BILL ANALYSIS SB 81 Page 1 SENATE THIRD READING SB 81 (Alquist) As Amended September 4, 2009 2/3 vote. Urgency SENATE VOTE : Vote not relevant SUMMARY : Creates an urgency statute that: 1)Requires, for the 2009-10 through the 2012-13 fiscal year, that a regional occupational center or program (ROC/P), established and maintained by school districts acting as a joint powers agency (JPA), receive its operating funds directly from the county office of education of the county in which it is located in a manner that is consistent with the apportionments for those school districts that comprise the JPA and that are provided to the county office of education pursuant to the annual Budget Act. 2)Authorizes a joint powers agency receiving an apportionment for a school district pursuant to 1) above to disburse those funds, pursuant to its joint powers agreement, to the school district to which that apportionment was made. 3)Specifies that nothing in these provisions prevents any school district or county office of education from using ROC/P funding for any educational purpose. EXISTING LAW : 1)Authorizes the establishment of ROC/Ps by high school districts, district consortia (operating as a JPA), or county offices of education. 2)Establishes a funding formula for ROC/Ps based on per pupil revenue limits for each ROC/P, current year average daily attendance (ADA) or a cap on funded ADA as established historically and in the prior year, any annual cost of living adjustment (COLA) made to the per pupil revenue limit amounts in the annual Budget Act, and any adjustments to the funded cap on ADA made for growth. 3)Provides for temporary flexibility to spend the funds appropriated for nearly all categorical programs, including funding for ROC/Ps, in order to relieve local budget pressure SB 81 Page 2 created by the current economic downturn. FISCAL EFFECT : According to the Assembly Appropriations Committee analysis of a substantially similar bill, this bill creates potential General Fund Proposition 98 cost pressure, likely between $200,000 and $280,000, if a school district that terminates its participation in a ROC/P JPA does not receive their funding from the JPA. There are 26 JPA operated ROC/Ps. COMMENTS : This bill originally served as a budget bill intended to enact statutory changes relating to the Budget Act of 2009; as such, this bill has not been heard in any policy of fiscal committee. The bill in its current version is substantially similar to SB 307 (Alquist); that bill was heard by the Assembly Education Committee and was held under submission in the Assembly Appropriations Committee. ROC/Ps offer a vocational educational program for high school students and adults, and may be operated by a district, a consortium of districts under a joint powers agreement, or by a county office of education. Nearly every county office of education in California operates a single, countywide ROC/P. California's 74 ROC/Ps have existed as part of California's educational system for over 35 years. According to the California Department of Education (CDE), nearly 470,000 students age 16 or older enroll in ROC/Ps each year; approximately 30 percent of those students are adult learners. 26 of the current ROC/Ps operate as a JPA. These JPAs operate under specific requirements, defined in Government Code, dealing with governance, fiscal and programmatic accountability, and the nature of the agreement between the member districts. The JPA administers the programs, classes and day-to-day operations of the ROC/P; ROC/P funding apportioned to each of the member districts provides the fiscal support for the JPA. ROC/P funding is provided to districts as part of the Principal Apportionment, which also includes regular revenue limit funding, and is included in a block of funding (equal to the sum of Principal Apportionment funding for all districts in a county) that the CDE provides to the county office of education (COE); COEs have historically served as clearinghouses that distribute this funding to each of the districts in the county according to a schedule that is also provided by the CDE. Up to and including the 2008-09 fiscal year, funding for ROC/Ps operating as a JPA was treated in this manner with the funds SB 81 Page 3 moving from the CDE to the COE, then being transferred to each JPA member district, and finally being submitted by the member districts to the JPA. This process was to be changed commencing with the 2009-10 fiscal year as a result of SB 1197 (Alquist), Chapter 519, Statutes of 2008; SB 1197 requires that a ROC/P operated as a JPA receive its funding directly from the COE, rather than the funds being transferred from the COE to the member districts prior to the JPA receiving those funds from each of the school districts. This new provision was enacted January 1, 2009, and was to be operative for the 2009-10 fiscal year. In February 2009, SB 4 X3 (Ducheny), Chapter 12, Statutes of 2009 Third Extraordinary Session [as amended in July by AB 2 X4 (Evans), Chapter 2, Statutes of 2009 Fourth Extraordinary Session], implemented categorical flexibility for the 2008-09 through 2012-13 fiscal year; this flexibility allows recipients to use restricted educational funding from 43 categorical programs, including ROC/P funding, for any discretionary educational