BILL ANALYSIS ------------------------------------------------------------ |SENATE RULES COMMITTEE | AB 1874| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ 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 CONTINUED AB 1874 Page 2 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. CONTINUED AB 1874 Page 3 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 CONTINUED AB 1874 Page 4 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 CONTINUED AB 1874 Page 5 **** END **** CONTINUED