BILL ANALYSIS
AB 8
Page 1
ASSEMBLY THIRD READING
AB 8 (Brownley)
As Amended June 1, 2009
Majority vote
EDUCATION 11-0 APPROPRIATIONS 17-0
-----------------------------------------------------------------
|Ayes:|Brownley, Nestande, |Ayes:|De Leon, Nielsen, |
| |Ammiano, Arambula, | |Ammiano, |
| |Buchanan, Carter, Eng, | |Charles Calderon, Davis, |
| |Garrick, Miller, Solorio, | |Duvall, Fuentes, Hall, |
| |Torlakson | |Harkey, Miller, |
| | | |John A. Perez, Price, |
| | | |Skinner, Solorio, Audra |
| | | |Strickland, Torlakson, |
| | | |Krekorian |
| | | | |
|-----+--------------------------+-----+--------------------------|
| | | | |
-----------------------------------------------------------------
SUMMARY : Convenes a working group to make findings and
recommendations regarding the restructuring of California's
education finance system. Specifically, this bill :
1)Makes legislative findings and declarations related to
California's current education finance system; also states
legislative intent to develop a comprehensive plan for school
finance reform, simplify and improve rationality and equity in
the system, support accountability through improved fiscal
transparency and reporting, support ongoing improvement and
reform, and hold local educational agencies harmless by
transitioning to the new system as new funds become available.
2)Requires the Department of Finance (DOF) and Legislative
Analyst's Office (LAO) to convene a working group that
includes representatives of the Governor and Superintendent of
Public Instruction (SPI), as well as majority and minority
staff of the appropriate policy and fiscal committees of both
houses of the Legislature; also requires the working group to
consult with or invite organizations or experts as it deems
appropriate.
3)Requires the working group to consider and give weight to the
AB 8
Page 2
Getting Down to Facts (GDTF) research and resulting efforts,
including the report of the Governor's Committee on Education
Excellence (GCEE) or other subsequent research, and to draw
on, rather than repeat, those efforts; also requires the
working group to report its findings and recommendations to
the Legislature and Governor on or before December 1, 2010.
4)Requires the working group to make findings and
recommendations regarding:
a) Alternative funding structures that are simple,
rational, equitable, and based on costs; that support
accountability, facilitate financial reporting, recognize
the impact of growing or declining enrollment, reinforce
academic goals; and are based on exogenous local
educational agency (LEA) and student characteristics that
clearly affect costs;
b) A means of transitioning to a new restructured finance
system as new funds become available, including
pre-transition conditions, timing of the transition, the
manner in which LEAs are held harmless during the
transition, a component for equalizing funding based on the
cost of providing education services, and the mechanism for
and timing of elimination of the legacy funding system;
c) The policy and fiscal implications of the new system,
including costs, trade-offs, equity considerations,
incentives and disincentives, and governance
considerations; and,
d) Modifications to the Standardized Account Code Structure
(SACS) necessary to support school-level financial
reporting.
5)Requires that any costs, incurred by the working group, that
can not be absorbed by the participating entities be paid from
non-state funds donated or granted for that purpose.
EXISTING LAW :
1)Provides for Revenue Limit (base discretionary) funding for
school districts that is, in part, based on average daily
attendance (ADA), and provides, historically in specific
AB 8
Page 3
years, funding and a mechanism for equalizing school district
revenue limits by increasing the base revenue limit for some
set of low revenue limit districts.
2)Establishes and funds categorical programs that focus
resources and/or compliance requirements on specific classes
of students or schools, or on specific uses of funds,
identified by the Legislature as priorities.
3)Consolidates a number of historical categorical programs into
a smaller set of block grants, where a block grant gives
funding recipients the flexibility to spend the funds across
any of the previously individual programs consolidated into
that block grant, and provides for temporary flexibility to
spend the funds appropriated for nearly all categorical
programs in order to relieve local budget pressure created by
the current economic downturn.
