shares, Administrative
Shares, Classic Shares, Investor Shares, Participant Shares, Premier Shares,
Service Shares or Select Shares may bear pursuant to the Service Plan without
the approval of the holders of such class of shares and that other material
amendments of the Service Plan must be approved by the Board, and by the Board
members who are not "interested persons" (as defined in the 1940 Act)
of the Fund and have no direct or indirect financial interest in the operation
of the Service Plan or in any agreements entered into in connection with the
Service Plan, by vote cast in person at a meeting called for the purpose of
considering such amendments. Each Service Plan is subject to annual approval
by such vote of its Board members cast in person at a meeting called for the
purpose of voting on the Service Plan. Each Service Plan may be terminated at
any time as to a class of shares by vote of a majority of the Board members who
are not "interested persons" and have no direct or indirect financial
interest in the operation of the Service Plan or in any agreements entered into
in connection with the Service Plan or by vote of the holders of a majority of
such class of shares.
Set forth below are the total
amounts paid by each Fund pursuant to its Service Plan during the fiscal year
ended January 31, 2011 to the Distributor, for distributing, advertising and
marketing and for Servicing such classes of shares.
Name of Fund
and Share Class
|
Total Amount
Paid Pursuant to
Service Plan
|
|
|
Dreyfus Cash Management
|
|
Agency Shares
|
$ 45,878
|
Administrative Shares
|
$ 824,992
|
Investor Shares
|
$ 8,159,958
|
Participant Shares
|
$ 2,617,185
|
Dreyfus
Government Cash Management
|
|
Agency Shares
|
$ 43,094
|
Administrative Shares
|
$ 843,322
|
Investor Shares
|
$ 5,130,426
|
Participant Shares
|
$ 1,513,711
|
|
|
Dreyfus Government Prime
Cash Management
|
|
Agency Shares
|
$ 23,959
|
Administrative Shares
|
$ 572,435
|
Investor Shares
|
$ 1,311,303
|
Participant Shares
|
$ 2,058,943
|
Dreyfus Municipal Cash Management Plus
|
|
Agency Shares
|
$ 252
|
Administrative Shares
|
$ 467,897
|
Investor Shares
|
$ 754,204
|
Participant Shares
|
$ 95,294
|
Dreyfus
New York Municipal Cash Management
|
|
Agency Shares
|
$ 1
|
Administrative Shares
|
$ 56,389
|
Investor Shares
|
$ 695,176
|
Participant Shares
|
$ 79,417
|
Dreyfus
New York AMT-Free Municipal Cash Management
|
|
Administrative Shares
|
$ 7,376
|
Classic Shares
|
$ 147,525
|
Investor Shares
|
$ 164,207
|
Participant Shares
|
$ 40
|
Dreyfus
Tax Exempt Cash Management
|
|
Agency Shares
|
$ 659
|
Administrative Shares
|
$ 90,278
|
Investor Shares
|
$ 952,069
|
Participant Shares
|
$ 95,149
|
Dreyfus Treasury & Agency Cash Management
|
|
Agency Shares
|
$ 33,513
|
Administrative Shares
|
$ 439,153
|
Investor Shares
|
$ 4,708,874
|
Participant Shares
|
$ 1,956,678
|
Service Shares
|
$ 24,642
|
Select Shares
|
$ 149.642
|
Premier
Shares
|
$ 187.318
|
Dreyfus Treasury Prime Cash Management
|
|
Agency Shares
|
$ 39,182
|
Administrative Shares
|
$ 1,213,213
|
Investor Shares
|
$ 8,791,192
|
Participant Shares
|
$ 9,829,181
|
Dreyfus California
AMT-Free Municipal Cash Management
|
|
Agency Shares
|
$ 1
|
Administrative Shares
|
$ 14,074
|
Investor Shares
|
$ 150,899
|
Participant Shares
|
$ 190,377
|
|
|
Shareholder Services Plans
(Institutional Shares only)
Each Fund, as to its
Institutional Shares only, has adopted a separate Shareholder Services Plan
(the "Plan") pursuant to which the Fund has agreed to reimburse the
Distributor an amount not to exceed the annual rate of 0.25% of the value of
the Fund's average daily net assets attributable to Institutional Shares for
certain allocated expenses of providing personal services and/or maintaining
shareholder accounts. The services provided to holders of Institutional Shares
may include personal services relating to shareholder accounts, such as
answering shareholder inquiries regarding the Fund and providing reports and
other information, and services related to the maintenance of shareholder
accounts.
A quarterly report of the
amounts expended under each Plan and the purposes for which such expenditures
were incurred, must be made to the respective Board for its review. In
addition, each Plan provides that material amendments of the Plan must be approved
by the Fund's Board, and by the Board members who are not "interested
persons" (as defined in the 1940 Act) of the Fund or the Manager and have
no direct or indirect financial interest in the operation of the Plan, by vote
cast in person at a meeting called for the purpose of considering such
amendments. Each Plan is subject to annual approval by such vote of the Board
members of such Fund cast in person at a meeting called for the purpose of
voting on the Plan. Each Plan is terminable at any time by vote of a majority
of the Board members who are not "interested persons" and have no
direct or indirect financial interest in the operation of the Plan.
The total amounts reimbursed by
each Fund pursuant to its Plan with respect to Institutional Shares are as
follows:
|
Total Amount
Paid Pursuant to
Service Plan
|
|
|
Dreyfus Cash Management
|
$ 511,157
|
Dreyfus
Government Cash Management
|
$ 140,081
|
Dreyfus Government Prime
Cash Management
|
$ 55,125
|
Dreyfus Municipal Cash Management Plus
|
$ 38,276
|
Dreyfus New York Municipal Cash
Management
|
$ 12,562
|
Dreyfus New York AMT-Free Municipal Cash Management
|
$ 5,394
|
Dreyfus Tax Exempt Cash Management
|
$ 460,137
|
Dreyfus Treasury & Agency Cash Management
|
$ 606,433
|
Dreyfus Treasury Prime Cash Management
|
$ 342,681
|
Dreyfus California AMT-Free
Municipal Cash Management
|
$ 4,975
|
How to Redeem Shares
General
. Each Fund
ordinarily will make payment for shares on the same or next business day after
receipt by the Dreyfus Investments Division or other authorized entity of a
redemption request in proper form, except as provided under the 1940 Act (as
described in the Funds’ Prospectuses). As to holders of Classic Shares of
Dreyfus New York AMT-Free Municipal Cash Management who received their shares
in exchange for Classic Shares of the Predecessor New York AMT-Free Fund in
connection with the reorganization of the Predecessor New York AMT-Free Fund,
if such investor has purchased Classic Shares by check, by Dreyfus
TeleTransfer
Privilege or through Dreyfus-
Automatic
Asset Builder
Ò
and subsequently submits a written
redemption request to the Transfer Agent, the Fund may delay redemption of such
shares, and the redemption proceeds may not be transmitted to the investor, for
up to eight business days after the purchase of such shares. In addition, the
Fund will reject requests from such investors to redeem Classic Shares by wire
or telephone, online or pursuant to the Dreyfus
TeleTransfer
Privilege,
for a period of up to eight business days after receipt by the Transfer Agent
of the purchase check, the Dreyfus
TeleTransfer
purchase or the Dreyfus-
Automatic
Asset Builder
Ò
order against which such
redemption is requested. These procedures will not apply if the investor's
shares were purchased by wire payment, or if the investor otherwise has a
sufficient collected balance in his or her account to cover the redemption
request. Prior to the time any redemption is effective, dividends on such
shares will accrue and be payable, and investors will be entitled to exercise
all other rights of beneficial ownership.
Processing
of Redemption Order
. If a redemption
request is received in proper form, the shares will be priced at the next
determined net asset value, and if received by the Transfer Agent or authorized
entity by the time indicated above (under the section entitled “How to Buy
Shares”), the proceeds of the redemption, if transfer by wire is requested,
ordinarily will be transmitted in Federal Funds on the same day and the shares
will not receive the dividend declared on that day. Proceeds related to a
redemption request received in proper form after the indicated time, if wire
transfer is requested, ordinarily will be transmitted in Federal Funds on the
next business day and such shares will not receive the dividend declared on
that next business day.
Redemption by Telephone
.
By using this procedure, the investor authorizes the Transfer Agent to act on
telephone redemption instructions from any person representing himself or
herself to be an authorized representative of the investor, and reasonably
believed by the Transfer Agent to be genuine. Redemption proceeds will be
transferred by Federal Reserve wire only to a bank that is a member of the
Federal Reserve System.
Dreyfus
TeleTransfer Privilege
. (Classic Shares only) Holders of Classic Shares
of Dreyfus New York AMT-Free Municipal Cash Management who received their
shares in exchange for Classic Shares of the Predecessor New York AMT-Free Fund
in connection with the reorganization of the Predecessor New York AMT-Free Fund
may request by telephone or online that redemption proceeds be transferred
between such investor's Fund account and the investor's bank account. Only a
bank account maintained in a domestic financial institution which is an ACH
member may be designated. Such investors should be aware that if the investor
has selected the Dreyfus
TeleTransfer
Privilege, any request for a
Dreyfus
TeleTransfer
transaction will be effected through the ACH system
unless more prompt transmittal specifically is requested. Redemption proceeds
will be on deposit in the investor's account at an ACH member bank ordinarily
two business days after receipt of the redemption request. Shares held in an
IRA or Education Savings Account may not be redeemed through the Dreyfus
TeleTransfer
Privilege. See "How to Buy Shares—Dreyfus
TeleTransfer
Privilege."
Stock Certificates;
Signatures
. (Classic Shares only) Any certificates representing Fund
Classic Shares to be redeemed must be submitted with the redemption request.
Written redemption requests must be signed by each shareholder, including each
holder of a joint account, and each signature must be guaranteed. Signatures
on endorsed certificates submitted for redemption also must be guaranteed. The
Transfer Agent has adopted standards and procedures pursuant to which
signature-guarantees in proper form generally will be accepted from domestic
banks, brokers, dealers, credit unions, national securities exchanges,
registered securities associations, clearing agencies and savings associations,
as well as from participants in the New York Stock Exchange Medallion Signature
Program, the Securities Transfer Agents Medallion Program ("STAMP")
and the Stock Exchanges Medallion Program. Guarantees must be signed by an
authorized signatory of the guarantor and "Signature-Guaranteed" must
appear with the signature. The Transfer Agent may request additional
documentation from corporations, executors, administrators, trustees or
guardians, and may accept other suitable verification arrangements from foreign
investors, such as consular verification. For more information with respect to
signature-guarantees, please call one of the telephone numbers listed on the
cover.
Redemption Commitment
.
Each Fund has committed to pay in cash all redemption requests by any
shareholder of record, limited in amount during any 90-day period to the lesser
of $250,000 or 1% of the value of the Fund's net assets at the beginning of
such period. Such commitment is irrevocable without the prior approval of the
SEC. In the case of requests for redemption from a Fund in excess of such
amount, the Board reserves the right to make payments in whole or in part in
securities or other assets of the Fund in case of an emergency or any time a
cash distribution would impair the liquidity of the Fund to the detriment of
the existing shareholders. In such event, the securities would be valued in
the same manner as the Fund's portfolio is valued. If the recipient sells such
securities, brokerage charges might be incurred.
Determination of Net Asset Value
Amortized Cost Pricing
.
The valuation of each Fund's portfolio securities is based upon their amortized
cost which does not take into account unrealized capital gains or losses. This
involves valuing an instrument at its cost and thereafter assuming a constant
amortization to maturity of any discount or premium, regardless of the impact
of fluctuating interest rates on the market value of the instrument. While
this method provides certainty in valuation, it may result in periods during
which value, as determined by amortized cost, is higher or lower than the price
the Fund would receive if it sold the instrument.
Each Fund's Board has
established, as a particular responsibility within the overall duty of care
owed to the Fund's investors, procedures reasonably designed to stabilize the
Fund's price per share as computed for the purpose of purchases and redemptions
at $1.00. Such procedures include review of the
Fund's
portfolio holdings by the Fund's Board, at such intervals as it deems
appropriate, to determine whether the Fund's net asset value calculated by
using available market quotations or market equivalents deviates from $1.00 per
share based on amortized cost. In such review, investments for which market
quotations are readily available will be valued at the most recent bid price or
yield equivalent for such securities or for securities of comparable maturity,
quality and type, as obtained from one or more of the major market makers for
the securities to be valued. Other investments and assets, to the extent a
Fund is permitted to invest in such instruments, will be valued at fair value
as determined in good faith by the Fund's Board. With respect to the Tax
Exempt Funds, market quotations and market equivalents used in the Board's
review are obtained from an independent pricing service (the
"Service") approved by the Board. The Service values these Funds'
investments based on methods which include consideration of: yields or prices
of Municipal Obligations of comparable quality, coupon, maturity and type;
indications of values from dealers; and general market conditions. The Service
also may employ electronic data processing techniques and/or a matrix system to
determine valuations.
The extent of any deviation
between the Fund's net asset value per share based upon available market
quotations or market equivalents and $1.00 per share based on amortized cost
will be examined by the Fund's Board. If such deviation exceeds 1/2%, the
Fund's Board will consider promptly what action, if any, will be initiated. In
the event the Fund's Board determines that a deviation exists which may result
in material dilution or other unfair results to investors or existing
shareholders, it has agreed to take such corrective action as it regards as
necessary and appropriate including: selling portfolio instruments prior to
maturity to realize capital gains or losses or to shorten average portfolio
maturity; withholding dividends or paying distributions from capital or capital
gains; redeeming shares in kind; or establishing a net asset value per share by
using available market quotations or market equivalents.
New York Stock
Exchange and Transfer Agent Closings
. The holidays (as observed) on which
both the New York Stock Exchange and the Transfer Agent are closed currently
are: New Year's Day, Martin Luther King Jr. Day, Presidents' Day, Memorial
Day, Independence Day, Labor Day, Thanksgiving and Christmas. The New York
Stock Exchange also is closed on Good Friday.
Shareholder Services
Fund Exchanges
. Shares
of one class of a Fund may be exchanged for shares of the same class of another
Fund or of Dreyfus Institutional Cash Advantage Fund or Dreyfus Institutional
Cash Advantage Plus Fund. In addition, Classic Shares of Dreyfus New York
AMT-Free Municipal Cash Management may be exchanged for shares of certain funds
in the Dreyfus Family of Funds, to the extent such shares are offered for sale
in the investor's state of residence and the investor meets the minimum
investment requirements of such fund. Investors may be charged a sales load
when exchanging into any fund that has one. To request an exchange, exchange
instructions must be given in writing or by telephone. By using the Telephone
Exchange Privilege, the investor authorizes the Transfer Agent to act on
exchange instructions from any person representing himself or herself to be an
authorized representative of the investor and reasonably believed by the
Transfer Agent to be genuine. Telephone exchanges may be subject to
limitations as to the amount involved or the number of telephone exchanges
permitted. Shares will be exchanged at the net asset value next determined
after receipt of an exchange request in proper form. Shares in certificate
form are not eligible for telephone exchange.
An investor who wishes to
redeem shares of one class of shares and purchase shares of another class of
shares of a fund identified above should contact Dreyfus Investments Division
by calling one of the telephone numbers listed on the cover page of this
Statement of Additional Information, and should obtain a prospectus for the
relevant share class which the investor wishes to purchase.
No
fees currently are charged shareholders directly in connection with exchanges,
although each Fund reserves the right, upon not less than 60 days' written
notice, to charge shareholders a nominal administrative fee in accordance with
rules promulgated by the SEC.
Dreyfus Auto-Exchange
Privilege
. Dreyfus Auto-Exchange Privilege permits an investor to purchase
(on a semi-monthly, monthly, quarterly or annual basis), in exchange for shares
of one class of a Fund, shares of the same class of another Fund or of Dreyfus
Institutional Cash Advantage Fund or Dreyfus Institutional Cash Advantage Plus
Fund. In addition, holders of Classic Shares of Dreyfus New York AMT-Free
Municipal Cash Management may purchase (on a semi-monthly, monthly, quarterly
or annual basis), in exchange for Classic Shares, shares of certain funds in
the Dreyfus Family of Funds of which the investor is a shareholder. This
Privilege is available only for existing accounts. Shares will be exchanged on
the basis of relative net asset value. Enrollment in or modification or
cancellation of this Privilege is effective three business days following
notification by the investor. An investor will be notified if its account
falls below the amount designated under this Privilege. In this case, an
investor's account will fall to zero unless additional investments are made in
excess of the designated amount prior to the next Auto-Exchange transaction.
Shares in certificate form are not eligible for this Privilege.
Fund Exchanges and the Dreyfus
Auto-Exchange Privilege are available to investors resident in any state in
which shares of the fund being acquired may legally be sold. Shares may be
exchanged only between accounts having certain identical identifying
designations.
The Fund reserves the right to
reject any exchange request in whole or in part. The availability of Fund Exchanges
or the Dreyfus Auto-Exchange Privilege may be modified or terminated at any
time upon notice to investors.
Dreyfus-Automatic Asset
Builder
®
. (Classic Shares only) Dreyfus-
Automatic
Asset
Builder permits holders of Classic Shares of Dreyfus New York AMT-Free
Municipal Cash Management who received their shares in exchange for Classic
Shares of the Predecessor New York AMT-Free Fund in connection with the
reorganization of the Predecessor New York AMT-Free Fund to purchase Classic
Shares (minimum of $100 and a maximum of $150,000 per transaction) at regular
intervals selected by the investor. Fund shares are purchased by transferring
funds from the bank account designated by the investor.
Dreyfus Government Direct
Deposit Privilege
. (Classic Shares only) Dreyfus Government Direct
Deposit Privilege enables holders of Classic Shares of Dreyfus New York
AMT-Free Municipal Cash Management who received their shares in exchange for
Classic Shares of the Predecessor New York AMT-Free Fund in connection with the
reorganization of the Predecessor New York AMT-Free Fund to purchase Classic
Shares (minimum of $100 and maximum of $50,000 per transaction) by having
Federal salary, Social Security, or certain veterans', military or other
payments from the U.S. Government automatically deposited into the investor's
Fund account.
Dreyfus Payroll Savings Plan
.
(Classic Shares only) Dreyfus Payroll Savings Plan permits holders of Classic
Shares of Dreyfus New York AMT-Free Municipal Cash Management who received
their shares in exchange for Classic Shares of the Predecessor New York
AMT-Free Fund in connection with the reorganization of the Predecessor New York
AMT-Free Fund to purchase Classic Shares (minimum of $100 per transaction)
automatically on a regular basis. Depending upon the direct deposit program of
such investor's employer, the investor may have part or all of his or her
paycheck transferred to the investor's existing Dreyfus account electronically
through the ACH system at each pay period. To establish a Dreyfus Payroll
Savings Plan account, an investor must file an authorization form with his or
her employer's payroll department. It is the sole responsibility of the
investor's employer to arrange for transactions under the Dreyfus Payroll
Savings Plan.
Automatic
Withdrawal Plan
. (Classic Shares only) The Automatic Withdrawal Plan
permits holders of Classic Shares of Dreyfus New York AMT-Free Municipal Cash
Management who received their shares in exchange for Classic Shares of the
Predecessor New York AMT-Free Fund in connection with the reorganization of the
Predecessor New York AMT-Free Fund to request withdrawal of a specified dollar
amount (minimum of $50) on either a monthly or quarterly basis if the investor
has a $5,000 minimum account. Withdrawal payments are the proceeds from sales
of Fund shares, not the yield on the shares. If withdrawal payments exceed
reinvested dividends and distributions, the investor's shares will be reduced
and eventually may be depleted. The Automatic Withdrawal Plan may be
terminated at any time by such investor, the Company or the Transfer Agent.
Shares for which stock certificates have been issued may not be redeemed
through the Automatic Withdrawal Plan.
Dividends, Distributions and Taxes
Management believes that each
Fund has qualified for treatment as a "regulated investment company"
under the Code for the fiscal year ended January 31, 2011. Each Fund intends
to continue to so qualify if such qualification is in the best interests of its
shareholders. As a regulated investment company, the Fund will pay no Federal
income tax on net investment income and net realized capital gains to the
extent that such income and gains are distributed to shareholders in accordance
with applicable provisions of the Code. To qualify as a regulated investment
company, the Fund must pay out to its shareholders at least 90% of its net
income (consisting of net investment income from tax exempt obligations and
taxable obligations, if any, and net short-term capital gains), and must meet
certain asset diversification and other requirements. If the Fund does not
qualify as a regulated investment company, it will be treated for tax purposes
as an ordinary corporation subject to Federal income tax. The term
"regulated investment company" does not imply the supervision of
management or investment practices or policies by any government agency.
Ordinarily, gains and losses
realized from portfolio transactions will be treated as capital gain or loss.
However, all or a portion of any gains realized from the sale or other
disposition of certain market discount bonds will be treated as ordinary
income.
Many states grant tax-free
status to dividends paid to shareholders of mutual funds from interest income
earned by a fund from direct obligations of the U.S. Government, subject in
some states to minimum investment requirements that must be met by the fund.
Investments in securities issued by the Government National Mortgage
Association or Fannie Mae, bankers' acceptances, commercial paper and repurchase
agreements collateralized by U.S. Government securities do not generally
qualify for tax-free treatment. At the end of each calendar year, as
applicable, investors will be provided with the percentage of any dividends
paid that may qualify for such tax-free treatment. Investors should then
consult with their tax advisers with respect to the application of state and
local laws to these distributions.
Portfolio Transactions
General
. The Manager
assumes general supervision over the placement of securities purchase and sale
orders on behalf of the funds it manages. In cases where the Manager or fund
employs a sub-adviser, the sub-adviser, under the supervision of the Manager,
places orders on behalf of the applicable fund(s) for the purchase and sale of
portfolio securities.
Certain funds are managed by
dual employees of the Manager and an affiliated entity in the BNY Mellon
organization. Funds managed by dual employees use the research and trading
facilities, and are subject to the internal policies and procedures, of the
affiliated entity. In this regard, the Manager places
orders
on behalf of those funds for the purchase and sale of securities through the
trading desk of the affiliated entity, applying the written trade allocation
procedures of such affiliate.
The Manager (and where
applicable, a sub-adviser or Dreyfus affiliate) generally has the authority to
select brokers (for equity securities) or dealers (for fixed income securities)
and the commission rates or spreads to be paid. Allocation of brokerage
transactions, including their frequency, is made in the best judgment of the
Manager (and where applicable, a sub-adviser or Dreyfus affiliate) and in a
manner deemed fair and reasonable to shareholders. The primary consideration
in placing portfolio transactions is prompt execution of orders at the most
favorable net price. In choosing brokers or dealers, the Manager (and where
applicable, a sub-adviser or Dreyfus affiliate) evaluates the ability of the
broker or dealer to execute the particular transaction (taking into account the
market for the security and the size of the order) at the best combination of
price and quality of execution.
In general, brokers or dealers
involved in the execution of portfolio transactions on behalf of a fund are
selected on the basis of their professional capability and the value and
quality of their services. The Manager (and where applicable, a sub-adviser or
Dreyfus affiliate) attempts to obtain best execution for the fund by choosing
brokers or dealers to execute transactions based on a variety of factors, which
may include, but are not limited to, the following: (i) price; (ii) liquidity;
(iii) the nature and character of the relevant market for the security to be
purchased or sold; (iv) the measured quality and efficiency of the broker's or
dealer's execution; (v) the broker's or dealer's willingness to commit capital;
(vi) the reliability of the broker or dealer in trade settlement and clearance;
(vii) the level of counter-party risk (
i.e
., the broker's or dealer's
financial condition); (viii) the commission rate or the spread; (ix) the value
of research provided; (x) the availability of electronic trade entry and
reporting links; and (xi) the size and type of order (
e.g
., foreign or
domestic security, large block, illiquid security). In selecting brokers or
dealers no factor is necessarily determinative; however, at various times and
for various reasons, certain factors will be more important than others in
determining which broker or dealer to use. Seeking to obtain best execution
for all trades takes precedence over all other considerations.
With respect to the receipt of
research, the brokers or dealers selected may include those that supplement the
Manager's (and where applicable, a sub-adviser's or Dreyfus affiliate's)
research facilities with statistical data, investment information, economic
facts and opinions. Such information may be useful to the Manager (and where
applicable, a sub-adviser or Dreyfus affiliate) in serving funds or accounts
that it advises and, conversely, supplemental information obtained by the
placement of business of other clients may be useful to the Manager (and where
applicable, a sub-adviser or Dreyfus affiliate) in carrying out its obligations
to the fund. Information so received is in addition to, and not in lieu of,
services required to be performed by the Manager (and where applicable, a
sub-adviser or Dreyfus affiliate), and the Manager's (and where applicable, a
sub-adviser's or Dreyfus affiliate's) fees are not reduced as a consequence of
the receipt of such supplemental information. Although the receipt of such
research services does not reduce the Manager's (and where applicable, a
sub-adviser's or Dreyfus affiliate's) normal independent research activities,
it enables it to avoid the additional expenses that might otherwise be incurred
if it were to attempt to develop comparable information through its own staff.
Investment
decisions for the Fund are made independently from those of the other
investment companies and accounts advised by Dreyfus and its affiliates
.
If, however, such other investment companies or accounts desire to invest in,
or dispose of, the same securities as the Fund, Dreyfus or its affiliates may,
but are not required to, aggregate (or "bunch") orders that are
placed or received concurrently for more than one investment company or account
and available investments or opportunities for sales will be allocated equitably
to each. In some cases, this procedure may adversely affect the size of the
position obtained for or disposed of by the Fund or the price paid or received
by the Fund. When transactions are aggregated, but it is not possible to
receive the same price or execution on the entire volume of securities
purchased or sold, the various prices may be averaged, and the Fund will be
charged or credited with the average price.
Dreyfus may buy for the Fund securities of issuers in
which other investment companies or accounts advised by Dreyfus or BNY Mellon
and its other affiliates have made, or are making, an investment in securities
that are subordinate or senior to the securities purchased for the Fund. For
example, the Fund may invest in debt securities of an issuer at the same time
that other investment companies or accounts are investing, or currently have an
investment, in equity securities of the same issuer. To the extent that the
issuer experiences financial or operational challenges which may impact the
price of its securities and its ability to meet its obligations, decisions by
BNY Mellon or its affiliates (including Dreyfus) relating to what actions are
to be taken may raise conflicts of interests and Dreyfus or BNY Mellon and its
other affiliates may take actions for certain accounts that have negative
impacts on other advisory accounts, including the Fund.
Portfolio
turnover may vary from year to year as well as within a year. In periods in
which extraordinary market conditions prevail, the Manager (and where
applicable, a sub-adviser or Dreyfus affiliate) will not be deterred from
changing a Fund's investment strategy as rapidly as needed, in which case
higher turnover rates can be anticipated which would result in greater
brokerage expenses. The overall reasonableness of brokerage commissions paid
is evaluated by the Manager (and where applicable, a sub-adviser or Dreyfus
affiliate) based upon its knowledge of available information as to the general
level of commissions paid by other institutional investors for comparable
services. Higher portfolio turnover rates usually generate additional
brokerage commissions and transaction costs and any short-term gains realized
from these transactions are taxable to shareholders as ordinary income.
To the extent
that a fund invests in foreign securities, certain of such fund's transactions
in those securities may not benefit from the negotiated commission rates
available to funds for transactions in securities of domestic issuers. For
funds that permit foreign exchange transactions, such transactions are made
with banks or institutions in the interbank market at prices reflecting a
mark-up or mark-down and/or commission.
The Manager (and
where applicable, a sub-adviser or Dreyfus affiliate) may deem it appropriate
for one fund or account it manages to sell a security while another fund or
account it manages is purchasing the same security. Under such circumstances,
the Manager (and where applicable, a sub-adviser or Dreyfus affiliate) may
arrange to have the purchase and sale transactions effected directly between
the fund and/or accounts ("cross transactions"). Cross transactions
will be effected in accordance with procedures adopted pursuant to Rule 17a-7
under the 1940 Act.
All portfolio
transactions of each money market fund are placed on behalf of the fund by the
Manager. Debt securities purchased and sold by a fund generally are traded on
a net basis (
i.e
., without a commission) through dealers acting for
their own account and not as brokers, or otherwise involve transactions
directly with the issuer of the instrument. This means that a dealer makes a
market for securities by offering to buy at one price and sell at a slightly
higher price. The difference between the prices is known as a
"spread." Other portfolio transactions may be executed through
brokers acting as agent. A fund will pay a spread or commission in connection
with such transactions. The Manager uses its best efforts to obtain execution
of portfolio transactions at prices that are advantageous to a fund and at
spreads and commission rates (if any) that are reasonable in relation to the
benefits received. The Manager also places transactions for other accounts
that it provides with investment advice.
When more than
one fund or account is simultaneously engaged in the purchase or sale of the
same investment instrument, the prices and amounts are allocated in accordance
with a formula considered by the Manager (and where applicable, a sub-adviser
or Dreyfus affiliate) to be equitable to the fund or account. In some cases
this system could have a detrimental effect on the price or volume of the
investment instrument as far as a fund or account is concerned. In other
cases, however, the ability of a fund or account to participate in volume
transactions will produce better executions for the fund or account.
When transactions are executed in the over-the-counter
market (
i.e
., with dealers), the Manager will typically deal with the
primary market makers unless a more favorable price or execution otherwise is
obtainable.
None of the
Funds paid a stated brokerage commission during the fiscal years ended January
31, 2009, 2010, and 2011 (and, for Dreyfus New York AMT-Free Municipal Cash
Management, for the fiscal years ended December 31, 2008, one-month fiscal
period ended January 31, 2009, and fiscal years ended January 31, 2010 and 2011).
Disclosure of
Portfolio Holdings
. It is the policy of Dreyfus to protect the
confidentiality of fund portfolio holdings and prevent the selective disclosure
of non-public information about such holdings. Each fund, or its duly
authorized service providers, publicly discloses its portfolio holdings in
accordance with regulatory requirements, such as periodic portfolio disclosure
in filings with the SEC. Each non-money market fund, or its duly authorized
service providers, may publicly disclose its complete schedule of portfolio
holdings at month-end, with a one-month lag, at www.dreyfus.com. In addition,
each money market fund, or its duly authorized service providers, may publicly
disclose daily on the website its complete schedule of portfolio holdings as of
the end of the previous business day. Portfolio holdings will remain available
on the website until the fund files a Form N-CSR or Form N-Q for the period
that includes the date of the posted holdings.
If a fund's portfolio
holdings are released pursuant to an ongoing arrangement with any party, such
fund must have a legitimate business purpose for doing so, and neither the
fund, nor Dreyfus or its affiliates, may receive any compensation in connection
with an arrangement to make available information about the fund's portfolio
holdings. Funds may distribute portfolio holdings to mutual fund evaluation
services such as Standard & Poor's, Morningstar or Lipper Analytical
Services; due diligence departments of broker-dealers and wirehouses that
regularly analyze the portfolio holdings of mutual funds before their public
disclosure; and broker-dealers that may be used by the fund, for the purpose of
efficient trading and receipt of relevant research, provided that: (a) the recipient
does not distribute the portfolio holdings to persons who are likely to use the
information for purposes of purchasing or selling fund shares or fund portfolio
holdings before the portfolio holdings become public information; and (b) the
recipient signs a written confidentiality agreement.