purpose. This flexibility was achieved by deeming those funding recipients to be in compliance with the program and funding requirements contained in statutory, regulatory, and provisional language associated with those programs. Funding for these flexible programs is apportioned from the amounts provided in the Budget Act in an amount based on the same relative proportion that the recipient received in the 2008-09 fiscal year for those programs. As a condition of receiving this flexibility, district governing boards and county boards of education are required to hold public hearings on the proposed use of the flexible funds, and are required to fully account for all expenditures. Implementation of the flexibility provision (i.e., placing the flexibility provisions of AB 2 X4 ahead of the intent of SB 1197) in the case of JPA-operated ROC/P funding could create fiscal problems for the JPA, in the same way that other educational programs may be affected by flexibility, if a JPA member school district chooses to make use of its flexibility authority and move ROC/P funds to another use. On the other hand, failure to allow that district to implement flexibility (by placing the intent of SB 1197 ahead of the flexibility provisions), may jeopardize a JPA member district's fiscal status. The fundamental question raised by this bill is whether the Legislature, in SB 4 X3, intended that ROC/P funds, including those apportioned for JPA member school districts, be SB 81 Page 4 subject to flexibility in that those previously restricted monies could be used by the recipient school district or COE for any discretionary purpose? This bill proposes to resolve this question so that under any circumstances during the 2009-10 through 2012-13 fiscal years, COEs transfer the apportioned funds to JPAs in order to continue the operation of the JPA ROC/Ps. In other words this bill places the provisions of SB 1197 in a dominant position over the flexibility provisions of SB 4 X3; effectively this bill provides a protected status for JPA operated ROC/Ps in that funding apportioned to JPA member school districts will be spent on the ROC/P activities with no opportunity for the member school district to put those funds to another discretionary use. Supporters of this bill state that, "SB 307 will correct an unintended consequence of the 2009-10 budget trailer bill [SB 4 X3]," and describe this bill as "a cleanup bill" that "has no fiscal impact and remains consistent with [SB 4 X3], by ensuring local control and flexibility." A question might also be asked as to what entity has the authority to make decisions over the use of the funds apportioned to JPA member school districts for ROC/P? Since the flexibility provision of SB 4 X3, as amended by AB 2 X4, allows recipients of the funding to use the funds with discretion, and since funding for JPA ROC/Ps is apportioned to the individual districts that are members of that JPA, the strongest case might be made that each member district has the authority to flexibly use these funds through the 2012-13 fiscal year; this appears also to be consistent with Legislative intent that all ROC/P funding be eligible for flexible use. At the same time, the funds are provided to the COE in its role as a funding clearinghouse; thus if a COE interprets the SB 1197 requirement to be dominant over the flexibility provisions, then that COE could move to transfer the member district's ROC/P apportionments directly to the JPA. It is clear that such a COE action, combined with the fact that the funding would then never be in the possession of the school district to which it was apportioned, would act to eliminate a district's opportunity to implement the flexibility provision. As the Assembly Appropriations Committee noted in its analysis, "this bill is contrary to these [flexibility] provisions because school districts participating in the ROC/P JPA will not have direct access to ROC/P funding in order to use in a flexibility manner." SB 81 Page 5 Under this scenario, the only recourse that a JPA member district would have if it desired to shift ROC/P funding to another higher priority budget use would be to remove itself from the JPA. Since SB 4 X3 requires the CDE to apportion "an amount to recipients based on the same relative proportion that the recipient received in the 2008-09 fiscal year for the" program, funds for ROC/P would continue to be apportioned to the school district even after that school district was no longer a member of the JPA. Since the provisions of SB 1197 and the proposal made in this bill only allow a COE to direct these funds to the JPA for JPA member districts, the funds would go to the district (albeit constrained by any contract or JPA agreement signed by the district that speaks to the issue of funding for former member districts continuing to be provided to the JPA) and the district could use the funds flexibly. Unfortunately, constraining districts to this one recourse also creates a chilling effect on district participation in JPA ROC/Ps, which may not be an optimal policy in the long run. The situation thus created could also lead to litigation if a COE were to transfer a former member district's ROC/P apportionment to the JPA. Analysis Prepared by : Gerald Shelton / ED. / (916) 319-2087 FN: 0003012