BILL NUMBER: AB 1303 CHAPTERED 07/21/05 CHAPTER 97 FILED WITH SECRETARY OF STATE JULY 21, 2005 APPROVED BY GOVERNOR JULY 21, 2005 PASSED THE SENATE JULY 11, 2005 PASSED THE ASSEMBLY APRIL 28, 2005 AMENDED IN ASSEMBLY MARCH 31, 2005 AMENDED IN ASSEMBLY MARCH 29, 2005 INTRODUCED BY Assembly Member Daucher FEBRUARY 22, 2005 An act to amend Sections 41329.52, 41329.55, 41329.56, and 41329.57 of the Education Code, and to add Section 63049.68 to the Government Code, relating to school finance, and declaring the urgency thereof, to take effect immediately. LEGISLATIVE COUNSEL'S DIGEST AB 1303, Daucher School finance: emergency apportionments and lease financing. Existing law authorizes a school district to receive a 2-part financing designed to provide an advance of apportionments owed to the school district from the State School Fund and requires the initial emergency apportionment to be an interim loan from the General Fund to the school district. Existing law requires the school district to enter into a lease financing with the California Infrastructure and Economic Development Bank (the bank) for the purpose of financing the emergency apportionment and requires the term of the lease not to exceed 20 years. This bill would require the term of the lease to be extended for a period not to exceed 10 years if at the end of the lease term any rent payable is not fully paid or if the rent payable has been abated. Existing law requires notification by the bank to the Controller of the lease financing, along with a schedule of rent payments to become due to the bank from the school district and identifying the bond trustee. Existing law requires the Controller to make the apportionment to the bond trustee of those amounts on the dates shown on the schedule. Existing law provides that the bank may further authorize that the apportionments be used to pay or reimburse the provider of any credit enhancement of bonds issued by the bank. This bill would also authorize those apportionments to be used to pay or reimburse the provider for other ongoing or periodic ancillary costs of the bond financing. The bill would require the bank to also provide notification of the lease financing to the school district. Existing law requires the bank to issue separate bonds for the West Contra Costa Unified School District and the Oakland Unified School District for lease financing and requires those school districts to use the proceeds to repay the existing apportionments. Existing law requires the terms of those leases not to exceed 20 years. This bill would require the terms of the leases to be extended for a period not to exceed 10 years if at the end of the lease terms any rent payable is not fully paid or if the rent payable has been abated. Existing law requires the Controller to annually transfer from Section A of the State School Fund the amount of funds necessary to pay certain warrants so that the effective cost of the lease financing provided to specified school districts is equal to the cost of the emergency loan made to each district at a certain annual rate. This bill would instead require the Controller to make that transfer pursuant to a schedule provided to the Controller by the bank, would provide that the effective cost of the lease financing is equal to the cost of the original emergency loan, and would specify the applicable interest rate for each district, as provided. Existing law requires the executive director of the bank to annually notify the Controller of certain amounts relating to the lease financing and requires the Controller to annually issue a warrant to certain school districts in that amount. This bill would instead require the executive director or chair of the bank to periodically provide a schedule to the Controller and each school district of the certain amounts relating to the lease financing and require the Controller to issue warrants to each school district pursuant to the schedule. Existing law provides that a financing of emergency apportionments upon the request of a school district, as provided, is deemed to be in the public interest and eligible for financing by the bank. Existing law authorizes the bank to issue revenue bonds and provide the proceeds to a school district pursuant to a lease agreement, as provided. This bill would declare that the state pledges that it will not alter a certain directive and will not amend or repeal certain provisions of existing law in any manner that would materially impair the security or other interests of the bondholders. This bill would declare that it is to take effect immediately as an urgency statute. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. Section 41329.52 of the Education Code is amended to read: 41329.52. (a) A school district may receive a two-part financing designed to provide an advance of apportionments owed to the district from the State School Fund. (b) The initial emergency apportionment shall be an interim loan from the General Fund to the school district. General Fund money shall not be advanced to a school district until that district agrees to obtain a lease financing as described in subdivision (c) and the bank adopts a reimbursement resolution governing the lease financing. The interim loan shall be repaid in full, with interest, from the proceeds of the lease financing pursuant to subdivision (c) within one year of the date the district receives the initial emergency apportionment disbursement. The interest rate on the interim loan shall be the rate earned by moneys in the Pooled Money Investment Account as of the date of the initial disbursement of emergency apportionments to the school district. (c) The school district shall enter into a lease financing with the bank for the purpose of financing the emergency apportionment, including a repayment to the General Fund of the amount advanced pursuant to subdivision (b). In addition to the emergency apportionment, the lease financing may include funds necessary for reserves, capitalized interest, credit enhancements and costs of issuance. The bank shall issue bonds for that purpose pursuant to the powers granted pursuant to the Bergeson-Peace Infrastructure and Economic Development Bank Act as set forth in Division 1 (commencing with Section 63000) of Part 6.7 of the Government Code. The term of the lease shall not exceed 20 years, except that if at the end of the lease term any rent payable is not fully paid, or if the rent payable has been abated, the term of the lease shall be extended for a period not to exceed 10 years. SEC. 2. Section 41329.55 of the Education Code is amended to read: 41329.55. (a) Simultaneous with the execution of the lease financing authorized pursuant to