Funds may also
disclose any and all portfolio information to their service providers and
others who generally need access to such information in the performance of
their contractual duties and responsibilities and are subject to duties of
confidentiality, including a duty not to trade on non-public information,
imposed by law and/or contract. These service providers include the fund's
custodian, independent registered public accounting firm, investment adviser,
administrator, and each of their respective affiliates and advisers.
Disclosure of a
Fund's portfolio holdings may be authorized only by the Fund's Chief Compliance
Officer, and any exceptions to this policy are reported quarterly to the Fund's
Board.
Information About the Funds
Each Fund's shares are
classified into multiple classes. Each Fund share has one vote and
shareholders will vote in the aggregate and not by class, except as otherwise
required by law or with respect to any matter which affects only one class.
Each Fund share, when issued and paid for in accordance with the terms of the
offering, is fully paid and non-assessable. Fund shares have no preemptive,
subscription or conversion rights and are freely transferable.
Under Massachusetts law,
shareholders of a Fund could, under certain circumstances, be held liable for
the obligations of the Fund. However, each Fund's Agreement and Declaration of
Trust (each, a
"Trust Agreement") disclaims
shareholder liability for acts or obligations of such Fund and requires that
notice of such disclaimer be given in each agreement, obligation or instrument
entered into or executed by the Fund or its Board members. Each Trust
Agreement provides for indemnification from the Fund's property for all losses
and expenses of any shareholder held personally liable for the obligations of
the Fund. Thus, the risk of a shareholder incurring financial loss on account
of shareholder liability is limited to circumstances in which the Fund itself
would be unable to meet its obligations, a possibility which management
believes is remote. Upon payment of any liability incurred by a Fund organized
as a Massachusetts business trust, the shareholder paying such liability will
be entitled to reimbursement from the general assets of such Fund. Each of
these Funds intends to conduct its operations in such a way so as to avoid, as
far as possible, ultimate liability of its shareholders for liabilities of the
Fund.
Unless otherwise required by
the 1940 Act, ordinarily it will not be necessary for the Fund to hold annual
meetings of shareholders. As a result, Fund shareholders may not consider each
year the election of Board members or the appointment of auditors. However,
the holders of at least 10% of the shares outstanding and entitled to vote may
require the Fund to hold a special meeting of shareholders for purposes of
removing a Board member from office. Fund shareholders may remove a Board
member by the affirmative vote of two-thirds of the respective Fund's
outstanding voting shares. In addition, the Fund's Board will call a meeting
of shareholders for the purpose of electing Board members if, at any time, less
than a majority of the Board members then holding office have been elected by
shareholders.
Each of the Company and the
Trust is a "series fund," which is a mutual fund divided into
separate portfolios, each of which is treated as a separate entity for certain
matters under the 1940 Act and for other purposes. A shareholder of one
portfolio is not deemed to be a shareholder of any other portfolio. For
certain matters shareholders vote together as a group; as to others they vote
separately by portfolio.
To date, the Board of the
Company has authorized the creation of two series of shares and the Board of
the Trust has authorized the creation of three series of shares. All
consideration received by the Company or Trust, as the case may be, for shares
of one of the portfolios, and all assets in which such consideration is
invested, will belong to that portfolio (subject only to the rights of
creditors of the Company or Trust, as the case may be) and will be subject to
the liabilities related thereto. The income attributable to, and the expenses
of, one portfolio would be treated separately from those of any other portfolio.
The Company and the Trust have the ability to create, from time to time, new
series without shareholder approval.
Rule 18f-2 under the 1940 Act
provides that any matter required to be submitted under the provisions of the
1940 Act or applicable state law or otherwise to the holders of the outstanding
voting securities of an investment company, such as the Company and the Trust,
will not be deemed to have been effectively acted upon unless approved by the
holders of a majority of the outstanding shares of each series affected by such
matter. Rule 18f-2 further provides that a series shall be deemed to be
affected by a matter unless it is clear that the interests of each series in
the matter are identical or that the matter does not affect any interest of
such series. Rule 18f-2 exempts the selection of the independent registered
public accounting firm and the election of Board members from the separate
voting requirements of the Rule.
Effective June 1, 2007, the
Trust changed its name from "Dreyfus Tax Exempt Cash Management" to
its current name. Effective January 1, 2008, Dreyfus California AMT-Free
Municipal Cash Management changed its name from "Dreyfus California AMT
Tax-Free Cash Management" to its current name. Effective March 12, 2008,
Dreyfus Treasury & Agency Cash Management changed its name from
"Dreyfus Treasury Cash Management" to its current name.
Although each Fund is offering
only its own shares, it is possible that a Fund might become liable for any
misstatement in the combined Prospectuses or this Statement of Additional
Information about
another Fund. The Board members
with respect to each Fund have considered this factor in approving the use of
the combined Prospectuses and this Statement of Additional Information.
Each Fund sends annual and
semi-annual financial statements to all its shareholders.
Counsel and Independent Registered Public Accounting Firm
Stroock & Stroock &
Lavan LLP, 180 Maiden Lane, New York, New York 10038-4982, as counsel for each
Fund, has rendered its opinion as to certain legal matters regarding the due
authorization and valid issuance of the shares being sold pursuant to the
Funds' Prospectuses.
Ernst
& Young LLP, 5 Times Square, New York, New York 10036
, an
independent registered public accounting firm, have been selected to serve as
the independent registered public accounting firm for each Fund.
APPENDIX A
(DREYFUS CASH MANAGEMENT)
Descriptions of the highest
commercial paper, bond and other short- and long-term rating categories
assigned by Standard & Poor's Ratings Services ("S&P"),
Moody's Investors Service, Inc. ("Moody's"), and Fitch Ratings
("Fitch").
Commercial Paper Ratings and Short-Term Ratings
The designation A-1 by S&P
indicates that the degree of safety regarding timely payment is either overwhelming
or very strong. Those issues determined to possess overwhelming safety
characteristics are denoted with a plus sign (+) designation.
The rating Prime-1 (P-1) is the
highest commercial paper rating assigned by Moody's. Issuers of P-1 paper must
have a superior capacity for repayment of short-term promissory obligations,
and ordinarily will be evidenced by leading market positions in well
established industries, high rates of return on funds employed, conservative
capitalization structures with moderate reliance on debt and ample asset
protection, broad margins in earnings coverage of fixed financial charges and
high internal cash generation, and well established access to a range of
financial markets and assured sources of alternate liquidity.
The rating Fitch-1 (Highest
Credit Quality) is the highest commercial paper rating assigned by Fitch and
indicates the strongest capacity for timely payment of financial commitments.
Bond Ratings and Long-Term Ratings
Bonds rated AAA are considered
by S&P to be the highest grade obligation and possess an extremely strong
capacity to pay principal and interest.
Bonds rated Aaa are judged by
Moody's to be of the best quality. Bonds rated Aa by Moody's are judged by
Moody's to be of high quality by all standards and, together with the Aaa
group, they comprise what are generally known as high-grade bonds.
Bonds rated AAA by Fitch are
judged by Fitch to be of the highest credit quality. The AAA rating by Fitch
denotes the lowest expectation of credit risk. The AAA rating is assigned by
Fitch only in case of exceptionally strong capacity for timely payment of
financial commitments; the capacity is highly unlikely to be adversely affected
by foreseeable events.
Fitch also assigns a rating to
certain international and U.S. banks. A Fitch bank rating represents Fitch's
current assessment of the strength of the bank and whether such bank would
receive support should it experience difficulties. In its assessment of a
bank, Fitch uses a dual rating system comprised of Legal Ratings and Individual
Ratings. In addition, Fitch assigns banks Long and Short-Term Ratings as used
in the corporate ratings discussed above. Legal Ratings, which range in
gradation from 1 through 5, address the question of whether the bank would receive
support provided by central banks or the bank's shareholders if it experienced
difficulties, and such ratings are considered by Fitch to be a prime factor in
its assessment of credit risk. Individual Ratings, which range in gradations
from A through E, represent Fitch's assessment of a bank's economic merits and
address the question of how the bank would be viewed if it were entirely
independent and could not rely on support from state authorities or its owners.
APPENDIX B
(TAX EXEMPT FUNDS)
Description of certain S&P, Moody's and Fitch ratings:
S&P
Municipal Bond Ratings
An S&P municipal bond
rating is a current assessment of the creditworthiness of an obligor with
respect to a specific obligation.
The ratings are based on
current information furnished by the issuer or obtained by S&P from other
sources it considers reliable, and will include: (1) likelihood of
default-capacity and willingness of the obligor as to the timely payment of
interest and repayment of principal in accordance with the terms of the
obligation; (2) nature and provisions of the obligation; and (3) protection
afforded by, and relative position of, the obligation in the event of
bankruptcy, reorganization or other arrangement under the laws of bankruptcy
and other laws affecting creditors' rights.
AAA
Debt rated AAA has the highest
rating assigned by S&P. Capacity to pay interest and repay principal is
extremely strong.
AA
Debt rated AA has a very strong
capacity to pay interest and repay principal and differs from the highest rated
issues only in small degree. The AA rating may be modified by the addition of a
plus or a minus sign, which is used to show relative standing within the
category.
Municipal Note Ratings
SP-1
The issuers of these municipal
notes exhibit very strong or strong capacity to pay principal and interest.
Those issues determined to possess overwhelming safety characteristics are
given a plus (+) designation.
Commercial Paper Ratings
The rating A is the highest
rating and is assigned by S&P to issues that are regarded as having the
greatest capacity for timely payment. Issues in this category are delineated
with the numbers 1, 2 and 3 to indicate the relative degree of safety. Paper
rated A-1 indicates that the degree of safety regarding timely payment is either
overwhelming or very strong. Those issues determined to possess overwhelming
safety characteristics are denoted with a plus sign (+) designation.
Moody's
Municipal Bond Ratings
Aaa
Bonds
which are rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa
Bonds which are rated Aa are
judged to be of high quality by all standards. Together with the Aaa group
they comprise what generally are known as high grade bonds. They are rated
lower than the best bonds because margins of protection may not be as large as
in Aaa securities or fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make the long-term risks
appear somewhat larger than in Aaa securities. Generally, Moody's provides
either a generic rating or a rating with a numerical modifier of 1 for bonds in
each of the generic rating categories Aa, A, Baa, Ba and B. Moody's also
provides numerical modifiers of 2 and 3 in each of these categories for bond
issues in health care, higher education and other not-for-profit sectors; the
modifier 1 indicates that the issue ranks in the higher end of its generic
rating category; the modifier 2 indicates that the issue is in the mid-range of
the generic category; and the modifier 3 indicates that the issue is in the low
end of the generic category.
Municipal Note Ratings
Moody's ratings for state and
municipal notes and other short-term loans are designated Moody's Investment
Grade (MIG). Such ratings recognize the difference between short-term credit
risk and long-term risk. Factors affecting the liquidity of the borrower and
short-term cyclical elements are critical in short-term ratings, while other
factors of major importance in bond risk, long-term secular trends for example,
may be less important over the short run.
A short-term rating may also be
assigned on an issue having a demand feature. Such ratings will be designated
as VMIG or, if the demand feature is not rated, as NR. Short-term ratings on
issues with demand features are differentiated by the use of the VMIG symbol to
reflect such characteristics as payment upon periodic demand rather than fixed
maturity dates and payment relying on external liquidity. Additionally,
investors should be alert to the fact that the source of payment may be limited
to the external liquidity with no or limited legal recourse to the issuer in
the event the demand is not met.
Moody's short-term ratings are
designated Moody's Investment Grade as MIG 1 or VMIG 1 through MIG 4 or VMIG
4. As the name implies, when Moody's assigns a MIG or VMIG rating, all
categories define an investment grade situation.
MIG 1/VMIG 1
This designation denotes best
quality. There is present strong protection by established cash flows,
superior liquidity support or demonstrated broad-based access to the market for
refinancing.
MIG 2/VMIG 2
This designation denotes high quality. Margins of
protection are ample although not so large as in the preceding group.
Commercial Paper Ratings
The rating Prime-1 (P-1) is the
highest commercial paper rating assigned by Moody's. Issuers of P-1 paper must
have a superior capacity for repayment of short-term promissory obligations,
and
ordinarily will be evidenced by leading market
positions in well established industries, high rates of return on funds
employed, conservative capitalization structures with moderate reliance on debt
and ample asset protection, broad margins in earnings coverage of fixed
financial charges and high internal cash generation, and well established
access to a range of financial markets and assured sources of alternate
liquidity. Issuers rated Prime-2 (P-2) have a strong ability for repayment of
senior short-term debt obligations. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample alternate
liquidity is maintained.
Fitch
Municipal Bond Ratings
The ratings represent Fitch's
assessment of the issuer's ability to meet the obligations of a specific debt
issue or class of debt. The ratings take into consideration special features
of the issue, its relationship to other obligations of the issuer, the current
financial condition and operative performance of the issuer and of any
guarantor, as well as the political and economic environment that might affect
the issuer's future financial strength and credit quality.
AAA
Bonds rated AAA are considered
to be investment grade and of the highest credit quality. The obligor has an
exceptionally strong ability to pay interest and repay principal, which is
unlikely to be affected by reasonably foreseeable events.
AA
Bonds rated AA are considered
to be investment grade and of very high credit quality. The obligor's ability
to pay interest and repay principal is very strong, although not quite as
strong as bonds rated AAA. Because bonds rated in the AAA and AA categories
are not significantly vulnerable to foreseeable future developments, short-term
debt of these issuers is generally rated F-1+. Plus (+) and minus (-) signs
are used with the rating symbol AA to indicate the relative position of a
credit within the rating category.
Short-Term Ratings
Fitch's short-term ratings
apply to debt obligations that are payable on demand or have original
maturities of up to three years, including commercial paper, certificates of
deposit, medium-term notes, and municipal and investment notes.
Although the credit analysis is
similar to Fitch's bond rating analysis, the short-term rating places greater
emphasis than bond ratings on the existence of liquidity necessary to meet the
issuer's obligations in a timely manner.
F-1+
Exceptionally Strong Credit Quality
. Issues
assigned this rating are regarded as having the strongest degree of assurance
for timely payment.
F-1
Very Strong Credit Quality
. Issues assigned this
rating reflect an assurance of timely payment only slightly less in degree than
issues rated F-1+.
F-2
Good Credit Quality
. Issues carrying this rating
have a satisfactory degree of assurance for timely payments, but the margin of
safety is not as great as the F-1+ and F-1 categories.
APPENDIX C
(DREYFUS NEW YORK MUNICIPAL CASH MANAGEMENT AND
Dreyfus New York AMT-Free Municipal Cash
Management
)
RISK FACTORS—INVESTING IN NEW YORK MUNICIPAL OBLIGATIONS
The following information
constitutes only a brief summary, does not purport to be a complete
description, and is based primarily on information drawn from the Annual
Information Statement of the State of New York (the "State") and any
updates available as of the date of this Statement of Additional Information.
While the Fund has not independently verified this information, it has no
reason to believe that such information is not correct in all material
respects.
Economic Trends
U.S. Economy
. Real
household spending grew over 4% in the fourth quarter of 2010, the first
quarter of such growth since 2006, with real spending finally surpassing its
fourth quarter 2007 pre-recession peak. The national economy overall, as
measured by real U.S. gross domestic product ("GDP"), grew 2.8% in
the fourth quarter of 2010. Real U.S. GDP currently is projected to grow by
3.2% in 2011, following an increase of 2.9% for 2010.
The U.S. Bureau of Labor
Statistics released its 2010 benchmark revision to the national employment
data. The revised data indicate that about 8.8 million jobs were lost during
the last downturn, compared to the pre-revision estimate of 8.4 million. In
addition, the labor market now appears to have turned around in March 2010 rather
than in January as originally estimated. Since February of last year, the
private sector has added 1.3 million jobs, an average of 114,000 per month,
while total employment has increased by about 1 million, or an average of
93,000 per month. The labor market is expected to add an average of about
200,000 jobs per month for the remainder of the year. On an annual average
basis, the New York State Division of the Budget ("DOB") projects an
increase in total employment of 1.3% for 2011, following a decline of 0.7% for
2010.
Personal income is projected to
rise 5.3% in 2011, following growth of 3% in 2010. In addition, several
indicators of confidence in the sustainability of the national economic
recovery have strengthened since earlier in the year, including equity market
activity, price growth and interest rates. DOB projects inflation, as measured
by growth in the Consumer Price Index, of 2% for 2011. A 10-year Treasury
yield of 3.8% is anticipated for the current year.
The economic outlook calls for
the national recovery to continue its growth, in large part led by strong
demand from both consumers and businesses. However, there are significant risks
to this forecast. With conflict continuing to spread across the Middle East,
the risk of oil and gasoline prices remaining elevated is heightened. Higher
energy prices act effectively as a tax on household and business spending, and
would likely result in lower spending in other areas. This lower spending
could diminish the pace of job growth relative to current projections, which
could result in an even greater pullback in spending on the part of households.
Lower household spending and weaker job growth could both add to the strain
already being faced by state and local governments. In contrast, a quick
resolution to the turmoil in the Middle East, accompanied by faster global
growth than projected could result in stronger growth than is reflected in this
forecast.
State Economy
. State
wage growth for 2010 is estimated at 4.4% while wage growth for 2011 is
projected to be 3.1%. All of the risks to the U.S. forecast apply to the State
forecast as well, although with New York the nation's financial capital, the
volume of financial market activity and equity market volatility pose a
particularly large degree of uncertainty for the State. In addition, with Wall
Street still adjusting their compensation practices in the wake of the passage
of financial reform, the cash portion of bonus payments for the current and
subsequent fiscal years could be lower than projected. In turn, the
economic activity generated by the spending of that
income could also be lower. An even weaker labor market than projected could
also result in lower wages, which in turn could result in weaker household
consumption. Similarly, should financial and real estate markets be weaker than
anticipated, taxable capital gains realizations could be negatively affected. These
effects would ripple though the State economy, depressing both employment and
wage growth. In contrast, stronger national and world economic growth, or a
stronger upturn in stock prices, along with even stronger activity in mergers
and acquisitions and other Wall Street activities, could result in higher wage
and bonuses growth than projected.
The City of New York
.
The fiscal demands on the State may be affected by the fiscal health of New
York City, which relies in part on State aid to balance its budget and meet its
cash requirements. The State's finances also may be affected by the ability of
the City, and certain entities issuing debt for the benefit of the City, to
market their securities successfully in the public credit markets.
Other Localities
.
Certain localities outside the City have experienced financial problems and
have requested and received additional State assistance during the last several
State fiscal years. While a relatively infrequent practice, deficit financing
has become more common in recent years. Between 2004 and 2010, the State
Legislature authorized 21 bond issuances to finance local government operating
deficits. There were four new or additional deficit financing authorizations
during Fiscal Year 2009-2010. In addition, the State has periodically enacted
legislation to create oversight boards in order to address deteriorating fiscal
conditions within a locality. The potential impact on the State of any future
requests by localities for additional oversight or financial assistance is not
included in the projections of the State's receipts and disbursements for Fiscal
Year 2010-11 or thereafter.
Like the State, local
governments must respond to changing political, economic and financial
influences over which they have little or no control. Such changes may
adversely affect the financial condition of certain local governments. For example,
the State or Federal government may reduce (or in some cases eliminate) funding
of some local programs or disallow certain claims which, in turn, may require
local governments to fund these expenditures from their own resources. The
expected loss of temporary Federal stimulus funding in 2011 will particularly
impact counties and school districts in New York State. The State's cashflow
problems have resulted in delays to the payment of State aid, and in some
cases, have necessitated borrowing by the localities. Similarly, some State
policymakers have expressed interest in implementing a property tax cap for
local governments. Adoption of a property tax cap would affect the amount of
property tax revenue available for local government purposes and could
adversely affect their operations, particularly those that are heavily
dependent on property tax revenue such as school districts. Changes to sales
tax distributions resulting from the 2010 Federal population census may also
have a material impact on certain local governments. Ultimately, localities as
well as local public authorities may suffer serious financial difficulties that
could jeopardize local access to the public credit markets, which may adversely
affect the marketability of notes and bonds issued by localities within the
State. Localities may also face unanticipated problems resulting from certain
pending litigation, judicial decisions and long-range economic trends. Other
large-scale potential problems, such as declining urban populations, declines
in the real property tax base, increasing pension, health care and other fixed
costs, and the loss of skilled manufacturing jobs, may also adversely affect
localities and necessitate requests for State assistance.
Special Considerations
.
In recent fiscal years, actual receipts collections have fallen substantially
below the levels forecasted in the State's financial plans. Complex political,
social, environmental and economic forces influence the State's economy and
finances, many of which are outside the ability of the State to control. These
include, but are not limited to: (i) performance of the national and State
economies and the concomitant receipt of economically sensitive tax revenues in
the amounts projected; (ii) the extent, if any, to which wage increases for
State employees exceed the annual wage costs assumed; (iii) the realization of
projected earnings for pension fund assets and current assumptions with respect
to wages for State employees affecting the State's required pension fund
contributions; (v) the
willingness and ability of the
Federal government to provide the aid contemplated in a financial plan; (vi) the
effect on adoption of the State's budgets by the Legislature in substantially
the forms submitted by the Governor; (vii) the ability of the State to
implement cost reduction initiatives, including the reduction in State agency
operations, and the success with which the State controls expenditures; and (viii)
ability of the State and its public authorities to market securities
successfully in the public credit markets.
Health Insurance Company
Conversions
. An additional risk is the cost of the State in permitting a health
insurance company to convert its organizational status from a not-for-profit to
a for-profit corporation, subject to a number of terms, conditions and
approvals. Under State law, the State must use the proceeds from a health care
company conversion for health care related expenses included in the Health Care
Reform Act ("HCRA") Account. For planning purposes, the Fiscal Year
2011-12 financial plan assumes that approximately $150 million in proceeds from
a health care conversion in Fiscal Year 2011-12, and additional amounts in
future years, would be deposited into HCRA. If the conversion does not occur
on the timetable or at the levels assumed in that financial plan, the State
would be required to take other actions to increase available resources or to
reduce planned spending to fund projected HCRA expenditures.
Labor Settlements.
Another
additional risk is the cost of potential collective bargaining agreements and
salary increases for judges (and possibly other elected officials) that may
occur in Fiscal Year 2010-11 and beyond for the period covering Fiscal Year 2007-08
through Fiscal Year 2010-11. The Fiscal Year 2011-12 financial plan includes a
reserve of $346 million to cover the costs of a pattern settlement with all
unions that have not agreed to contracts through Fiscal Year 2010-11. The
pattern is based on the terms agreed to by the State's largest unions for this
period. There can be no assurance that actual settlements, some of which are
subject to binding arbitration, will not exceed the amounts included in that
financial plan. An additional risk is the cost of salary increases for judges
which could occur in Fiscal Year 2012-13 and beyond as a result of the actions
of a statutorily authorized judicial compensation commission. The Fiscal Year 2011-12
financial plan does not include any costs for potential general wage increases
after the current labor agreements expire, or salary increases for judges.
State
Finances
The State accounts for all
budgeted receipts and disbursements that support programs and other
administrative costs of running State government within the All Governmental
Funds type. The All Governmental Funds, comprised of funding supported by
State Funds and Federal Funds, provides the most comprehensive view of the
financial operations of the State. State Funds includes the General Fund and
other State-supported funds including State Special Reserve Funds, Capital
Projects Funds and Debt Service Funds. The General Fund is the principal
operating fund of the State and is used to account for all financial
transactions except those required to be accounted for in another fund. It is
the State's largest fund and receives almost all State taxes and other
resources not dedicated to particular purposes.
The economic downturn has had a
severe impact on State finances. Actual receipts have fallen consistently
below projected levels, fixed costs for debt service and fringe benefits have
risen steadily, and demand for State services has grown. Over the last two
years, the State has been required to take extraordinary actions to maintain
balanced operations and sufficient liquidity, including enacting mid-year
reductions to programs, instituting several rounds of agency spending
reductions and deferring payments to local aid recipients and taxpayers. To
avoid using its rainy day reserves, which are relied on during a fiscal year to
provide liquidity, the State has managed the timing of payments across fiscal
years, including deferring payments not yet legally due from one fiscal year to
the next fiscal year.
Prior Fiscal Year Results
.
Fiscal Year 2008-09 Results
General Fund receipts, including transfers from other funds, were $1.84
billion lower than the State's initial projections for Fiscal Year 2008-09 ,
while spending for the
year finished at $1.75 billion
lower than expectations. The result was $83 million less in cash reserves than
expected in the Fiscal Year 2008-09 enacted budget.
The General Fund ended Fiscal
Year 2008-09 with a balance of $1.9 billion, which included dedicated balances
of $1.2 billion in rainy day reserves, $21 million in the contingency reserve
fund to guard against litigation risks, $145 million in the Community Projects
Fund and $577 million in general reserves, part of which DOB expects to use for
payments initially planned for Fiscal Year 2008-09 that were delayed until
Fiscal Year 2009-10. The year-end balance was substantially improved by the
receipt of $1.3 billion in unplanned General Fund relief from the temporary
increase in the Federal matching rate for certain Medicaid expenditures.
General Fund receipts, including transfers from other funds and the impact of
the tax refund reserve transaction, totaled $53.8 billion in Fiscal Year
2008-09, an increase of $705 million from Fiscal Year 2007-08 results. While
tax receipts decreased by $93 million, miscellaneous receipts increased by $621
million and transfers increased by $178 million. General Fund spending totaled
$54.6 billion in Fiscal Year 2008-09, an increase of $1.2 billion from Fiscal
Year 2007-08.
Fiscal Year 2009-10 Results
(Unaudited).
General Fund receipts, including transfers from other funds
were $1.2 billion below Fiscal Year 2008-09 results, while spending for the
fiscal year ended $1.2 billion lower than Fiscal Year 2008-09 results. Tax
receipts decreased by $1.2 billion and transfers decreased by $750 million,
partly offset by increased miscellaneous receipts of $744 million.
The General Fund ended Fiscal
Year 2009-10 with a balance of $1.2 billion in the State's rainy day reserves,
$21 million in the contingency reserve fund (to guard against litigation
risks), $96 million in the Community Projects Fund, and $978 million in general
reserves. General Fund receipts, including transfers from other funds, totaled
$52.6 billion, or $1.78 billion lower than the State's initial projections for
Fiscal Year 2009-10, while spending, including transfers to other funds,
totaled $52.2 billion, a decrease of $2.71 billion from initial projections. However,
actual disbursements were affected by $2.1 billion in payment deferrals taken
by the State to end the fiscal year without the use of its rainy day reserves
and other designated balances. Without the deferrals, disbursements for the
fiscal year would have been approximately $665 million below initial
projections.
In the final quarter of the
fiscal year, in order to avoid depleting its reserves, the State deferred a
planned payment to school districts ($2.1 billion), which reduced spending from
planned levels, and certain tax refunds, which increased available receipts
from planned levels ($500 million). Both the school aid payment and the tax
refunds were scheduled to be paid in Fiscal Year 2009-10 but, by statute, were
not due until June 1, 2010. The combined value of the deferrals had the effect
of increasing the closing balance in the General Fund for Fiscal Year 2009-10
to $2.3 billion. The higher closing balance was due exclusively to the cash
management actions described above and did not represent an improvement in the
State's financial operations. In early April 2010, the State paid the $500
million in tax refunds that had been deferred from Fiscal Year 2009-10 to
Fiscal Year 2010-11. On June 1, 2010, the State paid the $2.1 billion in
School Aid deferred from Fiscal Year 2009-10. The November 2010 database
update for School Aid reduced projected spending in by $215 million in Fiscal Year
2011-12, $298 million in Fiscal Year 2012-13, $433 million in Fiscal Year 2013-14;
and by $444 million in Fiscal Year 2014-15.
The DOB estimated that the
deficit reduction plan approved on December 2, 2009 would generate recurring
savings in the range of $700 million to $875 million in Fiscal Year 2010-11
through Fiscal Year 2013-14.
Fiscal Year 2010-11 Enacted
Budget Financial Plan
During the Fiscal Year 2010-11
budget process, the Governor introduced an Executive Budget Financial Plan to
eliminate a budget gap for Fiscal Year 2010-11 estimated at $7.4 billion, and
in
February 2010, revised the estimated budget gap
upward to $8.2 billion. In March 2010, the estimated budget gap for Fiscal
Year 2010-11 had increased to $9.2 billion (requiring additional gap-closing
actions) due to further downward revisions to tax receipts, combined with an
expected budget shortfall from Fiscal Year 2009-10 that would be carried into
Fiscal Year 2010-11. As the new fiscal year started on April 1, 2010, the State
began enacting a series of interim appropriation bills to fund government
operations on a short-term basis. While the State Legislature enacted the
annual debt service appropriation bill for Fiscal Year 2010-11 in March 2010,
the Legislature did not complete action on all annual appropriation bills until
late June 2010, and did not pass a revenue bill to complete the budget until
August 3, 2010.
The Fiscal Year 2010-11
Financial Plan reduces spending from the current-services forecast by over $6.4
billion in Fiscal Year 2010-11, holds annual spending below the rate of
inflation, mandates uniform reductions to remaining local assistance payments,
with certain limited exceptions, to cover the estimated $280 million shortfall
from the $1.1 billion in savings assumed in the gap-closing plan from enhanced
Federal Medicaid Assistance Percentage ("FMAP"), and maintains the
State's rainy day reserves at $1.2 billion. The projections for annual
spending growth in Fiscal Year 2010-11 are affected by both the management of
payments at the end of Fiscal Year 2009-10 and by the uncertainties concerning
the timing of Federal aid. The latter consists of American Recovery and
Reinvestment Act ("ARRA") stimulus money for a wide range of purposes
that provides no gap-closing benefit, but by law must pass through the State's budget
before it reaches its beneficiaries. To avoid the distorting effect of these
factors, the DOB has adjusted spending to (i) exclude the effect of the
deferral of the $2.06 billion end-of-year school aid payment from Fiscal Year 2009-10
into Fiscal Year 2010-11 and (ii) include $2.0 billion in ARRA funding that was
initially expected in Fiscal Year 2009-10, but is now expected to occur in
future years.
DOB now estimates that the
General Fund could have a budget gap of $315 million in Fiscal Year 2010-11. Based
on a review of updated information for receipts and disbursements, DOB expects
to end Fiscal Year 2010-11 in balance on a cash basis in the General Fund,
although risks remain. Tax receipts have continued to fall substantially below
anticipated levels, but a combination of unplanned miscellaneous receipts and
lower than anticipated disbursements across a range of programs and activities
are expected to be sufficient to end Fiscal Year 2010-11 in balance.
