BILL NUMBER: SB 39	CHAPTERED
	BILL TEXT

	CHAPTER  14
	FILED WITH SECRETARY OF STATE  JUNE 2, 2003
	APPROVED BY GOVERNOR  MAY 30, 2003
	PASSED THE SENATE  MAY 29, 2003
	PASSED THE ASSEMBLY  MAY 23, 2003
	AMENDED IN ASSEMBLY  MAY 22, 2003
	AMENDED IN ASSEMBLY  MAY 14, 2003
	AMENDED IN SENATE  APRIL 24, 2003
	AMENDED IN SENATE  APRIL 21, 2003
	AMENDED IN SENATE  APRIL 7, 2003

INTRODUCED BY   Senator Perata
   (Principal coauthor: Assembly Member Chan)

                        JANUARY 3, 2003

   An act relating to the Oakland Unified School District, making an
appropriation therefor, and declaring the urgency thereof, to take
effect immediately.



	LEGISLATIVE COUNSEL'S DIGEST


   SB 39, Perata.  Oakland Unified School District:  emergency loan.
   (1) Existing law provides for emergency apportionments to school
districts subject to specified conditions including, in certain
circumstances, the repayment of an emergency loan over a period of no
more than 10 years and the appointment by the Superintendent of
Public Instruction of an administrator who would exercise the powers
and responsibilities of the governing board of the school district.
   This bill would require the Superintendent of Public Instruction
to assume all the rights, duties, and powers of the governing board
of the Oakland Unified School District and to appoint an
administrator to act on behalf of the Superintendent of Public
Instruction in exercising the superintendent's authority over the
school district.  The bill would authorize the administrator, with
the approval of the superintendent, to enter into agreements on
behalf of the school district and to change any existing district
rules, policies, or practices, as provided.  The bill would require
the administrator to be added by the district as an employee for
certain insurance purposes.  The bill would, in addition, specify
that the administrator is a public school employer within the meaning
of the Educational Employment Relations Act.
   The bill would specify that the governing board of the school
district is not to receive any compensation during the period of the
superintendent's authority over the district.  The bill would
authorize the administrator to terminate the employment of certain
district personnel, as provided.
   The bill would continue the authority of the superintendent and
the administrator over the school district until certain enumerated
conditions are met, including the completion of an improvement plan
for the school district.
   The bill would require the administrator to consider, on a monthly
basis, or more frequently if desired, information from one or more
specified groups.  The bill would require the County Office Fiscal
Crisis and Management Assistance Team (FCMAT) to prepare an
improvement plan for the school district, as provided, by July 1,
2003, and would require the FCMAT to report on the implementation of
the plan, as specified.
   This bill would appropriate $100,000,000 from the General Fund to
the Superintendent of Public Instruction for the purpose of providing
the Oakland Unified School District with an emergency loan.  The
bill would authorize loan funds to be disbursed from the proceeds of
the loan only if the trustee and FCMAT jointly determine that
disbursement is necessary.  The bill would require the district to
repay the loan as a straight line loan amortized over a 20-year term,
with interest as provided.  The bill would authorize the district
from June 1, 2003, to June 30, 2005, inclusive, to sell property of
the district and use the proceeds from that transaction to reduce or
retire the emergency loan.  The bill would, in addition, make the
school district ineligible for hardship state funding for the
construction of school facilities during that time.
   The bill would require the school district, except as specified,
to bear 100% of all costs associated with implementing its
provisions, thereby imposing a state-mandated local program.
   (2) This bill would declare that due to the unique circumstances
relating to the Oakland Unified School District's fiscal emergency, a
general statute cannot be made applicable.
  (3) The California Constitution requires the state to reimburse
local agencies and school districts for certain costs mandated by the
state.  Statutory provisions establish procedures for making that
reimbursement.
   This bill would provide that with regard to certain mandates no
reimbursement is required by this act for a specified reason and
would provide that with regard to any other mandates, if the
Commission on State Mandates determines that the bill contains costs
so mandated by the state, reimbursement for those costs shall be made
pursuant to the statutory provisions noted above.
   (4) This bill would declare that it is to take effect immediately
as an urgency statute.
