BILL ANALYSIS                                                                                                                                                                                                    






                         SENATE COMMITTEE ON EDUCATION
                              Gloria Romero, Chair
                           2009-2010 Regular Session
                                        

          BILL NO:       AB 1022
          AUTHOR:        Nava
          AMENDED:       April 29, 2009
          FISCAL COMM:   Yes            HEARING DATE:  June 25, 2009
          URGENCY:       No             CONSULTANT:Kathleen Chavira

           SUBJECT  :  Ventura Unified School District: surplus property  
          proceeds.

           SUMMARY  

          This bill authorizes the Ventura Unified School District to  
          deposit $10 million of the proceeds from the sale of  
          surplus real property purchased entirely with local funds  
          and sold prior to January 1, 2005, into the general fund of  
          the school district to be used for any one-time general  
          fund purpose. 

           BACKGROUND  

          Current law requires school districts to use the funds  
          derived from the sale of surplus property for capital  
          outlay or maintenance of school district property.    
          Current law authorizes the deposit of proceeds from the  
          sale or lease with option to purchase into the district's  
          general fund if: 1) the school district governing board and  
          the State Allocation Board have determined that the  
          district has no anticipated need for additional sites or  
          building construction for the ten-year period following the  
          sale or lease with option to purchase, and 2) the district  
          has no major deferred maintenance requirements. 

          Current law, established by SB 1415 (Scott, Chapter 810,  
          Statutes of 2006), requires that the proceeds from the sale  
          or lease with option to purchase of school district  
          property be used only for one-time expenditures, and  
          prohibits the use of these funds for ongoing expenditures  
          including, but not limited to, salaries and other general  
          operating expenses.  In exchange for this consideration,  
          districts are unable to participate in the School Facility  
          Program (SFP) for a period of ten years.  




                                                               AB 1022
                                                                Page 2




          Current law also provides for an exception to the 10-year  
          exclusion from the SFP if two conditions are met.   First,  
          five years must have elapsed since the date upon which the  
          sale or lease with option to purchase was executed and  
          second, the State Allocation Board must make a  
          determination that the district has
          demonstrated enrollment growth or a need for additional  
          sites or building construction that the district could not  
          have easily anticipated at the time the board made its  
          original determination, that the district had no need for  
          additional sites or building construction for the ten-years  
          following the sale or lease with option to purchase of  
          surplus property.

           ANALYSIS
           
          This bill  :

          1)   Authorizes the Ventura Unified School District  
               (District) to deposit $10 million dollars of the  
               proceeds from the sale of surplus real property  
               purchased entirely with local funds and sold prior to  
               January 1, 2005, into the general fund of the school  
               district to be used for any one-time general fund  
               purpose.

          2)   Specifies that if the purchase of the surplus property  
               was made using the proceeds of a general obligation  
               bond act or revenue derived from developer fees, the  
               amount of the proceeds of the transaction that may be  
               deposited into the general fund of the school district  
               cannot exceed the percentage computed by the  
               difference between the purchase price of the property  
               and the proceeds from the transaction, divided by the  
               proceeds of the transaction, as defined. 

          3)   Defines "proceeds of the transaction" for purposes of  
               the bill as follows:

                    a)             For a cash sale, the amount from  
                    the sale of the property less reasonable related  
                    expenses.

                    b)             For a sale that did not result in  
                    a lump-sum cash payment, the amount from the sale  




                                                               AB 1022
                                                                Page 3



                    of the property that is the sum of all cash  
                    received and the net present value of the future  
                    cashflow generated by the transaction, less  
                    reasonable related expenses.

          4)   Requires the State Allocation Board (SAB), if the  
               district exercises the authority granted by the bill,  
               to reduce an apportionment of hardship assistance  
               awarded to the District by an amount equal to the  
               amount of the proceeds of the sale used for general  
               fund purposes. 

          5)   Specifies that if the school district exercises the  
               authority granted by the bill it is ineligible for  
               hardship funding from the State School Deferred  
               Maintenance Fund for five years after the enactment of  
               the bill.

          6)   Specifies that the deposit of proceeds into the  
               District's general fund pursuant to the bill's  
               provisions does not disqualify the school district  
               from eligibility for state funding for any school  
               facilities program authorized by the state. 

          7)   Requires the governing board of the District, before  
               it exercises the authority granted by the bill to: 

                    a)             Certify specified information to  
                    the State Allocation Board.
                
                    b)             Present a plan for expenditure of  
                    the one-time resources at a regularly scheduled  
                    board meeting, as specified.  

          8)   Sunsets these provisions on January 1, 2010, and  
               repeals them unless deleted or extended by a later  
               enacted statute. 

          9)   Declares that the unique circumstances make a general  
               statute inapplicable and that the bills provisions are  
               necessarily applicable only to the Ventura Unified  
               School District.