Explanation of Fiscal Year
2010-11 Gap-Closing Plan
The gap-closing plan enacted as part of the
Fiscal Year 2010-11 Financial Plan consists of two parts, the actions under the
Fiscal Year 2010-11 Financial Plan and the recurring impact of the Deficit
Reduction Plan ("DRP"). The Fiscal Year 2010-11 gap-closing actions
are organized into three general categories: (i) spending control, or actions
that reduce current-services spending in the General Fund on a recurring basis;
(ii) revenue actions, or actions that increase revenues on a recurring basis;
and (iii) non-recurring resources, or transactions that increase revenues or
lower spending in Fiscal Year 2010-11, but that cannot be relied on in the
future.
The Fiscal Year 2010-11
gap-closing plan focuses foremost on actions that reduce the growth in State
spending on a recurring basis. Actions to control spending account for nearly
70% of the gap-closing plan and will affect most activities funded by the
State. Fiscal Year 2010-11 spending has been reduced by roughly $4.8 billion
from current services levels. The Governor's vetoes further reduced General
Fund spending in Fiscal Year 2010-11 by $533 million. In addition, the FMAP
contingency bill is expected to reduce local assistance spending by
approximately $280 million.
The gap-closing plan includes
$1.0 billion in new revenue, including $925 million from tax and fee increases.
These tax and fee increases include: (i) the temporary suspension of the State
sales tax exemption on clothing and footwear priced at less than $110; (ii) a
$1.60 per pack increase in the cigarette tax; (iii) a temporary cap on the
aggregate tax credit claims for business-related tax credits at $2.0 million
per taxpayer annually; and (iv) a decrease in the percentage of allowable
remaining itemized deductions from 50% to 25% for taxpayers with New York
adjusted gross income above $10 million. In addition,
audit,
compliance, and enforcement activities are expected to increase the tax base by
approximately $371 million annually. Non-recurring resources, which comprise
7% of the gap-closing actions total $660 million.
To address the revised budget
gap estimates, the Governor is expected to ask the Legislature to address the
shortfall in a fashion similar in scope to that approved as part of the FMAP
contingency plan authorized in the Fiscal Year 2010-11 Financial Plan. Governor
Paterson is expected to ask the Legislature to approve reductions beyond the
level needed to eliminate the current-year budget gap, and to agree that any
excess be used to fund priority initiatives, including legislation passed by
the Legislature and vetoed by Governor Paterson for fiscal reasons in 2010. Based
on preliminary calculations, DOB estimates that spending for State programs
would need to be reduced in the range of 1.5 to 2% over the remainder of the
fiscal year to achieve a General Fund savings target of approximately $375
million.
Fiscal Year 2010-11 Receipts
Forecast
. Consistent with the slow pace of the economic recovery, revenue
growth in the State has been weak. After plunging 12.3% in Fiscal Year
2009-10, total tax receipts growth is estimated to be 2.1% in Fiscal Year
2010-11 and 7.5% in Fiscal Year 2011-12. Unadjusted State funds tax receipts
are estimated to increase 5.4% in Fiscal Year 2010-11 and are projected to
increase 6.5% in Fiscal Year 2011-12. In addition to below average growth,
revenue collections have exhibited volatility. The uncertainty surrounding the
year-end sunset of the Federal tax cuts and the last minute extension created
significant taxpayer confusion. The impacts of potential changes in the timing
and level of financial sector bonus payments and in the way employees in this
sector are compensated as a result of recent financial reforms are unknown.
Extreme volatility in the volume of taxable capital gains, the large overhang
of residential and commercial mortgage debt, the continuation of recent gains
in consumer spending, and the expected recovery from the apparent decline in
the value of property being insured have provided obstacles to accurate
forecasting. In addition, the lag between the realization of profits as well
as the use of previous overpayments by taxpayers, make projecting business tax
receipts very difficult. Further, inconsistent personal income and business
taxpayer behavior related to the timing and level of estimated and final
payments has caused large swings in quarterly receipts. As a result of these
and other factors, the tax receipts forecasts were revised downward by $699
million for Fiscal Year 2010-11, $950 million for Fiscal Year 2011-12 and $587
million for Fiscal Year 2012-13.
A modest acceleration in State
employment and average wage growth, as well as the stock market recovery, are
expected to provide growth of 8.0% in personal income tax receipts in Fiscal
Year 2011-12. Projected corporate profits growth for the 2011 calendar year
combined with the tax credit deferral legislation enacted in 2010 is expected
to provide a second consecutive year of growth in business tax receipts in
Fiscal Year 2011-12. The return of consumers to the marketplace, partially
offset by the return of a limited version of the tax exemption on clothing is
projected to produce sales tax growth of 4.3% in Fiscal Year 2011-12.
All Funds receipts are
projected to total $134.5 billion, an increase of $7.8 billion over Fiscal Year
2009-10 results. All Funds tax receipts are estimated to increase by $3.1
billion, or 5.4%. The majority of the increase in tax receipts is attributable
to growth in personal income tax, sales tax, estate tax and cigarette and
tobacco tax collections. General Fund receipts, including transfers from other
funds, are estimated to total $54.1 billion in Fiscal Year 2010-11, an increase
of over $1.5 billion (2.9%) compared to Fiscal Year 2009-10 results. General
Fund receipts through February 2011 were $1.8 billion (3.9%) higher than the
same period in 2010, largely due to the increased collections in the personal
income tax ($1.3 billion), user taxes and fees ($790 million) and other taxes
($510 million). Business tax collections fell $71 million, largely the result of
the timing of refunds.
Fiscal Year 2010-11
Disbursements Forecast
. For Fiscal Year 2010-11, All Funds spending for
local assistance is estimated to total $95.6 billion, a 2.7% increase over
Fiscal Year 2010-11 results. Total spending is comprised of State aid to
medical assistance providers and public health programs
($42.4
billion); State aid for education, including school districts, universities,
and tuition assistance ($33.2 billion); temporary and disability assistance
($4.7 billion); mental hygiene programs ($4.0 billion); transportation ($5.1
billion); children and family services ($3.0 billion); and local government
assistance ($791 million). All Funds spending for State operations is
projected to total $19.4 billion in Fiscal Year 2010-11, a 1.3% decrease from
prior year spending, finances the costs of Executive agencies ($17.2 billion)
and the Legislature and Judiciary ($2.1 billion).
All Funds spending on general
State charges ("fringe benefits") is projected to increase by $535
million in Fiscal Year 2010-11, an increase of 12.5 % over Fiscal Year 2009-10
results. Fringe benefits are projected to grow at an average annual rate of
10.1% from Fiscal Year 2010-11 through Fiscal Year 2013-14. The growth is
mainly due to anticipated cost increases in pensions and health insurance for
active and retired State employees. Pension costs are expected to increase by
$313 million (27.1%) in Fiscal Year 2010-11. This increase is net of $242
million in amortization savings scheduled for Fiscal Year 2010-11.
All Funds debt service is
projected at $5.5 billion in Fiscal Year 2010-11, of which $1.6 billion is paid
from the General Fund. Debt service on State-supported debt is projected to
increase by $510 million (10.3%) in Fiscal Year 2010-11, with approximately 35%
of the growth due to the restructuring of certain transportation-related debt
in 2005 that deferred substantial debt service costs until Fiscal Year
2010-11. Overall spending from debt service funds, which includes certain
non-personal service spending appropriated in the debt service budget is
projected by the DOB to increase by nearly $600 million.
All Funds capital spending for
Fiscal Year 2010-11 is projected at $8.4 billion, an increase of 18.4% over
Fiscal Year 2009-10 spending. Transportation spending, primarily for
improvements and maintenance to the State's highways and bridges, continues to
account for the largest share (52%) of this total. The balance of projected
spending will support capital investments in the areas of education (14%), economic
development (11%), parks and environment (8%), and mental hygiene and public
protection (6%). The remainder of projected capital projects spending is spread
across health and social welfare, general government and other areas (8%). Capital
spending was below the Enacted Budget Financial Plan estimates primarily due to
slower than anticipated spending on economic development projects ($69 million),
Higher Education ($60 million), and Transportation ($25 million).
General Fund disbursements,
including transfers to other funds, are estimated at $55 billion. Estimated
disbursements have been reduced across a range of programs and activities in
local assistance, State agency operations, and debt service. Recent operating
estimates assume the General Fund will use approximately $37 million of the $73
million in unreserved fund balances to make all planned payments in the current
year. General Fund disbursements through February 2011 were $226 million (0.5%),
higher than in 2010. Spending growth is affected by the delay of the end of
year School Aid payment ($2.06 billion) from March 2010 to the statutory
deadline of June 1, 2010. Excluding the School Aid delay, spending through
February 2011 totaled $40.8 billion, or $1.8 billion below Fiscal Year 2009-10
levels.
Fiscal Year
2011-12 Proposed Budget Financial Plan
In Fiscal Year 2011-12, the
State faces a projected budget gap of $10 billion. The budget gaps in future
years are projected at $14.9 billion, $17.4 billion and $20.9 billion in Fiscal
Years 2012-13, 2013-14 and 2014-15, respectively. The budget gaps represent
the difference between the projected General Fund disbursements, including
transfers to other funds, needed to maintain anticipated service levels and
specific commitments, and the expected level of resources to pay for them.
These gaps reflect in part the short-term impact of the recession on State tax
receipts and economically-sensitive programs, the long-term impact of rapidly
growing entitlement programs (especially, Medicaid and School Aid) and other
spending commitments, and the phase-out of the Federal government's increased
support for Medicaid, education, and other costs through the Federal stimulus
funding.
The
Governor's Executive Budget for Fiscal Year 2011-12 (the "2011-12
Executive Budget"), if enacted as proposed, is expected to eliminate the
General Fund budget gap of $10 billion in Fiscal Year 2011-12, and reduce the
future projected budget gaps to $2.2 billion, $2.5 billion and $4.4 billion in
Fiscal Years 2012-13, 2013-14 and 2014-15, respectively. The 2011-12 Executive
Budget proposes savings of approximately $2.85 billion each for School Aid and
Medicaid, $1.4 billion for State agency operations and corresponding reductions
in other funds, where appropriate, and $1.8 billion for a range of other
programs and activities. The 2011-12 Executive Budget does not recommend any
tax increases.
The Governor has appointed
advisory commissions charged with redesigning current operations and
recommending specific savings from Medicaid, prison closures, and State agency
operations. On February 24, 2010, the Medicaid Redesign Team submitted its
proposals to achieve $2.85 billion in savings in 2011-12, which is reflected in
the 2011-12 Executive Budget. Recommendations by the other commissions are due
in the coming months.
The State's new fiscal year
begins on April 1, 2011 and the 2011-12 Executive Budget, as amended, is
awaiting action by the Legislature. The General Fund gap-closing measures
included as part of the 2011-12 Executive Budget assume the enactment of a
budget by the start of Fiscal Year 2011-12. There can be no assurance that the
Legislature will adopt a budget for Fiscal Year 2011-12 by April 1, 2011, or
that it will adopt all or any portion of the 2011-12 Executive Budget as
proposed, or that the fiscal impact of the budget for Fiscal Year 2011-12, when
enacted, will not differ materially and adversely from current estimates and
projections.
Explanation of Fiscal Year
2011-12 Gap-Closing Plan
The gap-closing plan actions set forth in the
2011-12 Executive Budget are organized into three general categories: (i)
spending control, or actions that reduce current-services spending in the
General Fund on a recurring basis; (ii) revenue actions, or actions that
increase revenues on a recurring basis; and (iii) non-recurring resources, or transactions
that increase revenues or lower spending in Fiscal Year 2011-12, but that cannot
be relied on in the future.
The Fiscal Year 2011-12
gap-closing plan focuses foremost on actions that reduce the growth in State
spending on a recurring basis. Actions to control spending account for 89% of
the gap-closing plan and will affect most activities funded by the State.
Fiscal Year 2011-12 spending is estimated to be reduced by roughly $8.9 billion
compared to the current-services forecast.. Reductions from the Fiscal Year
2011-12 current-services forecast for local assistance contribute $7.5 billion
to the General Fund gap-closing plan. In total, the proposed reductions to
state agencies are expected to provide an estimated $1.4 billion in savings
compared to the current-services forecast. If the State is unsuccessful in
negotiating changes, DOB expects that significant layoffs would be necessary to
achieve expected State agency savings. Implementation of the savings in State
agencies may be affected by, among other things, statutory or regulatory
constraints, negotiations with State employee unions, and other factors.
Accordingly, there can be no assurance that the actual savings will not differ
materially and adversely from current projections.
The gap-closing plan proposes $340
million in revenue enhancements. Proposed non-recurring actions total $805
million in Fiscal Year 2011-12, comprising approximately 8% of the gap-closing
plan. The actions are expected to be derived from contributions by the State's
public authorities, use of fund balances, and maintaining a consistent level of
pay-as-you-go financing for eligible capital expenses. DOB estimates that the
value of non-recurring resources in the 2011-12 Executive Budget is less than
the annual growth in savings achieved by the recurring gap-closing actions,
which are estimated to increase in value by approximately $3.5 billion from Fiscal
Year 2010-11 to Fiscal Year 2011-12. As a result, non-recurring resources have
no adverse impact on the gap for Fiscal Year 2012-13 because they are more than
offset by the growth in recurring savings.
Cash
Position
The General
Fund is authorized to borrow resources temporarily from other available funds
in the State's Short Term Investment Pool ("STIP") for a period not
to exceed four months or to the end of the fiscal year, whichever occurs first.
The amount of resources that can be borrowed by the General Fund is limited to
the available balances in STIP, as determined by the State Comptroller. The General
Fund used this authorization to meet payment obligations in May, June,
September, November, and December 2010. It is expected that the General Fund
will rely on this borrowing authority at times during the remainder of the
fiscal year.
To date, the State has taken
actions to maintain adequate operating margins, and expects to continue to do
so as events warrant. The State continues to reserve money to make the debt
service payments scheduled for each upcoming quarter that are financed with
General Fund resources. Money to pay debt service on bonds secured by
dedicated receipts, including Personal Income Tax ("PIT") bonds,
continues to be set aside as required by law and bond covenants.
With cash management actions,
the General Fund ended June 2010 with a negative balance of $87 million. However,
the State ended the month of September with a positive General Fund balance of
$2.4 billion. The cash-flow projections for receipts and disbursements take
into account statutory payment dates, historical receipts and disbursement
patterns, and other information. The DOB believes the projections are based on
reasonable and prudent assumptions, and the State's current cash position is
sufficient to meet current liquidity needs. It is expected that the General
Fund will end Fiscal Year 2010-11 with a cash balance of $1.36 billion. The
balance consists of $1.03 billion in the Tax Stabilization Reserve, $175
million in the Rainy Day Reserve, $94 million in the Community Projects Fund,
$21 million in the Contingency Reserve, and $36 million in undesignated fund
balance.
Risks to budget balance in the
current fiscal year remain, including the potential that actual tax receipts
may fall below the revised estimates, year-end transactions (such as the
transfer of excess balances from other funds or payments from non-State
entities) may occur at lower levels than currently projected and disbursements
in certain programs, especially economically-sensitive programs such as
Medicaid, may exceed budgeted amounts. In addition, the State expected to
price and close a general obligation bond sale by March 30, 2011. A portion of
the sale proceeds will be used to reimburse the General Fund for capital expenditures
through the end of Fiscal Year 2010-11.
The amount of resources that
can be borrowed by the General Fund is limited to the available balances in
STIP, as determined by the State Comptroller. The available balances on hand in
STIP have declined compared to recent years. DOB will continue to closely
monitor and manage the State's liquidity position during the fiscal year, which
may include temporarily reducing planned payments, and will continue to reserve
money in advance of the upcoming quarter of debt service payments that are
financed with General Fund resources. Money to pay debt service on bonds
secured by dedicated receipts, including PIT bonds, continues to be set aside
as required by law and bond covenants.
General Fund Out-Year
Projections
At the start of the year, DOB
projected out-year budget gaps will total approximately $10 billion in Fiscal
Year 2011-12, $14.9 billion in Fiscal Year 2012-13, $17.4 billion in Fiscal
Year 2013-14, and 20.9 billion in Fiscal Year 2014-15. Assuming the
Legislature enacts the Governor's proposal in its entirety and without
modification by the start of Fiscal Year 2011-12 on April 1, 2011, the DOB
estimates that the Governor's budget proposal would eliminate the General Fund
budget gap of $10 billion in Fiscal Year 2011-12 and reduce the budget gaps to
$2.2 billion in Fiscal Year 2012-13, $2.5 billion in Fiscal Year 2013-14 and
$4.4 billion in Fiscal Year 2014-15. The net operating deficits in State
Operating Funds are projected at $9.1 billion in Fiscal Year 2011-12, $1.7
billion in Fiscal Year 2012-13, $1.9 billion in Fiscal Year 2013-14 and $3.7
billion in Fiscal Year 2014-15. The imbalances projected for the General Fund
and State Operating Funds in future years are similar because the General Fund
is typically the financing source of last resort for many State programs, and
any imbalance in other funds that cannot
be rectified
by the use of existing balances is typically paid for by the General Fund.
The estimated gaps, reflect in
part the short-term impact of the recession on State tax receipts and
economically-sensitive programs, the long-term impact of rapidly growing
entitlement programs (especially, Medicaid and School Aid) and other spending
commitments, and the phase-out of the Federal government's increased support
for Medicaid, education, and other costs through the Federal stimulus funding.
Out-Year Receipts
Projections
. Total All Funds receipts are expected to reach $132.7
billion, a decrease of $1.8 billion (1.4%) from Fiscal Year 2010-11 estimates. All
Funds tax receipts are projected to increase by $4.0 billion (6.5%). All Funds
Federal grants are expected to decrease by $5.7 billion (11.4%). Total General
Fund receipts are projected to be $57.0 billion, an increase of $2.9 billion
(5.3%) from Fiscal Year 2010-11 estimates. General Fund tax receipts are
projected to increase by 7.1% from Fiscal Year 2010-11 estimates, and General
Fund miscellaneous receipts are projected to grow by 0.2%.
Total All Funds receipts in
Fiscal Year 2012-13 are projected to be $ $130.5 billion, a decrease of $2.2
billion from Fiscal Year 2011-12 estimates. Total All Funds receipts in Fiscal
Year 2013-14 are expected to increase by $5.2 billion over Fiscal Year 2012-13
projections. Total All Funds receipts in Fiscal Year 2014-15 are expected to increase
by $6.8 billion over Fiscal Year 2013-14 projections. All Funds tax receipts
are expected to increase by 1.9% in Fiscal Year 2012-13, 5.1% in Fiscal Year
2013-14 and 3.0% in Fiscal Year 2014-15. Total General Fund tax receipts are
projected to be approximately $57.2 billion, $59.6 billion and $60.7 billion in
Fiscal Years 2012-13, 2013-14 and 2014-15, respectively. The growth pattern is
consistent with an economic forecast for continued but slower economic growth.
Out-Year Disbursement
Projections
. General Fund spending is projected to grow at an average
annual rate of 4.6% from Fiscal Year 2011-12 through Fiscal Year 2014-15 (as
adjusted). The spending projections incorporate the target growth rates in the
areas of Medicaid and School Aid, as well as an estimate of the effect of
national health care reform on State health care costs. State expenditures for
Medicaid are estimated to range from approximately $20.9 billion in Fiscal Year
2011-12 to $23.7 billion in Fiscal Year 2014-15. State expenditures for School
Aid are estimated to range from approximately $19.4 billion in Fiscal Year
2011-12 to $21.9 billion in Fiscal Year 2014-15. Spending growth reflects an
expected return to a lower Federal matching rate for Medicaid expenditures
after June 30, 2011, which will increase the share of Medicaid costs that must
be financed by State resources, and the expected loss of temporary Federal aid
for education. Spending growth is driven primarily by Medicaid, education,
pension costs (including contributions to SUNY's optional retirement program),
employee and retiree health benefits, social services programs and debt service.
State Indebtedness
General
. The State is
one of the largest issuers of municipal debt, ranking second among the states,
behind California, in the amount of debt outstanding. The State ranks fifth in
the U.S. in debt per capita, behind Connecticut, Massachusetts, Hawaii, and New
Jersey. At the end of Fiscal Year 2009-10, total State-related debt
outstanding was $55 billion. Debt measures continue to remain stable with debt
outstanding as a percentage of personal income at about 6.0%.
Financing activities of the
State include general obligation debt and State-guaranteed debt, to which the
full faith and credit of the State has been pledged, as well as lease-purchase
and contractual-obligation financing, moral obligation and other financing
through public authorities and municipalities, where the State's legal
obligation to make payments to those public authorities and municipalities for
their debt service is subject to annual appropriation by the Legislature. The
State has never defaulted on any of its general obligation indebtedness or its
obligations under lease-purchase or contractual-obligation financing
arrangements and has never been called upon to make any direct payments
pursuant to its guarantees.
Limitations
on State-Supported Debt
. The Debt Reform Act of 2000 limits outstanding
State-supported debt to no greater than 4% of New York State personal income,
and debt service on State-supported debt to no greater than 5% of All
Governmental Funds receipts. The limits apply to all State-supported debt
issued after April 1, 2000. The State projects that $33.6 billion of
State-supported debt outstanding will be subject to the cap as of March 31,
2011, which is equal to approximately 3.55% of personal income. Debt service
subject to the cap will be approximately $3.1 billion, equal to 2.34% of All
Governmental Funds receipts.
Based on current forecasts,
debt outstanding and debt service costs over the period are expected to remain
below the limits imposed by the Act. However, the available room under the
debt outstanding cap is expected to decline from $4.2 billion in Fiscal Year
2010-11 to approximately $850 million in Fiscal Year 2013-14. The estimates do
not include the potential impact of new capital spending that may be authorized
in future budgets, or efforts to curtail existing bonded programs. The debt
reform projections are sensitive to changes in State personal income levels.
Measures to adjust capital spending and debt financing practices will continue
to be needed for the State to stay in compliance with the statutory debt limit.
Variable Rate Obligations
and Related Agreements.
State statutory law authorizes issuers of
State-supported debt to issue a limited amount of variable rate obligations
and, subject to various statutory restrictions, enter into a limited amount of
interest rate exchange agreements. State law limits the use of debt
instruments which result in a variable rate exposure to no more than 20% of
total outstanding State-supported debt, and limits the use of interest rate
exchange agreements to a total notional amount of no more than 20% of total
State-supported outstanding debt. As of March 31, 2010, State-supported debt
in the amount of $50.3 billion was outstanding, resulting in a variable rate
exposure cap and interest rate exchange agreement cap of approximately $10
billion each. As of March 31, 2010, both amounts are less than the statutorily
cap of 20%, and are projected to be below the caps for the entire forecast
period through Fiscal Year 2012-13.
As of March 31, 2010, the
State's authorized issuers had entered into a notional amount of $2.77 billion
of interest rate exchange agreements that are subject to the interest rate
exchange agreement cap, or 5.3% of total debt outstanding.
The State has significantly reduced
its swap exposure from $5.9 billion as of March 31, 2008 to $2.7 billion as of
March 31, 2010, a 54% reduction. Over this two-year period, the State has
terminated $3.2 billion of swaps, including $565 million that was terminated
automatically due to the bankruptcy of Lehman Brothers Holdings, Inc. The State
currently has no plans to increase its swap exposure, and may take further
actions to reduce swap exposures commensurate with variable rate restructuring
efforts.
As of March 31, 2010, the State
had about $1.3 billion of outstanding variable rate debt instruments, or 2.5%
of total debt outstanding, that are subject to the net variable rate exposure
cap. That amount includes $1.2 billion of unhedged variable rate obligations
and $82 million of synthetic variable rate obligations. In addition to these
variable rate obligations, as of March 31, 2010, the State had outstanding $2.4
billion of fixed-rate obligations that may convert to variable rate obligations
in the future. This amount included $1.75 billion in State-supported
convertible rate bonds outstanding.
State-Supported Debt
.
The State's debt affordability measures compare favorably to the forecasts
contained in the State's Capital Program and Financing Plan. Issuances of
State-supported debt obligations have been generally consistent with the
expected sale schedule for the current year, with marginal revisions reflecting
certain economic development bonding that occurred earlier in the year than
originally anticipated.
General Obligation Bond
Programs
. General obligation debt is currently authorized by the State for
transportation, environment and housing purposes. Transportation-related bonds
are issued for State
highway and bridge improvements,
aviation, highway and mass transportation projects and purposes, and rapid
transport, rail, canal, port and waterway programs and projects. Environmental
bonds are issued to fund environmentally sensitive land acquisitions, air and
water quality improvements, municipal non-hazardous waste landfill closures and
hazardous waste site cleanup projects. As of March 31, 2010, the total amount
of general obligation debt outstanding was $3.4 billion.
Lease-Purchase and
Contractual-Obligation Financing Programs.
Lease-purchase and
contractual-obligation financing arrangements with public authorities and
municipalities has been used primarily by the State to finance the State's
bridge and highway programs, SUNY and CUNY buildings, health and mental hygiene
facilities, prison construction and rehabilitation and various other State
capital projects. As of March 31, 2010, approximately $18 billion of PIT Bonds
were outstanding.
Fiscal Year 2010-11 State Supported Borrowing Plan
. The State's Fiscal Year 2010-11 borrowing plan
projects new issuance of $606 billion in general obligation bonds; $495 million
in Dedicated
Highway and
Bridge Trust Fund Bonds issued to finance capital projects for transportation;
$232 million in Mental Health Facilities Improvement Revenue Bonds issued to
finance capital projects at mental health facilities; $78 million in SUNY
Dormitory Facilities Revenue Bonds to finance capital projects related to
student dormitories; and $3.9 billion in PIT Bonds to finance various capital
programs.
Litigation
General
. The legal
proceedings listed below involve State finances and programs and miscellaneous
civil rights, real property, contract and other tort claims in which the State
is a defendant and the potential monetary claims against the State are deemed
to be material, generally in excess of $100 million. These proceedings could
adversely affect the State's finances in the current fiscal year or
thereafter. Adverse developments in the proceedings could affect the ability
of the State to maintain a balanced budget. The State believes that any budget
will include sufficient reserves to offset the costs associated with the
payment of judgments that may be required during the current fiscal year.
There can be no assurance, however, that adverse decisions in legal proceedings
against the State would not exceed the amount of all potential budget resources
available for the payment of judgments.
Real Property Claims
.
In
Oneida Indian Nation of New York, et al. v. State of New York
, the
alleged successors-in-interest to the historic Oneida Indian Nation seek a
declaration that they hold a current possessory interest in approximately
250,000 acres of land that the tribe sold to the State in a series of
transactions between 1795 and 1846, and ejectment of the State and surrounding
counties from all publicly-held lands in the claim area. This case was dormant
while the plaintiffs pursuant an earlier action which ended in an unsuccessful
effort at a settlement. In 1998, the U.S. intervened in the case, and in
December 1998 both the U.S. and the tribal plaintiffs moved for leave to amend
their complaints to assert claims for 250,000 acres, including both monetary
damages and ejectment, to add the State as a defendant and to seek class
certification for all individuals who currently purport to hold title within
the disputed land area. On September 25, 2000, the court granted the motions
to amend the complaints to add the State as a defendant and to assert monetary
damages, but denied the motions to seek class certification and the remedy of
ejectment. On March 29, 2002, the court granted, in part, plaintiffs' motion
to strike the State's defenses and counterclaims as to liability, but such
defenses may still be asserted with respect to monetary damages. The court
also denied the State's motion to dismiss for failure to join indispensable
parties.
Further
efforts at settlement of this action failed to reach a successful outcome.
While such discussions were underway, two significant decisions were rendered
by the Supreme Court and the Second Circuit Court of Appeals which changed the
legal landscape pertaining to ancient land claims:
City of Sherrill v.
Oneida Indian Nation of New York
and
Cayuga Indian Nation of New York v.
Pataki
. Taken together, these cases have made clear that the equitable doctrines
of laches, acquiescence, and impossibility can bar ancient land claims. These
decisions prompted the court to reassess its 2002 decision, which in
part had struck such defenses, and to permit the filing
of a motion for summary judgment predicated on the
Sherrill and Cayuga
holdings. On August 11, 2006, the defendants moved for summary judgment
dismissing the action, based on the defenses of laches, acquiescence, and
impossibility. By order dated May 21, 2007, the court dismissed plaintiffs'
claims to the extent that they asserted a possessory interest, but permitted
plaintiffs to pursue a claim seeking the difference between the amount paid and
the fair market value of the lands at the time of the transaction. The court
certified the May 21, 2007 order for interlocutory appeal and, on July 13,
2007, the Second Circuit granted motions by both sides seeking leave to pursue
interlocutory appeals of that order. On August 9, 2010, the Circuit Court
rendered a decision which affirmed the summary judgment order insofar as it
dismissed the Oneida land claim and reversed it insofar as it would have
allowed plaintiffs to pursue a fair compensation claim against the State.
Oneida
Indian Nation et al v. County of Oneida et al
. This decision mandates
dismissal of the Oneida land claim. The U.S. and the Oneidas filed an
application for en banc review before the Second Circuit on October 21, 2010, which
was denied on December 16, 2010. The plaintiffs originally had until March 16,
2011 to apply for a writ of certiorari before the Supreme Court, but applied
for a 30-day extension to that deadline.
Other
Indian land claims include
Canadian St. Regis Band of Mohawk Indians, et
al., v. State of New York, et al.,
and
The Onondaga Nation v. The State
of New York, et al.
both in United States District Court.
In the
Canadian St. Regis
Band of Mohawk Indians
case, plaintiffs seek ejectment and monetary damages
with respect to their claim that approximately 15,000 acres in Franklin and St.
Lawrence counties were illegally transferred from their
predecessors-in-interest. On July 28, 2003, the court granted, in most
respects, the plaintiffs' motion to strike defenses and dismiss counterclaims.
On October 20, 2003, the court denied the State's motion for a reconsideration
of the July 28
th
decision regarding the State's counterclaims for
contribution. On February 10, 2006, after renewed efforts at settlement failed
to resolve this action, and recognizing the potential significance of the
Sherrill
and
Cayuga
appeals, the District Court stayed all further
proceedings in this case until 45 days after the United States Supreme Court
issued a final decision in
Cayuga
. On November 6, 2006, after
certiorari was denied in
Cayuga
, the defendants moved for judgment on
the pleadings. Although the motion is fully briefed and awaiting decision, on
April 16, 2008, the District Court issued an order staying the case until a
decision was rendered with respect to the appeal in the
Oneida
case. Once
the
Oneida
decision was rendered, supplemental briefs were field on
February 7, 2011. Reply briefs were filed on March 9, 2011.
In
The Onondaga Nation v.
The State of New York, et al.
, plaintiff seeks a judgment declaring that
certain lands within the State are the property of the Onondaga Nation and the
Haudenosaunee, and that conveyances of that land pursuant to treaties during
the period from 1788-1822 are null and void. On August 15, 2006, based on
Sherrill
and
Cayuga
, the defendants moved for an order dismissing this
action, based on the issue of laches. On September 22, 2010, the Court granted
this motion. It is now on appeal before the Second Circuit.