   Appropriation:  yes.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  The Legislature finds and declares all of the
following:
   (a) Providing a quality education that meets the unique needs of
Oakland public school pupils is a fundamental goal that should not be
jeopardized.
   (b) In late August 2002, the Oakland Unified School District
became aware of a negative general fund balance for the 2001-02
fiscal year, and of potential deficits in its 2002-03 budget, and
thereafter, promptly reported this information to the Alameda County
Office of Education.
   (c) The Oakland Unified School District is projected to run out of
cash in May of 2003 and will be unable to pay school employees
unless immediate action is taken.
   (d) Despite initial budget cuts for the 2002-03 fiscal year
exceeding fourteen million dollars ($14,000,000) and additional
budget cuts and adjustments of seventeen million dollars
($17,000,000), the Oakland Unified School District will have a
negative fund balance at the close of the current fiscal year and
requires a loan from the State of California.
   (e) While in need of a loan from the State of California, there
have not been any accusations of intentional mismanagement or fraud
in the Oakland Unified School District.
   (f) The Oakland Unified School District has made demonstrable
academic  improvements over the last few years, witnessed by test
score improvements, more fully credentialed teachers in Oakland
classrooms, and increased parental and community involvement.
   (g) The community of the Oakland Unified School District has the
will to continue the key educational reforms that have benefited
Oakland public school pupils in the last three years and to support
difficult decisions in order to immediately eliminate all further
overspending by the district.
  SEC. 2.  (a) It is the intent of the Legislature that the state
administrator appointed pursuant to this act should work with the
present administrators and governing board of the Oakland Unified
School District to identify the procedures and programs currently
implemented by the district that have proven to do one or more of the
following:
   (1) Significantly raise pupil achievement.
   (2) Improve pupil attendance.
   (3) Lower pupil dropout rate.
   (4) Increase parental involvement.
   (5) Attract, retain, and train a quality teaching staff.
   (b) It is the intent of the Legislature that these identified
procedures and programs should be protected, maintained, and expanded
as the district's budget allows.
  SEC. 3.  The Legislature finds and declares that because of the
fiscal emergency in which the Oakland Unified School District finds
itself and in recognition of the March 27, 2003 request of the
governing board of the district for a loan from the state, it is
necessary that the Superintendent of Public Instruction assume
control of the district in order to ensure the return to the district
of fiscal solvency.
  SEC. 4.  (a) The Superintendent of Public Instruction shall
immediately assume all of the rights, duties, and powers of the
governing board of the Oakland Unified School District.
   (b) The Superintendent of Public Instruction, in consultation with
the Alameda County Superintendent of Schools, shall appoint an
administrator to act on behalf of the Superintendent of Public
Instruction in exercising the authority described in this act.  The
Superintendent of Public Instruction or the state-appointed
administrator may, on a short-term basis, employ at district expense
any staff necessary to assist the administrator, including, but not
limited to, a certified public accountant.  The administrator shall
have recognized expertise in management and finance.  The
administrator shall serve under the direction and supervision of the
Superintendent of Public Instruction until terminated by the
Superintendent of Public Instruction at his or her discretion.  The
Superintendent of Public Instruction shall consult with the Alameda
County Superintendent of Schools prior to terminating the
administrator.  The Superintendent of Public Instruction, operating
through the administrator, may do all of the following:
   (1) Implement substantial changes in the fiscal policies and
practices of the Oakland Unified School District, including, if
necessary, the filing of a petition under Chapter 9 of the federal
Bankruptcy Act (11 U.S.C. Sec. 901 et seq.) for the adjustment of
indebtedness of the district.
   (2) Revise the educational program of the Oakland Unified School
District to reflect realistic income projections, in response to the
dramatic effect of the changes in fiscal policies and practices upon
educational program quality and the potential for the success of all
pupils.  To the extent allowed by district finances, it is the intent
of the Legislature that the revised program shall maintain the core
educational reforms that have led to districtwide improvement of
academic achievement, including, but not limited to, educational
reforms targeting underperforming schools, new small schools, and
other reforms that have demonstrated measurable success.
   (3) Encourage all members of the school community to accept a fair
share of the burden of the fiscal recovery of the Oakland Unified
School District.
