BILL ANALYSIS AB 487 Page A Date of Hearing: April 1, 2009 ASSEMBLY COMMITTEE ON EDUCATION Julia Brownley, Chair AB 487 (Brownley) - As Introduced: February 24, 2009 SUBJECT : Instructional materials: sale of surplus or undistributed obsolete instructional materials SUMMARY : Makes changes to the existing restrictions placed on the disposal of surplus or obsolete undistributed instructional materials and establishes the Surplus Instructional Materials (SIM) fund, as specified. Specifically, this bill : 1)Establishes the SIM fund under the administration of the Superintendent of Public Instruction (SPI) and provides that the moneys in the SIM fund are available, subject to appropriation, for the purpose of allowing school districts, county offices of education, and charter schools to acquire supplemental instructional materials. 2)States that all moneys appropriated from the SIM fund shall supplement, rather than supplant, existing funds available for instructional materials, and requires that any deposit made into the SIM fund, and the allocation of any moneys from this fund, including the subsequent use of those moneys, be subject to the annual audit of local educational agencies required by existing law. 3)Expands application of the provisions related to disposal of undistributed obsolete instructional materials to county offices of education and charter schools. 4)Deletes a provision authorizing the sale of surplus or undistributed obsolete instructional materials to any organization that agrees to use the materials solely for educational purposes and authorizes districts, county offices of education and charter schools to sell surplus and obsolete materials. 5)Requires that 50% of the proceeds of any sale of surplus or undistributed obsolete instructional materials made under the provisions of this bill be remitted to the state and deposited in the SIM fund. AB 487 Page B 6)Deletes a provision requiring an organization or institution receiving obsolete instructional materials to certify that it agrees to make no charge to the persons to whom the organization gives or lends the materials, and requires an organization that receives donated obsolete materials to certify that the materials will be used for educational purposes. EXISTING LAW 1)Establishes the Instructional Materials Fund in the State Treasury as a means of annually funding the acquisition of instructional materials as required by the California Constitution. 2)Requires the State Board of Education (SBE) to adopt basic instructional materials for use in kindergarten and grades one to eight, inclusive consistent with the six and eight year adoption cycles for all subject areas. 3)Authorizes the SBE and school districts to dispose of surplus or undistributed obsolete instructional materials that are usable for educational purposes, to specified entities, including by sale to any organization that agrees to use the materials solely for educational purposes and to make no charge of any kind to the persons to whom the organization gives or lends the materials. FISCAL EFFECT : Unknown COMMENTS : Current law requires the SBE to adopt Kindergarten to grade 8, inclusive, (K-8) basic instructional materials in language arts, mathematics, science, social science, and bilingual or bicultural subjects not less than two times every six years, and not less than two times every eight years in any other subject for which the SBE determines the adoption of instructional materials to be necessary or desirable. There has been at least one adoption of instructional materials every year since 2005. Current law requires local governing boards to provide pupils with standards-aligned textbooks or basic AB 487 Page C instructional materials no later than 24 months<1> after those materials have been adopted by the SBE, and therefore districts practically have had to purchase materials every year for the last number of years. The state spends a considerable amount of resources in providing instructional materials. The 2008-09 revised budget provides $353,367 for instructional materials, a slightly lower amount than what has been allocated in previous years. According to the author, "Over the last four fiscal years the Legislature has appropriated more than $1.3 billion for the acquisition of instructional materials to be used in California's nearly 10,000 schools." The resources coupled with the frequent adoptions and requirements for districts to purchase new instructional materials, assures that there is and will continue to be a steady abundance of used, surplus, and obsolete instructional materials. Nevertheless, districts have limited options for the disposal of such materials. Some school districts dispose of used obsolete instructional materials by donating them to non-profit entities that, in turn, pass the books on to others such as individuals, home schooling groups or overseas organizations. Districts may also donate them to libraries, children or adults for the purpose of increasing the general literacy of people or districts may sell them to an organization that agrees to use the materials solely for educational purposes and that agrees will not charge for those materials. This bill does not limit the ability of school districts to donate or transfer their surplus or obsolete materials directly to any other party or for any other use currently allowed. In fact, the bill extends that same authority to county offices of education and charter schools. Other school districts dispose of the materials as a combination of solid waste disposal and recycling and others pay for storage of these materials. Districts are currently prohibited from selling or donating surplus and obsolete materials to organizations that will resell them. This bill would allow districts to sell such materials to any organization but remit 50% of the proceeds to the state to --------------------------- <1> The enactment of SB 4 X3 (Ducheny), Chapter 12, Statutes of 2009, the education budget trailer bill, provides districts flexibility with regards to the 24-month purchasing requirement until July 1, 2010. AB 487 Page D be deposited in a special fund for the Legislature to appropriate for purposes of purchasing supplemental instructional materials. The other 50% would remain with the school districts. To the extent that districts choose to sell their surplus or obsolete instructional materials, this measure will create a revenue source for school districts and the state. Prior legislative attempts to change the existing restrictions in the disposal of surplus or obsolete materials have been unsuccessful. Two bills that sought to allow the sale of materials to organizations that would then sell them for a profit were held in different Committees along the legislative process. The opponents of such legislation argued that it would not be appropriate to allow for profit organizations to benefit from materials that were purchased with public funds. Conversely, a bill that sought to emphasize that surplus or obsolete materials could only be sold to organizations that agreed to use the materials solely for educational purposes and that agreed not to resell them for a profit also faced opposition. The opposition came from Follet Educational Services arguing, "it would eliminate our ability to do business with the California schools and districts since we are a 'for profit' organization. It