4)Authorizes the use of SACS, developed by the California
Department of Education, to account for school district
revenues and expenditures.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, one-time General Fund (GF) costs, likely less than
$100,000, to DOF and LAO to convene the working group; also to
the extent that this bill leads to the establishment of a
transition funding mechanism and increased funding for K-12
pupils, there will be significant GF Proposition 98 cost
pressure, likely in excess of $5 billion.
COMMENTS : According to the author, this bill would "provide
state policymakers with a comprehensive plan to reform the
current education finance system, to leverage and support pupil
achievement by making California's funding system simpler, more
transparent, and more effective." The author envisions this
working group as the next step in reforming the state's current
system of education finance in answer to well-accepted
criticisms. Studies, completed in 2007 under the GDTF project,
point to numerous shortcomings in our finance system. Those
studies have also implicitly provided broad suggestions for how
the system could be changed. Many of those broad suggestions
have been further debated and developed into conceptual policy
proposals by the GCEE and in subsequent research. The working
group proposed in this bill provides the mechanism for turning
AB 8
Page 4
those broad, conceptual policy proposals into more specific
findings and recommendations that could be debated and proposed
for legislative action.
This bill is intended to bridge that gap between the academic
conclusions of the GDTF studies, the findings of the GCEE, and
specific legislative proposals that can be drafted, enacted and
implemented. An additional positive aspect of this proposal is
that the composition of the working group brings representatives
of all policy makers together with other stakeholders and
experts to collaboratively craft specific recommendations that
may then receive broad-based support. The charge given to the
working group in this bill is both broad and in-depth, since the
working group is to produce recommendations for comprehensive
reform of the entire school funding system and the transition to
that new system.
This bill directs the working group to make recommendations
regarding a specific means of transitioning into the new funding
system. Historical discussions concerning the transition from
one funding scheme to another have generally focused on making
the change in one step, while sorting out those winners that
gain funding and those losers that receive less funding; the
traditional approach then either holds the losers harmless or
simply lets the losers suffer from the loss of funds. The
former approach is often, and certainly would currently be,
prohibitively expensive, and the latter approach is particularly
unattractive when, as research indicates is the current case,
all California school districts are dramatically under-funded.
Thus these traditional approaches would either count on funds
that the state does not now have, or take funding away from
under-funded school districts to give to other school districts
in a zero sum game. AB 8 calls for a modified approach that
provides a transition over time by only applying the new funding
rules to new increases in funding. In this way districts will
continue to receive their pre-transition levels of funding
according to the funding allocation rules of the old legacy
system until some point in the future when that old system is
dismantled. Under this proposal, no district would lose funding
as a result of the move to the new system as long as the
transition is in place. The working group is charged with
designing the timing and other details of this transition
approach, including the eventual elimination of the legacy
system.
AB 8
Page 5
The bill also requires the working group to make recommendations
for the modification of the existing SACS system to support
school-level financial reporting. There are clear benefits to
school-level fiscal reporting related to increased transparency
and sensitivity to possible funding and service inequities.
There are also numerous technical, administrative, accounting,
and information technology issues that would have to be examined
in order for the working group to make these recommendations.
More than any other aspect of the working group's charge,
outside experts in these areas would be necessary to inform and
advise the working group.
Related and previous legislation: AB 60 (Coto), held in the
Assembly Appropriations Committee, proposed a study of the
weights that would be necessary to implement a weighted-student
funding approach. AB 2159 (Brownley), held in the Senate Rules
Committee in 2008, would have established a commission to
develop a plan for reforming the school finance system. AB 2394
(Coto), held in the Assembly Appropriations Committee in 2008),
was substantially similar to the current AB 60. AB 586 (Coto),
held in the Assembly Appropriations Committee in 2008, would
have stated legislative intent to replace the funding mechanisms
for kindergarten through twelfth grade education with a weighted
student funding formula that also included adjustments for grade
level and geographic cost differences, and would have directed
the SPI to convene a working group to develop the statutory
language that would enact this intent. SB 146 (Scott), vetoed
in 2008, would have directed the SPI to make calculations that
would inform a future change from attendance to enrollment based
funding.
Analysis Prepared by : Gerald Shelton / ED. / (916)
319-2087FN: 0001224