Section 41329.52, the bank shall provide to the Controller and the school district a notification of its lease financing. The notice shall include a schedule of rent payments to become due to the bank from the school district and identifying the bond trustee. The Controller shall make the apportionment to the bond trustee of those amounts on the dates shown on the schedule. The bank may further authorize that the apportionments be used to pay or reimburse the provider of any credit enhancement of bonds and other ongoing or periodic ancillary costs of the bond financing issued by the bank in connection with this article. The Controller shall make the apportionment only from moneys in Section A of the State School Fund designated for apportionment to the district and any apportionment authorized pursuant to this subdivision shall constitute a lien senior to any other apportionment or payment of State School Fund moneys to or for that district not made pursuant to this subdivision. (b) The amount apportioned for a school district pursuant to this section is an allocation to the district for purposes of subdivision (b) of Section 8 of Article XVI of the California Constitution. For purposes of computing revenue limits pursuant to Section 42238 for any school district, the revenue limit for any fiscal year in which funds are apportioned for the district pursuant to this section shall include any amounts apportioned by the Controller pursuant to subdivision (a) as well as Section 41329.57. (c) No party, including the school district or any of its creditors, shall have any claim to the money apportioned or to be apportioned to the bond trustee by the Controller pursuant to this section. SEC. 3. Section 41329.56 of the Education Code is amended to read: 41329.56. (a) Chapter 57 of the Statutes of 1993 consolidated several previous emergency apportionments and a loan to the West Contra Costa Unified School District and specified the repayment terms of that apportionment. Chapter 14 of the Statutes of 2003 authorized an emergency apportionment to the Oakland Unified School District and specified the repayment terms of that apportionment. Collectively these are referred to in this section as "existing apportionments." (b) Promptly after August 23, 2004, the bank shall issue separate bonds for the West Contra Costa Unified School District and the Oakland Unified School District for lease financing pursuant to Section 41329.52. The school districts shall use the proceeds to repay the existing apportionments. The terms of the leases shall not exceed 20 years, except that if at the end of the lease term any rent payable is not fully paid, or if the rent payable has been abated, the term of the lease shall be extended for a period not to exceed 10 years. SEC. 4. Section 41329.57 of the Education Code is amended to read: 41329.57. (a) (1) Pursuant to a schedule provided to the Controller by the bank, the Controller shall transfer from Section A of the State School Fund the amount of funds necessary to pay the warrants issued pursuant to paragraph (2) so that the effective cost of the lease financing provided to the Oakland Unified School District, the Vallejo City Unified School District, and the West Contra Costa Unified School District pursuant to this article shall be equal to the cost of the original General Fund emergency loan made to each district. (A) For the purposes of determining the cost of the original emergency loan for the West Contra Costa Unified School District, the original interest rate is the rate established pursuant to Section 41474 of 1.532 percent. (B) For the purposes of determining the cost of the original emergency loan for the Oakland Unified School District, the original interest rate is 1.778 percent. This rate shall also apply to any disbursements of the loan pursuant to Chapter 14 of the Statutes of 2003 that are subsequent to August 23, 2004. (C) For the purposes of determining the cost of the original emergency loan for the Vallejo City Unified School District, the original interest rate is 1.5 percent. This rate shall also apply to any disbursements of the loan pursuant to Chapter 53 of the Statutes of 2004 that are subsequent to August 23, 2004. (2) The executive director or chair of the bank shall periodically provide a schedule to the Controller and each school district of the actual amount of the difference between the cost of the lease financing compared to the cost of the original emergency loan for each district for each year and the Controller shall issue warrants to each school district pursuant to the schedule. Payments to a district shall occur only during the term of the loan for that district and shall be made no sooner than the corresponding payments are made to the bond trustee under the lease financing for that district. (3) For purposes of making the computations required by Section 8 of Article XVI of the California Constitution, the warrants issued pursuant to paragraph (2) are "General Fund revenues appropriated to school districts," as defined in subdivision (c) of Section 41202 for the fiscal years in which the warrants are issued and included within the "total allocations to school districts and community college districts from General Fund proceeds of taxes appropriated pursuant to Article XIII B" as defined in subdivision (e) of Section 41202, for the fiscal years in which the warrants are issued. (b) It is the intent of the Legislature that the financing cost subsidies funded in this section not be deemed precedent nor in conflict with Section 41329.53, as these districts requested loans prior to the enactment of this article. SEC. 5. Section 63049.68 is added to the Government Code, to read: 63049.68. The State of California pledges that (a) the state will not alter the directive to the Controller to make apportionments to the bond trustee of moneys in the State School Fund from that set forth in Section 41329.55 of the Education Code, and (b) the state will not amend or repeal subdivision (f) of Section 63049.67, in each case in any manner that would materially impair the security or other interests of holders of any bonds issued pursuant to this article. The bank is authorized to include this pledge in the bonds, or other documents entered into in connection with the bonds, as a covenant for the benefit of the bondholders. SEC. 6. 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 Constitution and shall go into immediate effect. The facts constituting the necessity are: In order to address the fiscal emergencies facing school districts that have received or that are requesting an emergency apportionment from the state, it is necessary that this act take effect immediately.