BILL ANALYSIS SENATE COMMITTEE ON EDUCATION Gloria Romero, Chair 2009-2010 Regular Session BILL NO: AB 184 AUTHOR: Block AMENDED: August 2, 2010 FISCAL COMM: Yes HEARING DATE: August 11, 2010 URGENCY: Yes CONSULTANT:Lynn Lorber NOTE : This bill has been amended to replace its contents and this is the first time the bill is being heard in its current form. SUBJECT : Special Disabilities Adjustment KEY POLICY ISSUE Should the special disabilities adjustment be extended to the 2009-10 fiscal year, thereby preventing school districts that already received and spent some of this funding from owing those funds to the state? SUMMARY This bill, an urgency measure, extends the special disabilities adjustment by one additional year, to the 2009-10 fiscal year. BACKGROUND In 1997, the Legislature reformed special education funding (AB 602, Ch. 854) to move from a formula based on the number of special education pupils to one based on a school district's overall average daily attendance (thereby removing an incentive to identify higher numbers of pupils as needing special education to drive an increase in funding). As part of this reform, a funding mechanism was created to provide additional funding to special education local plan areas (SELPAs) having a disproportionately large number of "high-cost" special education pupils. This funding is based on an incidence multiplier that was developed pursuant to a study completed in 1998 by the American Institutes for Research (AIR). AB 184 Page 2 Recognizing that these factors may change over time, the special education funding reform (AB 602) called for the incidence multiplier to expire after the 2002-03 fiscal year, and called for a new study to be completed by March 2003. AIR completed this second study, which recommended that the incidence multiplier be updated at least every five years, if not annually, and that the state gradually phase-out SELPAs that have been receiving adjustment funds for the five years prior to the release of the report, and provide full and immediate funding to SELPAs identified as responsible for a disproportionate number of high cost students. The Legislature has passed six bills to extend the calculation of the special disabilities adjustment, each for an additional fiscal year, with the latest extending this calculation to the 2008-09 fiscal year. Current law requires the Superintendent of Public Instruction to annually calculate the special disabilities adjustment for each SELPA based on the incidence multiplier established pursuant to the 1998 American Institutes for Research report. (Education Code 56836.155) ANALYSIS This bill , an urgency measure, extends the special disabilities adjustment by one additional year, to the 2009-10 fiscal year. Specifically, this bill: 1) Requires the Superintendent of Public Instruction (SPI) to calculate the special disabilities adjustment of each SELPA for the incidence of disabilities for the 2009-10 fiscal year. 2) Specifies that the special disabilities adjustment for the 2009-10 fiscal year is to be excluded from the SELPA's base special education funding (per unit of average daily attendance). 3) Requires the SPI to calculate the special disabilities adjustment for the 2009-10 fiscal year and adjust this funding for each SELPA regardless of when this bill becomes operative. 4) Includes an urgency clause. STAFF COMMENTS AB 184 Page 3 1) Need for the bill . According to the author, the state budget last year included funds for the 2009-10 SDA and the California Department of Education (CDE) had been sending school districts their SDA funding this past year. In June 2010, CDE announced that it did not have the authority for its distribution in the 2009-10 fiscal year and without emergency legislation it would alert the State Controller to offset 2010-11 special education apportionments for school districts that received and spent 2009-10 special disabilities adjustment funds. 2) How did we get here ? The CDE has annually calculated and allocated the special disabilities adjustment, beginning with the 1998-99 fiscal year. This funding is sent to SELPAs as part of the overall special education funding, and is made in monthly payments. CDE began sending monthly payments to SELPAs for the 2009-10 fiscal year in February 2010 (as part of the First Principal Apportionment, also known as P1), under the assumption that the special disabilities adjustment would continue to be included in the overall special education funding (for those SELPAs that are eligible for the special disabilities adjustment). However, while the 2009 Budget Act included an appropriation for the special disabilities adjustment (as part of overall special education funding), statutory authority to allocate those funds for the 2009-10 fiscal year was not included in budget trailer bill language, as had been the case in prior years. As part of the P1 notification to SELPAs, CDE included a link to the calculations used to determine the 2009-10 P1, which specifically states that authority to use the special disabilities adjustment in the calculation of overall special education funding was not extended to the 2009-10 fiscal year and that CDE will not include incidence multipliers or special disabilities adjustment funding in its Second Principal Apportionment (P2) calculation if the statute is not extended. At the point of the P2 calculation (June 2010), school districts within SELPAs that received these funds had already included the special disabilities adjustment funding in their budgets and expended some of those funds. 3) For prior fiscal year . This bill provides for the special disabilities adjustment only for the 2009-10 fiscal year. Will the problem addressed by this bill AB 184 Page 4 recur for the current fiscal year? Should this bill be amended to clearly state that SELPAs should not expect to continue to receive special disabilities adjustment funding in the future? 4) Not all SELPAs are eligible . Thirty-two SELPAs (out of 122) are currently eligible to receive the special disabilities adjustment, based on the formula in current law. While this adjustment is calculated annually, it is based on a formula that is 12 years old. 5) Related budget action . The Budget Conference Committee recently reached a compromise relative to the special disabilities adjustment, which provides for the continuation of this funding through the 2010-11 fiscal year. The compromise recognizes the usefulness of this bill in ensuring CDE can allocate the remaining 2009-10 funds if the budget continues to be delayed. The compromise also provides federal funding for a study to determine options for the replacement of the special disabilities adjustment, and repeals the existing adjustment funding formula on July 1, 2011. 6) Fiscal impact . The 2009-10 special disabilities adjustment amount totals $69.85 million, which was appropriated but not allocated for the 2009-10 fiscal year. Because these funds were appropriated, this bill would not result in additional costs to the state. 7) Prior legislation . SB 1564 (Schiff, Ch. 330, 1998) established the special disabilities adjustment through the 2002-03 fiscal year. AB 97 (Nation, Ch. 21, 2004) extended the special disabilities adjustment to the 2003-04 fiscal year. AB 2525 (Committee on Education, Ch. 896, 2004) extended the special disabilities adjustment to the 2004-05 fiscal year. SB 63 (Committee on Budget and Fiscal Review, Ch. 73, 2005) extended the special disabilities adjustment to the 2005-06 fiscal year. AB 1802 (Committee on Budget, Ch. 79, 2006) extended the special disabilities adjustment to the 2006-07 fiscal year. SB 80 (Committee on Budget and Fiscal AB 184 Page 5 Review, Ch. 174, 2007) extended the special disabilities adjustment to the 2007-08 fiscal year. AB 519 (Committee on Budget, Ch. 757, 2008) extended the special disabilities adjustment to the 2008-09 fiscal year. SUPPORT San Diego Unified School District OPPOSITION None received.