   (4) Consult, for the purposes described in this act, with the
governing board of the Oakland Unified School District, the exclusive
representatives of the employees of the district, parents, and the
community.
  SEC. 5.  (a) (1) To facilitate the appointment of the
state-appointed administrator and the employment of any necessary
staff, for the purposes of this act, the Superintendent of Public
Instruction is exempt from the requirements of Article 6 (commencing
with Section 999) of Chapter 6 of Division 4 of the Military and
Veterans Code and Part 2 (commencing with Section 10100) of the
Public Contract Code.
   (2) The salary and benefits of the administrator shall be
established by the Superintendent of Public Instruction and paid by
the Oakland Unified School District.
   (3) During the tenure of his or her appointment, the
administrator, if otherwise an employee of the state or of the county
superintendent, is an employee of the school district, but shall
remain in the same retirement system under the same plan that has
been provided by his or her employment with the state or the office
of the county superintendent.  Upon the expiration or termination of
the appointment, the administrator shall have the right to return to
his or her former position, or to a position at substantially the
same level as that position, if that former position was with the
state or the office of the county superintendent.  The time served in
the appointment shall be counted for all purposes as if the
administrator had served that time in his or her former position with
the state or with the office of the county superintendent.
   (b) For the period of time during which the Superintendent of
Public Instruction exercises the authority described in subdivision
(a) of Section 4, the governing board of the Oakland Unified School
District shall serve as an advisory body reporting to the
administrator, but has no rights, duties, or powers, and is not
entitled to any stipend, benefits, or other compensation from the
district.
   (c) Notwithstanding any other provision of law, the administrator
may, after according the employee reasonable notice and opportunity
for hearing, terminate the employment of any district superintendent
of schools, or deputy, associate, or assistant superintendent of
schools, or other person employed in an equivalent capacity, whose
duties include overseeing, managing, or otherwise directing the
fiscal and budgetary operations of the Oakland Unified School
District, and who is employed by the Oakland Unified School District
under a contract of employment renewed after the effective date of
this act if the employee fails to document, to the satisfaction of
the administrator, that before the effective date of this act he or
she either advised the governing board of the district, or his or her
superior, that actions contemplated or taken by the governing board
could result in the fiscal insolvency of the district, or took other
appropriate action to avert that fiscal insolvency.
   (d) With the approval of the Superintendent of Public Instruction,
the administrator may enter into agreements on behalf of the school
district and, subject to any contractual and statutory obligation of
the school district, change any existing school district rules,
regulations, policies, or practices as necessary for the effective
implementation of the improvement plan specified in Section 7 of this
act.
   (e) The authority of the Superintendent of Public Instruction and
the administrator pursuant to this act shall continue until all of
the following conditions occur:
   (1) Two complete fiscal years have elapsed following the
appointment of the administrator or, at any time after one complete
fiscal year has elapsed following that appointment, if the
administrator determines, and so notifies the Superintendent of
Public Instruction, that future compliance by the Oakland Unified
School District with the improvement plan specified in Section 7 of
this act is probable.
   (2) The County Office Fiscal Crisis and Management Assistance Team
(FCMAT) completes the improvement plan specified in Section 7 of
this act.
   (3) FCMAT, after consultation with the administrator, determines
that for at least the immediately previous six months the school
district made substantial and sustained progress in implementation of
the plans in the major functional area.
   (4) The administrator certifies that all necessary collective
bargaining agreements have been negotiated and ratified, and that the
agreements are consistent with the terms of the improvement plan
specified in Section 7 of this act.
   (5) The district completes all reports required by the
Superintendent of Public Instruction and the administrator.
   (6) The Superintendent of Public Instruction concurs with the
assessment of the administrator and FCMAT that future compliance by
the Oakland Unified School District with the improvement plan
described in Section 7 of this act and the multiyear financial
recovery plan described in paragraph (2) of subdivision (a) of
Section 41327 of the Education Code is probable.
   (f) If all of the conditions specified in subdivision (e) occur,
the governing board of the Oakland Unified School District shall
regain all of its rights, duties, and powers.