Cayuga Indian Nation of New
York
,
et al. v. Pataki, et al.
, involved approximately 64,000 acres
in Seneca and Cayuga Counties that the historic Cayuga Nation sold to the State
in 1795 and 1807 in alleged violation of the Nonintercourse Act of 1790 because
the transactions were not held under Federal supervision, and were not formally
ratified by the U.S. Senate and proclaimed by the President. In 2001, the
court denied ejectment as a remedy and rendered a judgment against the State
for in the net amount of $250 million. The State appealed the judgment. The
tribal plaintiffs (but not the U.S. Government) cross-appealed, seeking
ejectment of all of the present day occupants of the claimed land and
approximately $1.5 billion in additional prejudgment interest.
On June 28, 2005, the Second
Circuit reversed and entered judgment dismissing the action, based upon the
intervening
Sherrill
decision. The Second Circuit concluded that the
same equitable considerations that the Supreme Court relied on in
Sherrill
applied to the Cayugas' possessory claim and required dismissal of the entire
lawsuit, including plaintiffs' claims for money damages and ejectment.
The Court also held that the United States'
complaint-in-intervention was barred by laches. The Supreme Court denied
certiorari in
Cayuga
on May 15, 2006.
This case was closed but
recently became active when the Cayuga plaintiffs filed a motion to have the
judgment vacated and the case stayed until after the Second Circuit decided the
appeal in
Oneida
. The motion is premised on the ruling in
Oneida
that, in spite of the decision in
Cayuga,
the tribal plaintiffs may
proceed to prove a non-possessory claim for unjust compensation against the
State. Further briefing on the plaintiffs' motion from relief from judgment
had been suspended, pending the outcome of the
Oneida
appeal. That stay
was recently lifted in light of the
Oneida
decision, and further briefing
regarding the pending motion was filed on September 10, 2010. On January 6,
2011, the Court denied the motion. Plaintiffs' time to appeal expired on
March 6, 2011.
Tobacco Master Settlement
Agreement
. In
Freedom Holdings Inc. et al. v. Spitzer et ano.
, two
cigarette importers brought an action in 2002 challenging portions of laws
enacted by the State under the 1998 Tobacco Master Settlement Agreement
("MSA") that New York and many other states entered into with major
tobacco manufacturers. The initial complaint alleged: (i) violations of the
U.S. Constitution; (ii) the establishment of an "output cartel" in
conflict with the Sherman Act; and (iii) selective nonenforcement of laws on
Native American reservations in violation of the Equal Protection Clause of the
U.S. Constitution. The District Court granted defendants' motion to dismiss
the complaint for failure to state a cause of action. Plaintiffs appealed from
this dismissal. In an opinion dated January 6, 2004, the United States Court
of Appeals for the Second Circuit (i) affirmed the dismissal of the Commerce
Clause claim; (ii) reversed the dismissal of the Sherman Act claim; and (iii)
remanded the selective enforcement claim to the District Court for further
proceedings. Plaintiffs have filed an amended complaint that also challenges
the MSA itself (as well as other related State statutes) primarily on
preemption grounds. On September 14, 2004, the District Court denied all
aspects of plaintiffs' motion for a preliminary injunction, except that portion
of the motion relating to the ability of tobacco manufacturers to obtain the
release of certain funds from escrow. Plaintiffs appealed the denial of the
remainder of the motion. In May 2005, the Second Circuit affirmed the denial
of the preliminary injunction. In December 2006, the summary judgment motions
and cross-motions were fully submitted to the District Court. By order dated
July 7, 2008, the District Court requested updated statistical information and
other information needed to resolve certain material questions. Following an
evidentiary hearing, by order dated December 15, 2008 summarizing a preliminary
decision, the District Court dismissed all of plaintiff's claims. On January
12, 2009, the Court issued its opinion and order granting judgment dismissing
the complaint. Plaintiff appealed to the Second Circuit. On October 18, 2010,
the Second Circuit affirmed the decision.
In
Grand River Ent. v. King
,
a cigarette importer raises the same claims as those brought by the plaintiffs
in
Freedom Holdings
, in a suit against the attorneys general of thirty
states, including New York. The parties cross-moved for summary judgment and oral
argument was held on April 27, 2010. The parties are awaiting decision.
Arbitration Related to Tobacco
Master Settlement Agreement
. Under the MSA, tobacco manufacturers who are
party to the MSA ("PMs") pay 46 settling states, plus some
territories and the District of Columbia, (collectively, the "Settling
States"), an annual base payment to compensate for financial harm to the
Settling States for smoking-related illness. New York's allocable share of the
total payment is approximately 12.8%, or approximately $800 million, annually.
In order to keep the base payment under the MSA, each Settling State must pass
and diligently enforce a statute that requires tobacco manufacturers who are
not party to the MSA to deposit in escrow an amount roughly equal to the amount
that the PMs pay per pack sold. The PMs have brought a nationwide arbitration
against the Settling States (minus Montana) asserting that those Settling
States failed to diligently enforce their respective escrow statutes in 2003.
Any such claim for the years prior to 2003 were settled in 2003. The PMs are
making the same claim for years 2004-2006, but none of those years are yet in
arbitration. The full panel of arbitrators has been selected, and an
administrative conference was held on July 20, 2010.
Subsequently,
hearings took place in Chicago on October 5, 2010 and on December 6, 2010. On January
28, 2011 a discovery conference was held in San Francisco. The arbitration panel
has ruled that the Settling States have the burden of proof in establishing
diligent enforcement and also ruled against the Settling States, finding that
the 2003 settlements do not preclude the PMs from basing their claim for a 2003
adjustment on 2002 sales by manufacturers who not are party to the MSA. Further,
they have denied the Settling States ' request to have the issue of "units
sold" briefed and decided as a purely legal preliminary issue. The parties
are now engaged in extensive discovery. The next hearing is scheduled to be
held in Chicago on April 12, 2011.
Representative Payees
. In
Weaver et ano. v. State of New York
, two claimants allege that the executive
directors of the Office of Mental Health facilities in which the claimants were
hospitalized, acting as representative payees under the Federal Social Security
Act, improperly received benefits due them and improperly applied those
benefits to the cost of their in-patient care and maintenance and, in the case
of one of the claimants, also to the cost of her care and maintenance in a
state-operated community residence. The first named claimant initially sought
benefits on her own behalf as well as certification of a class of claimants.
However, the class claims were dismissed on February 10, 2010 for failure to
comply with legislation. On March 18, 2010, claimants filed a notice of
appeal. On June 4, 2010, the State moved for summary judgment against the
individual claims on various grounds. By decision and order dated September
27, 2010, the court granted the State's motion for summary judgment and
dismissed the individual claims. The court held that the State statutes relied
on by claimants do not apply to Social Security benefits and that executive
directors of the Office of Mental Health facilities are acting properly in
accordance with the Social Security Act and applicable Federal regulations. Claimants
served a notice of appeal on November 23, 2010.
Bottle Bill Litigation
.
In
International Bottled Water Association, et al. v. Paterson, et al
.,
plaintiffs seek declaratory and injunctive relief declaring that certain
amendments to the State's Bottle Bill enacted on April 7, 2009 as part of the
Fiscal Year 2009-2010 budget violate the due process clause, the equal
protection clause and the commerce clause of the United States Constitution.
By order entered May 29, 2009, the district court granted a preliminary
injunction that (i) enjoined the State from implementing or enforcing the
New-York exclusive universal product code provision of the Bottle Bill and (ii)
enjoined the State from implementing or enforcing any and all other amendments
to the Bottle Bill signed into law on April 7, 2009, until April 1, 2010, to
allow persons subject to the amendments sufficient time to comply with the
law's requirements.
The State defendants moved to
modify the preliminary injunction. On August 13, 2009 the court modified the
injunction so that its provisions applied only to water bottles, stating that
the injunction would dissolve by October 22, 2009 unless the bottlers showed
cause that due process required that the injunction should continue. On October
23, 2009, after reviewing the parties' submissions, the court lifted the
injunction, allowing most parts of the State law requiring a five cent deposit
on water bottles to take effect October 31, 2009. The court's decision,
however, permanently enjoined the State from implementing a provision that
required water bottles to bear a New York-exclusive universal product code on
each bottle.
On March 22, 2010, the Court
endorsed stipulated final judgments making final the permanent injunction on
the New York-exclusive UPC provisions and lifting the preliminary injunctions
in the August 13, 2009 and October 23, 2009 orders. On March 23, 2010, the
Court endorsed plaintiffs' voluntary dismissal of all remaining claims,
including their challenge to the Sugar Water Exemption. An interlocutory
appeal by a non-party to the Second Circuit challenging a September 14, 2009
clarification order that the August 13, 2009 order lifting the preliminary
injunction as to all non-bottled water products was not intended to be
retroactive remains pending. Negotiations over plaintiffs' attorney fees have
been completed.
Civil
Service Litigation
. In
Simpson v. New York State Department of Civil
Service
, plaintiffs have brought a class action claiming that a civil
service test administered between 1996 and 2006 resulted in a disparate impact
upon the class. This case was settled on December 29, 2010, for $45 million in
damages and fees, payable in four equal annual installments, starting on or
about April 1, 2011 or upon passage of the State budget. Class members must
opt out by April 1, 2011 and a fairness hearing is scheduled for April 15,
2011.
Public Finance
. In
Bordeleau
et al. v. State of New York, et al
., a group of 50 individuals filed a
complaint asking the trial court to enjoin certain expenditures of State funds
and declare them to be illegal under the State Constitution. In particular,
the plaintiffs claim that the State budget appropriates funds for grants to
private corporations in violation of the Constitution, and also claim that
certain enabling language in the State budget constitutes improper delegation
of legislative power to the executive branch in violation.
In addition to the State
defendants, the complaint names as defendants certain public authorities and
private corporations that are claimed to be recipients of the allegedly illegal
appropriations. The State defendants and several other defendants moved to
dismiss the complaint for failure to state a cause of action, for failure to
join certain necessary parties, and for lack of a justiciable controversy. In
a decision and order dated February 27, 2009 the trial granted the motion to
dismiss the complaint, finding no Constitutional violation. The court
concluded that the challenged appropriations were valid expenditures for public
purposes and not "gifts" prohibited under the Constitution. The
court also rejected the appellant's challenge to the reference in the budget to
a memorandum of understanding, relying on that court's holding in
Saxton v.
Carey,
that the degree of itemization required under the Constitution is to
be determined by the Legislature, not the courts.
Plaintiffs appealed from the
dismissal of their complaint. On June 24, 2010, the appellate court reversed
the trial court's order to the extent it dismissed the plaintiffs' cause of
action under the State Constitution and affirmed the order to the extent it
dismissed the plaintiffs' cause of action under the State Constitution, and
remitted the case to the trial court for further proceedings. The defendants
moved for reargument or, in the alternative, leave to appeal the portion of the
appellate court's order that reversed trial court's dismissal of the cause of
action under the State Constitution. The appellate court denied reargument but
granted leave to appeal on the question of whether that court erred by
reversing the dismissal of the plaintiffs' cause of action under the State
Constitution. The appeal is pending.
Metropolitan Transportation
Authority
. In various cases, including
Hampton Transportation Ventures,
Inc. et al. v. Silver et al.,
plaintiffs challenge the constitutionality of
a 2009 State law that imposed certain taxes and fees, including a regional
payroll tax, the revenue from which is directed to the Metropolitan
Transportation Authority. Plaintiffs seek a judgment declaring that enactment
of the law violated various provisions of the State Constitution.
School Aid
. In
Becker
et al. v. Paterson et al
., plaintiffs seek a judgment declaring that the
Governor's determination to delay payment of school aid due by statute on December
15, 2009, violated various provisions of the State Constitution. Since the
commencement of the suit, the moneys at issue have been released. Pursuant to
a court-direct schedule, plaintiffs moved for summary judgment on March 5,
2010. Defendants cross-moved for summary judgment on April 15, 2010.
In a second case involving the
same parties, plaintiffs seek a judgment declaring that the Governor's
determination to delay payment of school aid from March 31, 2010 to June 1,
2010 also violated various State constitutional provisions. Since the
commencement of the suit, the moneys at issue were released. Plaintiffs moved
for summary judgment on July 21, 2010 and defendants responded and cross-moved
for summary judgment on September 16, 2010.
On January
14, 2011, the trial court issued a joint order and decision dismissing both
actions as moot because of the payments made after the commencement of the
actions. On February 25, 2011, plaintiffs appealed.
In
Hussein v. State of New
York
, plaintiffs seek a judgment declaring that the State's system of
financing public education violates the Constitution on the ground that it
fails to provide a sound basic education. In a decision and order dated July
21, 2009 the trial court denied the State's motion to dismiss the action. The
State appealed this decision, which was upheld by the appellate court on
January 13, 2011. Defendants had until March 25, 2011 to seek leave to appeal.
Sales Tax
. In
Oneida
Indian Nation of New York v. Paterson, et al.
(and four consolidated
cases), plaintiffs seek judgments declaring that their Federal rights are
violated by the State's imposition of an excise tax on cigarettes sold by the
plaintiffs to non-tribal members. In four of the five cases, the trial court
denied plaintiffs' motions for preliminary injunctions, but granted a stay of
enforcement pending plaintiffs' appeal. In the fifth case, the trial court
granted the plaintiff's motion for a preliminary injunction. On December 9,
2010, the Second Circuit denied defendants' motion to vacate the injunctions
pending appeal. The Second Circuit was scheduled to hear argument on March 15,
2011.
In
Day Wholesale Inc., et
al. v. State, et al.,
plaintiffs also seek to enjoin the collection of
taxes on cigarettes sold to or by reservation retailers. On August 31, 2010,
the trial court issued an order vacating two earlier preliminary injunctions of
that court barring the collection of such taxes until defendants had taken
certain steps to comply with prior law. The court also denied plaintiffs'
motion for a preliminary injunction . The plaintiffs appealed. On September
14, 2010 the appellate court denied plaintiffs' motion for a preliminary
injunction pending appeal.
On February 10, 2011, the
Seneca Nation of Indians commenced
Seneca
Nation of Indians v. State
of New York, et al.
, challenging the promulgation of regulations to
implement the statutory voucher system intend to enable the State to collect
taxes on certain sales of cigarettes on Indian reservations. Plaintiffs seek
declaratory judgment that the regulations are void, a temporary and permanent
injunction against enforcing both the regulations and the statutory provisions
authorizing the voucher system.
Personal Injury Claims
.
In
Watson v. State
, claimants seek damages arising out of a motor
vehicle accident in which four members of a family were injured. On February
2, 2010, the Court of Claims granted summary judgment on the issue of liability
to claimants. Pursuant to negotiations among the parties, all claims were
settled on February 8, 2011. Certain proceedings still remain to be scheduled
before the matter can be closed.
Eminent Domain
. In
Gyrodine
v. State of New York
, claimant seeks compensation under the Eminent Domain
Procedures Law . By decision dated June 21, 2010, the Court of Claims awarded
claimant $125 million as compensation for the appropriation. On September 13,
2010, the State appealed from the decision.
Insurance Department
Assessments
. In New
York Insurance Association, Inc. v. State
,
several insurance companies and an association of insurance companies seek a
declaration that certain assessments issued against the plaintiff insurance
companies by the Insurance Department violate the Federal Constitution to the
extent that the assessments include amounts for items that are not direct
expenses of the Insurance Department. On June 9, 2010, the State filed a
motion for summary judgment. By decision dated March 10, 2011, plaintiffs'
motion for permission to conduct discovery prior to responding to the State's
motion for summary judgment was granted.
APPENDIX D
(DREYFUS CALIFORNIA AMT-FREE MUNICIPAL CASH MANAGEMENT)
RISK
FACTORS—INVESTING IN CALIFORNIA MUNICIPAL OBLIGATIONS
The following
information is a summary of special factors affecting investments in California
Municipal bonds. It does not purport to be a complete description and is based
on information drawn from official statements relating to securities offerings
of the State of California (the "State") available as of the date of
this Statement of Additional Information. While the Fund has not independently
verified this information, it has no reason to believe that such information is
not correct in all material respects.
General Information
Economy
. California's
economy, the nation's largest and one of the largest and most diverse in the
world, has major sectors in high technology, trade, entertainment, agriculture,
manufacturing, government, tourism, construction and services. The State,
however, experienced a severe economic recession which began at the end of
2007, from which the State is still slowly recovering. Personal income fell in
the first three quarters of 2009 before increasing moderately in the fourth
quarter of that year and in the first quarter of 2010. Taxable sales fell
sharply in the first half of 2009 before increasing substantially in the third
and fourth quarters of 2009 and the first quarter of 2010. Taxable sales
during the first two quarters of 2010 were up 3.6% from the first half of
2009. The State's unemployment rate has increased from 5.9% at the start of
2008 to 12.6% in March 2010. The rate improved slightly thereafter, falling to
12.4% in August 2010 and holding steady in September 2010. For comparison, the
U.S. unemployment rate at that time was 9.6%.
During 2008 and most of 2009,
the State experienced what was the most significant economic downturn and
financial pressure since the Great Depression of the 1930s. As a result of
continuing weakness in the State economy, State tax revenues have declined
precipitously, resulting in large budget gaps and cash shortfalls. In response
to the most severe economic downturn in the United States since the Great
Depression, in the Amended 2009 Budget Act, the State implemented substantial
spending reductions, program eliminations, revenue increases, and other
solutions in order to close an estimated $60 billion budget gap over Fiscal
Years 2008-09 and 2009-10. The State adopted reforms in nearly every area of
government to better contain costs in the future. The 2010 Budget Act, adopted
on October 8, 2010, made further reductions to many programs. Overall General
Fund spending has been reduced to a level well below what it was over a decade
ago.
The State's housing sector is
showing some signs of recovery. Existing home sales have stabilized around the
half-million unit rate (seasonally-adjusted and annualized) and the median
sales price rose by nearly 5% from September 2009 to September 2010, bringing
the median price of these homes to approximately $310,000. Unsold inventory
trended downward in 2009, as did the number of days needed to sell a home.
While both measures appeared to bottom out early in 2010, they worsened during
the summer and fall. Additional foreclosures may result from the resetting of rates
on adjustable rate mortgages between 2010 and 2012, the commencement of
amortization during the same period on mortgages that were previously in an
interest-only mode, and the expiration of the mortgage foreclosure relief
program. The impact of the resetting may be mitigated by the resets being
spread out over multiple years, and may be further mitigated if mortgage
interest rates remain low. The worst of the housing slump, though, may be
over. Home building permitting—which suffered a long, steady three-year
decline starting in 2005—bottomed out early in 2009 and increased on a
year-over-year basis at the start of 2010. Permitting during the first nine
months of 2010 was up 22% year-over-year, but remained at about only 35% of the
pre-recession levels.
The
longest and deepest recession in the post-Depression era is most likely over
with both the State and national economies appear poised to make modest
comebacks. Output of the national economy grew for the fifth consecutive
quarter in the third quarter of 2010, and California payroll employment grew by
7,800 jobs each month on average during the first eight months of 2010.
However, some sectors of both economies have yet to show any positive signs and
the recovery will probably be moderate and prolonged by historical standards.
In addition, there can be no assurances that the fiscal stress and cash
pressures currently facing the State will not continue or become more
difficult, or that continuing declines in State tax receipts or other impacts
of the current economic recession will not further materially adversely affect
the financial condition of the State.
Population.
The State's
July 1, 2009 population of about 38.5 million represented over 12% of the total
United States population. California's population is concentrated in
metropolitan areas. As of the 2000 census, 97% resided in the 25 major
metropolitan statistical areas in the State. As of July 1, 2009, the 5-county
Los Angeles area accounted for 41% of the State's population, with over 18.5
million residents, and the nine-county San Francisco Bay Area represented
nearly 20%, with a population of over 7 million.
Recent Developments
Economic Developments
.
On November 10, 2010, the State's Legislative Analyst's Office released a
report projecting a possible budget deficit of $6.1 billion at the end of
Fiscal Year 2010-11. In addition, California's projected budget gap for
Fiscal Year 2011-12 was $19 billion and the projected budget gap for Fiscal
Years 2012-13 through Fiscal Years 2014-15 was $20 billion for each year. On
November 11, 2010, the Governor announced that he would declare a fiscal
emergency and called a special session of the Legislature that was scheduled
begin on December 6, 2010. The Governor intended to present legislation to
make spending reductions and other changes to the 2010 Budget Act necessary to
address any estimated shortfall in the current fiscal year.
Other Developments
. On
November 2, 2010, voters approved the following initiative measures, which were
effective immediately and will have an effect on the State's finances: (i)
Proposition 22, which restricts the ability of the State to use or borrow
money from local governments and moneys dedicated to transportation financing.
It also prohibits actions taken in current and prior budgets to use excise
taxes on motor vehicle fuels to offset General Fund costs of debt service on
certain transportation bonds, and to borrow money from certain transportation
funds; (ii) Proposition 25, which reduces the required vote in each house of
the Legislature to adopt the annual budget act, "trailer bills" which
accompany the budget act, and other appropriations measures to a majority from
two-thirds; and (iii) Proposition 26, which expands the definition of "taxes"
under existing Constitutional provisions which require a two-thirds vote of the
Legislature to approve.
State Indebtedness and Financing
The State Treasurer is
responsible for the sale of debt obligations of the State and its various
authorities and agencies. The State has always paid when due the principal of
and interest on its general obligation bonds, general obligation commercial
paper notes, lease-purchase debt and short-term obligations, including RANs and
revenue anticipation warrants ("RAWs"). State agencies and
authorities also can issue revenue obligations for which the General Fund has
no liability.
General Obligation Bonds
.
The State Constitution prohibits the creation of general obligation
indebtedness of the State unless a bond law is approved by a majority of the
electorate voting at a general election or a direct primary. General
obligation bond acts provide that debt service on such bonds shall be
appropriated annually from the General Fund and all debt service on general
obligation bonds is paid from the General Fund. Under the State Constitution,
debt service on general obligation bonds is the second charge to the General
Fund after the application of monies in the General Fund to the support of
the public school system and public institutions of
higher education. Certain general obligation bond programs receive revenues
from sources other than the sale of bonds or the investment of bond proceeds.
As of October 1, 2010, the
State had outstanding over $76.8 billion aggregate principal amount of long-term
general obligation bonds, of which over $68.1 billion was payable primarily
from the General Fund and over $8.7 billion was payable from other revenue
sources. As of October 1, 2010, there were unused voter authorizations for the
future issuance of approximately $42.9 billion of long-term general obligation
bonds. Of this unissued amount, over $1.31 billion is for bonds payable from
other revenue sources.
A ballot measure will be
submitted to the voters at the Statewide election on November 6, 2012 to
approve the issuance of $11.14 billion in general obligation bonds for a wide
variety of purposes relating to improvement of California's water supply
systems, drought relief, and groundwater protection. This legislation specifies
that not more than one-half of the bonds may be sold before July 1, 2015.
Additional bond measures may be included on future election ballots, but any
proposed bond measure must first be approved by the Legislature or placed on
the ballot through the initiative process.
The State is permitted to issue
as variable rate indebtedness up to 20% of the aggregate amount of long-term
general obligation bonds outstanding. As of October 1, 2010, the State had
outstanding over $4.84 billion in variable rate general obligation bonds (which
includes a portion of the Economic Recovery Bonds ("ERBs") described
below), representing about 6.3% of the State's total outstanding general
obligation bonds as of that date.
Commercial Paper Program
.
Pursuant to legislation enacted in 1995, voter-approved general obligation
indebtedness may be issued either as long-term bonds or, for some but not all
bond issuances, as commercial paper notes. Commercial paper notes may be
renewed or may be refunded by the issuance of long-term bonds. The State
issues long-term general obligation bonds from time to time to retire its
general obligation commercial paper notes. Commercial paper notes are deemed
outstanding upon authorization by the respective finance committees, whether or
not such notes are actually issued. Pursuant to the terms of the current bank
credit agreement, the general obligation commercial paper program may have up
to $2 billion in aggregate principal amount at any time. As of November 1,
2010, $1.29 billion aggregate principal amount of general obligation commercial
paper notes were outstanding.
Lease-Revenue Debt
. In
addition to general obligation bonds, the State builds and acquires capital
facilities through the use of lease-revenue borrowing. Under these
arrangements, the State Public Works Board, another State or local agency or a
joint powers authority issues bonds to pay for the construction of facilities
such as office buildings, university buildings or correctional institutions.
These facilities are leased to a State agency or the University of California
under a long-term lease that provides the source of payment of the debt service
on the lease-revenue bonds. In some cases, there is not a separate bond issue,
but a trustee directly creates certificates of participation in the State's
lease obligation, which are then marketed to investors. Certain of the
lease-revenue financings are supported by special funds rather than the General
Fund. The State had approximately $9.8 billion General Fund-supported
lease-revenue obligations outstanding as of October 1, 2010. The State Public
Works Board, which is authorized to sell lease revenue bonds, had approximately
$12.3 billion authorized and unissued as of November 1, 2010.
Non-Recourse
Debt
.
Certain State agencies and authorities
issue revenue obligations for which the General Fund has no liability. Revenue
bonds represent obligations payable from State revenue-producing enterprises
and projects, which are not payable from the General Fund, and conduit
obligations payable only from revenues paid by private users of facilities
financed by the revenue bonds. The enterprises and projects include
transportation projects, various public works projects, public and private
educational facilities, housing, health facilities and pollution control
facilities. State agencies and
authorities had
approximately $57 billion aggregate principal amount of revenue bonds and
notes, which are non-recourse to the General Fund outstanding as of June 30,
2010.
Future Issuance Plans
.
Between November 2006 and August 2009, voters and the Legislature authorized
more than $60 billion of new general obligation bonds and lease revenue bonds,
which are paid solely from the General Fund, thereby increasing the amount of
such General Fund-supported debt to more than $78 billion, while still leaving
authorized and unissued about $54 billion as of May 1, 2010. The State has
increased the volume of issuance of both categories of bonds substantially,
starting in Fiscal Year 2007-08, in order to address the program needs for
these new authorizations, along with those which existed before 2006. The
amounts and timing of future issuance of general obligation and lease revenue
bonds depends on a variety of factors, including the actual timing of
expenditure needs for the various programs for which such bonds are to be
issued, the amount and timing of interim financing provided to the programs,
the interest rate and other market conditions at the time of issuance, and the
timing and amounts of additional general obligation bonds or lease revenue
bonds that may be approved.
Disruptions in financial
markets and uncertainties about the State's budget condition have caused
significant disruptions over the past two years in the State's bond issuance
program. Because of these factors, the State did not issue any new general
obligation bonds between July 2008 and March 2009. In March 2009, it issued
$6.54 billion of new tax-exempt bonds. A few weeks later, the State took
advantage of a new Federal program called "Build America Bonds"
("BABs") to issue $6.86 billion of Federally taxable general
obligations bonds, of which $5.3 billion were BABs. BABs are bonds whose
interest is subject to Federal income tax, but the U.S. Treasury will repay to
the State an amount equal to 35% of the interest cost on the BABs. This will
result in a net interest expense lower than what the State would have had to
pay for tax-exempt bonds at that time and in that amount. Between April 2009
and through September 2010, the State issued a significant amount of BABs,
including $10.39 billion of general obligation bonds and $551 million of lease
revenue bonds, and the State expects to issue additional BABs during calendar
year 2010. The Obama Administration has proposed making the BABs program permanent,
although at a lower subsidy rate. In May 2010, the House of Representatives
passed a law which extends the BAB program for two years, at successively lower
subsidy rates, but higher than what was proposed by the Obama Administration;
this proposal has not yet been acted on by the Senate.
Based on the current
projections of program expenditure needs, without taking any future
authorizations into account, the aggregate amount of outstanding general
obligation and lease revenue bonds is estimated to peak at about $114.6 billion
by Fiscal Year 2015-2016, compared to the current total outstanding amount of
about $79.8 billion. The annual debt service costs on this amount of debt was
estimated to increase to approximately $9.49 billion in Fiscal Year 2012-13,
compared to about $6.84 billion estimated in Fiscal Year 2010-11.
In light of the substantial
drop in General Fund revenues since Fiscal Year 2007-08 and the projections for
substantial new bond sales in the future, the ratio of debt service on general
obligation and lease revenue bonds supported by the General Fund, to annual
General Fund revenues, can be expected to increase significantly in future
years. Based on the revised estimates contained in the 2010 Budget Act, in
Fiscal Year 2010-11, the General Fund debt ratio is estimated to equal
approximately 7.26% based on the assumed debt issuances discussed herein and
the assumed growth in General Fund revenues and transfers contained in the
2010-11 May Revision. Through Fiscal Year 2013-14, the State's General Fund
debt ratio is projected to peak at 10.12% in Fiscal Year 2012-13.
Economic Recovery Bonds
.
The California Economic Recovery Bond Act ("Proposition 57") was
approved by voters at the Statewide primary election in March 2004. Proposition
57 authorized the issuance of up to $15 billion of ERBs to finance the negative
General Fund reserve balance as of June 30, 2004 and other General Fund
obligations undertaken prior to June 30, 2004. Repayment of the ERBs is
secured by a pledge of revenues from a 1/4¢ increase in the State's sales and
use tax that started July 1,
2004, but also is secured
by the State's full faith and credit because the ERBs were approved by voters
as general obligation bonds.
The State issued $10.896
billion of ERBs, resulting in the deposit of net proceeds to the General Fund
of approximately $11.254 billion. In order to relieve current cash flow and
budgetary shortfalls, the State issued $3.179 billion of ERBs on February 14,
2008, generating net proceeds of $3.313 billion, which were transferred to the
General Fund. That issuance represents the last ERBs that can be issued under
Proposition 57, except for any future issuance of refunding bonds.
Because of the sharp reduction
in taxable sales as a result of the current economic recession, the 1/4¢
special sales tax revenues collected from the 1/4¢ tax dedicated to repayment
of the ERBs decreased to a level that did not provide adequate coverage above
the required debt service amounts. This resulted in downgrades of the ratings
of the ERBs and would have required debt service to be paid from reserve funds
for at least some period of time. In order to restore adequate coverage, the
State restructured the ERB debt through the issuance of approximately $3.435
billion ERB refunding bonds on November 5, 2009. The restructuring reduced
annual debt service costs to come into alignment with reduced tax revenues,
with a coverage target of at least 1.3 times.
Three different sources of
funds are required to be applied to the early retirement of ERBs: (i) all
proceeds from the dedicated 1/4¢ tax in excess of the amounts needed, on a
semi-annual basis, to pay debt service and other required costs of the ERBs,
(ii) all proceeds from the sale of specified surplus State property, and (iii)
50% of each annual deposit, up to $5 billion in the aggregate, of deposits in
the Budget Stabilization Account ("BSA"). As of October 2010, funds
from these sources have been used for early retirement of approximately $3.98
billion of ERBs during Fiscal Years 2005-06 through 2010-11, including $1.495
billion which was transferred from the BSA in Fiscal Year 2006-07 ($472
million) and Fiscal Year 2007-08 ($1.023 billion). The Governor suspended the
BSA transfers in Fiscal Years 2008-09, 2009-10, and 2010-11 due to the
condition of the General Fund. As of September 1, 2010, a total of $7.28
billion in ERBs had been retired by the State, leaving an approximate
outstanding balance of $7.39 billion in ERBs.
