BILL ANALYSIS                                                                                                                                                                                                    






                         SENATE COMMITTEE ON EDUCATION
                               Jack Scott, Chair
                           2005-2006 Regular Session
                                        

          BILL NO:       SB 1358
          AUTHOR:        Simitian
          INTRODUCED:    February 21, 2006
          FISCAL COMM:   Yes            HEARING DATE:  April 5, 2006
          URGENCY:       Yes            CONSULTANT:James Wilson

           SUBJECT  :  School District Revenue Limit Equalization
          
           SUMMARY  

          This bill, an urgency measure, establishes a statutory  
          formula to make equalizing adjustments to school district  
          revenue limits with a goal of raising per pupil revenue  
          limits to a fixed point at which 90 percent of all pupils  
          would be attending school districts with revenues that are  
          equal to other districts of the same size and type.

           BACKGROUND  

          "Equalization" is a term that has traditionally been  
          applied to the process of revising school funding formulas  
          in order to reduce per pupil funding differences in general  
          aid (revenue limit funding).  Revenue limit equalization  
          was initiated in response to the Serrano decisions that  
          ordered the reduction of wealth related (assessed value  
          related) disparity in general funding for school districts  
          of similar size and type.  Although the last Serrano case  
          was closed in 1986, the state has continued to make  
          equalizing adjustments to per pupil revenue limits which  
          have a tendency to become less equalized as a result of  
          various forces such as statutory revisions of the  
          definition of ADA, declining enrollment adjustments, and  
          district mergers and territory transfers.  In sum, most  
          differences in today's per pupil revenue limits cannot be  
          ascribed to "wealth related disparities" but rather result  
          from policy changes unrelated to equalization.

          For purposes of equalization, school districts are divided  
          into six "size and type" groups that were recognized by the  
          Serrano courts as having legitimate reasons for differences  
          in revenue limits.  Among the types; high school districts  




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          have the highest per pupil costs, elementary districts are  
          the lowest, and unified districts that serve all grade  
          levels have per pupil revenue limit averages that are  
          between the other two.  Each type of district is also  
          divided into large and small groups, reflecting the economy  
          of scale associated with size.

          Traditional equalization formulas are aimed at raising  
          district per pupil revenues that are below average up to  
          the average for their size and type group.  Because the  
          very act of adding equalization funding to revenue limits  
          caused the average to grow, this method had the drawback of  
          leaving ever larger number of districts "below" the new  
          higher average, albeit by a small increment.  At the  
          suggestion of the Legislative Analyst, the equalization  
          proposals that have been under consideration in the recent  
          past have aimed not at the average but at the "90th  
          percentile."  Under the new methodology, districts are  
          still grouped by size and type but the goal is set so that  
          90% of the pupils will be attending districts with the same  
          per pupil revenue limits (for their size and type) and the  
          remaining 10% of pupils will have marginally more revenues  
          per pupil.  

          Categorical funding programs have generally not been  
          subject to equalization because their funds may have to be  
          distributed to meet specific needs that are not equally  
          distributed among school districts.  For example, some  
          districts may have higher transportation costs because they  
          serve a widely dispersed population.  Because there is a  
          "rational basis" for these differences, the Serrano courts  
          allowed categorical funding to remain outside of  
          equalization mandates.

           ANALYSIS
           
           This bill, an urgency measure:  

          1)   Establishes a formula for the equalization of school  
               district revenue limits so that per pupil revenues may  
               be increased to a target level at which, in the  
               2005-06 year, 90 percent of pupils attended districts  
               with lower per pupil revenues and 10 percent of pupils  
               attended districts with per pupil revenues that were  
               equal to or greater than the target level.





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          2)   Provides that revenues, for purposes of this  
               equalization formula, will not include revenue  
               received for the 1999 Beginning-Teacher Salary  
               incentive program or the 1983 "longer day and year"  
               incentive.

          3)   For the purpose of this equalization formula, divides  
               school districts into the traditional size and type  
               groups, as follows:

               a)        Small elementary, less than 101 ADA
               b)        Large elementary, more than 100 ADA
               c)        Small high school, less than 301 ADA
               d)        Large high school, more than 300 ADA
               e)        Small unified, less than 1,501 ADA
               f)        Large unified, more than 1500 ADA

           STAFF COMMENTS  

           Related legislation  . 

          AB 2070 (Daucher), would establish an equalization formula  
          that is identical to this measure.

          SB 1077 (Simitian), in the Assembly Education Committee,  
          would establish a very similar equalization formula in that  
          it would also equalize to the 90% target. SB 1077 differs  
          from this measure by including, rather than excluding,  
          funds from the beginning teacher and instructional time  
          incentives, as well as including funds from two other  
          revenue limit "add-on" programs, in the base of funding to  
          be equalized under the formula.  This difference could  
          affect the eligibility of individual districts for  
          equalization funding, but it is unlikely to make a  
          substantial difference in the statewide cost of  
          implementation. 

          Another piece of related legislation is AB 2531 (Goldberg).  
           AB 2531 would recalculate all district revenue limits into  
          separate weighted amounts by grade span (K-5, 6-8 and 9-12)  
          and then recombine the amounts to create a new district  
          revenue limit that would be equalized to the 90% target.   
          Like SB 1077, AB 2531 would include incentive and "add-on"  
          programs in the equalization calculation.

           SUPPORT  




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          California Association of School Business Officials
          Small School Districts' Association

           OPPOSITION  

          None received.