BILL ANALYSIS
AB 2560
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Date of Hearing: May 5, 2010
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 2560 (Brownley) - As Amended: April 14, 2010
Policy Committee: EducationVote:9-0
Urgency: No State Mandated Local Program:
No Reimbursable: No
SUMMARY
This bill authorizes the State Department of Education (SDE) and
the California School Finance Authority (CFA) to assign and
distribute the state's 2010 federal tax credit bond volume cap
for qualified school construction bonds (QSCB) program to or for
the benefit of school districts, county offices of education
(COEs), or charter schools, as specified. Specifically this
bill:
Declares that the federal QSCB program does not constitute
federal moneys, federal funds, or funds of any kind for any
purposes.
FISCAL EFFECT
In March 2011, California received a total of $1.3 billion for
the 2010 QSCB program. Of this amount, $547million is allocated
directly to large school districts based on their federal Title
I allocations (poor, needy pupils) and $720 million is reserved
for school districts, COEs, and charter schools. This bill does
not determine funding allocations for school districts, COEs,
and charter schools.
There is not a minimum bond authorization amount in order for
LEAs to participate in this program. LEAs, however, are limited
to $25 million in tax credits per authorization cycle.
COMMENTS
1)Purpose . In February 2009, the federal government passed
ARRA, which allocated approximately $100 billion nationwide
for education programs with the purpose of stimulating the
economy, including tax credits under the QCSB program. The
QCSB program allows local education agencies (LEAs), including
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charter schools, to issue tax-exempt bonds and use 100% of the
proceeds for specified school facility purposes. The bonds
provide federal tax credits for bondholders in lieu of
interest in order to significantly reduce an issuer's (i.e.,
LEAs) cost of borrowing. The final maturity of the loan may
vary slightly; it typically is limited to approximately 15
years.
ARRA provides for an allocation to each state based on the
state's Title I allocation (funding for poor and needy
pupils), along with separate allocations for large school
districts. In the summer of 2009, SDE received a total of
$847 million under the QCSB program for allocation to LEAs,
including charter schools. Of this amount, SDE allocated
$773.5 million to school districts and COEs. The CFA
allocated $73.5 million to charter schools.
SB 205 (Hancock), Chapter 11, Statutes of 2010, provides
statutory authority for SDE and CSFA to issue tax credits
under the federal QCSB program based on 2009 ARRA allocations.
In March 2010, the state received $720 million for the QCSB
program. This bill authorizes SDE and CSFA to assign and
distribute the state's 2010 federal tax credit bond volume cap
for the this program to benefit school districts, COEs, or
charter schools, as specified.
2)Timeline for federal QSCB program . In the summer of 2009,
SDE, in collaboration with the governor's office and the state
treasurer, was designated as the administrating agency for the
QSCB program. SDE developed an administrative process for
implementing this program, including parameters for
participation and designating allocation amounts for school
districts and COEs ($773.5 million) and to CSFA for charter
schools ($73.5 million). Applications were due to SDE by
August 25, 2009.
CSFA was granted authority to administer the federal QSCB
program for charter schools due to its existing expertise in
charter school facility finance issues. Similar to SDE, CSFA's
board developed parameters and procedures for this program.
Applications were due to CSFA by September 14, 2009.
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While both SDE and CSFA established policies and procedures to
administer the QSCB program, each entities' bond counsel,
including the governor's office and the attorney general,
expressed concerns regarding their legal authority to issue
tax credits to LEAs and charter schools, as required under
this program. Therefore, approved school districts and charter
schools did not immediately issue bonds due to the legal
concerns regarding the state's ability to issue QSCB tax
credits. SB 205 (Hancock), Chapter 11, Statutes of 2010,
provided statutory authority for the administration of the
2009 federal QSCB program allocation. SDE and CSFA proceeded
with the issuance for federal QSCB tax credits.
California currently has the 2010 federal QSCB program
allocation. This bill provides authorization for 2010 program
implementation. The author notes specified amounts are not
included in the bill yet because discussions are on-going
regarding the amounts for school districts and charter
schools.
3)Who has received funding under the QSCB program ? SDE received
a total of 231 school district applications for $3.6 billion.
As a result, SDE conducted a lottery to determine the
recipients of the $773.5 million designated for LEAs.
Forty-three school districts were funded and initially
required to issue bonds by December 31, 2009. SDE granted
extensions to 39 of the 43 districts on a case by case basis.
Four LEAs returned their program allocations. Chapter 11
authorizes school districts until July 25, 2010 to issue
bonds. SDE reports one district has issued a bond using the
federal QSCB tax credits.
CSFA received 28 applications from charter schools for the
QSCB program. Under the board's parameters, CSFA staff
developed a list of six charter schools deemed "credit worthy"
and that demonstrated an ability to immediately begin
construction or modernization. These six charter schools were
approved for $29.2 million under the QSCB program. The CSFA
must issue bonds on behalf of charter schools because these
schools do not have the authority to issue bonds. To date,
CSFA has not issued a bond. The 22 remaining applicants are
being further evaluated by CSFA.
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Analysis Prepared by : Kimberly Rodriguez / APPR. / (916)
319-2081