Tobacco Settlement Revenue
Bonds
. In 1998, the State signed the Master Settlement Agreement (the
"MSA") with the four major cigarette manufacturers (the "PMs")
for payment of approximately $25 billion (subject to adjustment) over 25
years. Under the MSA, half of the money will be paid to the State and half to
local governments. Payments continue in perpetuity, but the specific amount to
be received by the State and local governments is subject to adjustment.
Details in the MSA allow reduction of payments for decreases in cigarette
shipment volumes by the PMs, payments owed to certain previously settled states
and certain types of offsets for disputed payments, among other things.
Settlement payments are adjusted upward each year by at least 3% for inflation,
compounded annually.
In 2003, two separate sales of
these assets financed with revenue bonds (the "2003 Bonds") produced
about $4.75 billion in proceeds which were transferred to the General Fund. In
2005 and 2007, the State refunded all of the original 2003 Bonds, generating
additional proceeds of approximately $1.783 billion, which were also
transferred to the General Fund. The back-up State guarantee was applied to
only the second 2003 sale of bonds and was continued when those bonds were
refunded in 2005. The back-up State guarantee now applies to the $3.14 billion
of 2005 Refunding Bonds.
The MSA provides for a
potential reduction to the PMs' payments under specified conditions relating to
the loss of market share to non-participating manufacturers
("NPMs"). This potential reduction is called an "NPM
adjustment." The State may dispute the PMs' right to an NPM adjustment
for any year. The MSA also allows the PMs to withhold any portion of their
annual payments that is disputed, until such time as the dispute is resolved.
Since 2006, the annual amount of revenues received by the State has incurred
some level of withholding (ranging from approximately $32.8 million to $50.9
million) based on the PMs' assertion of their right to receive an NPM
adjustment. Nevertheless, the
annual amount of
tobacco settlement revenues received to date has been in excess of the required
debt service payments. In addition, the State Attorney General is pursuing, in
a multi-state arbitration, a determination compelling the PMs to pay the full
amounts scheduled.
Cash Flow Borrowings and
Management
. As part of its cash management program, the State has
regularly issued short-term obligations to meet cash flow needs. The State has
issued RANs in 22 of the last 23 fiscal years to partially fund timing
differences between receipts and disbursements, as the majority of General Fund
revenues are received in the last part of the fiscal year. RANs must mature
prior to the end of the fiscal year of issuance. If additional external cash
flow borrowings are required, the State has issued RAWs, which can mature in a
subsequent fiscal year. RANs and RAWs are both payable from any unapplied
revenues in the General Fund on their maturity date, subject to the prior
application of such money in the General Fund to pay certain priority payments
in the general areas of education, general obligation debt service, State
employee wages and benefits and other specified General Fund reimbursements.
The State entered Fiscal Year
2009-10 with severely depleted cash resources as a result of having to pay
significant obligations before June 30, 2009, including repayment of $5.5
billion of RANs issued in Fiscal Year 2008-09. In addition, significant
payments to public schools was deferred from the end of Fiscal Year 2008-09
into the first few weeks of July 2009. By July 1, 2009, additional budget
solutions for Fiscal Year 2009-10 had not been adopted. Faced with reduced
cash resources, the State Controller started to issue registered warrants
("IOUs") on July 2, 2009, for certain obligations of the State not
having payment priority under law. The State Controller was able to manage
cash resources to ensure that higher priority payments, such as for schools and
debt service, were made on time in July and August 2009.
On July 28, 2009, the Governor
signed the Amended 2009 Budget Act, which included a number of provisions for
cash management purposes. With the adoption of the Amended 2009 Budget Act,
the State was able to undertake its normal external borrowing program for
Fiscal Year 2009-10. In order to provide an immediate increase in cash
resources, the State issued $1.5 billion of RANs on August 27, 2009, which were
scheduled to mature on October 5, 2009. This permitted early redemption of the
outstanding IOUs ($2.6 billion) as of September 4, 2009.
The State was able to manage
its cash flows for the balance of Fiscal Year 2009-10, although the Legislature
was required to defer certain payments in March and April 2010. The State paid
all of its obligations due through the end of the fiscal year using revenues
and internal borrowable resources. The General Fund ended the fiscal year
owing $9.992 billion to special funds for such short-term cash flow borrowings.
The State started Fiscal Year
2010-11 with General Fund cash and unused borrowable resources of approximately
$8.8 billion, but without an enacted budget, which prevented the State from
making payment for many programs which did not have continuing appropriations
or constitutionally mandated payment obligations, and payments to a variety of
suppliers of goods and services. This allowed the State to conserve its cash
resources, and, unlike the previous year, no RAWs had to be issued.
Once the 2010 Budget Act was
enacted, however, the State had to meet all its obligations which had remained
unpaid in the absence of valid appropriations during the three months that the
State had no approved budget, totaling approximately $6.7 billion payable from
the General Fund. The requirement that the State make up these payments
created cash challenges for October and November 2010. The State responded to
these challenges by (1) enactment of a cash management bill accompanying the
2010 Budget Act that allows for short term deferrals of approximately $4.5
billion to help manage the cash flow during that period and (2) by issuing $6.7
billion of RANs on October 28, 2010 in a private placement with multiple
financial institutions. The State planned to issue $ 10 billion of RANs to
public
investors on or about November 23, 2010 which
will allow repayment of the RANs from unapplied resources.
While the State's estimates of
cash flow in Fiscal Year 2010-11 indicate a positive projected cash position in
each month of the year (even after reduction of borrowable resources due to
Proposition 22), this is not indicative of a return to fiscal health. Rather,
the State's cash position has improved as a result of (1) the cash deferral
legislation and (2) continued heavy reliance on internal borrowing by the
General Fund from various Special Funds. The State's fiscal officers are
continuing to closely monitor developments that may affect the State's cash
management requirements, including monthly cash receipts and disbursements.
There can be no assurance that deterioration in revenue and/or increases in
expenditures in the current fiscal year or early in Fiscal Year 2011-12 will
not require the State to implement additional cash management measures before
the end of the fiscal year, including but not limited to additional payment
deferrals, issuance of additional RANs, or issuance of RAWs or registered
reimbursement warrants, to supplement its cash management program for Fiscal
Years 2010-11 or 2011-12.
Ratings
. The current ratings
of the State's general obligation bonds are "A1" from Moody's and
"A-" from S&P and Fitch.
State Funds and Expenditures
The Budget and
Appropriations Process
. The State's fiscal year begins on July 1 and ends
on June 30. The annual budget is proposed by the Governor by January 10 of
each year for the next fiscal year. Under State law, the annual proposed
budget cannot provide for projected expenditures in excess of projected
revenues and balances available from prior fiscal years. Following the
submission of the proposed budget, the Legislature takes up the proposal. The Balanced
Budget Amendment ("Proposition 58"), which was approved by voters in
March 2004, requires the State to adopt and maintain a balanced budget and
establish an additional reserve, and restricts future long-term deficit-related
borrowing.
The primary source of the
annual expenditure authorizations is the Budget Act as approved by the
Legislature and signed by the Governor. The Budget Act must be approved by a
two-thirds majority vote of each House of the Legislature. The Governor may
reduce or eliminate specific line items in the Budget Act or any other
appropriations bill without vetoing the entire bill. Such individual line-item
vetoes are subject to override by a two-thirds majority vote of each House of
the Legislature. Appropriations also may be included in legislation other than
the Budget Act. Bills containing appropriations (except for K-12 and community
college ("K-14") education) must be approved by a two-thirds majority
vote in each House of the Legislature and be signed by the Governor. Bills
containing K-14 education appropriations require a simple majority vote.
Continuing appropriations, available without regard to fiscal year, also may be
provided by statute or the State Constitution.
The General Fund
. The
monies of the State are segregated into the General Fund and over 1,000 other
funds, including special, bond and trust funds. The General Fund consists of
revenues received by the State Treasury and not required by law to be credited
to any other fund, as well as earnings from the investment of State monies not
allocable to another fund. The General Fund is the principal operating fund
for the majority of governmental activities and is the depository of most of
the major revenue sources of the State. The General Fund may be expended as a
consequence of appropriation measures enacted by the Legislature and approved
by the Governor, as well as appropriations pursuant to various constitutional
authorizations and initiative statutes.
The Special Fund for
Economic Uncertainties
. The Special Fund for Economic Uncertainties
("SFEU") is funded with General Fund revenues and was established to
protect the State from unforeseen revenue reductions and/or unanticipated
expenditure increases. Amounts in the SFEU may be transferred by the State to
the General Fund as necessary to meet cash needs of the General Fund. The
State is
required to return monies so transferred
without payment of interest as soon as there are sufficient monies in the
General Fund. At the end of each fiscal year, the State is required to
transfer from the SFEU to the General Fund any amount necessary to eliminate
any deficit in the General Fund. In certain circumstances, monies in the SFEU
may be used in connection with disaster relief. For budgeting and general accounting
purposes, any appropriation made from the SFEU is deemed an appropriation from
the General Fund. For year-end reporting purposes, the State is required to
add the balance in the SFEU to the balance in the General Fund so as to show
the total monies then available for General Fund purposes.
The Budget Stabilization
Account
. Proposition 58, approved in March 2004, created the BSA.
Beginning with Fiscal Year 2006-07, a specified portion of estimated annual
General Fund revenues (reaching a ceiling of 3% by Fiscal Year 2008-09) will be
transferred into the BSA no later than September 30 of each fiscal year, unless
the transfer is suspended or reduced. These transfers will continue until the
balance in the BSA reaches $8 billion or 5% of the estimated General Fund
revenues for that fiscal year, whichever is greater. The annual transfer
requirement will go back into effect whenever the balance falls below the $8
billion or the 5% target. Proposition 58 also provides that one-half of the
annual transfers shall be used to retire ERBs, until a total of $5 billion has
been used for that purpose. A total of $1.495 billion of the $5 billion amount
has now been allocated for retirement of ERBs.
The 2007, 2008 and 2009 Budget
Acts authorized the State to transfer funds from the BSA back into the General
Fund. On January 10, 2008, the Fiscal Year 2007-08 balance of $1.495 billion
was transferred from the BSA to the General Fund. The Governor issued an
executive order on May 28, 2008 suspending the Fiscal Year 2008-09 transfer of
$3.018 billion from the General Fund to the BSA, in light of the then-current
condition of the General Fund. In light of the condition of the General Fund,
the Governor suspended the September 30, 2010 transfer from the General Fund to
the BSA estimated at $2.8 billion (based on the 2010 Budget Act). The Governor
also had suspended the General Fund transfers to the BSA for Fiscal Year
2009-10 (approximately $2.8 billion) and Fiscal Year 2008-09 (approximately
$3.0 billion). There are currently no moneys in the BSA.
Inter-Fund Borrowings
.
Inter-fund borrowing is used to meet temporary imbalances of receipts and
disbursements in the General Fund. If General Fund revenue is or will be
exhausted, the State may direct the transfer of all or any part of the monies
not needed in special funds to the General Fund. All money so transferred must
be returned to the special fund from which it was transferred. As part of the
2008 Budget Act, statutory changes were enacted to reclassify 18 existing State
funds to become borrowable resources for General Fund cash flow purposes.
These funds increase the total amount of borrowable resources by approximately
$3.5 billion. An additional $500 million of additional borrowable resources
was previously made available in August 2008 as a result of administrative
actions taken by the Governor. The Initial 2009 Budget Act reclassified an
additional 19 funds to borrowable resources for General Fund cash flow
purposes. These funds will provide approximately $2 billion additional
borrowable cash to the General Fund. As of June 30, 2010, there was estimated
to be approximately $9.922 billion of loans from the SFEU and other internal
sources to the General Fund.
State Expenditures
.
State Appropriations Limit
.
The State is subject to an annual appropriations limit imposed by the State
Constitution (the "Appropriations Limit"). The Appropriations Limit
does not restrict appropriations to pay debt service on voter-authorized bonds
or appropriations from funds that do not derive their proceeds from taxes.
There are other various types of appropriations excluded from the
Appropriations Limit, including appropriations required to comply with mandates
of courts or the Federal government, appropriations for qualified capital
outlay projects, appropriations for tax refunds, appropriations of revenues
derived from any increase in gasoline taxes and motor vehicle weight fees above
January 1, 1990 levels, and appropriation of certain special taxes imposed by
initiative. The Appropriations Limit may be exceeded in cases of emergency.
The
Appropriations Limit in each year is based on the limit for the prior year,
adjusted annually for changes in State per capita personal income and changes
in population, and adjusted, when applicable, for any transfer of financial
responsibility of providing services to or from another unit of government or
any transfer of the financial source for the provisions of services from tax
proceeds to non-tax proceeds. The Appropriations Limit is tested over
consecutive two-year periods. Any excess of the aggregate "proceeds of
taxes" received over such two-year period above the combined
Appropriations Limits for those two years is divided equally between transfers
to K-14 school districts and refunds to taxpayers.
The DOF projects the
Appropriations subject to limitation to be approximately $25.747 billion and
$17.590 billion under the Appropriations Limit in Fiscal Years 2009-10 and
2010-11, respectively.
Pension Trusts
. The
principal retirement systems in which the State participates are California
Public Employees' Retirement System ("CalPERS") and the California
State Teachers' Retirement System ("CalSTRS").
CalPERS administers the Public
Employment Retirement Fund ("PERF"), which is a multiple-employer
defined benefit plan. As of June 30, 2009, PERF had 1,134,397 active and
inactive program members and 492,513 benefit recipients. The projected payroll
for State employees covered by PERF for Fiscal Year 2009-10 was approximately
$17.4 billion. The State's contribution to CalPERS, through the PERF, has
increased from $2.402 billion in Fiscal Year 2005-06 to $2.860 billion in
Fiscal Year 2009-10, with an estimated $3.769 billion for Fiscal Year 2010-11.
CalSTRS administers the
Teacher's Retirement Fund, which is an employee benefit trust fund created to
administer the State Teachers' Retirement Plan ("STRP"). STRP is a
cost-sharing, multi-employer, defined benefit pension plan that provides for
retirement, disability and survivor benefits to teachers and certain other
employees of the California public school system. As of June 30, 2009, the
Defined Benefit Program had approximately 1,745 contributing employers,
approximately 615,216 active and inactive program members and 232,617 benefit recipients.
State contribution to CalSTRS, through STRP, has increased from $499 million in
Fiscal Year 2005-06 to $563.1 million in Fiscal Year 2009-10, with an estimated
$568 million for Fiscal Year 2010-11.
Over the last three years,
CalPERS and CalSTRS have sustained significant investment losses during the
economic downturn and currently have substantial unfunded liabilities which
will require increased contributions from the General Fund in future years.
Welfare System
. The
Personal Responsibility and Work Opportunity Reconciliation Act of 1996
fundamentally reformed the nation's welfare system. This Act included
provisions to: (i) convert Aid to Families with Dependent Children
("AFDC"), an entitlement program, to Temporary Assistance for Needy Families
("TANF"), a block grant program with lifetime time limits on TANF
recipients, work requirements and other changes; (ii) deny certain Federal
welfare and public benefits to legal non-citizens (subsequent Federal law has
amended this provision), allow states to elect to deny additional benefits
(including TANF) to legal non-citizens, and generally deny almost all benefits
to illegal immigrants; and (iii) make changes in the Food Stamp program,
including to reduce maximum benefits and impose work requirements. Federal
authorization for the TANF program was scheduled to extend until at least
December 3, 2010.
The California Work Opportunity
and Responsibility to Kids ("CalWORKs") replaced the AFDC and other
similar welfare programs effective January 1, 1998. Consistent with Federal
law, CalWORKs contains time limits on receipt of welfare aid. The centerpiece
of CalWORKs is the linkage of eligibility to work participation requirements.
The CalWORKs caseload projections are 552,000 and 578,000 cases in Fiscal Years
2009-10 and 2010-11, respectively. Since CalWORKs' inception in January 1998,
however, caseload is projected to have declined by over 10%.
As in
prior years, California will fail to meet the work participation rate (at least
50% work participation among all families), and as a result, California's
required Maintenance of Effort ("MOE") will be 80% of the Federal
Fiscal Year ("FFY") 1994 historic expenditures rather than the 75%
MOE level California has been required to meet. The 2010 Budget Act reflected
an increase of MOE spending by $179.5 million in Fiscal Year 2010-11, to $2.9
billion, to reflect this penalty. The Federal government recently notified
California that it did not meet the 2008 work participation rate requirements
and assessed a penalty of $47.7 million. The State intends to seek relief from
the FFY 2008 penalty based on current economic conditions and/or a corrective
action plan. To the extent full or partial relief is not obtained, any FFY
2008 penalty likely would not be assessed prior to Fiscal Year 2011-12.
Considerable improvement in
work participation rates must be achieved to avoid additional Federal
penalties, which could cost the State and counties more than $2 billion over a
five-year period, beginning in Fiscal Year 2011-12. Efforts to address
improving work participation began during Fiscal Year 2006-07, and the State is
continuing to identify and evaluate additional options that place greater
emphasis on work participation and reduce reliance upon public assistance to
significantly improve the ability of the State and counties to meet federal
work requirements in the TANF program. Various long-term reforms will become
effective beginning in Fiscal Year 2011-12.
Nationwide, the American
Recovery and Reinvestment Act in February 2009 ("ARRA") appropriated
a combined total of $5 billion for a new TANF Emergency Contingency Fund
("ECF") for FFYs 2009 and 2010. A state can receive an ECF
allocation for (i) caseload increases, (ii) increased expenditures for
non-recurrent short term benefits, and/or (iii) increased expenditures for
subsidized employment. Through the ECF, a state can be reimbursed for 80% of
expenditures in a fiscal year that exceed the level of state expenditures in
each of these areas. For the two-year period ending September 30, 2010, total
General Fund savings resulting from the ECF are estimated to be over $708
million.
The 2010 Budget Act includes
$407.8 million in General Fund savings. The bulk of these savings is derived
from the extension of the ECF from October 1, 2010 through June 30, 2011, for
General Fund savings of $395.4 million.
Health Care
. Medi-Cal,
the State's Medicaid program, is a health care entitlement program for
low-income individuals and families who receive public assistance or otherwise
lack health care coverage. Federal law requires Medi-Cal to provide a set of
basic services such as doctor visits, hospital inpatient and outpatient care,
hospice and early periodic screening, diagnosis and treatment. Also, Federal
matching funds are available if the State chooses to provide any of numerous
optional benefits. The Federal government pays for half of the cost of
providing most Medi-Cal services in California, including optional benefits.
Approximately 4 million Medi-Cal beneficiaries (more than half of the people
receiving Medi-Cal benefits and services) are currently enrolled in managed
care plans. Average monthly caseload in Medi-Cal was 7.28 million in Fiscal
Year 2009-10. Caseload is expected to increase in Fiscal Year 2010-11 by
approximately 262,300 (3.6%) to 7.54 million people.
Medi-Cal expenditures are
estimated to be $41.2 billion ($11.2 billion General Fund) in Fiscal Year
2009-10 and $50.2 billion ($12.2 billion General Fund) in Fiscal Year 2010-11.
The net increase of $1 billion of Medi-Cal expenditures in Fiscal Year 2010-11
is due primarily to base cost increases of about $4.2 billion and savings of
$3.2 billion resulting from an anticipated increase in Federal funds and
various program reductions.
Unemployment Insurance
.
The Unemployment Insurance ("UI") program is a Federal-State program
that provides weekly UI payments to eligible workers who lose their jobs
through no fault of their own. The regular unemployment program is funded by
unemployment tax contributions paid by employers for each covered worker. Due
to the high rate of State unemployment, the employer contributions are not
sufficient to cover the cost of the benefits to claimants. The State reported
that, absent changes to the UI Fund financing structure, the UI Fund had a
deficit of $6.2 billion at the end of
2009 and $8.3
billion at the end of September 2010, and projected that, absent changes to the
UI Fund financing structure, the UI Fund will have deficits of $10.3 billion at
the end of 2010, $13.4 billion at the end of 2011 and 16.0 billion at the end
of 2012.
Commencing in January 2009, in
accordance with Federal law, the State began to fund deficits in the UI Fund
through a Federal loan to support benefit payments. If the loan is repaid
within the Federal fiscal year in which it is taken, the State does not have to
pay interest on the loan. If the State is unable to repay the loan within the
same year it is taken, then the State must pay interest on the borrowed funds.
However, the ARRA provides that interest will not begin to accrue until January
1, 2011, and repayment by the State would need to occur no later than September
30, 2011. Assuming the State does not begin repayment of the loan prior to
September 2011, in Fiscal Year 2011-12 the General Fund would be required to
make an interest only payment of approximately $362.3 million from January 1
through September 30, 2011 (based on an assumed then outstanding Federal loan
of $13.4 billion). The amount payable in fiscal years after Fiscal Year
2011-12 (assuming no federal waiver of the interest payment) will depend on a
variety of factors, including the actual amount of the federal loan then
outstanding (which in turn will depend on the rate of unemployment, employer
contributions to the UI Fund, and any state or federal law changes relating to
the funding of the program) and the interest rate imposed by the federal
government. Congress was considering an extension of the interest waiver beyond
December 31, 2010.
Local Governments
. The
primary units of local government in the State are the 58 counties, which are
responsible for the provision of many basic services, including indigent health
care, welfare, jails and public safety in unincorporated areas. There also are
480 incorporated cities and thousands of special districts formed for
education, utility and other services. The fiscal condition of local
governments has been constrained since the enactment of "Proposition
13" in 1978, which reduced and limited the future growth of property taxes
and limited the ability of local governments to impose "special
taxes" (those devoted to a specific purpose) without two-thirds voter
approval. Counties, in particular, have had fewer options to raise revenues
than many other local government entities and have been required to maintain
many services.
In the aftermath of Proposition
13, the State provided aid to local governments from the General Fund to make
up some of the loss of property tax monies, including taking over the principal
responsibility for funding K-12 schools and community colleges. During the
recession of the early 1990s, the Legislature eliminated most of the remaining
components of post-Proposition 13 aid to local government entities other than
K-12 schools and community colleges by requiring cities and counties to
transfer some of their property tax revenues to school districts. However, the
Legislature also provided additional funding sources (such as sales taxes) and
reduced certain mandates for local services.
The 2004 Budget Act, related
legislation and the enactment of Constitutional Amendment #4 ("Amendment
No. 4"), approved by voters in 2004 as Proposition 1A, dramatically
changed the State-local fiscal relationship. These constitutional and
statutory changes implemented an agreement negotiated between the Governor and
local government officials (the "State-local agreement") in
connection with the 2004 Budget Act. One change relates to the reduction of
the vehicle license fee ("VLF") rate from 2% to 0.65% of the market
value of the vehicle. In order to protect local governments, which have
previously received all VLF revenues, the reduction in VLF revenue to cities
and counties from this rate change was replaced by an increase in the amount of
property tax that they receive. This worked to the benefit of local
governments because the backfill amount annually increases in proportion to the
growth in property tax revenues, which has historically grown at a higher rate
than VLF revenues, although property tax revenues have declined over the past
two years. This arrangement continues without change in the 2010 Budget Act.
The Amended 2009 Budget Act
authorized the State to exercise its authority under Proposition 1A to borrow
an amount equal to about 8% of local property tax revenues, or $1.9 billion,
which must be
repaid within three years. State law was
also enacted to create a securitization mechanism for local governments to sell
their right to receive the State's payment obligations to a local government
operated joint powers agency ("JPA"). The JPA sold bonds in a
principal amount of $1.895 billion in November 2009 to pay the participating
local governments their full property tax allocations when they normally would
receive such allocations. Pursuant to Proposition lA, the State is required to
repay the local government borrowing (which in turn will be used to repay the
bonds of the JPA) no later than June 30, 2013. The 2010 Budget Act includes
$90.8 million for the interest payments that will be incurred in that fiscal
year to be paid from the General Fund. Proposition 22, however, supersedes
Proposition 1A and completely prohibits any future borrowing by the State from
local government funds, and generally prohibits the Legislature from making
changes in local government funding sources. Allocation of local
transportation funds cannot be changed without an extensive process.
Proposition 1A borrowing incurred as part of the Amended 2009 Budget Act is not
affected by Proposition 22.
The Amended 2009 Budget Act
also contains a shift of $1.7 billion in redevelopment authority funds from
current revenue and reserves in Fiscal Year 2009-10 and $350 million in Fiscal
Year 2010-11, which allows redevelopment agencies to borrow from parent
agencies. These revenues are then shifted to schools that serve the
redevelopment areas. This frees an equal amount of base property tax for the
impacted schools that is shifted to the Supplemental Revenue Augmentation Funds
in each county that were established by Proposition 1A. The funds in the
Supplemental Revenue Augmentation Fund are then used to offset various state
General Fund costs incurred in the counties. In Fiscal Year 2010-11, $350
million will be used to offset trial court costs.
The California Redevelopment
Association ("CRA"), which includes a number of redevelopment
agencies among its members, filed a lawsuit challenging the $1.7 billion shift
described above. The 2008 Budget Act included a shift of $350 million of
redevelopment agency moneys. The CRA challenged that shift, and a trial court
held that the legislation providing for the shift was invalid, which prevented
the State from shifting the funds for Fiscal Year 2008-09. The State withdrew
its appeal of the decision and subsequently enacted legislation that it
believes addresses the concerns noted by the trial court. However, the
subsequently enacted legislation is being challenged in the current CRA
lawsuit, and in a separate lawsuit filed by a group of counties.
Trial Courts
. Prior to
legislation enacted in 1997, local governments provided the majority of funding
for the State's trial court system. The legislation consolidated trial court
funding at the State level in order to streamline the operation of the courts,
provide a dedicated revenue source and relieve fiscal pressure on the
counties. The State's trial court system will receive approximately $2.6
billion in State resources in Fiscal Year 2009-10 and $2.8 billion in Fiscal
Year 2010-11, and $499 million in resources from the counties in each fiscal
year. The 2010 Budget Act reflects $55 million in General Fund reductions,
plus an additional $17.4 one-time reduction. The 2010 Budget Act also reflects
an increase in fee revenues ($103.6 million) and the transfer of special fund
balances ($130 million) to support operations. In addition, legislation
enacted in 2008 provides California's court system with increased fees and
fines to expand and repair its infrastructure to address significant caseload
increases and reduce delays. The fees raised by this legislation are intended
to support up to $5 billion in lease revenue bonds. Additional legislative
authorization is required prior to the issuance of such lease revenue bonds.
Proposition 98
. On
November 8, 1988, voters approved Proposition 98, a combined initiative
constitutional amendment and statute called the "Classroom Instructional
Improvement and Accountability Act." Proposition 98 changed State funding
of public education primarily by guaranteeing K-14 schools a minimum share of
General Fund revenues. Any amount not funded by local property taxes is funded
by the General Fund. Proposition 98 (as modified by Proposition 111, enacted
on June 5, 1990), guarantees K-14 schools a certain variable percentage of
General Fund revenues, based on certain factors including cost of living
adjustments, enrollment and per capita income and revenue growth.
Legislation
adopted prior to the end of Fiscal Year 1988-89, implementing Proposition 98,
determined the K-14 schools' funding guarantee to be 40.7% of the General Fund
tax revenues, based on Fiscal Year 1986-87 appropriations. However, that
percentage has been adjusted to approximately 40% to account for a subsequent
redirection of local property taxes that directly affected the share of General
Fund revenues to schools. Proposition 98 permits the Legislature by two-thirds
vote of both Houses, with the Governor's concurrence, to suspend the minimum
funding formula for a one-year period. Proposition 98 also contains provisions
transferring certain excess State tax revenues to K-14 schools, but no such transfers are expected for Fiscal Year 2009-10 or
2010-11.
The Amended 2009 Budget Act
reduced Fiscal Year 2008-09 Proposition 98 appropriations by $7.3 billion from
the $58.1 billion assumed in the 2008 Budget Act through a combination of
payment deferrals ($3.2 billion), fund re-designations ($1.7 billion), and
program reductions ($2.4 billion). In comparison to the Fiscal Year 2008-09
revised Proposition 98 spending level, the Initial 2009 Budget Act included an
additional $4.6 billion to backfill prior-year one-time solutions and $252
million to fund growth adjustments. The Fiscal Year 2009-10 Proposition 98
appropriation level reflected an additional $702 million in program
reductions. In July 2009, Proposition 98 funding levels for Fiscal Years
2008-09 and 2009-10 were further reduced. The Fiscal Year 2008-09 Proposition
98 funding level was established in statute at $49.1 billion. This reflects
another $1.6 billion reduction beyond the Initial 2009 Budget Act. Furthermore,
the Amended 2009 Budget Act reduced Fiscal Year 2009-10 appropriations by $5.6
billion through a combination of payment deferrals ($1.8 billion), program
reductions ($2.8 billion), and technical adjustments ($1.1 billion).
In order to balance the 2010
Budget Act, it was necessary to suspend the Proposition 98 guarantee by $4.1
billion in Fiscal Year 2010-11. The Proposition 98 guarantee is reduced from
the estimated minimum funding level of $53.8 billion down to a level of $49.4
billion, reflecting an additional veto reduction of $256 million. Per the
Proposition 98 constitutional formula, the $4.1 billion owed is added to the
outstanding maintenance factor balance and will be repaid over multiple years.
The total program spending for Fiscal Year 2009-10 is calculated at $49.5
billion. The 2010 Budget Act also includes $300 million in settle-up payments
that do not count towards the Fiscal Year 2010-11 Proposition 98 guarantee, but
reduces the settle-up owed at the end of Fiscal Year 2009-10 by a like amount.
In 2004, legislation suspended
the Proposition 98 guarantee, which, at the time the 2004 Budget Act was
enacted, was estimated to be $2.004 billion. That estimate, however, has been
increased by an additional $1.6 billion due to subsequent revenue growth in the
General Fund. This suspended amount is added to the existing maintenance
factor. This funding, along with approximately $1.1 billion in Fiscal Year
2005-06 was the subject of a lawsuit, which has recently been settled. The
terms agreed upon consist of retiring this approximately $2.7 billion
obligation beginning in Fiscal Year 2007-08
with a $300 million payment, followed by annual payments of $450 million
beginning in Fiscal Year 2008-09 until it is
paid in full. Due to the State's severe revenue decline, the Amended 2009
Budget Act suspended this payment for Fiscal Year 2009-10. The 2010 Budget Act
restarts the annual settlement payments by providing $30 million for Fiscal
Year 2009-10 and $420 million for Fiscal Year 2010-11, a total of $450 million.
