BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
205 (Hancock)
Hearing Date: 03/15/2010 Amended: 03/08/2010
Consultant: Dan Troy Policy Vote: NA
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BILL SUMMARY: SB 205, an urgency measure, would provide
statutory authority for the California Department of Education
and the California School Finance Authority, as specified, to
administer the Qualified School Construction Bonds tax credit
program authorized through the federal American Recovery and
Reinvestment Act of 2009. The bill would assign specified
amounts to school districts and county offices of education and
to charter schools, and would extend the timeframe for districts
that were notified of eligibility for this program on or before
December 31, 2009 to issues qualifying local bonds until 120
days after the enactment of this bill.
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Fiscal Impact (in thousands)
Major Provisions 2010-11 2011-12 2012-13 Fund
QCSB allocation Allows for allocation of $773
million in Federal
Federal tax credits
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STAFF COMMENTS: This bill meets the criteria for referral to the
Suspense File.
As part of the American Recovery and Reinvestment Act of 2009
(ARRA), the federal government allocated $22 billion in tax
credits under the Qualified School Construction Bonds (QSCB)
program. The QSCB program would provide savings for school
districts issuing local bonds for the construction and
renovation of school facilities by lowering or eliminating
interest payments. The federal government will provide federal
tax credits for bondholders in lieu of interest normally paid by
issuers. According to the California Department of Education
(CDE), interest payments typically equal about 50 percent of the
cost of a bond.
Allocations to the state are determined based upon the state's
Federal Title 1 allocation, 40 percent of which are allocated
directly by the federal government to large school districts and
the remaining to be allocated to school districts by the state.
California received a total of $1.3 billion for 2009 and will
receive another $1.3 billion for 2010. Of 2009 amount, $582
million was directly allocated to 11 large school districts and
$773.5 million has been reserved for school districts, county
office of educations (COEs), and charter schools for allocation
by the state. CDE, in collaboration with the Governor's Office
and the State Treasurer, designated $73.5 million of the state's
$773.5 million allocation for charter schools, to be
administered by the California School Finance Authority (CSFA).
This amount assigned for charter schools conforms with the
approximately 10 percent of new construction funding they
received in the last two statewide education school facility
bonds.
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SB 205 (Hancock)
CDE developed an administrative process for implementing this
program, including parameters for participation, and received
applications from 231 school districts totaling $3.6 billion in
requests for the $700 million. Through a lottery process, CDE
awarded tax credits to 43 school districts.
School districts that received bond tax credits through the
state were not been able to issue bonds by the December 31, 2009
deadline. This was due to districts being informed by bond
counsels that the federal law contains an ambiguity that
requires statutory clarification by the state. Specifically,
ARRA authorizes "the state" to make federal tax credit
allocations, but does not specify which entity in the state is
the responsible entity. As a result, bond counsels have refused
to issue bond opinions for school districts to sell bonds
fearing that a challenge can be made that a school district has
not received the tax credits from a legally-authorized entity.
This bill would clarify state authority for making the
allocations.
Specifically, this bill would:
Assign $700 million of the state's 2009 federal tax
credit bond volume cap for the QSCB program to CDE for
further assignment and distribution to school districts and
county offices of education
Assign $73.5 million of the state's 2009 federal tax
credit bond volume cap for the QSCB program to CSFA to be
issued for the benefit of charter schools
Provide that any of the state's 2009 federal tax credit
volume cap for QSCB assigned to CDE or CSFA that has not
resulted in the issuance of bonds by December 31, 2009 be
added to the state's volume cap for 2010
Extend the deadline for school districts and county
offices of education to issue bonds by 120 days from the
effective date of this bill, provided these entities
received an assignment of tax credits under the QSCB
program from CDE prior to December 31, 2009 and an
extension to issue bonds through March 31, 2010
Exempt the assignment and distribution of the federal
tax credit bond volume cap from rulemaking provisions of
the Administrative Procedure Act.
State the intent of the Legislature that the parameters
and conditions adopted by the CDE and the CSFA be
comparable where practical and applicable in order to
ensure consistency and equity in the state level assignment
and distribution of the federal tax credit bond volume cap,
including, but not limited to, maximum tax credit amounts
per project or school district
As the dollars in question are federal tax credits, this bill
should have no impact on the state's general fund.