   (g) Notwithstanding subdivision (f), if the Oakland Unified School
District violates any provision of the improvement plan specified in
Section 7 of this act, after the governing board of the school
district regains all of its rights, duties, and powers pursuant to
subdivision (f), the Superintendent of Public Instruction may
reassume, in accordance with this section, all of the rights, duties,
and powers of the governing board of the school district.  The
Superintendent of Public Instruction shall subsequently return to the
governing board of the school district all of its rights, duties,
and powers reassumed under this subdivision if he or she determines
that the conditions of subdivision (e) are satisfied.
   (h) For the purposes of Article 2 (commencing with Section 41320)
and Article 2.5 (commencing with Section 41325 of Chapter 3 of Part
24 of the Education Code, the administrator is a public school
employer within the meaning of the Educational Employment Relations
Act (Chapter 10.7 (commencing with Section 3540) of Division 4 of
Title 1 of the Government Code).
  SEC. 6.  The administrator shall consider, on a monthly basis, or
more frequently if so desired by the administrator, information from
one or more groups from each of the following categories:
   (a) The governing board of the school district.
   (b) Any advisory council of the school district.
   (c) Any parent-teacher organization of the school district.
   (d) Representatives from the community in which the school
district is located.
   (e) The County Office Fiscal Crisis and Management Assistance
Team.
   (f) The Superintendent of Public Instruction.
  SEC. 7.  (a) On or before July 1, 2003, the County Office Fiscal
Crisis and Management Assistance Team (FCMAT) shall prepare an
improvement plan for the Oakland Unified School District by updating
the January 2000 comprehensive assessments and recovery plans of the
Oakland Unified School District.
   (b) Based upon progress reports prepared pursuant to subdivision
(c), FCMAT shall recommend to the Superintendent of Public
Instruction those designated functional areas of school district
operation that it determines are appropriate for the governing board
of the school district to assume.
   (c) Commencing 30 days following the effective date of this act
and in September 2003, and each six months thereafter until September
2004, FCMAT shall file a written status report with the appropriate
fiscal and policy committees of the Legislature, including any
special committees created for the purpose of reviewing the reports,
and with the Members of the Legislature who represent the Oakland
Unified School District, the advisory board of the school district,
the Superintendent of Public Instruction, the Director of Finance,
and the Secretary for Education.  The reports shall include the
progress that the Oakland Unified School District is making in
meeting the recommendations of the improvement plan developed
pursuant to this section.
  SEC. 8.  (a) The Oakland Unified School District shall bear 100
percent of all costs associated with implementing this act, except
for the activities of the County Office Fiscal Crisis and Management
Team progress reports specified in Section 7 of this act.
   (b) The Oakland Unified School District shall add the
administrator as a covered employee of the school district for all
purposes of errors and omissions liability insurance policies.
  SEC. 9.  (a) The sum of one hundred million dollars ($100,000,000)
is hereby appropriated from the General Fund to the Superintendent of
Public Instruction for apportionment to the Oakland Unified School
District for the purpose of an emergency loan.  In order to qualify
for the loan, the district shall comply with Article 2 (commencing
with Section 41320) and Article 2.5 (commencing with Section 41325)
of Chapter 3 of Part 24 of the Education Code to the extent those
provisions are consistent with the conditions specified in this act.

   (b) Funds may be disbursed from the proceeds of the loan only if
the administrator and the County Office Fiscal Crisis and Management
Assistance Team jointly determine that the disbursement is necessary.

   (c) Based on the needs of the district to meet its obligations,
the Superintendent of Public Instruction may direct the Controller to
disburse, on a monthly basis, specific amounts of the emergency loan
before the approval of all of the conditions established by this
act.
   (d) For the fiscal year in which the loan moneys are disbursed and
each fiscal year thereafter, the Controller, or his or her designee,
shall cause an audit to be conducted of the books and accounts of
the district, instead of the audit required by Section 41020 of the
Education Code.  At the discretion of the Controller, the audit may
be conducted by the Controller, his or her designee, or an auditor
selected by the county superintendent and approved by the Controller.
  The costs of the audit shall be paid by the district.  The audits
shall be performed until the Superintendent of Public Instruction, in
consultation with the Controller, determines that the district is
financially solvent, but may not cease being performed earlier than
one year following the implementation of the plan required by Section
7 nor later than the time the emergency loan, including interest, is
repaid.  In addition, the Controller shall conduct quality control
reviews pursuant to subdivision (c) of Section 14504.2 of the
Education Code.
