BILL ANALYSIS                                                                                                                                                                                                    



                                                                       



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          |SENATE RULES COMMITTEE            |                  AB 1874|
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                                    CONSENT


          Bill No:  AB 1874
          Author:   Evans (D)
          Amended:  4/6/10 in Assembly
          Vote:     21

           
           SENATE EDUCATION COMMITTEE  :  6-0, 6/16/10
          AYES:  Romero, Huff, Emmerson, Hancock, Liu, Price
          NO VOTE RECORDED:  Alquist, Simitian, Wyland

           SENATE APPROPRIATIONS COMMITTEE :  Senate Rule 28.8

           ASSEMBLY FLOOR  :  74-0, 4/22/10 - See last page for vote


           SUBJECT  :    Education finance:  Vallejo City Unified School  
          District
                      Sale of property

           SOURCE  :     State Superintendent of Public Instruction


           DIGEST  :    This bill extends the time period Vallejo City  
          Unified School District is authorized to sell property and  
          use the proceeds to reduce or retire its emergency loan  
          from the state.

           ANALYSIS  :    SB 1190 (Chesbro), Chapter 53, Statutes of  
          2004, appropriated $60 million for an emergency loan to the  
          Vallejo City Unified School District (VCUSD).  The bill  
          required the state Superintendent of Public Instruction  
          (SPI) to assume all the legal rights, duties and powers of  
          the Governing Board of the VCUSD and to appoint, in  
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          consultation with the Solano County Superintendent of  
          Schools, an administrator to act on his behalf in  
          exercising authority over the school district.  

          Furthermore, SB 1190 authorized the school district,  
          between June 1, 2004 and July 30, 2007, to sell any  
          properties owned by the district and to use the proceeds  
          from the sale to reduce or retire the emergency loan. The  
          bill also prohibited the district from being eligible for  
          financial hardship assistance under the state's School  
          Facility Program from June 2004 through June 2006.  These  
          timeline provisions were extended by AB 1948 (Evans),  
          Chapter 636, Statutes of 2008.

          Current law requires that emergency loans to districts in  
          fiscal crisis be provided by legislative appropriation.  
          Requires, upon a district's acceptance of a loan exceeding  
          200 percent of a district's recommended reserve, that the  
          SPI assumes all the legal rights, duties and powers of the  
          district governing board, authorizes the SPI to appoint an  
          administrator to act on his or her behalf, and requires  
          that the district governing board become advisory to the  
          administrator.  The authority of the SPI and the  
          state-appointed administer shall continue until the loan  
          has been repaid, the district has adequate fiscal systems  
          and controls in place, and the SPI has determined that the  
          district's future compliance with the fiscal plan approved  
          for the district is probable. 

          There are five school districts (excluding VCUSD) that have  
          an outstanding emergency loan balance with the state: Emery  
          Unified School District ($960,000), Kings City Joint Union  
          High School District ($5 million), Oakland Unified School  
          District ($78.3 million), West Fresno Unified School  
          District ($681,039), and West Contra Costa ($11.9 million).

          This bill extends the time period from June 30, 2010, to  
          June 30, 2015, for VCUSD to sell property and use the  
          proceeds to reduce or retire its emergency loan.

          In addition, the bill extends the ineligibility period from  
          January 1, 2011, to June 30, 2015, for VCUSD to participate  
          in the financial hardship assistance program under the  
          School Facility Program.

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           Prior/Related Legislation
           
          AB 1948 (Evans), Chapter 636, Statutes of 2008, extended  
          VCUSD's authority to sell property owned by the district  
          and to use the proceeds from the sale to reduce or retire  
          the emergency loan through July 1, 2010.  Passed the Senate  
          Floor with a vote of 39-0 on 8/14/10.

          SB 1190 (Chesbro), Chapter 53, Statutes of 2004,  
          appropriates $60 million for an emergency loan to VCUSD,  
          requires the Superintendent of Public Instruction to assume  
          all the rights, duties, and powers of the governing board  
          of the district and to appoint an administrator to serve  
          during the term of the loan.  Passed the Senate Floor with  
          a vote of 30-8 on 6/17/04.

          AB 1554 (Keene), Chapter 263, Statutes of 2004, requires  
          that existing emergency loans for the West Contra Costa  
          Unified School District (WCCUSD), Oakland Unified School  
          District (OUSD)  and VUSD, be refinanced through I-Bank,  
          with any difference between interest paid on the existing  
          loans and the costs of refinancing those loans paid by the  
          state.  Passed the Senate Floor with a vote of 31-1 on  
          7/29/04.

          AB 1303 (Daucher), Chapter 97, Statutes of 2005, revises  
          statutes and terms pertaining to the lease financing that  
          the state is using to replace General Fund financing of  
          school district emergency loans.  Passed the Senate Floor  
          with a vote of 29-4 on 7/11/05.

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  Yes    
          Local:  No

          According to the Assembly Appropriations Committee, VCUSD's  
          emergency loan balance is $48.3 million. In 2003, the  
          school district chose to utilize only $50 million of the  
          original $60 million appropriation.  However, in May 2007,  
          VCUSD drew down the remaining $10 million. To date, the  
          district has paid $15.2 million on its loan, with an annual  
          payment of approximately $3 million. 

          VCUSD received a "negative" certification of its financial  

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          status at the 2009-10 First Interim Report (January 15)  
          issued by the State Department of Education (SDE). This  
          "negative" certification is given to a local education  
          agency that will not meet its financial obligations in the  
          2009-10 or 2009-10 fiscal years, as determined by the  
          Fiscal Crisis Management and Assistance Team (based on  
          current revenue projections).  The second interim report is  
          due to SDE by April 15 of each year; however, additional  
          time is needed for SDE to certify the report.

           SUPPORT  :   (Verified  6/29/10)

          State Superintendent of Public Instruction (source)
          Vallejo City Unified School District

           ARGUMENTS IN SUPPORT  :    According to the author's office,  
          allowing the VCUSD additional time to sell property allows  
          the district to maximize the potential revenue from any  
          possible sale.  Using property sale proceeds to pay down  
          the loan will free up local funds that the district could  
          use to balance its budget or improve programs.


           ASSEMBLY FLOOR  : 
          AYES:  Adams, Ammiano, Anderson, Arambula, Bass, Beall,  
            Bill Berryhill, Tom Berryhill, Blakeslee, Block,  
            Bradford, Brownley, Buchanan, Charles Calderon, Carter,  
            Chesbro, Conway, Cook, Coto, Davis, De La Torre, De Leon,  
            DeVore, Emmerson, Eng, Evans, Feuer, Fletcher, Fong,  
            Fuentes, Fuller, Furutani, Gaines, Galgiani, Garrick,  
            Gilmore, Hagman, Hall, Harkey, Hayashi, Hernandez, Hill,  
            Jeffries, Jones, Knight, Lieu, Logue, Bonnie Lowenthal,  
            Ma, Mendoza, Miller, Monning, Nava, Nestande, Niello,  
            Nielsen, V. Manuel Perez, Portantino, Ruskin, Salas,  
            Saldana, Silva, Skinner, Smyth, Solorio, Audra  
            Strickland, Swanson, Torlakson, Torres, Torrico, Tran,  
            Villines, Yamada, John A. Perez
          NO VOTE RECORDED:  Blumenfield, Caballero, Huber, Huffman,  
            Norby, Vacancy


          PQ:do  6/29/10   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  SEE ABOVE

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