Appropriations for Fiscal Years
1995-96, 1996-97, 2002-03 and 2003-04 are estimated cumulatively to be $1.4
billion below the amounts required by Proposition 98 because of increases in
State tax revenues above previous estimates. Legislation enacted in August
2004 annually appropriates $150 million per year, beginning in Fiscal Year
2006-07, to repay prior year Proposition 98 obligations. The current estimate
of the remaining obligation is $1.5 billion. The 2005 Budget Act funded $16.8
million toward these settle-up obligations, which reduced the first Fiscal Year
2006-07 settle-up appropriation, from $150 million to $133.2 million. The 2006
Budget Act included this appropriation along with a $150 million prepayment of
the Fiscal Year 2007-08 allocation. Legislation related to the 2008 Budget Act
suspends the Fiscal Year 2008-09 allocation. As a result, the outstanding
settle-up
balance as of the 2008 Budget Act is $1.1
billion. The February 2009 budget package used the $1.1 billion to pay for
school district revenue limit costs in Fiscal Year 2008-09. The Amended 2009
Budget Act has further clarified that Proposition 98 appropriations for Fiscal
Year 2006-07 are $212 million below the amounts required by the Proposition 98
minimum guarantee. This amount should be appropriated by the Legislature
beginning in Fiscal Year 2014-15. The final amount of settle-up owed for
Fiscal Years 2009- 10 and 2010-11 is unknown until the Proposition 98 guarantee
factors for that year are certified, usually a few years after the close of the
fiscal year.
Constraints on the Budget
Process
. Over the years, a number of laws and Constitutional amendments
have been enacted that restrict the use of General Fund or special fund revenues,
or otherwise limit the Legislature's and Governor's discretion in enacting
budgets. More recently, a new series of Constitutional amendments have
affected the budget process. These include Proposition 58, approved in 2004,
which requires the adoption of a balanced budget and restricts future borrowing
to cover budget deficits, Proposition 1A, approved in 2004, which limits the
Legislature's power over local revenue sources, and Proposition IA, approved in
2006, which limits the Legislature's ability to use sales taxes on motor
vehicle fuels for any purpose other than transportation. This, and other
recent Constitutional amendments, including two initiative measures approved in
November 2010 that affect the budget process, are described below.
Proposition 58 (Balanced
Budget Amendment).
Proposition 58, approved in 2004, requires the State to
enact a balanced budget, establish a special reserve in the General Fund and
restricts future borrowing to cover budget deficits. As a result, the State
may have to take more immediate actions to correct budgetary shortfalls.
Beginning with the budget for Fiscal Year 2004-05, Proposition 58 requires the
Legislature to pass a balanced budget and provides for mid-year adjustments in
the event that the budget falls out of balance. The balanced budget
determination is made by subtracting expenditures from all available resources,
including prior-year balances.
Proposition 58 requires that a
special reserve (the BSA) be established in the General Fund. The BSA will be
funded by annual transfers of specified amounts from the General Fund, unless
suspended or reduced by the Governor or until a specified maximum amount has
been deposited. Proposition 58 also prohibits certain future borrowing to
cover budget deficits. This restriction applies to general obligation bonds,
revenue bonds, and certain other forms of long-term borrowing. The restriction
does not apply to certain other types of RANs or RAWs currently used by the
State or inter-fund borrowings.
Local Government Finance
(Proposition 1A of 2004).
Approved in 2004, Proposition 1A amended the
State Constitution to reduce the Legislature's authority over local government
revenue sources by placing restrictions on the State's access to local
governments' property, sales, and VLF revenues as of November 3, 2004.
Beginning with Fiscal Year 2008-09, the State will be able to borrow up to 8%
of local property tax revenues, but only if the Governor proclaims such action
is necessary due to a severe State fiscal hardship and two-thirds of both
houses of the Legislature approves the borrowing. The amount borrowed is
required to be paid back within three years. The State also will not be able
to borrow from local property tax revenues for more than two fiscal years within
a period of 10 fiscal years. In addition, the State cannot reduce the local
sales tax rate or restrict the authority of local governments to impose or
change the distribution of the statewide local sales tax.
Proposition 1A further requires
the State to reimburse cities, counties, and special districts for mandated
costs incurred prior to Fiscal Year 2004-05 over a term of years. The 2010
Budget Act defers payment of these claims and refinances the balance owed over
the remaining payment period. The remaining estimated cost of claims for
mandated costs incurred prior to Fiscal Year 2004-05 is $950 million. The
Amended 2009 Budget Act authorized the State to exercise its Proposition 1A
borrowing authority. This borrowing generated $1.998 billion that will be
used to offset General Fund costs for a variety of court, health, corrections,
and K-12 programs.
Proposition
49 (After School Education Funding).
An initiative statute, called the
"After School Education and Safety Program of 2002," was approved by
the voters in 2002, and requires the State to expand funding for before and
after school programs in public elementary and middle schools. This increase
was first triggered in Fiscal Year 2006-07, which increased funding for these
programs to $550 million. These funds are part of the Proposition 98
minimum-funding guarantee for K-14 education and can only be reduced in certain
low revenue years.
Transportation Financing
(Proposition IA of 2006).
On November 7, 2006, voters approved Proposition
IA to protect Proposition 42 transportation funds from any further
suspensions. The new measure modified the constitutional provisions of
Proposition 42 in a manner similar to Proposition 1A of 2004, so that if such
suspension occurs, the amount owed by the General Fund must be repaid to the
Transportation Investment Fund within three years, and only two such
suspensions can be made within any ten-year period. The Budget Acts for Fiscal
Years 2006-07, 2007-08, 2008-09 and 2009-10 all fully funded the Proposition 42
transfer, and replaced it with increased fuel excise tax revenues that go
directly to local governments for road maintenance and to the State Highway
Account for highway maintenance and rehabilitation projects. The Amended 2009
Budget Act fully funded the Proposition 42 transfer in Fiscal Year 2009-10 at
$1.433 billion. However, the 2010 Budget Act still includes $83 million to
repay a portion of past suspensions.
Local Government Funds
(Proposition 22 of 2010)
. Proposition 22 supersedes some parts of
Proposition 1A, prohibits any future action by the Legislature to take,
reallocate or borrow money raised by local governments for local purposes, and
also prohibits changes in the allocation of property taxes among local
governments designed to aid State finances. Proposition 22 also supersedes
Proposition IA in that it prohibits the State from borrowing sales taxes or
excise taxes on motor vehicle fuels or changing the allocations of those taxes
among local governments except pursuant to specified procedures involving
public notices and hearings. Any law enacted after October 29, 2009
inconsistent with Proposition 22 is repealed. Passage of this measure
eliminates an estimated $850 million in General Fund relief in Fiscal Year
2010-11, an amount which would have grown to over $1 billion by Fiscal Year
2013-14. The inability of the State to borrow or redirect property tax or
redevelopment funds will reduce the State's flexibility in reaching budget
solutions in the future. The State has used these actions for several billion
dollars of solutions in some recent years.
Increases in Taxes or Fees
(Proposition 26 of 2010)
. This ballot measure revises provisions in the
State's Constitution dealing with tax increases. The measure specifies that a
two-thirds vote of both houses of the Legislature is required for any increase
in any tax on any taxpayer, eliminating the current practice where a tax
increase coupled with a tax reduction is treated as being able to be adopted by
majority vote. Furthermore, any increase in a fee beyond the amount needed to
provide the specific service or benefit is deemed a tax requiring two-thirds
vote. Finally, any tax or fee adopted after January 1, 2010 with a majority
vote which would have required a two-thirds vote if Proposition 26 were in
place would be repealed after one year from the election date unless readopted
by the necessary two-thirds vote. Passage of this measure is expected to have
the same impact on transportation related taxes as Proposition 22.
Sources of Tax Revenue
The severe economic downturn
resulted in General Fund revenues in Fiscal Year 2009-10 falling by
approximately 16% from their peak in Fiscal Year 2007-08. The State is
currently emerging from the recession, and although the level of unemployment
is still very high, economic growth is rebounding. As a result, estimated
General Fund revenues in Fiscal Year 2010-11 ($94.2 billion) are expected to
rebound by approximately 8.4% above the depressed Fiscal Year 2009-10 levels.
Future revenues will be affected by the expiration after Fiscal Year 2010-11 of
temporary tax increases enacted in Fiscal Year 2009-10, which represent about
$7 billion in receipts in the current year, as well as the expiration of
certain one-time revenues which were obtained in Fiscal Years 2009-10 and
2010-11.
The
Initial and Amended 2009 Budget Acts included several major changes in General
Fund revenues, include certain tax law changes intended to increase tax
compliance and accelerate some revenues. As part of the Initial 2009 Budget
Act, the following tax and fee increases were adopted: (i) the General Fund
sales and use tax rate was temporarily increased by 1 cent, from 5% to 6%.
This tax increase will be in effect through June 30, 2011 and is expected to
generate additional sales tax revenues of $4.299 billion in Fiscal Year 2009-10
and $4.223 billion in Fiscal Year 2010-11; (ii) VLF rates were temporarily
increased from 0.65% to 1.15% with 0.35% going to the General Fund. This
increase will remain in effect through June 30, 2011 and is expected to
generate additional revenues of approximately $1.386 billion in Fiscal Year
2009-10 and $1.472 billion in Fiscal Year 2010-11; (iii) a temporary addition
of 0.25% to each personal income tax rate for tax years 2009 and 2010, which is
expected to generate approximately $2.707 billion of additional General Fund
revenues in Fiscal Year 2009-10 and $1.073 billion in Fiscal Year 2010-11; and
(iv) a temporary reduction in the income tax exemption credit for dependents to
the amount provided for the personal credit for tax years 2009 and 2010 from
$309 to $99 (tax year 2008 values), which is expected to generate approximately
$1.429 billion of additional General Fund revenues in Fiscal Year 2009-10 and
$700 million in Fiscal Year 2010-11.
The Amended 2009 Budget Act
included the following tax law changes affecting the General Fund: (i)
requiring non-retailers holding a business license with least $100,000 in gross
receipts to register with the Board of Equalization and submit a return that
details purchases made during the year that were subject to the use tax yet for
which no use tax was paid. This law change was expected to increase General
Fund sales and use tax revenue by $26 million in Fiscal Year 2009-10 and $123
million in Fiscal Year 2010-11; (ii) beginning with the 2010 tax year,
individuals and corporations who pay estimated taxes will be required to pay
30% for the first quarter (April 15), 40% for the second quarter (June 15), 0%
for the third quarter (September 15) and 30% for the fourth quarter (December
15 for corporations and January 15 for individuals). This law change is
expected to accelerate $1.295 billion into Fiscal Year 2009-10 ($672 million in
personal income tax receipts and $623 million in corporate tax receipts) and
$98 million in Fiscal Year 2010-11 ($60 million in personal income tax receipts
and $38 million in corporate tax receipts); (iii) an increase in current wage
withholding rates by 10%, which is expected to accelerate $1.6 billion of
personal income tax receipts into Fiscal Year 2009-10; and (iv) conforming
State law to Federal law by requiring a withholding rate of 7% on earnings
reporting on certain IRS tax forms (W-2G and 1099) for State purposes whenever
it is required for federal purposes, which is expected to increase personal
income tax revenues by $32 million in Fiscal Year 2009-10 followed by an
additional $31 million in Fiscal Year 2010-11.
Enactment of Proposition 26 on
November 2, 2010 will make it more difficult in the future for the State to
raise taxes.
Personal Income Tax
.
The California personal income tax, which accounted for 51.6% of General Fund
tax revenues in Fiscal Year 2009-10, is closely modeled after Federal income
tax law. It is imposed on net taxable income (gross income less exclusions and
deductions), with rates ranging from 1% to 9.3% (1.25% to 9.55% for tax years
2009 and 2010) that are adjusted annually based on the change in the Consumer
Price Index. Personal, dependent and other credits are allowed against the
gross tax liability. In addition, taxpayers may be subject to an alternative
minimum tax ("AMT"). The personal income tax structure is highly
progressive. For instance, it is estimated that the top 1% of taxpayers paid
42.8% of the total personal income tax in the 2008 tax year. A proposal to add
a 1% surcharge on taxable income over $1 million in addition to the 9.3% rate,
became effective January 1, 2005 (9.55% for tax years 2009 and 2010). The
proceeds of the tax surcharge are required to be used to expand county mental
health programs.
Taxes on capital gains, which
are largely linked to stock market performance, add a significant dimension of
volatility to personal income tax receipts. Capital gains tax receipts
accounted for 14.8% of General Fund revenues and transfers in Fiscal Year
2000-01. The 2010 Budget Act projects that capital
gains
will account for 3.6% of General Fund revenues and transfers in Fiscal Year
2009-10 and 5.6% in Fiscal Year 2010-11.
Sales and Use Tax
. The
sales and use tax, which accounted for 30.6% of General Fund tax revenues in
Fiscal Year 2009-10, is imposed upon retailers and consumers for the privilege
of selling and using tangible personal property in California. Most retail
sales and leases are subject to the tax. However, exemptions have been
provided for certain essentials such as food for home consumption, prescription
drugs, gas delivered through mains and electricity. Other exemptions provide
relief for a variety of sales ranging from custom computer software to aircraft.
As of October 1, 2010, the
breakdown of the base State and local sales tax rate of 8.25% is as follows: 6%
is imposed as a General Fund tax; 0.5% is dedicated to local governments for
health and welfare program realignment; 0.5% is dedicated to local governments
for public safety services; 1.0% local tax imposed under the Uniform Local
Sales and Use Tax Law, with 0.25% dedicated to county transportation purposes
and 0.75% for the city and county general-purpose use; and 0.25% deposited into
the Fiscal Recovery Fund which will be available for annual appropriation by
the Legislature to repay the ERBs.
Existing law provides that
0.25% of the basic State tax rate may be suspended in any calendar year upon
State certification by November 1 in any year in which the both following
occur: (1) the General Fund reserve (excluding the revenues derived from the
0.25% sales and use tax rate) is expected to exceed 3% of revenues in that
fiscal year (excluding the revenues derived from the 0.25% sales and use tax
rate) and (2) actual revenues for the period May 1 through September 30 equal
or exceed the May Revision forecast. The 0.25% rate will be reinstated the
following year if the State subsequently determines conditions (1) or (2) above
are not met for that fiscal year. The DOF estimates that the reserve level
will be insufficient to trigger a reduction for calendar year 2010.
Corporation Tax
.
Corporation tax revenues, which accounted for 10.6% of General Fund tax
revenues in Fiscal Year 2009-10, are derived from the following taxes and/or
sources: (1) the franchise tax and the corporate income tax, which are levied
at an 8.84% rate on profits; (2) banks and other financial corporations that
are subject to the franchise tax plus an additional tax at the rate of 2% on
their net income; (3) the AMT, which is imposed at a rate of 6.65%, is similar
to the Federal AMT and is based on a higher level of net income computed by
adding back certain tax preferences; (4) a minimum franchise tax of up to $800,
which is imposed on corporations subject to the franchise tax but not on those
subject to the corporate income tax (new corporations are exempted from the
minimum franchise tax for the first two years of incorporation); (5)
Sub-Chapter S corporations, which are taxed at 1.5% of profits; and (6) fees
paid by limited liability companies, which account for 2.8% of revenues (the
constitutionality of these fees is currently being challenged in one pending
litigation).
As part of the 2009 Budget Act,
the Legislature adopted certain additional tax benefits for corporations,
affecting carryover of losses, sharing tax credits among affiliates, and
changes to the unitary tax calculations for multinational corporations, all of
which are to become effective in 2011 or later.
Insurance Tax
. The
majority of insurance written in California is subject to a 2.35% gross premium
tax. For insurers, this premium tax takes the place of all other State and
local taxes except those on real property and motor vehicles. Exceptions to
the 2.35% rate are certain pension and profit sharing plans that are taxed at
the lesser rate of 0.5%, surplus lines and non-admitted insurance at 3% and
ocean marine insurers at 5% of underwriting profits.
The State Board of Equalization
ruled in December 2006 that the premium tax insurers pay should be calculated
on a cash basis rather than the accrual method required by the Department of
Insurance. This ruling is expected to result in a total loss of $406 million
spread over several years; the
impact was $15 million
in Fiscal Year 2008-09, and is estimated to be $11 million in Fiscal Year
2009-10, $230 million in Fiscal Year 2010-11 and $149 million in Fiscal Year
2011-12.
Vehicle License Fee
.
The Amended 2009 Budget Act temporarily increased the VLF from 0.65% to 1.15%,
effective May 19, 2009, through June 30, 2011. Of this 0.5% increase, 0.35%
goes to the General Fund with the remaining 0.15% going to local law
enforcement.
Other Taxes
. Other
General Fund major taxes and licenses include: estate, inheritance and gift
taxes; cigarette taxes; alcoholic beverage taxes; horse racing license fees and
trailer coach license fees. The California estate tax is based on the State
death tax credit allowed against the Federal estate tax, and is designed to
pick up the maximum credit allowed against the Federal estate tax return. The
Federal Economic Growth and Tax Reconciliation Act of 2001 phases out the
Federal estate tax by 2010. It also reduced the State pick-up tax by 25% in
2002, 50% in 2003, and 75% in 2004 and eliminated it beginning in 2005. These
provisions sunset after 2010; at that time, the Federal estate tax will be
re-instated along with the State's estate tax. The 2010 Budget Act assumes
receipts of $800 million based on reinstatement of the Federal estate tax after
January 1, 2011. Federal estate tax law may be changed to modify or eliminate
the State's pick-up tax.
Special Fund Revenues
.
The State Constitution and statutes specify the uses of certain revenue. Such
receipts are accounted for in various special funds. In general, special fund
revenues comprise three categories of income: (i) receipts from tax levies,
which are allocated to specified functions such as motor vehicle taxes and fees
and certain taxes on tobacco products; (ii) charges for special services to
specific functions, including such items as business and professional license
fees; and (iii) rental royalties and other receipts designated for particular
purposes (e.g., oil and gas royalties). Motor vehicle related taxes and fees are
projected to account for approximately 39% of all special fund revenues in
Fiscal Year 2010-11. Principal sources of this income are motor vehicle fuel
taxes, registration and weight fees and VLFs. In Fiscal Year 2010-11, $10.9
billion is projected to come from the ownership or operation of motor
vehicles. About $2.9 billion of this revenue is projected to be returned to
local governments. The remainder will be available for various State programs
related to transportation and services to vehicle owners.
Taxes on Tobacco Products
.
Proposition 10, approved in 1998, increased the excise tax imposed on
distributors selling cigarettes in California to 87¢ per pack effective January
1, 1999. At the same time, this proposition imposed a new excise tax on cigars,
chewing tobacco, pipe tobacco and snuff at a rate equivalent to the tax
increase on cigarettes. In addition, the higher excise tax on cigarettes
automatically triggered an additional increase in the tax on other tobacco
products effective July 1, 1999. The State's excise tax proceeds are earmarked
for early childhood development, education, health, research and other
programs.
American Recovery and
Reinvestment Act
. The ARRA provides approximately $787 billion of economic
stimulus actions in the form of direct payments from the Federal government and
tax relief to individuals and businesses nationwide. The stimulus bill
provides about $330 billion in aid to states, about $170 billion for Federal
projects and non-state aid, and about $287 billion of tax relief. The State
estimates ARRA will have an $85.4 billion effect in California, including $55.2
billion in aid and an additional $30.2 billion in tax relief. As of June 30,
2010, the State has been awarded $907 million for labor and workforce development,
$7.6 billion for education, $3.8 billion investment for transportation
infrastructure, $2.9 billion for energy, $1.9 billion for science and
technology, $1.5 billion for water and environment, $1.2 billion for housing,
$676 million for public safety, $464 million investment for health and human
services and $1.2 billion for other projects. The 2010 Budget Act includes an
estimated $5.4 billion in Fiscal Year 2009-10 and a minimum of $4.2 billion in
Fiscal Year 2010-11 ARRA funds to offset General Fund expenditures. Of the
estimated $3.6 billion of additional Federal funds still subject to action and
approval by the Federal government which are included in the 2010 Budget Act,
up to another
$500 million may come from ARRA. Of the
$1.8 billion of additional Federal funds which have been approved, $1.3 billion
is from ARRA.
State Economy and Finances
Following a half decade of
strong economic and revenue growth in the late 1990s and into 2000, during
Fiscal Year 2001-02, as the State and national economies feel into a recession
and the stock markets dropped significantly, the State experienced an
unprecedented drop in revenues largely due to reduced personal income taxes
from stock options and capital gains activity. During Fiscal Years 2001-04, the
State encountered severe budgetary difficulties because of reduced revenues and
failure to make equivalent reductions in expenditures, resulting in successive
budget deficits. The State's economy rebounded strong during Fiscal Years
2004-2007, with the result that General Fund revenues were substantially higher
in each year than had been projected at the start of the year. This allowed
the budgets in those years to end with substantial positive balances. The
State continued to utilize a combination of expenditure cuts, cost avoidance,
internal and external borrowings and one-time measures such as securitization
of tobacco settlement revenues and sale of ERBs to produce balanced budgets.
Final estimates relating to
Fiscal Year 2006-07 indicated that the State experienced more favorable results
than were projected at the time the 2006 Budget Act was signed. As a result of
the revised estimates and improved economic results that generated increases in
tax revenues, the State estimated that the fund balance at June 20, 2006 was
about $3.5 billion, of which $3 billion was in the SFEU.
2007 Budget Act
. The
2007 Budget Act was adopted by the Legislature on August 21, 2007 and signed by
the Governor on August 24, 2007. The 2007 Budget Act included the largest
reserve of any budget act in the State's history ($4.1 billion) due to the
large number of risks in the Act. Under the 2007 Budget Act, General Fund
revenues and transfers were projected to increase 6%, from $95.5 billion in
Fiscal Year 2006-07 to $101.2 billion in Fiscal Year 2007-08. The 2007 Budget
Act contained General Fund appropriations of $102.3 billion, compared to $101.7
billion in Fiscal Year 2006-07. The June 30, 2008 total reserve was projected
to be $4.1 billion, similar to the estimated June 30, 2007 reserve.
During Fiscal Year 2007-08, the
State faced a number of issues that affected the General Fund and reduced the
budget reserves included in the 2007 Budget Act, including (i) deterioration of
revenues primarily as a result of weaker economic conditions; (ii) reduction in
reserves by $500 million as a result of an adverse court ruling involving
delayed payments to the State Teachers' Retirement Fund; and (iii) higher than
expected Proposition 98 spending. Approximately $3.5 billion of the budget
solutions included in the 2007 Budget Act were one-time actions, which could
not be repeated in Fiscal Year 2008-09.
It was projected that the State
would end Fiscal Year 2007-08 with a total reserve of $858.5 million, compared
with the original estimate of $4.1 billion in the 2007 Budget Act. Subsequent
projections estimated a total reserve at June 30, 2008 of $3.113 billion. The
continuation of a positive budget reserve was significantly affected by two
one-time revenue sources totaling $4.8 billion: sale of ERBs ($3.313 billion)
and transfer of the BSA reserve to the General Fund ($1.495 billion).
As part of the adoption of the
2008 Budget Act, General Fund revenues for Fiscal Year 2007-08 were projected
at $102 billion, an increase of $1.8 billion from 2007 Budget Act projections.
In addition, General Fund expenditures for Fiscal Year 2007-08 were projected
at $103.4 billion, an increase of $1.1 billion compared to the 2007 Budget Act
projection. Legislation was adopted at the fiscal emergency special session to
reduce expenditures in Fiscal Year 2007-08 and lower certain base expenditures
for Fiscal Year 2008-09, which resulted in $4.3 billion of budget solutions for
Fiscal Year 2007-08 and $2.7 billion of budget solutions in Fiscal Year 2008-09.
2008
Budget Act
. The 2008 Budget Act was adopted by the Legislature on
September 16, 2008 and signed by the Governor on September 23, 2008. The 2008
Budget Act, combined with actions taken during the fiscal emergency legislative
session, resolved the $17.3 billion budget deficit and was projected to provide
a modest reserve of $1.7 billion, but projected a deficit of $1 billion for
Fiscal Year 2009-10. Under the 2008 Budget Act, as originally enacted, General
Fund revenues and transfers were projected to decrease from $103 billion in
Fiscal Year 2007-08 to $102 billion in Fiscal Year 2008-09, and General Fund
appropriations were estimated at $103.4, up only $100 million from Fiscal Year
2007-08. The June 30, 2009 total reserve was projected to be $1.7 billion, a
decrease of $1.4 billion from the June 30, 2008 reserve.
The 2008 Budget Act had the
following major General Fund components:
1.
Deficit Matters
.
The 2008 Budget Act resolved the budget deficit via a number of solutions, 46%
of which were expenditure reductions totaling $8 billion. Additional solutions
included: $8.4 billion in revenue increases, $0.7 billion in borrowing, a
reduction in the reserve of $306 million, $855 million in transfers to the
General Fund from other special funds, savings of $340 million from the delay
of enacting the 2008 Budget Act, a Governor's Executive Order reducing the use
of certain part-time employees by the State, the use of $500 million of revenue
from sales tax on gasoline to offset certain General Fund costs associated with
transportation, and other one-time budgetary actions.
2.
Cash Flow
Management.
In order to reduce the need for external borrowing, the
Legislature approved a plan to smooth cash flow imbalances by shifting certain
payments for some programs. This plan was projected to reduce the need for
external borrowing by $3 to $4 billion in Fiscal Year 2008-09.
3.
Proposition 98.
The Proposition 98 Guarantee for Fiscal Year 2008-09 was projected to grow to
$58.1 billion. The 2008 Budget Act fully funded the Proposition 98 minimum
guarantee, appropriating $41.9 billion from the General Fund and the remainder
from local revenue.
4.
K-12 and Higher
Education.
Total expenditures for K-12 education programs in Fiscal Year
2008-09 were projected to be $71.9 billion ($42 billion from the General
Fund). The 2008 Budget Act reflected total funding for higher education of
$20.7 billion, including $14.2 billion General Fund and Proposition 98 sources
for all major segments of higher education.
5.
Health and Human
Services.
The 2008 Budget Act included funding of $31 billion from the
General Fund for Health and Human Services Programs, which was an increase of $
1.6 billion from the revised Fiscal Year 2007-08 estimate.
6.
Transportation
Funding.
The 2008-09 Budget Act included $1.42 billion to fully fund
Proposition 42 in Fiscal Year 2008-09.
Since the enactment of the 2008
Budget Act, economic conditions in the State worsened considerably from
projections. The 2009-10 Governor's Budget projected that the State would end
Fiscal Year 2008-09 with no reserve, compared to the original estimate of $1.7
billion. Subsequent projections estimated a total reserve deficit on June 30,
2009 of $3.4 billion, down $5.1 billion from the 2008 Budget Act estimate. Given
the dramatic decline in General Fund revenues and the emergence of a $41.6
billion combined current and budget year General Fund gap, the Governor called
three special sessions of the Legislature on November 6, December 1, and
December 19, 2008 to take actions on various budget items in order to reduce
expenditures in Fiscal Year 2008-09 and address the State's cash shortage.
2009 Budget Act
. The
State's budget for Fiscal Year 2009-10 was enacted in an unusual sequence.
Because of strong disagreement in the Legislature as to the amount of
corrective actions which would be taken by tax increases versus expenditure
reductions, a compromise was not reached until
February
2009. At that time, amendments to the 2008 Budget Act were enacted along with,
more than four months early, a full budget act for Fiscal Year 2009-10 (the
"Initial 2009 Budget Act"). The State enacted $36 billion in
solutions to what was then estimated to be a $42 billion General Fund budget
gap for Fiscal Years 2008-09 and 2009-10. It also provided for five
budget-related measures that would have provided an estimated $6 billion in
additional budget solutions, to be placed before the voters on May 19, 2009.
These measures were all rejected by the voters.
Under the Initial 2009 Budget Act,
based on then-current assumptions about the State's financial circumstances,
and assuming receipt of approximately $8 billion of Federal stimulus funds to
offset General Fund costs and voter approval of various ballot measures,
General Fund revenues and transfers were projected to increase 9.3%, from $89.4
billion in Fiscal Year 2008-09 to $97.7 billion in Fiscal Year 2009-10. The
Initial 2009 Budget Act contained General Fund appropriations of $92.2 billion,
compared to $94.1 billion in Fiscal Year 2008-09. The June 30, 2010 total
reserve was projected to be $2.1 billion, an increase of $5.5 billion compared
to the estimated June 30, 2009 reserve deficit of negative $3.4 billion.
As the recession deepened
throughout the spring of 2009, revenues continued to erode and the budget again
had fallen out of balance. On July 1, 2009 the Governor declared a fiscal
emergency and called a special session of the Legislature to solve the new
$24.3 billion deficit. The Legislature passed on July 24, 2009, and the
Governor signed on July 28, 2009 the Amended 2009 Budget Act. The prior year's
resources available balance in the Amended 2009 Budget Act reflected a net
increase of $72 million for Fiscal Year 2008-09 since the 2008 Budget Act.
Under the Amended 2009 Budget Act, General Fund revenues and transfers were
projected to increase 6.4%, from a revised $84.1 billion in Fiscal Year 2008-09
to $89.5 billion in Fiscal Year 2009-10. The Amended 2009 Budget Act contained
General Fund appropriations of $84.6 billion in Fiscal Year 2009-10, compared
to $91.5 billion in Fiscal Year 2008-09, a 7.5% decrease. The June 30, 2010
total reserve initially was projected to be $500 million as compared to the
revised June 30, 2009 reserve of negative $4.5 billion.
The Amended 2009 Budget Act
contained the following major General Fund components:
12.
Addressing the Deficit.
The $60 billion in budget solutions
adopted for Fiscal Years 2008-09 and 2009-10 ($36 billion in solutions were
adopted in February 2009 and $24 billion in July 2009) were wide-ranging and
touched all three of the State's major revenue sources (personal income taxes,
corporation taxes and sales and use taxes). Spending cuts were implemented in
virtually every State program that received General Fund support. The budget
solutions included spending reductions of $31 billion and also included an
estimated receipt of $8 billion of Federal stimulus funds. Additional
solutions included $12.5 billion of tax increases and $8.4 billion of other
solutions.
13.
Federal Stimulus.
The Amended 2009 Budget Act assumed the
receipt of at least $8 billion from the ARRA to offset General Fund
expenditures in Fiscal Years 2008-09 and 2009-10.
14.
Proposition 98.
The Proposition 98 Guarantee for Fiscal Year
2009-10 was projected to be $50.4 billion, of which $35 billion was the General
Fund portion. Currently, the Proposition 98 guarantee for Fiscal Year 2009-10
is projected to be $49.9 billion, of which $34.7 billion is the General Fund
portion.
15.
K-12 and Higher Education.
The Amended 2009 Budget Act included
$50.4 billion for K-12 education programs for Fiscal Year 2009-10 of which $35
billion was funded from the General Fund. The Amended 2009 Budget Act reflects
a total funding of $20.9 billion, including $12.6 billion General Fund and
Proposition 98 sources for all major segments of Higher Education.
16.
Health and Human Services.
The Amended 2009 Budget Act includes
$24.8 billion in non-Proposition 98 General Fund expenditures for Health and
Human Service Programs for Fiscal Year
2009-10. Due
to the State's severe fiscal shortfall, the Amended 2009 Budget Act included
$5.8 billion in proposed General Fund expenditure reductions in Health and
Human Services programs in Fiscal Year 2009-10.