  SEC. 10.  (a) Notwithstanding subparagraph (A) of paragraph (2) of
subdivision (a) of Section 41327 of the Education Code, the Oakland
Unified School District shall repay the emergency loan incurred
pursuant to Section 9 of this act as a straight line loan amortized
over a 20-year term.  This amount shall be repaid by the district,
plus interest calculated at a rate equal to the rate earned by the
Pooled Money Investment Account on the date this act becomes
effective, for a period not to exceed 20 years.
   (b) If a required payment is not made within 60 days after a
scheduled date, the Controller shall pay the defaulted loan payment
of principal and interest by withholding that amount from the next
available payment that would otherwise be made to the county
treasurer on behalf of the district pursuant to Section 14041 of the
Education Code.  However, subject to the approval of the Department
of Finance, the amount withheld may be in monthly amounts as
determined by an agreement between the Oakland Unified School
District and the Controller during the period beginning with the next
available apportionment through the month preceding the next
scheduled payment.
   (c) The Director of Finance may amend the payment schedule set
forth in subdivision (a) if the director concludes that the amendment
is warranted and is in the best interests of both the state and the
Oakland Unified School District education program.  Upon that
determination, the director shall notify the Joint Legislative Budget
Committee that the payment scheduled will be changed on the date
that is 90 days from the date of notification if the Legislature is
in session.  If the 90-day period ends during a recess of the
Legislature or while the Legislature is not in session, the 90-day
period shall be extended until the Legislature reconvenes.
Amendments to the payment schedule shall defer the unpaid portion of
a repayment of the earliest fiscal year in which no other repayment
is scheduled.  Interest shall accrue on the unpaid portion of a
repayment from the scheduled due date until the time the payment is
actually made.  The interest charge shall be the rate equal to the
daily investment rate of the Pooled Money Investment Account on the
date the pay schedule is changed.
   (d) The school district may repay its loan obligation without
incurring any prepayment penalties.
  SEC. 11.  (a) Notwithstanding Sections 17456, 17457, 17462, and
17463 of the Education Code, or any other law, from June 1, 2003, to
June 30, 2005, inclusive, the Oakland Unified School District may
sell property owned by the district and use the proceeds from the
sale to reduce or retire the emergency loan provided in Section 9 of
this act.  The sale only of property pursuant to this subdivision is
not subject to Section 17459 or 17464 of the Education Code.
   (b) Notwithstanding any other provision of law, from June 1, 2003,
to June 30, 2005, inclusive, the Oakland Unified School District is
not eligible for financial hardship assistance pursuant to Article 8
(commencing with Section 17075.10) of Chapter 12.5 of Part 10 of the
Education Code.
  SEC. 12.  The Alameda County Superintendent of Schools maintains
the responsibility to superintend school districts under its
jurisdiction.  This act does not remove any statutory or regulatory
rights, duties, or obligations from the county superintendent of
school.
  SEC. 13.  The Department of Finance is authorized to redirect funds
appropriated in Item 6110-107-0001 of Section 2.00 of the Budget Act
of 2002 and from the corresponding item and section number of the
Budget Act of 2003 for the purposes of funding activities of the
County Office Fiscal Crisis and Management Assistance Team specified
in this act.
  SEC. 14.  The Legislature finds and declares that due to unique
circumstances relating to the fiscal emergency in the Oakland Unified
School District, a general statute cannot be made applicable within
the meaning of Section 16 of Article IV of the California
Constitution.
  SEC. 15.  No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district are the result of a program for which legislative authority
was requested by that local agency or school district, within the
meaning of Section 17556 of the Government Code and Section 6 of
Article XIII B of the California Constitution.
  SEC. 16.  This act is an urgency statute necessary for the
immediate preservation of the public peace, health, or safety within
the meaning of Article IV of the California Constitution and shall go
into immediate effect.  The facts constituting the necessity are:
   In order to address the fiscal emergency in which the Oakland
Unified School District finds itself and to ensure that it meets its
cash obligations for this fiscal year, it is necessary that this act
take effect immediately.