would also eliminate a much-needed source of revenue back into our California schools." From these arguments, one can conclude that despite provisions in the code prohibiting the sale of surplus materials to organizations that resell them, that such transactions could be taking place out of compliance with current law. Waiver request : In 2005, the State Board of Education (SBE) rejected a request from a school district seeking to waive provisions of the Education Code (EC) restricting the sale of surplus or obsolete instructional materials "solely for educational purposes" and to agencies that do not intend to charge a fee to the recipient. The district wanted to sell such materials, for a profit, to an organization that intended to resell them to educational agencies in other states. The district alleged that "approval of this waiver would allow it to resell obsolete instructional materials that it current sells for scrap for approximately $420/year, to a for-profit textbook reseller." The district anticipated that it could make $6-8 million dollars from these sales. The basis for SBE's denial of the waiver according to information on the SBE's agenda is the AB 487 Page E following: The fact that the district can be motivated by profit to make this resale should not be considered an excuse for not pursuing the current option that the district has of donating these materials to other needy students. Approval of this waiver would likely result in a surge of other districts seeking to dump their old materials onto the resale market in other states. The district has stated how much they hope to recover from a waiver of these sections, but what is unknown is the amount of profit that the "national book vendors" noted in its waiver application would make by selling materials that California has deemed "obsolete" to students in other states. The waiver of EC sections designed to protect the interests of students in order to facilitate corporate profits, with the justification that the obsolete materials are not being sold in California, seems to run counter to the intent of these statutes. Suggested amendments : There has been interest in expanding access to technology-based electronic instructional materials, but lack of funding for such resources and equipment has made it difficult. Staff recommends the bill be amended to expand the allowable uses of the SIM fund to include technology-based materials. On page 2 line 16 after "materials" add: "or technology-based materials" The bill requires that 50% of the revenue generated by the sale of surplus or obsolete instructional materials be remitted to the state and deposited in the SIM fund but it does not specify what the allowable uses are for the remainder of the funds. Staff recommends that the revenue generated from the sale of these materials be used for purchasing instructional materials. Staff recommends the bill be amended to specify that the school district shall use the remaining 50% of revenue generated by the sale of surplus or obsolete materials for the purchase of instructional materials, supplemental instructional materials or technology-based materials. Current law requires any organization that receives obsolete instructional materials either by sale or donation to certify to AB 487 Page F the school district that it agrees to use the materials for educational purposes and that it agrees not to charge persons to whom the organization gives or lends the materials. This bill deletes the requirement that the materials be used for educational purposes when an organization purchases these materials, but maintains the requirement for organizations that receive these materials by donation. The inclusion of this language is relevant to the existing restrictions on the sale of surplus and obsolete materials, but because this bill now allows the sale of these materials to any organization without regard to whether the materials will be used for an educational purpose or not, the same rules on usage should apply to organizations that acquire the materials by donation. Staff recommends the bill be amended to delete the requirement that organizations that acquire instructional materials by donation agree to use such materials for educational purposes. This bill also allows organizations that acquire surplus or obsolete instructional materials by donation to resell the materials. This raises the question of whether organizations that acquire these materials by donation should be allowed to resell or to charge for lending the materials, especially because these materials were purchased with public funds. Staff recommends the bill be amended to reinstate language requiring an organization that acquires obsolete instructional materials by donation to certify that it will not make a charge of any kind to the persons to whom the organization gives or lends such materials. The author states, "Some school districts dispose of used instructional materials by donating the materials to non-profit entities that, in turn, pass the books on to others such as individuals, home schooling groups or overseas organizations for educational purposes. Other school districts dispose of the materials as a combination of solid waste disposal (cover stock and glued bindings) and recycling (paper). Some districts even pay for warehouse storage space to house obsolete instructional materials. During these tough economic and budget strapped times these obsolete instructional materials are wasted resources that schools should be utilizing." Related legislation: AB 525 (Anderson) authorizes school districts to sell surplus or obsolete instructional materials to any organization. AB 525 (Anderson) does not include provisions requiring districts to remit any of the funds back to the state, AB 487 Page G nor does it require assurances that the materials be used solely for educational purposes and not resold when the materials have been donated. These materials were purchased with public funds and donating them to organizations that could in turn sell them and make a profit out these materials may raise concerns. AB 525 (Anderson) is in direct conflict with this bill. Staff recommends the Committee consider approving one of the two measures and avoid passing competing measures that are in direct conflict with one another. Previous legislation : AB 1342 (Mendoza) of 2007 changes the restrictions placed on the State Board of Education and school districts in the disposal of surplus or undistributed obsolete instructional materials. AB 1342 was held in the Assembly Education Committee. AB 2654 (Coto) of 2006 authorizes the sale of usable surplus or undistributed obsolete instructional materials by school districts to organizations that would be permitted, with an assurance the materials will be used for educational purposes, to sell the materials for a profit. AB 2654 was held in the Senate Appropriations Committee. AB 93 (J. Horton) of 2005 Allows school districts to sell surplus and obsolete instructional materials to any organization that agrees to use the materials only for educational purposes and that agrees not to resell the materials for a profit. AB 93 was held in the Assembly Education Committee. REGISTERED SUPPORT / OPPOSITION : Support American Federation of State, County and Municipal Employees Opposition None on file. Analysis Prepared by : Marisol Avi?a / ED. / (916) 319-2087