17.
Transportation Funding.
The Amended 2009 Budget Act included
$1.441 billion of General Fund expenditures to fully fund local transportation
programs in Fiscal Year 2009-10. Additionally, the Amended 2009 Budget Act
directed $1.015 billion of funds from sales tax on fuels to offset costs of programs
otherwise likely to be funded from the General Fund such as debt service on
transit bonds and other transportation programs. Of this amount, approximately
$878 million was for uses substantially similar to those that were the subject
of litigation related to the 2008 Budget Act (
Shaw v. Chiang
), which
resulted in the judicial invalidation of the use of those funds as
appropriated. Fuel excise tax revenues will be used to offset highway bond
debt service thus providing increasing General Fund relief beginning in Fiscal
Year 2009-10 and growing in future years. Remaining Public Transportation
Account funds and new diesel sales tax revenues were used to offset transit
bond debt service allowable under the court ruling in Fiscal Years 2009-10 and
2010-11. After these two fiscal years, the statute provides for no further use
of Public Transportation Account for debt service offset.
Additionally, $650 million of
excise tax proceeds available from this legislation in Fiscal Year 2010-11 was
proposed to be loaned to the General Fund and repaid in three years. The 2010
Budget Act assumes fuel excise tax revenues will be used to offset highway bond
debt service, providing $491 million of General Fund relief in Fiscal Year
2010-11. Additionally, $225 million of Public Transportation Account funds and
diesel sales tax revenues will be used to offset transit bond debt service
allowable under the court ruling. All of these actions are apparently
prohibited by enactment of Proposition 22, although fund transfers which took
place prior to November 3, 2010 are not affected. Of the amounts of General
Fund solutions above, at least $850 million are not expected to be realized in
Fiscal Year 2010-11.
Events after adoption of the
Amended 2009 Budget Act resulted in the State ending Fiscal year 2009-10 with
$86.9 billion in General Fund revenues and transfers (compared to $89.5 billion
projected in the Amended 2009 Budget Act) and expenditures of $86.3 billion
(compared to $84.6 billion projected). As a result, the State exhausted the
projected General Fund reserve and ended Fiscal Year 2009-10 with a negative
General Fund balance of $6.3 billion.
2010 Budget Act
. The
2010 Budget Act was the latest budget enactment in State history. The 2010
Budget Act projects revenues and transfers to the General Fund of $94.2
billion, with expenditures of $86.6 billion, leaving a balance on June 30, 2011
(after taking into account the negative beginning fund balance from June 30,
2010 of $6.3 billion) of $1.3 billion. An estimated $19.3 billion budget gap
was resolved with a combination of expenditure reductions (44%), Federal funds
(28%) and various other one-time receipts, loans and other solutions (28%).
The 2010 Budget Act also included Special Fund expenditures of $30.9 billion
and Bond Fund expenditures of $7.9 billion. Whether the State will be able to
receive all the projected receipts or achieve all the planned expenditure
reductions will depend on future actions at the State and Federal level, and
there is no assurance that all of the assumptions will be met. Furthermore,
Proposition 22 will prohibit the operation of certain parts of the 2010 Budget
Act, with a negative effect of an estimated $850 million on the current fiscal
year and increased effects on future years. The State projects that there will
be multi-billion dollar budget gaps in future years, as temporary fiscal
measures adopted in recent years have to be repaid or temporary tax increases
expire at the end of the Fiscal Year 2010-11.
Prior to enactment of the 2010
Budget Act, the Administration had reported a budget gap of $19.3 billion,
including a $1.3 billion reserve based on projected General Fund revenues and
transfers in Fiscal Year 2010-11 compared against projected expenditures
(assuming the workload budget from Fiscal Year 2009-10, adjusted for increases
in costs and certain other developments but no changes in law). The 2010
Budget Act planned to close the estimated budget gap by a combination of
expenditure reductions, federal
funds, and other solutions.
The majority of these solutions are one-time or temporary in nature, which will
cause budget gaps to recur in Fiscal Year 2011-12 and beyond. The 2010 Budget
Act solutions consist of the following major components : (i) $8.4 billion in
expenditure reductions (43.6% of total solutions); (ii) $5.4 billion in
additional federal funds above ongoing Federal support of state programs and
commitments of funds from ARRA (28% of total solutions); and (iii) $5.5 billion
in other one-time solutions (28.4% of total solutions).
The 2010 Budget Act has the
following significant General Fund components:
1.
Health and Human Services
. General Fund expenditures are
proposed to decrease by $853 million. Some of the largest reductions include
decreases of (i) $187.1 to the Department of Health Care Services by enrolling
seniors and people with disabilities in managed care plans and deferring some
payments, (ii) $365.7 million to the Department of Social Services from
advances in TANF grants, (iii) $300 million to the Department of Social
Services in funding for in-home services due to assumed additional Federal
funds and (iv) a 3.6% across-the-board program reduction in assessed hours, and
a reduced estimate of caseload volume
2.
Corrections and Rehabilitation
. A decrease of $820 million to the
budget for the Medical Services Program implemented by the court-appointed
Receiver for the State's prison system to reduce per-inmate medical costs to a
level comparable to other states' correctional health-care programs, and a
decrease of $200 million from projected reduction of inmate population.
3.
Proposition 98
. A decrease of $4.1 billion due to suspension of
the Proposition 98 guarantee for education funding. Even with the suspension,
the guaranteed funding level for K-14 education remains the same as in the
prior year, and is higher with Federal funding increases.
4.
General Government
. A reduction of $1.6 billion in State
employee compensation through collective bargaining agreements and other
administrative actions. A reduction of $449.6 million through a 5% workforce
reduction and $130 million in associated operating expense and equipment
savings. A one-time reduction of $365 million by suspending most State mandates
not related to elections, law enforcement, and property taxes.
The 2010 Budget Act assumes the
State will benefit from $5.4 billion in additional Federal funds or flexibility
to reduce expenses by waiver of Federal requirements. This $5.4 billion of
Federal aid is above amounts in ongoing Federal programs or stimulus moneys
previously approved. As of November 1, 2010 about $1.83 billion of these funds
have been approved, consisting of a decrease in State expenditures of $1.33
billion resulting from extension by prior act of Congress of the enhanced
Medicaid funding and a decrease in State expenditures of approximately $500
million from Federal approval of a Medi-Cal Financing Waiver. The State is
continuing to seek the remaining funding, which includes a decrease of $395.4
million resulting from continuation by prior act of Congress of TANF funding
and a prospective decrease of $3.1 billion in State expenditures in
anticipation of increased Federal funding for a number of areas, including
incarceration of undocumented immigrant felons, special education and Medicare and
Medicaid programs. Congress has not taken action on these items, which are
still the subject of discussions between the State and the Federal government.
The 2010 Budget Act and related
legislation addressing the State's financial situation, and the State's cash
management plan, were based on a variety of assumptions that could be adversely
impacted if they do not materialize. Some events have occurred since enactment
of the 2010 Budget Act which already erode those assumptions. There can be no
assurances that the financial condition of the State will not be further
materially and adversely affected by actual conditions or circumstances.
Litigation
The State is a party to
numerous legal proceedings. The following are the most significant pending proceedings,
as reported by the Office of the Attorney General.
Budget Related Litigation
.
In
Epstein, et al. v. Schlvarzenegger, et al.
, two taxpayers have filed
a lawsuit seeking to enjoin the sale of State office properties, which was
scheduled to close in December 2010, on the grounds that the sale of certain of
the buildings that house appellate court facilities requires the approval of
the Judicial Council, which had not been obtained, and that the entire sale of
all properties constitutes a gift of public funds in violation of the State
Constitution and a waste of public funds in violation of State law. Plaintiffs'
request for a temporary restraining order was denied, and a hearing regarding
plaintiffs' request for a preliminary injunction was scheduled prior to the
scheduled closing date for the sale.
In
Robles-Wong, et al. v.
State of California
plaintiffs challenge the constitutionality of the
State's "education finance system." Plaintiffs, consisting of 62
minor school children, various school districts, the California Association of
School Administrators and the California School Boards Association, allege the
State has not adequately fulfilled its constitutional obligation to support its
public schools, and seek an order enjoining the State from continuing to
operate and rely on the current financing system and to develop a new education
system that meets constitutional standards as declared by the court. It is
currently unknown what the fiscal impact of this matter might be upon the
General Fund. In a related matter,
Campaign for Quality Education et al. v.
State of California
, plaintiffs also challenge the constitutionality of the
State's education finance system. An initial hearing on these matters was set
for December 10, 2010.
Two cases challenge the $489
million in line-item vetoes the Governor made to the Amended 2009 Budget Act:
Steinberg
v. Schwarzenegger, et al.
and
St. John's Well Child and Family Center,
et al. v. Schwarzenegger, et al
. Both actions maintain that because the
Legislature only reduced existing appropriations in the budget revision bill
without making any new appropriations, the Governor was not entitled to use his
line-item veto power. The appellate court allowed the
Steinberg
petitioners to intervene in the
St. John's
action. The appellate court
then denied the writ and upheld the vetoes in the
St. John's
action.
Petitioners requested review of the ruling by the California Supreme Court,
which was granted in June 2010. The State Supreme Court issued a decision
affirming the appellate court ruling that the vetoes were lawful.
Steinberg
was stayed pending resolution of the
St. John's
matter, with the stay to
remain in effect until 30 days after the
St. John's
matter is final.
Action Challenging
Reductions to Child Care Services
. In
Parent Voices Oakland, et al. v.
Jack O'Connell, et al.
an advocacy group and parents challenge the
implementation of the Governor's veto of $256 million from a program that
provides subsidized child care services to low-income families who participated
in the CalWORKS program, alleging the termination of services fails to comply
with due process and applicable administrative procedures. Plaintiffs request
that the court order the State to continue providing services pending
compliance with appropriate procedures. On November 5, 2010, the trial court
ordered a temporary stay of the terminations and required the State to provide
new notices to recipients who are subject to termination that they may be
screened for eligibility for other child care services. A further hearing was
scheduled for November 23, 2010.
In
Poizner v. Genest, et al.
,
the State Insurance Commissioner challenges the proposed sale of a portion of a
public enterprise providing workers' compensation insurance to California employers,
asserting that the proposed sale would violate the California Constitution.
In
Lord, et al. v.
Schwarzenegger, et al.
, petitioners are a correctional officer and the
employee organization designated as the exclusive bargaining representative of
the officer and other correctional law employees. Petitioners allege that the
State budget bill enacted in July 2009 violates the California
Constitution provision that requires that a statute
embrace one subject expressed in its title. The bill includes budget-related
items intended to reduce various State expenses and increase various State
revenues, including deferral of payment of State employee compensation and
elimination of a rural health care subsidy paid to the petitioner and other
State employees. Petitioners seek a declaration that the bill is
unconstitutional. If petitioners are successful, this case could nullify the
entire bill. The trial court ruled the bill violated the Constitution, and it
struck from the bill the provision eliminating the rural health care subsidy
program, leaving the remainder of the bill intact.
Petitioners in
California
Redevelopment Association, et al. v. Genest, et al.
, challenge the
constitutionality of legislation that required that local redevelopment
agencies remit a total of $1.7 billion in Fiscal Year 2009-10 and $350 million
in Fiscal Year 2010-11 to county education funds. Petitioners are asking the
trial court to enjoin implementation of the legislation. A second case,
County
of Los Angeles, et al. v. Genest, et al.
, challenging the constitutionality
of this legislation and seeking to enjoin its implementation has been filed by
seven counties.
The trial
court denied the petitions in both matters, and petitioners in the
California Redevelopment
Association
matter
appealed. The appellate court denied petitioners' request for a stay pending
resolution of the appeal.
In several cases, petitioners
challenge the Governor's executive orders directing the furlough without pay of
State employees. The first order, issued on December 19, 2008, directed
furloughs for two days per month, effective February 1, 2009 through June 30,
2010. The second, issued on July 1, 2009, required a third furlough day per
month, effective through June 30, 2010. On July 28, 2010, the Governor issued
a new executive order requiring furloughs for three days per month beginning
August 1, 2010, until the budget for Fiscal Year 2010-11 was adopted and the
State determined that it had sufficient cash flow to pay for essential
services.
On October 4, 2010, the
California Supreme Court, ruling in three consolidated cases, upheld the
validity of the two day per month furloughs implemented by the Governor's
December 2008 order on the ground that the Legislature had ratified these
furloughs in enacting the revisions to the 2008 Budget Act. (
Professional
Engineers in California Government ("PECG"), et al. v.
Schwarzenegger, et al
.) The ruling affirmed a judgment rendered by the
trial court in these three cases, which had challenged the furloughs. (
PECG
v. Schwarzenegger
;
California Attorneys, Administrative Law Judges and
Hearing Officers in State Employment v. Schwarzenegger, et al.
; and
Service
Employees International Union, Local 1000 v. Schwarzenegger, et al.
)
Various other actions are
pending with respect to other challenges to these executive orders, including
challenges to the application of the furlough to certain classes and types of
employees, the accrual of furlough time, procedural violations concerning the
promulgation of the order and unlawful interference with constitutionally
mandated obligations to certain plan participants.
In a separate action,
Schwarzenegger;
et al. v. Chiang, et al.
, the Governor is seeking an order to compel the
State Controller to implement the reduction in wages as a result of the reduced
work time (furlough) with respect to employees of other Statewide elected
executive branch officers, including the Lieutenant Governor, State Controller,
Secretary of State, State Treasurer, Superintendent of Public Instruction,
Insurance Commissioner, and Attorney General. The trial court ruled in favor
of the Governor, and various parties have appealed. The Lieutenant Governor
has been voluntarily dismissed from the appeal.
In
TOMRA Pacific, Inc. et
al. v. Chiang, et al.
, plaintiffs challenge three transfers totaling $415.7
million from a special State recycling fund to the General Fund, asserting that
the transfers have interfered with the operation of the recycling program for
which the special fund was created, in violation of State law. In
California
Chamber of Commerce et al. v. Chiang et al.
, which has been consolidated
with the
TOMRA
case, plaintiffs challenge these same transfers on the
grounds that their inclusion violates the provision of the State Constitution that
requires that a statute embrace one subject.
On
June
15, 2010, the trial court issued a ruling
denying the plaintiffs' requests for a writ of mandate in both cases, and plaintiffs
appealed.
Tax Refund Cases
. Six
actions have been filed contending that the Legislature's modification of part
of the State's tax code that implemented the double-weighting of the sales
factor in California's apportionment of income formula for the taxation of
multistate business entities, is invalid and/or unconstitutional.
Kimberly-Clark
Worldwide, Inc., et. al. v. Franchise Tax Board
;
Gillette Company and
Subsidiaries v. Franchise Tax Board
;
Proctor & Gamble Manufacturing
Company & Affiliates v. Franchise Tax Board
;
Sigma-Aldrich, Inc. and
Affiliates v. Franchise Tax Board
;
RB Holdings (USA), Inc. v. Franchise
Tax Board
and
Jones
Apparel Group v. Franchise Tax Board
,
now consolidated in
one matter, collectively referred to as
Gillette Company v. Franchise Tax Board
.
An adverse ruling in
these cases would affect multiple taxpayers and create potential exposure to
refund claims in excess of $750 million. The trial court has ruled in favor of
the State in each matter.
A
pending case challenges the imposition of limited liability company fees by the
Franchise Tax Board ("FTB").
Bakersfield Mall LLC v. Franchise
Tax Board
, was filed as a class action on behalf of all limited liability
companies operating in California and is pending in the trial court. A second
lawsuit that is virtually identical to Bakersfield Mall has been filed, and
also seeks to proceed as a class action.
CA-Centerside II, LLC v. Franchise
Tax Board
. If either case proceeds as a class action, the claimed refunds
would be significant.
Plaintiff in
River Garden
Retirement Home v. California v. Franchise Tax Board
alleges that the
penalty under the State's tax amnesty program is unconstitutional. The statute
imposed a new penalty equal to 50% of accrued interest from February 1, 2005,
to March 31, 2005 on unpaid tax liabilities for taxable years for which amnesty
could have been requested. The trial court granted summary judgment for the
FTB, and the ruling was affirmed on appeal. The State Supreme Court denied
review of the appeal. The potential fiscal impact of the case could be in
excess of $300 million.
Nortel Networks Inc. v.
State Board of Equalization
and
Lucent Technologies, Inc. v. State Board
of Equalization ("Lucent I")
, tax refund cases, involve the
interpretation of certain statutory sales and use tax exemptions for
"custom-written" computer software and licenses to use computer
software. A third case,
Lucent Technologies, Inc. v. State Board of
Equalization ("Lucent II"),
has been filed involving the same
issue but for different tax years than in the
Lucent I
matter
.
In
Nortel
, the trial court ruled in favor of plaintiff and the State Board
of Equalization appealed. The appeal was heard on October 21, 2010. The trial
court ruling, if applied to other similarly situated taxpayers, could have a
significant negative impact, in the range of approximately $500 million
annually, on tax revenues.
In
River Garden Retirement
Home v. California Franchise Tax Board,
the plaintiff is challenging the
denial of a deduction for dividends under the State's Revenue and Taxation
Code. After the Tax Code was held to be unconstitutional, the FTB allowed a
deduction for all dividends for years in which the normal 4-year statute of
limitations prevented additional assessments and denied a deduction for all
dividends for all taxpayers for all years in which the 4-year statue was still
open. The trial court sustained the demur of the FTB on this issue and
plaintiff unsuccessfully appealed. Plaintiff also challenges the tax amnesty
penalty. An adverse ruling in these matters, applied in the context of other statutes,
could have a significant revenue impact.
In
Computer Services Tax
Cases (Dell, Inc. v. State Board of Equalization)
, the appellate court
ruled that the State Board of Equalization improperly collected sales and use
tax on optional service contracts that Dell sold with computers. The State
will now be required to refund the tax with interest. The amount of the refund
has not yet been determined, but, with interest, may exceed $250 million.
Petitioners
in
California Taxpayers Association v. Franchise Tax Board
challenge a
section of Revenue and Taxation Code which imposes a penalty for large
understatement of corporate tax, alleging it violates the State and Federal
constitutions, and was not properly enacted. The trial court ruled in favor of
the FTB. Petitioner has appealed. An adverse ruling enjoining collection of
the tax could have a significant impact on tax revenue.
Environmental Matters
.
In the matter of
Leviathan Mine, Alpine County, California, Regional Water
Quality Control Board, Lahontan Region, State of California,
the State, as
owner of the Leviathan Mine, is a party through the Lahontan Regional Water
Quality Control Board (the "Board"), which is the State entity
potentially responsible for performing certain environmental remediation at the
Leviathan Mine site. Also a party is ARCO, the successor in interest to the
mining company that caused certain pollution of the mine site. The Leviathan
Mine site is listed on the Environmental Protection Agency (the
"EPA") Superfund List, and both remediation costs and costs for
natural resource damages may be imposed on the State. The Board has undertaken
certain remedial action at the mine site, but the EPA's decision on the interim
and final remedies are pending. ARCO filed a complaint on November 9, 2007,
against the State, the State Water Resources Control Board, and the Board (
Atlantic
Richfield Co. v. State of California
). ARCO seeks to recover past and
future costs, based on the settlement agreement, the State's ownership of the property,
and the State's allegedly negligent past clean up efforts. It is possible
these matters could result in a potential loss to the State in the hundreds of
millions of dollars.
In
Pacific Lumber v. State
of California
, plaintiffs are seeking injunctive relief and damages against
defendants State Water Resources Council, North Coast Water Quality Control
Board, and the State of California for the alleged breach of the Headwaters
Agreement, which involved the sale of certain timberlands by plaintiffs to
Federal and State agencies. The plaintiffs allege that the State's
environmental regulation of their remaining timberlands constitute a breach of
the prior agreement. The State denies plaintiffs' claims. The current
plaintiffs are successors in interest to the original plaintiffs who are
debtors in a bankruptcy proceeding, and have alleged in that proceeding that
the value of the litigation ranges from $626 million to $639 million in the
event liability is established. The possible fiscal impact on the General Fund
is unknown at this time.
In
City of Colton v.
American Professional Events, Inc. et al
, two defendants involved in a
liability action for contaminated ground water have filed cross complaints
seeking indemnification from the State and the Regional Water Quality Control
Board in an amount of up to $300 million.
Escheated
Property Claims
. In two cases, plaintiffs claim that the State has an
obligation to pay interest on private property that has escheated to the State,
and that failure to do so constitutes an unconstitutional taking of private
property:
Suever v. Connell
and
Taylor v. Chiang
. Both
Suever
and
Taylor
are styled as class actions but to date no class has been
certified. The
Suever
and
Taylor
plaintiffs argue that the
State's failure to pay interest on claims paid violated their constitutional
rights. In
Suever
, the district court concluded that the State is
obligated to pay interest to persons who reclaim property that has escheated to
the State, but its ruling did not specify the rate at which interest must be
paid. The district court certified this issue for appeal. Plaintiffs in
Suever
and
Taylor
also assert that for the escheated property that has been
disposed of by the State, plaintiffs are entitled to recover, in addition to
the proceeds of such sale, any difference between the sale price and the
property's highest market value during the time the State held it; the State
asserts that such claims for damages are barred by the Eleventh Amendment. The
district court granted the State's motion for summary judgment on this claim in
Suever
, and plaintiffs appealed. The Ninth Circuit ruled against
plaintiffs on the two consolidated
Suever
appeals, holding that the
State is not required to pay interest and that the Eleventh Amendment bars
plaintiffs from suing in Federal court for anything other than the return of
their property or the proceeds of its sale. The Ninth Circuit denied
plaintiffs' request for rehearing and plaintiffs declined to seek review in the
U.S. Supreme Court.
The
district court granted the State's motion for summary judgment on all remaining
claims in
Suever
, and plaintiffs have appealed.
Action
Seeking Damages for Alleged Violations of Privacy Rights
. In
Gail Marie
Harrington-Wisely, et al. v. State of California, et al.
, plaintiffs seek
damages for alleged violations of prison visitors' rights resulting from the
Department of Corrections' use of a body imaging machine to search visitors
entering State prisons for contraband. This matter has been certified as a
class action. The trial court granted judgment in favor of the State.
Plaintiffs' appeal has been dismissed and the trial court denied plaintiff's
motion for attorneys' fees. The parties agreed to a stipulated judgment and
dismissed the case subject to further review if the Department of Corrections
decides to use similar technology in the future. Plaintiffs may not seek
further review of the trial court's rulings until 2013. If plaintiffs were
successful in obtaining an award of damages for every use of the body-imaging
machine, damages could be as high as $3 billion.
The plaintiff in
Gilbert P.
Hyatt v. Franchise Tax Board
was subject to an audit by the FTB involving a
claimed change of residence from California to Nevada. Plaintiff alleges a
number of separate torts involving privacy rights and interference with his
business relationships arising from the audit. The trial court ruled that
plaintiff had not established a causal relation between the audit and the loss
of his licensing business with Japanese companies; the Nevada Supreme Court
denied review of this ruling. The economic damages claim exceeds $500
million. On the remaining claims, the jury awarded damages of approximately
$387 million, including punitive damages, and over $1 million in attorneys'
fees. The total judgment with interest is approximately $490 million. The
State appealed and the Nevada Supreme Court has granted a stay of execution on
the judgment pending appeal. The State will vigorously pursue its appeal of this
unprecedented award.
Actions to Increase Amount
of State Aid for Dependent Children
. In
Katie A., et al. v. Bonta, et
al.
, a class action against Department of Health Services
("DHS"), Department of Social Services and the City of Los Angeles,
plaintiffs seek to expand Medicaid-covered services for mentally disordered
children in foster care. The district court issued a preliminary injunction
ordering the State defendants to provide additional services to class members.
Further, the court ordered the State defendants and plaintiffs to meet and
confer both to develop a plan to implement the preliminary injunction and to
come to consensus on whether the court should appoint a special master. On
appeal, the Ninth Circuit reversed the decision of the district court and
remanded the matter for further proceedings. Plaintiffs filed another motion
for preliminary injunction in the district court. The district court vacated
the motion without prejudice and appointed a special master to assist the
parties in resolving differences. At this time, it is unknown what financial
impact this unprecedented litigation would have on the General Fund.
Local Government Mandate
Claims and Actions
. In litigation filed in November 2007,
California
School Boards Association et al. v. State of California et al.
, plaintiffs,
including the San Diego County Office of Education and four school districts,
allege the State has failed to appropriate approximately $900 million for new
State-required programs or services in violation of the State Constitution.
Plaintiffs sought declaratory and injunctive relief, including an order
compelling reimbursement. The trial court ruled that the Legislature had
improperly failed to fund State education mandates, but refused to grant writ
relief for the $900 million sought by the plaintiffs. The State has appealed
the ruling regarding the failure to fund mandates and plaintiffs filed a
cross-appeal regarding the denial of an order to pay $900 million allegedly
owed. The trial court judgment has been stayed pending resolution of the
appeal. At this time it is unknown what fiscal impact this matter would have
upon the General Fund.
In
Department of Finance v.
Commission on State Mandates, et al
, the DOF is seeking to overturn a
determination of the Commission on State Mandates that a State law requiring
the development of a behavioral intervention plan for certain children
receiving special education services exceeds the Federal requirements for
individualized education plans and, therefore, is an unfunded State mandate.
The parties reached a settlement agreement, subject to legislative approval,
under which the State would pay school districts $510 million in retroactive
reimbursements over six years starting in Fiscal Year 2011-12, and will permanently
increase the special education funding formula by $65 million
annually, beginning in Fiscal Year 2009-10. The
settlement was dependent upon funding by the Legislature, which failed to
provide funding for the settlement agreement. The trial court granted the
request for dismissal filed by the Department of Finance. The school districts
and county offices of education have indicated they will seek reimbursement on
their claims through the normal procedure.
In
Department of Finance v.
Commission on State Mandates
,the State is appealing a determination by the Commission on State Mandates
relating to whether the requirement for completion of a second science course
for graduation from high school constitutes a reimbursable State-mandated
program. Following court action on consolidated cases involving challenges to
the State Controller's Office reduction of claims (
San Diego
Unified School District, et al. v. Commission
on State Mandates, et al.
and
Woodland
Joint Unified School District v. Commission on State
Mandates, et al.)
, the Commission adopted revised
parameters and guidelines which included a reasonable reimbursement methodology
for claiming increased teacher costs. Historically, education-related State
mandate claims are funded from moneys provided to meet the Proposition 98
Guarantee. The Commission's adoption of the revised parameters and guidelines
could result in a reimbursement requirement that exceeds the funding available
through the Proposition 98 Guarantee in any one fiscal year.
Actions Relating to Certain
Tribal Gaming Compacts
. In June 2004, the State entered into amendments to
tribal gaming compacts between the State and five Indian Tribes (the
"Amended Compacts"). Those Amended Compacts are being challenged in
three pending cases. A decision unfavorable to the State in the cases
described below could eliminate future receipts of gaming revenues anticipated
to result from the Amended Compacts, and could delay or impair the State's
ability to sell a portion of the revenue stream anticipated to be generated by
these Amended Compacts.
In
Rincon Band of Luiseno Mission Indians of the Rincon Reservation v.
Schwarzenegger, et al.
the plaintiff (the "Rincon Band"), sought
an injunction against implementation of the Amended Compacts on grounds that
their execution and ratification by the State constituted an unconstitutional
impairment of the State's compact with the Rincon Band. The Rincon Band
asserts that its compact contains an implied promise that the State would not
execute compacts or compact amendments with other tribes that would have an
adverse impact on the Rincon Band's market share by allowing a major expansion
in the number of permissible gaming devices in California. The complaint also
asserts that the State breached Rincon's compact, principally by incorrectly
calculating the total number of gaming device licenses, and a claim for damages
sought for a separate alleged breach of compact but did not dismiss Rincon's
other breach of compact claims, including a claim that the State failed to
negotiate a compact amendment with the Rincon Band in good faith. The district
court entered a separate judgment with respect to the dismissed claims, and
plaintiff appealed. On appeal, the Rincon Band did not challenge the validity of
the Amended Compacts. The appellate court reversed the dismissal of the claim
involving the total number of gaming device licenses and affirmed the dismissal
of the Rincon's claim for damages. The U.S. Supreme Court denied the State's
petition, seeking review of the Ninth Circuit's decision to allow the challenge
to the number of authorized gaming device licenses to proceed in the absence of
other tribal parties. The court granted summary judgment for Rincon on its
claim that the State failed to negotiate a compact amendment in good faith.
The State filed a petition for certiorari to the U.S. Supreme Court.
The district court also granted
Rincon's motion for summary judgment on its remaining claim regarding the
authorized number of gaming device licenses, and the State has appealed.
San Pasqual Bank of Mission
Indians v. State of California, et al.
plaintiff seeks a declaration that
more aggregate slot machines licenses are available for issuance to all tribes
that signed compacts with the State than the number of such licenses determined
by the State in 2002. Should relief be granted and more licenses available,
the Five Tribes' obligations to continue to fund State transportation bonds
under the Amended Compacts would be rendered uncertain because the Amended
Compacts contemplated the license pool created by the 1999 Compact would remain
fixed at the number determined by the State. An expanded license pool would
thus present questions about the Five Tribes' monetary obligations that would
presumably be required to be addressed by amendment of the Amended Compacts.
The district
court dismissed the complaint, and
plaintiff appealed. The Ninth Circuit reversed the order and remanded the
matter back to district court. The district court granted plaintiff's motion
for summary judgment regarding the number of licenses, and the State appealed.
In
Twenty-Nine Palms Band of
Mission Indians v. Schwarzenegger; et al
., plaintiff seeks a declaration
that monetary distributions made to tribe members and derived from its casino
gambling operation profits and income earned by tribe members by means of
employment at the tribe casino, are exempt from State taxation based upon the
Federal Constitution, Federal statutes and the Tribal Compact between
plaintiffs and the State. The district court dismissed the complaint without
leave to amend it. The plaintiff has appealed. It is currently unknown what
the fiscal impact of this matter might be upon the General Fund, should the
plaintiff obtain a favorable ruling that may be applicable to other similarly
situated taxpayers.
Prison Healthcare Reform
.
The adult prison health care delivery system includes medical health care,
mental health care and dental health care. The annual budget for this system
is exceeds $1.8 billion. The system is operated by the California Department
of Corrections and Rehabilitation, and affects approximately 33 prisons
throughout the State. There are three significant cases pending in Federal
district courts challenging the constitutionality of prison health care.
