BILL ANALYSIS                                                                                                                                                                                                    


          |SENATE RULES COMMITTEE            |                  SB 1358|
          |Office of Senate Floor Analyses   |                         |
          |1020 N Street, Suite 524          |                         |
          |(916) 651-1520         Fax: (916) |                         |
          |327-4478                          |                         |
                                 THIRD READING

          Bill No:  SB 1358
          Author:   Simitian (D)
          Amended:  As introduced
          Vote:     27 - Urgency

           SENATE EDUCATION COMMITTEE  :  8-0, 4/5/06
          AYES:  Scott, Maldonado, Denham, Lowenthal, Romero,  
            Simitian, Soto, Torlakson
          NO VOTE RECORDED:  Alquist, Morrow, Speier

           SENATE APPROPRIATIONS COMMITTEE  :  13-0, 5/25/06
          AYES:  Murray, Aanestad, Alarcon, Alquist, Ashburn, Battin,  
            Dutton, Escutia, Florez, Ortiz, Poochigian, Romero,  

          SUBJECT  :    School finance:  revenue limits

           SOURCE  :     Author

           DIGEST  :    This bill establishes an 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.

           ANALYSIS  :    "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).  


                                                               SB 1358

           Revenue limit equalization was initiated in response to  
          the  Serrano  decisions that ordered the reduction of wealth  
          related (assess 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 form policy changes unrelated to  

          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  
          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 even 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 same new methodology, districts are  
          still grouped by size and type but the goal is set so that  
          90 percent of the pupils will be attending districts with  
          the same per pupil revenue limits (for their size and type)  
          and the remaining 10 percent of pupils will have marginally  
          more revenues per pupil.

          Categorical funding programs have generally not been  


                                                               SB 1358

          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.

          This bill:

          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.

          2.Provides that revenues, for purposes of this equalization  
            formula, will not include revenue received for the 1999  
            Beginning-Teacher Salary incentive program for 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 1,500 ADA


          Related Legislation

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

           SB 1077 (Simitian)  , in the Assembly Education Committee,  
          would establish a very similar equalization formula that it  


                                                               SB 1358

          would also equalize to the 90 percent target.  SB 1077  
          differs from this bill 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  

           AB 2531 (Goldberg)  , 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 percent target.  Like this bill, AB 2531 would include  
          incentive and "add-on" programs in the equalization  

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  Yes    
          Local:  No

                          Fiscal Impact (in thousands)

           Major Provisions             2006-07           2007-08           
           2008-09             Fund

           Equalization                    $300,000* - $500,000** one  
          time          General***

              *Amount in the Governor's proposed budget (6110-601)
            **Amount necessary to equalize to the 90th percentile
          ***Counts towards meeting the Proposition 98 minimum  
             funding guarantee.  An appropriation to fund an  
             equalization adjustment would become an ongoing  

           SUPPORT  :   (Verified  5/25/06)

          California Association of School Business Officials
          Small School Districts' Association
          Department of Finance


                                                               SB 1358

          NC:cm  5/26/06   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  SEE ABOVE

                                ****  END  ****