           STAFF COMMENTS  

           1)   More information  .  According to the author, the  




                                                               AB 1022
                                                                Page 4



               Ventura Unified School District (District) is  
               increasing class size, reducing teachers, support  
               staff and administrators, eliminating programs,  
               eliminating summer school, reducing academic and  
               social interventions, yet they have approximately $30  
               million in proceeds from the sale of surplus property.  
                This is the year that flexibility has been given in  
               areas that have never been considered before and, the  
               author contends, it is perplexing that the District  
               cannot access its proceeds from the sale of surplus  
               property when they are able to access funding  
               previously limited for specified programs. 

           2)   What does current law allow  ?  Under current law, and  
               with State Allocation Board (SAB) approval, the  
               District could deposit funds from the sale of surplus  
               property into the general fund for one-time  
               expenditures, but is prohibited from using these funds  
               for ongoing or general operating expenses.  The  
               District would also be prohibited from requesting  
               state funds for school facility modernization or new  
               construction for at least five and at most ten years.  
               The District could be eligible for state facilities  
               funding after five years if the SAB determines that  
               there is enrollment growth or a need for additional  
               sites or building construction that the district could  
               not have easily anticipated when it sold the surplus  
               property.  

               This bill would authorize the deposit of proceeds from  
               the sale of surplus property that occurred prior to  
               2005 into the general fund for one-time expenditures  
               until October 31, 2013.  The District would maintain  
               the ability to request state funds for school facility  
               modernization or new construction during that time. 

           3)   Consistency  .  This bill authorizes the use of proceeds  
               for the sale of surplus real property for any one-time  
               general fund purpose.  Current law defines "one-time  
               expenditures" for purposes of the School Facility  
               program.  In order to ensure consistency with the  
               definition of one-time expenditures, staff recommends  
               the bill be amended on  page 2 line 9 to insert  
               "consistent with Section 17462 and the regulations  
               adopted by the State Allocation Board pursuant to  
               subdivision (c) of that section relating to the  




                                                               AB 1022
                                                                Page 5



               appropriate use of one-time expenditures" after  
               "purpose" and before the period.
           

          4)   Is this a unique circumstance  ?  Staff notes that the  
               Governor recently proposed several flexibility options  
               in order to help local districts meet their budget  
               shortfalls.  Among these was the flexibility to  
               deposit proceeds from the sale of surplus property  
               into the general fund for any one-time general fund  
               purpose and trailer bill language which parallels this  
               bill's provisions.  This bill would grant this  
               authority for a single district, the Ventura Unified  
               School District and declare a "unique circumstance  
               that makes a general statute inapplicable."  Districts  
               throughout the state are experiencing budget  
               shortfalls as a result of the current fiscal climate.   
               Should the flexibility granted by this bill be limited  
               to one district only?  If the Governor's flexibility  
               proposal is adopted by the Budget Conference  
               Committee, is this bill necessary?

           5)   Prior legislation  .  The Legislature and Governor have  
               enacted several legislative proposals to authorize the  
               use of proceeds from the sale of surplus property for  
               general fund purposes.  Staff notes that in each case,  
               the use of these funds was restricted to one-time  
               general fund purposes.

               AB 1908 (Wolk, Chapter 634, Statutes of 2008)  
               Authorizes the Dixon Unified School District  to sell  
               specified surplus property and to deposit the proceeds  
               into the general fund of the school district in order  
               to reestablish a 3% reserve to stay out of  
               receivership.

               AB 1895 (Coto, Chapter 269, Statutes of 2006)  
               authorized the Oak Grove Elementary School District,  
               until January 1,  2010, to sell certain surplus real  
               and personal  property and to use the proceeds from  
               that transaction  for any one-time general fund  
               purpose.  

               SB 177 (Hollingsworth, Chapter 839, Statutes of 2004)  
               authorized the Santee Elementary School District and  
               the Capistrano Unified School  District to sell  




                                                               AB 1022
                                                                Page 6



               surplus real property and  related personal property,  
               and deposit the net proceeds into the general fund for  
               any one-time  general fund purpose.  Specified  
               conditions for such authority included potential  
               reductions in apportionments for hardship assistance,  
               and ineligibility for hardship funding from the State  
               School Deferred Maintenance Fund.   

               SB 1906 (Sher, Chapter 838, Statutes of 2004)  
               authorized the Santa Clara Unified School District,  
               with specified conditions, to sell surplus real  
               property and related personal property, and deposit  
               the net proceeds into the general fund to use for any  
               one-time general fund purpose. 

               AB 264 (Mullin Chapter 891, Statutes of 2003)  
               authorized school districts with fewer than 11,000   
               pupils to deposit up to 25% of the proceeds of the  
               sale or lease of surplus school real property into the  
               school district general  fund for use for any one-time  
               expenditure of the school district, except for  
               salaries and benefits, if prescribed conditions were  
               met.  The authority granted by this bill was repealed  
               on January 1, 2005. 


           SUPPORT 

          California Association of School Business Officials (CASBO)
          California School Boards Association (CSBA)

           OPPOSITION

           None received.