Plata
v. Schwarzenegger
is a class action regarding the adequacy of medical
health care;
Coleman v. Schwarzenegger
is a class action regarding
mental health care; and
Perez v. Tilton
is a class action regarding
dental health care. A fourth case,
Armstrong v. Schwarzenegger
is a
class action on behalf of inmates with disabilities alleging violations of the
Americans with Disabilities Act and Section 504 of the Rehabilitation Act. In
Plata
the district court appointed a Receiver, who took office in April 2006, to
run and operate the medical health care portion of the health care delivery
system. The
Plata
Receiver and the Special Master appointed by the
Coleman
court, joined by the court representatives appointed by the
Perez
and
Armstrong
courts, meet routinely to coordinate efforts in these cases. To date, ongoing
costs of remedial activities have been incorporated into the State's budget
process. However, at this time, it is unknown what financial impact this
litigation would have on the State's General Fund, particularly in light of the
unprecedented step of appointing a Receiver of medical health care. The
Receiver filed a motion in the
Plata
case, asking the court to hold the
Governor and State Controller in contempt for failing to fund prison healthcare
capital projects that the Receiver wishes to construct and to order the State
to pay $8 billion to fund such projects. On October 27, 2008, the district
court ordered the State to transfer $250 million to the Receiver. The court
indicated it would proceed later with the additional amounts requested by the
Receiver. The State appealed that order and the Ninth Circuit dismissed the
State's appeal for lack of jurisdiction. The Receiver has since abandoned the
$8 billion plan and agreed to a smaller plan with the State. On March 24,
2009, the district court denied the State's motion to terminate the Receiver,
and the State has appealed that order.
In
Plata
and
Coleman
a three-judge panel was convened consider plaintiffs' motion for to issue a
prisoner release order. The motions alleged that prison overcrowding was the
primary cause of unconstitutional medical and mental health care. After a
trial, the panel issued an order requiring the State to prepare a plan for the
release of approximately 40,000 prisoners over two years. The State filed a
prisoner-release plan with the three-judge panel and filed an appeal in the
U.S. Supreme Court. On June 14, 2010, the U.S. Supreme Court granted the
State’s request for review of the prisoner release order. The matter was
scheduled to be heard by the Court on November 30, 2010.
Actions Seeking Medi-Cal
Reimbursements and Fees
. In
Orinda Convalescent Hospital, et al. v.
Department of Health Services
, plaintiffs challenge a quality assurance fee
charged to certain nursing facilities and a Medi-Cal reimbursement methodology
applicable to such facilities that were enacted in 2004, alleging violations of
Federal Medicaid law, the Federal and State constitutions and State law.
Plaintiffs seek a refund of fees paid and to enjoin future collection of the
fee. If an injunction against collection of the fee is issued, it could
negatively affect the State's receipt of Federal funds. At this time it is
unknown what fiscal impact this matter would have upon the General Fund.
Various
other pending cases challenge State legislation requiring reductions in
Medi-Cal reimbursements to Medi-Cal providers. In
Independent Living Center
of Southern California, et al. v. Shewry, et al.
, health care advocates, Medi-Cal
providers and recipients challenge various reductions, payment holds and delays
in cost-of-living adjustments in the State Supplementary Program for the Aged,
Blind and Disabled. Plaintiffs seek injunctive relief to prevent
implementation of these measures. This matter has been removed to Federal
court. The district court granted in part a preliminary injunction, requiring
the State, as of August 18, 2008, to pay the rates in effect prior to the
reduction. The district court thereafter issued a second preliminary
injunction, restoring the rates in effect prior to the reduction, as of
November 2008, for two additional categories of services. The State and
plaintiffs appealed and the Ninth Circuit affirmed the preliminary injunctions
and also found that the district court erred in making the injunction effective
as of August 18, 2008, and that the injunction should apply to services
rendered on or after July 1, 2008. The Ninth Circuit denied both petitions for
rehearing filed by the State. The State filed a petition for certiorari in the
U.S. Supreme Court
and the
Court invited the Solicitor General to file a brief expressing its views on the
petition. The district court amended the injunction to apply retroactively. On
June 17, 2010, the district court stayed further proceedings pending resolution
of the petition for certiorari. A final decision adverse to the State in this
matter could result in additional costs to the General Fund of $70 million.
In
California Medical
Associate, et al. v. Shewry, et al.
, professional associations representing
Medi-Cal providers seek to enjoin implementation of the Medi-Cal rate
reductions planned to go into effect on July 1, 2008, alleging that the
legislation violates Medicaid requirements, State laws and regulations and the
California Constitution. The trial court denied plaintiffs' motion for a
preliminary injunction, plaintiffs filed an appeal, which was dismissed at
their request. Plaintiffs have indicated that they will file an amended
petition seeking the retrospective relief the Ninth Circuit awarded in the
Independent
Living
case, above, after final disposition of that case. A final decision
adverse to the State in this matter would result in costs to the General Fund
of $508.2 million.
In
California Pharmacists
Association, et al. v. David Maxwell-Jolly, et al.
, Medi-Cal pharmacy
providers filed a suit challenging reimbursement rates, including the
Department of Health Care Services' use of reduced published average wholesale
price data to establish reimbursement rates. The district court granted a
request for preliminary judgment in part, and denied it in part, with respect
to the Department of Health Care Services' reimbursement rate methodology.
Plaintiffs filed a motion seeking to modify the district court ruling, and both
parties filed notices of appeal to the Ninth Circuit, which stayed the appeal
and the district court also stayed further proceedings in light of the pending
petitions for certiorari in
Independent Living
and
Sierra Medical
Services Alliance.
At this time it is unknown what fiscal impact this case
would have on the General Fund.
In
Centinela Freeman
Emergency Medical Associates, et al. v. David Maxwell-Jolly, et al.
, filed
as a class action on behalf of emergency room physicians and emergency
department groups, plaintiffs claim that Medi-Cal rates for emergency room
physicians are below the cost of providing care. Plaintiffs seek damages and
injunctive relief, based on alleged violations of the Federal Medicaid
requirements, State law and the Federal and State Constitutions. The trial
court granted the petition of the plaintiffs and ordered the Department of
Health Care Services to conduct an annual review of reimbursement rates for
physicians and dentists pursuant to the Constitution. A final decision in this
matter adverse to the State could result in costs to the General Fund of $250
million.
In
Sierra Medical Services
Alliance, et al. v. David Maxwell Jolly
,
et al.
, emergency medical
transportation companies challenge legislation, which sets Medi-Cal
reimbursement rates paid for medical transportation services. Plaintiffs seek
damages and injunctive relief. The case is stayed pending the petitions for
certiorari in
Maxwell-Jolly v. Independent Living
and
California
Pharmacists Association
. At this time it is unknown what fiscal impact this
case would have on the General Fund.
In
California
Association of Health Facilities v. David Maxwell Jolly
, consolidated with
Developmental
Services Network, et al., v. David Maxwell Jolly
, plaintiffs (professional
associations representing Medi-Cal providers) challenge legislative action to
maintain Medi-Cal reimbursement rates for intermediate care facilities and
freestanding pediatric sub-acute facilities as the rates for Fiscal Year 2009-10,
and each year thereafter, to not exceed the rates applicable in Fiscal Year
2008-09. Plaintiffs seek declaratory and injunctive relief. Plaintiffs allege
that the rate freeze violates the State Constitution because the Legislature
did not study the impact of the freeze on efficiency, economy, quality of care,
and access to care. Plaintiffs also allege that the rate freeze violates the
notice and public process provisions of the Constitution. At this time, it is
unknown what fiscal impact these matters will have upon the General Fund.
In
California Hospital
Association v. Maxwell-Jolly, et al.
, plaintiff challenges limits on
Medi-Cal reimbursement rates for hospital services enacted in 2008, and which
were to take effect October 1, 2008 or March 1, 2009, as allegedly violating
Federal law. Plaintiff seeks to enjoin the implementation of the limits. At
this time it is unknown what fiscal impact this matter may have on the General
Fund.
Construction-Related Actions
Against the Department of Transportation
. A pending litigation matter,
Otay
River Constructors v. South Bay Expressway, et al
., relates to an agreement
between Caltrans and South Bay Expressway ("SBX") for the design,
construction and operation of a private-public partnership project in San Diego
County. SBX contracted with Otay River Constructors ("ORC") for the
design and construction of the project, consisting of the privately-funded toll
road initially contemplated by the parties and the publicly and privately
funded gap and connector project to connect the toll road to existing State
highways. ORC sued SBX, alleging cost overruns on the gap/connector project
were caused by SBX, and SBX cross-complained against Caltrans for breach of
contract and indemnification, seeking $295 million in damages. In separate
pending arbitration relating to the toll road, SBX is seeking approximately
$278 million in damages based on the same theories as in the gap/connector
litigation. ORC has filed a motion to join this arbitration with the
litigation.
Both matters are
currently stayed after SBX filed for bankruptcy.
APPENDIX E
Set forth
below, as to each share class of each Fund, as applicable, are those
shareholders of record known by each Fund to own 5% or more of a class of
shares of the Fund as of May 13, 2011.
Dreyfus Cash Management
Institutional Shares
: (1) Boston
& Co., PO Box 534005, Pittsburgh, PA 15253-4005 (33.0093%); (2) Hare &
Co., c/o The Bank of New York, Short Term Investment Funds, 111 Sanderscreek
Pkwy, 2
nd
Floor, E. Syracuse, NY 13057-1382 (28.9227%); (3) J.P.
Morgan Clearing Corp. (GAMA), FBO 0488969015, Attn: Denise DiLorenzo-Siegel,
One Metrotech Center North, Brooklyn, NY 11201-3832 (5.6988%).
Investor Shares
: (1) Hare
& Co., c/o The Bank of New York, Short Term Investment Funds, 111
Sanderscreek Pkwy, 2
nd
Floor, E. Syracuse, NY 13057-1382 (49.6819%);
(2) BNY (OCS) Nominees Limited, 1 Canada Square, London, UK E14 5AL (16.6942%);
(3) Pershing LLC, P.O. Box 2052, Jersey City, NJ 07303-2052 (14.9287%); (4) Boston
& Co., Attn: Cash Sweep, 3 Mellon Bank Center, Pittsburgh, PA 15259-0001 (5.0197%).
Administrative Shares
: (1)
Hare & Co., c/o The Bank of New York, Short Term Investment Funds, 111
Sanderscreek Pkwy, 2
nd
Floor, E. Syracuse, NY 13057-1382 (53.6734%);
(2) Pershing LLC, PO Box 2052, Jersey City, NJ 07303-2052 (14.5771%); (3) Boston
& Co., Attn: Cash Sweep, 3 Mellon Bank Center, Pittsburgh, PA 15259-0001 (12.4226%);
(4) Stifel Nicolaus & Co. Inc. for the Exclusive Benefit of Customers, 500
N Broadway, Saint Louis, MO 63102-2110 (8.2982%).
Participant Shares
: (1)
Hare & Co., c/o The Bank of New York, Short Term Investment Funds, 111
Sanderscreek Pkwy, 2
nd
Floor, E. Syracuse, NY 13057-1382 (36.1551%);
(2) Vantagetrust NAV, 777 North Capitol Street, NE, Washington DC 20002-4239 (27.3252%);
(3) ICMA-RC RHS Omnibus Acct, c/o ICMA Retirement Corporation, 777 North
Capitol Street, NE, Washington DC 20002-4239 (10.1073%).
Agency Shares
: (1) Hare
& Co., c/o The Bank of New York, Short Term Investment Funds, 111
Sanderscreek Pkwy, 2
nd
Floor, E. Syracuse, NY 13057-1382 (98.6299%).
Dreyfus Government Cash
Management
Institutional Shares
: (1) Boston
& Co., Attn: Cash Sweep 153-3615, 3 Mellon Bank Center, Pittsburgh, PA
15259-0001 (34.1420%); (2) Hare & Co., c/o The Bank of New York, Short Term
Investment Funds, 111 Sanderscreek Pkwy, 2
nd
Floor, E. Syracuse, NY
13057-1382 (28.6051%); (3) FDIC National Receivership Acct, Attn: Manager
Treasury Operations Section, 3501 Fairfax Drive-E5049, Arlington, VA 22226-3599
(10.4679%).
Investor Shares
: (1) Pershing
LLC, P.O. Box 2052, Jersey City, NJ 07303-2052 (55.6909%); (2) Hare & Co.,
c/o The Bank of New York, Short Term Investment Funds, 111 Sanderscreek Pkwy, 2
nd
Floor, E. Syracuse, NY 13057-1382 (27.0859%).
Administrative Shares
: (1)
Pershing LLC, P.O. Box 2052, Jersey City, NJ 07303-2052 (41.8363%); (2) Hare
& Co., c/o The Bank of New York, Short Term Investment Funds, 111
Sanderscreek Pkwy, 2nd Floor, E. Syracuse, NY 13057-1382 (22.6107%); (3) Morgan
Keegan &
Co., For the Exclusive Benefit of Customers,
50 N Front St, Memphis, TN 38103-2126 (17.4345%).
Participant Shares
: (1)
Lazard Capital Markets LLC, Attn Jeff Heite, 30 Rockefeller Plaza 19
th
Floor, New York, NY 10112-0015 (40.5752%); (2) Hare & Co., c/o The Bank of
New York, Short Term Investment Funds, 111 Sanderscreek Pkwy, 2
nd
Floor, E. Syracuse, NY 13057-1382 (19.3985%).
Agency Shares
: (1) Hare
& Co., c/o The Bank of New York, Short Term Investment Funds, 111
Sanderscreek Pkwy, 2
nd
Floor, E. Syracuse, NY 13057-1382 (99.6394%).
Dreyfus Government Prime Cash
Management
Institutional Shares
: (1) Boston
& Co., PO Box 534005, Pittsburgh, PA 15253-4005 (43.9624%); (2) Hare &
Co., c/o The Bank of New York, Short Term Investment Funds, 111 Sanderscreek
Pkwy, 2
nd
Floor, E. Syracuse, NY 13057-1382 (39.3148%); (3) Citizens
Bank Attn: Jeffrey Fletcher c/o Investment Management Serv, 870 Westminster
St., Providence, RI 02903-4089
Investor Shares
: (1) Hare
& Co., c/o The Bank of New York, Short Term Investment Funds, 111
Sanderscreek Pkwy, 2nd Floor, E. Syracuse, NY 13057-1382 (40.8255%); (2) Pershing
LLC, P.O. Box 2052, Jersey City, NJ 07303-2052 (38.3640%).
Administrative Shares
: (1)
Pershing LLC, P.O. Box 2052, Jersey City, NJ 07303-2052 (21.1598%); (2) Hare
& Co., c/o The Bank of New York, Short Term Investment Funds, 111
Sanderscreek Pkwy, 2nd Floor, E. Syracuse, NY 13057-1382 (15.7883%).
Participant Shares
: (1) National
Financial Services Corp., for the Exclusive Benefit of its Customers, Attn:
Mutual Funds Dept., 5
th
Floor, One World Financial Center, 200
Liberty St., New York, NY 10281-1003 (32.1313%); (2) Jefferies & Company
Inc, For the Benefit of our Customers, 34 Exchange Place, Plaza III Ste 705,
Jersey City, NJ 07302-3885 (22.0629%); (3) Hare & Co., c/o The Bank of New
York, Short Term Investment Funds, 111 Sanderscreek Pkwy, 2nd Floor, E.
Syracuse, NY 13057-1382 (17.3971%); (4) Pershing LLC, P.O. Box 2052, Jersey
City, NJ 07303-2052 (14.3254%); (5) First Republic Bank, Investment Division,
111 Pine Street, San Francisco, CA 94111-5602 (11.8173%).
Agency Shares
: (1) Hare
& Co c/o Bank of New York Short Term Investment Funds, 111 Sanderscreek
Pkwy 2
nd
Fl, E Syracuse, NY 13057-1382 (99.9139%).
Dreyfus Treasury & Agency
Cash Management
Institutional Shares
: (1) Boston
& Co., PO Box 534005, Pittsburgh, PA 15253-4005 (50.3444%); (2) Hare
& Co., c/o The Bank of New York, Short Term Investment Funds, 111
Sanderscreek Pkwy, 2
nd
Floor, E. Syracuse, NY 13057-1382 (19.1525%);
(3) Special Acct for the Excl Benefit of Custs of PNC Capital Mkts LLC, Attn: Jeffrey
Szalkuski PI – POPP-09-2, Investment Oper., 249 Fifth Avenue One PNC Plaza,
Pittsburgh, PA 15222 (5.1108%)
Investor Shares
:
(1)
Hare & Co., c/o The Bank of New York, Short Term Investment Funds, 111
Sanderscreek Pkwy, 2
nd
Floor, E. Syracuse, NY 13057-1382 (42.3812%);
(2) Mellon Financial Corporation Attn: AIS Operations, Mellon Client Service
Center, 500 Ross St Rm 154-0940,
Pittsburgh, PA
15262-0001 (28.3406%); (3) Pershing LLC, P.O. Box 2052, Jersey City, NJ
07303-2052 (10.6211%); (4) Zions First National Bank, Trust Department, P.O.
Box 30880, Salt Lake City, UT 84130-0880 (6.5867%); (5) Egap & Co., A
Partnership, Attn: Trust Operations, PO Box 820, Burlington, VT 05402-0820 (5.8811%).
Administrative Shares
: (1)
Hare & Co., c/o The Bank of New York, Short Term Investment Funds, 111
Sanderscreek Pkwy, 2
nd
Floor, E. Syracuse, NY 13057-1382 (33.2616%);
(2) Boston & Co., Attn: Cash Sweep, 3 Mellon Bank Center, Pittsburgh, PA
15259-0001 (28.4190%); (3) Pershing LLC, PO Box 2052, Jersey City, NJ 07303-2052
(9.4729%).
Participant Shares
: (1)
Hare & Co., c/o The Bank of New York, Short Term Investment Funds, 111
Sanderscreek Pkwy, 2
nd
Floor, E. Syracuse, NY 13057-1382 (47.8672%);
(2) Lazard Capital Markets LLC, Attn Jeff Heite, 30 Rockefeller Plaza 19
th
Floor, New York, NY 10112-0015 (25.6832%); (3) Jefferies & Company Inc., 34
Exchange Place, Plaza III Ste. 705, Jersey City, NJ 07302-3885 (15.1607%); (4)
Morgan Keegan & Co. Inc., 50 N Front Street, Memphis, TN 38103-2126
(5.0378%).
Select Shares
: (1) Stratevest
& Co., PO Box 2499, Brattleboro, VT 05303-2499 (50.7674%); (2) Hare &
Co., c/o The Bank of New York, Short Term Investment Funds, 111 Sanderscreek
Pkwy,
2
nd
Floor, E. Syracuse, NY
13057-1382 (41.3621%); (3) Band & Co. c/o US Bank, 1555 North Rivercenter
Dr. Ste 302, Milwaukee, WI 53212-3958 (7.8705%).
Service Shares
: (1) Hare
& Co., c/o The Bank of New York, Short Term Investment Funds, 111
Sanderscreek Pkwy, 2
nd
Floor, E. Syracuse, NY 13057-1382 (83.6890%);
(2) Reliance Trust Co FBO Integrity Investments, 1100 Abernathy Road, Atlanta,
GA 30328-5620 (11.0595%).
Premier Shares
: (1) Hare
& Co., c/o The Bank of New York, Short Term Investment Funds, 111
Sanderscreek Parkway, 2nd Floor, E. Syracuse, NY 13057-1382 (100.0000%).
Agency Shares
: (1) Hare
& Co., c/o The Bank of New York, Short Term Investment Funds, 111
Sanderscreek Parkway, 2nd Floor, E. Syracuse, NY 13057-1382 (100.0000%).
Dreyfus Treasury Prime Cash
Management
Institutional Shares
: (1)
Boston & Co., Attn: Cash Sweep, 3 Mellon Bank Center, Pittsburgh, PA
15259-0001 (34.7049%); (2) Hare & Co., c/o The Bank of New York, Short Term
Investment Funds, 111 Sanderscreek Pkwy, 2
nd
Floor, E. Syracuse, NY
13057-1382 (24.2576%); (3) BNY (OCS) Nominees Limited, 1 Canada Square, London,
UK E14 5AL (9.0888%).
Investor Shares
: (1) Hare
& Co., c/o The Bank of New York, Short Term Investment Funds, 111
Sanderscreek Pkwy, 2
nd
Floor, E. Syracuse, NY 13057-1382 (47.3999%);
(2) Pershing LLC, P.O. Box 2052, Jersey City, NJ 07303-2052 (33.3184%).
Administrative Shares
: (1)
Hare & Co., c/o The Bank of New York, Short Term Investment Funds, 111
Sanderscreek Pkwy, 2
nd
Floor, E. Syracuse, NY 13057-1382 (59.4856%);
(2) Pershing LLC, P.O. Box 2052, Jersey City, NJ 07303-2052 (15.2844%); (3) BNP
Paribas Prime Brokerage, Inc., Charles Ricottone, 787 7
th
Ave 8
th
Fl, New York, NY 10019-6018 (9.1025%); (4) First Republic Bank, Investment
Division, 111 Pine Street, San Francisco, CA 94111-5628 (9.0888%).
Participant
Shares
: (1) First Republic Bank, Investment Division, 111 Pine Street, San
Francisco, CA 94111-5602 (19.6890%); (2) Typhoonbass and Co, c/o State Street
Bank, 1200 Crown Colony Drive, Attn: Mutual Funds, Quincy, MA 02169-0938
(16.5979%); (3) Saturn & Co, c/o Investors Bank & Trust Company, Mail
Code FPG 90, PO Box 5501, Boston, MA 02206-5501 (10.8648%); (4) Stifel Nicolaus
& Co. Inc., for the Exclusive Benefit of Customers, 500 N Broadway, Saint
Louis, MO 63102-2110 (7.4971%); (5) Morgan Keegan & Co. Inc., 50 Front
Street, Floor 4, Memphis, TN 38103-2126 (7.3189%); (6) Pershing LLC, P.O. Box
2052, Jersey City, NJ 07303-2052 (5.1160%); (7) Jefferies & Company Inc,
For the Benefit of our Customers, 34 Exchange Place, Plaza III Ste 705, Jersey City,
NJ 07302-3885 (5.0767%).
Agency Shares
: (1) DOW
Chemical/Rohm & Haas Attn: Nancy Steinbech, Newport Office VII, 480
Washington Blvd 29
th
Fl, Jersey City, NJ 07310-2053 (96.1204%).
Dreyfus Municipal Cash
Management Plus
Institutional Shares
: (1)
Boston & Co., Attn: Cash Sweep, 3 Mellon Bank Center, Pittsburgh, PA
15259-0001 (28.0751%); (2) Pershing LLC, P.O. Box 2052, Jersey City, NJ
07303-2052 (15.6349%); (3) UBS WM USA, 499 Washington Blvd, Jersey City, NJ
07310-1995 (13.9043%); (4) The Private Bank & Trust Company, 70 W Madison
Suite 800, Chicago, IL, 60602-4252 (9.2179%); (5) Mac & Co, Attn – MPWM
Operations Mutual Fund Unit, PO Box 534005, Pittsburgh, PA 15253-4005 (9.1795%);
(6) Janney Montgomery Scott LLC, 1801 Market St., Philadelphia, PA 19103-1628 (8.3899%);
(7) Stifel Nicolaus & Co. Inc., for the Exclusive Benefit of Customers, 500
N Broadway, Saint Louis, MO 63102-2110 (6.7035%).
Investor Shares
: (1) Pershing
LLC, P.O. Box 2052, Jersey City, NJ 07303-2052 (93.9202%).
Administrative Shares
: (1)
Morgan Keegan & Co., Inc., 50 N Front Street, Memphis, TN 38103-2126 (78.2345%);
(2) Pershing LLC, P.O. Box 2052, Jersey City, NJ 07303-2052 (21.0580%).
Participant Shares
: (1)
First Republic Bank, Investment Division, 111 Pine Street, San Francisco, CA
94111-5602 (69.9280%); (2) Pershing LLC, P.O. Box 2052, Jersey City, NJ 07303-2052
(26.0612%).
Agency Shares
: (1) Morgan
Stanley & Co, Harborside Financial Center Plaza 2, 3
rd
Floor,
Jersey City, NJ 07311 (93.1811%); (2) BNY Mellon Corp, MBC Investments Corp,
100 White Clay Center Dr Suite 102, AIM#195-0100, Newark, DE 19711 (6.8123%).
Dreyfus Tax Exempt Cash
Management
Institutional Shares
: (1) Bost
& Co, Attn: Cash Sweep 153-3615, 3 Mellon Bank Center, Pittsburgh, PA 15259-0001
(31.4626%); (2) Stifel Nicolaus & Co. Inc., for the Exclusive Benefit of
Customers, 500 N Broadway, Saint Louis, MO 63102-2110 (10.7019%); (3) Pershing
LLC, PO Box 2052, Jersey City, NJ 07303-2052 (6.7537%); (4) Wells Fargo Bank
N.A., Attn: Cash Sweeps Dept, 733 Marquette Ave, Minneapolis, MN 55402-2309 (5.6984%).
Investor Shares
: (1) Pershing
LLC, P.O. Box 2052, Jersey City, NJ 07303-2052 (47.5400%); (2) Hare & Co.,
c/o The Bank of New York, Short Term Investment Funds, 111 Sanderscreek Pkwy, 2
nd
Floor, E. Syracuse, NY 13057-1382 (43.9402%); (3) Boston & Co., PO Box 534005,
Pittsburgh, PA 15253-4005 (5.2152%)
Administrative
Shares
: (1) Pershing LLC, P.O. Box 2052, Jersey City, NJ 07303-2052 (87.2393%);
(2) Palmetto Partners LP, 104 Crandon Blvd Ste 419, Key Biscayne, FL 33149-1542
(6.1373%).
Participant Shares
: (1) Saturn
& Co., c/o Investors Bank & Trust Company, P.O. Box 5501, Boston, MA
02206-5501 (85.7683%); (2) Hare & Co., c/o The Bank of New York, Short Term
Investment Funds, 111 Sanderscreek Parkway, 2nd Floor, E. Syracuse, NY
13057-1382 (7.6494%).
Agency Shares
: (1) Hare
& Co., c/o The Bank of New York, Short Term Investment Funds, 111
Sanderscreek Parkway, 2nd Floor, E. Syracuse, NY 13057-1382 (100.0000%).
Dreyfus New York Municipal Cash
Management
Institutional Shares
: (1) Boston
& Co, PO Box 534005, Pittsburgh, PA 15253-4005 (65.2858%); (2) Pershing
LLC, P.O. Box 2052, Jersey City, NJ 07303-2052 (10.4660%); (3) Reliance Trust
Co, 1100 Abernathy Rd, 500 Northpark Suite 400, Atlanta, GA 30328 (5.3127%).
Investor Shares
: (1) Pershing
LLC, P.O. Box 2052, Jersey City, NJ 07303-2052 (84.8391%); (2) Hare & Co.,
c/o The Bank of New York, Short Term Investment Funds, 111 Sanderscreek
Parkway, 2nd Floor, E. Syracuse, NY 13057-1382 (14.6616%).
Administrative Shares
: (1)
Pershing LLC, P.O. Box 2052, Jersey City, NJ 07303-2052 (65.1041%); (2) Banc of
America Securities LLC, Money Market Funds Omnibus, 200 N College St Fl 3,
Charlotte, NC 28202-2191 (25.6640%); (3) Stifel Nicolaus & Co. Inc., for
the Exclusive Benefit of Customers, 500 N. Broadway, St. Louis, MO 63102-2110 (8.9184%).
Participant Shares
: (1) First
Republic Bank, Investment Division, 111 Pine Street, San Francisco, CA
94111-5602 (95.0180%).
Agency Shares
: (1) BNY
Mellon Corporation, MBC Investments Corporation, 100 White Clay Center Dr.
Suite 102, AIM#195-0100, Newark, DE 19711-5480 (100.0000%).
Dreyfus California AMT-Free
Municipal Cash Management
Institutional Shares
: (1)
Capinco c/o US Bank, Attn: Susan Serio, PO Box 1787, Milwaukee, WI 53201-1787
(36.0669%); (2) Wells Fargo Securities, LLC, Attn: Money Funds, 1525 W WT
Harris Blvd – Bldg 1B1, Charlotte, NC 28262-8522 (19.8026%); (3) UBS WM USA,
499 Washinton Blvd, Jersey City, NJ 07310-1995 (16.1493%); (4) Stifel Nicolaus
& Co. Inc., for the Exclusive Benefit of Customers, 500 N. Broadway, St.
Louis, MO 63102-2110 (14.1432%); (5) Wells Fargo Bank N.A., Attn Cash Sweep
Dept, MAC #N9306-04C, 733 Marquette Ave, Minneapolis, MN 55402-2309 (7.3338%).
Investor Shares
: (1) Hare
& Co., c/o The Bank of New York, Short Term Investment Funds, 111
Sanderscreek Parkway, 2nd Floor, E. Syracuse, NY 13057-1382 (60.6780%); (2) National
Financial Services Corp., Attn: Mutual Funds Dept., One World Financial Center,
200 Liberty St., New York, NY 10281-1003 (30.6797%).
Administrative
Shares
: (1) Pershing LLC, P.O. Box 2052, Jersey City, NJ 07303-2052 (97.9873%).
Participant Shares
: (1)
First Republic Bank, Investment Division, 111 Pine Street, San Francisco, CA
94111-5602 (99.6424%).
Agency Shares
: (1) BNY
Mellon Corporation, MBC Investments Corporation, 100 White Clay Center Dr.
Suite 102, AIM#195-0100, Newark, DE 19711-5480 (100.0000%).
Dreyfus New York AMT-Free
Municipal Cash Management
Institutional Shares
: (1)
Kamran Hakim, 3 West 57
th
Street, 7
th
Fl, New York, NY
10019-3407 (45.0456%); (2) UBS WM USA, 299 Washington Blvd, Jersey City, NJ
07310-1995 (33.2717%); (3) Mac & Co., P.O. Box 534005, Pittsburgh, PA
15253-4005 (10.2495%); (4) Alliance Bank, 160 Main Street, Oneida, NY
13421-1629 (5.0605%).
Investor Shares
: (1) Mac
& Co., P.O. Box 534005, Pittsburgh, PA 15253-4005 (70.2291%); (2) Pershing
LLC, P.O. Box 2052, Jersey City, NJ 07303-2052 (23.6684%).
Administrative Shares
: (1)
Pershing LLC, P.O. Box 2052, Jersey City, NJ 07303-2052 (100.0000%).
Participant Shares
: (1) BNY
Mellon Corporation, MBC Investments Corporation, 100 White Clay Center Dr.
Suite 102, AIM#195-0100, Newark, DE 19711-5480 (99.9999%).
Classic Shares
: (1) Bank
of NY Mellon as Agent for Seymour Insurance Company c/o The Durst Organization,
1 Bryant Park Fl 49, New York, NY 10036-6715 (50.8681%); (2) Bank of NY Mellon
as Agent for 4TS II LLC, c/o The Durst Organization, 1 Bryant Park Fl 49, New
York, NY 10036-6715 (47.1340%).
Dreyfus Govt Cash Administrative (NASDAQ:DAGXX)
過去 株価チャート
から 6 2024 まで 7 2024
Dreyfus Govt Cash Administrative (NASDAQ:DAGXX)
過去 株価チャート
から 7 2023 まで 7 2024