BILL ANALYSIS ------------------------------------------------------------ |SENATE RULES COMMITTEE | AB 851| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ THIRD READING Bill No: AB 851 Author: Brownley (D) Amended: 7/15/09 in Senate Vote: 21 SENATE EDUCATION COMMITTEE : 9-0, 7/08/09 AYES: Romero, Huff, Alquist, Hancock, Liu, Maldonado, Padilla, Simitian, Wyland SENATE APPROPRIATIONS COMMITTEE : 8-0, 8/17/09 AYES: Kehoe, Cox, Corbett, Denham, Leno, Price, Runner, Wolk NO VOTE RECORDED: Hancock, Oropeza, Walters, Wyland, Yee ASSEMBLY FLOOR : 78-0, 5/21/09 (Consent) - See last page for vote SUBJECT : School finance SOURCE : Author DIGEST : This bill simplifies calculation of school district general purpose funding (revenue limits) by consolidating five add-on formulas into two fixed adjustments. ANALYSIS : School district revenue limits were created in 1972 in response to the Serrano v. Priest lawsuit that was then pending in the courts. The Serrano case determined that the state's then existent property tax based system of CONTINUED AB 851 Page 2 school funding was unconstitutional and the state was ordered to equalize per pupil revenues that had no rational basis to be different. The Serrano courts excluded categorical funding from equalization order because the need to compensate districts for differential needs provided a rational basis for unequal distribution. Over the years the state has provided school districts with various general aid allocations that, arguably, had a rational basis for not being equalized. These "revenue limit add-ons" were allocated to districts with their revenue limit funding but not included in equalization calculations and thus always kept separate from the districts' "base revenue limits." Some of these "add-ons," such as the "meals for needy pupils" were allocations to districts to allow them to maintain local initiatives that had been funded from "voted overrides" of local property tax rates. All such property tax increments were eliminated by Proposition 13 in 1978 and local districts had appealed to the state to maintain what had been locally funded programs with "add-on" funding. In addition to preserving local initiatives, revenue limit add-ons were created by statute to address costs that varied among districts, and therefore did not make sense to equalize, but still were basic funding needs that didn't need to be restricted under a categorical program. The minimum beginning teacher salary incentive was such an add-on. Current law also requires the state to reimburse school districts for costs of unemployment insurance that exceed the amount incurred by the district in 1975-76 and reimburse the Newport-Mesa Unified School District for funding that was not received due to the bankruptcy of Orange County in 1994-95. Finally, current law requires that three school districts in the Santa Cruz area receive a revenue limit adjustment that equalizes funding among the districts participating in an inter-district attendance agreement for middle school pupils. The funding provided for this arrangement constitutes a transfer in general purpose funding among the districts. This bill: AB 851 Page 3 1. Commencing with 2011-12, requires the Superintendent of Public Instruction (SPI) to compute an amount for each school district equal to the sum of funding received in 2007-08 (if any) for the Meals for Needy Pupils and Beginning Teacher Salary Incentive divided by the district's average daily attendance (ADA) and further adjusted by the annual cost of living adjustment applied to school district revenue limits. 2. Commencing with 2010-11, requires the SPI to compute an amount for each school district equal to the sum of funding received in 2007-08 (if any) for unemployment insurance, Orange County bankruptcy, and the inter-district transfer of middle school pupils in three school districts, divided by the recipient district's ADA. 3. Directs the SPI to increase affected school districts' revenue limits per unit of ADA by the adjustments computed above. 4. Provides that the statutes authorizing the five revenue limit "add-ons", which are replaced by the above adjustments, shall become, inoperative as of July 1, 2010, and repeal as of January 1, 2011. 5. Makes inoperative as of July 1, 2010, and repeals as of January 1, 2011, the program statutes authorizing school districts to implement the beginning teacher salary incentive. 6. Authorizes county offices of education to maintain their beginning teacher salary incentive. Background Need for the bill. According to the author's office, this proposal will simplify and provide additional transparency for the state's education finance system, goals that are consistent with the Getting Down to Facts research studies released in 2007. The author's office also points to reduced administrative costs at the state and local levels as a benefit of this proposal. AB 851 Page 4 Consolidation of revenue limit add-ons makes sense since the funding has long ago lost all connection to the program that initially existed. These add-ons are neither restricted in purpose nor related to current program costs and may be used for any discretionary purpose just like all other revenue limit funding. In view of these facts, the Legislative Analyst's Office has recommended that a number of revenue limit add-ons, including those specified in this bill, be rolled into revenue limits. Previous legislation : AB 599 (Mullin) of 2008 was substantially similar to this bill, except that it also included 1983 instructional time incentive in the adjustment that is created out of the Meals for Needy Pupils and Beginning Teacher Salary Incentive add-ons. AB 599 was vetoed with the following message: While this bill attempts to simplify an overly complex education finance system, this bill has several technical concerns in the way it was drafted. I am concerned that the consolidated "add-on" may not be revenue neutral, as the author intended, since various factors could result in unanticipated General Fund costs or savings in future years. Furthermore, the bill as crafted may diminish the incentives for districts to offer longer instructional time. FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes Local: No According to the Senate Appropriations Committee: Fiscal Impact (in thousands) Major Provisions 2009-10 2010-11 2011-12 Fund Revenue limit add-on Significant savings, General* consolidations depending on the Unemployment Insurance AB 851 Page 5 contribution rate in a given fiscal year *Counts toward meeting the Proposition 98 minimum funding guarantee SUPPORT : (Verified 8/20/09) American Federation of State, County and Municipal Employees, AFL-CIO Small School Districts' Association ASSEMBLY FLOOR : AYES: Adams, Ammiano, Anderson, Arambula, Beall, Bill Berryhill, Tom Berryhill, Blakeslee, Block, Blumenfield, Brownley, Buchanan, Caballero, Carter, Chesbro, Conway, Cook, Coto, Davis, De La Torre, De Leon, DeVore, Duvall, Emmerson, Eng, Evans, Feuer, Fletcher, Fong, Fuentes, Fuller, Furutani, Gaines, Galgiani, Garrick, Gilmore, Hagman, Hall, Harkey, Hayashi, Hernandez, Hill, Huber, Huffman, Jeffries, Jones, Knight, Krekorian, Lieu, Logue, Bonnie Lowenthal, Ma, Mendoza, Miller, Monning, Nava, Nestande, Niello, Nielsen, John A. Perez, V. Manuel Perez, Portantino, Price, Ruskin, Salas, Silva, Skinner, Smyth, Solorio, Audra Strickland, Swanson, Torlakson, Torres, Torrico, Tran, Villines, Yamada, Bass NO VOTE RECORDED: Charles Calderon, Saldana DLW:do 8/20/09 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END ****