BILL ANALYSIS ------------------------------------------------------------ |SENATE RULES COMMITTEE | AB 2717| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ THIRD READING Bill No: AB 2717 Author: Walters (R) Amended: 5/26/06 in Assembly Vote: 21 SENATE EDUCATION COMMITTEE : 10-0, 6/28/06 AYES: Scott, Maldonado, Alquist, Denham, Lowenthal, Romero, Simitian, Soto, Speier, Torlakson NO VOTE RECORDED: Morrow SENATE APPROPRIATIONS COMMITTEE : 7-3, 8/7/06 AYES: Aanestad, Alarcon, Alquist, Ashburn, Battin, Dutton, Poochigian NOES: Murray, Escutia, Florez NO VOTE RECORDED: Ortiz, Romero, Torlakson ASSEMBLY FLOOR : 76-0, 5/30/06 - See last page for vote SUBJECT : Charter school finance SOURCE : Author DIGEST : This bill allows the California School Finance Authority to provide tax-exempt, low cost financing to charter schools for use in the construction, repair, or lease of school facilities. ANALYSIS : Current law establishes the California School Finance Authority (CSFA) to assist school districts and community college districts by providing access to CONTINUED AB 2717 Page 2 financing for working capital and capital improvements. Charter schools cannot access facility financing through the CSFA unless their chartering school district or county office of education agrees to act in their behalf. This bill: 1. Revises the definitions of various terms governing the operation of the CSFA. 2. Provides that bonds issued by the CSFA do not constitute a debt or liability of any entity that is authorized to grant a charter to a charter school, except a charter school that is a dependent of a school district or county office of education, or is itself a school district. 3. Authorizes the State Controller to make payments for various debt and debt-related costs by deducting the funds directly from the general-purpose entitlements of charter schools. 4. Provides that the charter school or its agent and its creditors do not have a claim to funds apportioned by the State Controller for payment of various debts and expenses related to CSFA financing, thereby subordinating any other debt of, or claims against, the charter school. 5. Provides that a charter school may by resolution authorize its chartering district or educational management organization to act as its agent in the performance of any of the matters permitted by the statutes governing services provided by the CSFA. Comments The CSFA was established in 1985 to oversee the statewide system for the sale of revenue bonds to reconstruct, remodel or replace existing school buildings, acquire new school sites and buildings to be made available to public school districts (K-12) and community colleges, and to assist school districts by providing access to financing for working capital and capital improvements. The CSFA, AB 2717 Page 3 which serves as conduit to access financing, also administers the state's $400 million Charter School Facilities Program. Dependent charter schools cannot access facility financing through the CSFA unless their chartering school district or county office of education agrees to act in their behalf. Charter schools organized as a nonprofit 501 (c) (3) corporation may legally borrow the proceeds of a tax-exempt financing issued by a governmental entity such as the CSFA. Under this bill, these independent charter schools, charters which receive their funding directly from the state, would be permitted to access the CSFA directly. (Charter schools have attempted to obtain facility financing secured by their state apportionment but financial institutions are reluctant to offer financing to an entity which must renew its charter, the source of its state apportionment, every five years.) There is no direct fiscal impact on the state because the CSFA, which has the authority to use intercept financing, also has the authority to charge fees to recover its costs. Additionally, any debt issued through the CSFA is the sole obligation of the borrower. Section 17185 of the Education Code provides that revenue bonds issued under CSFA authority are not and shall not be deemed to constitute a debt or liability of the state, or any political subdivision of the state thereof, and are not and shall not be deemed to be a pledge of the faith and credit of the state, or any political subdivision thereof, other than the authority. FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes Local: No No direct state costs, CSFA costs offset by fees. SUPPORT : (Verified 8/9/06) California Charter Schools Association Charter Voice ASSEMBLY FLOOR : AB 2717 Page 4 AYES: Aghazarian, Arambula, Baca, Bass, Benoit, Berg, Bermudez, Blakeslee, Bogh, Calderon, Canciamilla, Chan, Chavez, Chu, Cogdill, Cohn, Coto, Daucher, De La Torre, DeVore, Dymally, Emmerson, Evans, Frommer, Garcia, Goldberg, Hancock, Harman, Haynes, Jerome Horton, Shirley Horton, Houston, Huff, Jones, Karnette, Keene, Klehs, Koretz, La Malfa, La Suer, Laird, Leno, Leslie, Levine, Lieu, Liu, Matthews, Maze, McCarthy, Montanez, Mountjoy, Mullin, Nakanishi, Nation, Nava, Negrete McLeod, Niello, Parra, Plescia, Richman, Ridley-Thomas, Sharon Runner, Ruskin, Salinas, Spitzer, Strickland, Torrico, Tran, Umberg, Vargas, Villines, Walters, Wolk, Wyland, Yee, Nunez NO VOTE RECORDED: Lieber, Oropeza, Pavley, Saldana NC:mel 8/11/06 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END ****