BILL ANALYSIS SB 307 Page 1 Date of Hearing: August 19, 2009 ASSEMBLY COMMITTEE ON EDUCATION Julia Brownley, Chair SB 307 (Alquist) - As Amended: May 26, 2009 SENATE VOTE : 40-0 SUBJECT : Regional occupational centers or programs SUMMARY : Creates an urgency statute that requires 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; establishes this requirement commencing in the 2009-10 fiscal year, and makes this requirement operative in any fiscal year when a substantially similar requirement currently in law is not operative. 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 created by the current economic downturn. FISCAL EFFECT : This bill is keyed non-fiscal, however, the Assembly Appropriations Committee has requested that this bill be referred to them. If this bill is passed by the Assembly SB 307 Page 2 Education Committee, it will be referred to the Committee on Appropriations to consider the fiscal implications. COMMENTS : 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. Total revenue limit funding for ROC/Ps is comprised of three components: an amount of base funding per unit of ADA (up to that ROC/P's current ADA cap), an amount of funding (if provided) to cover cost increases related to the cost of living (COLA), and an amount of funding to cover program growth (if provided) that is allocated among the ROC/Ps in the form of an expansion in ADA caps. For ROC/Ps operated as a JPA, these calculations are made for each school district that is a member of the JPA, and this ROC/P funding is apportioned to each of those member districts. 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 307 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 revenues and expenditures. The fact that SB 1197 was enacted, but did not become operational, prior to the enactment of SB 4 X3 creates a number of potential questions and ambiguities regarding funding for ROC/Ps operated by a JPA. For example, is the requirement established by SB 1197, that a ROC/P operated as a JPA receives its funding directly from the COE rather than the funds being transferred from the COE to the member districts, operable? The provision in SB 4 X3 that deems recipients of apportionments (in this case the member districts or the COE acting as the funding clearing house) to have complied with funding and program requirements associated with ROC/P, along with the apparent intent of the Legislature that ROC/P funds be available for flexible and discretionary use, argue that the SB 1197 SB 307 Page 4 requirement does not apply, however, there is no language in SB 4 X3 or AB 2 X4 that specifically makes the SB 1197 provision inoperable. A question might also be asked as to who 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 on a district by district basis, the strongest case might be made that the member districts have the authority to flexibly use these funds through the 2012-13 fiscal year; this appears also to be consistent with Legislative intent. 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 operable under current law, then that COE could move to transfer the member district's ROC/P apportionments directly to the JPA. It also might even be argued that a COE could choose to flexibly use these ROC/P apportionments for its own purposes, since the COE received the funds from the CDE and is deemed to already be in compliance with all funding requirements associated with the program (i.e., the SB 1197 requirement to pass the funds along to the JPA). It is clear that different interpretations of whether the flexibility provisions of SB 4 X3 dominate the funding requirement of SB 1197, combined with the fact that the funds may never be in the possession of the school district to which it was apportioned, create some ambiguity in current law. 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." SB 307 (with the technical amendments discussed below) would serve to clarify the potential ambiguities described above; however, the bill also implies a substantive policy position that has potentially large fiscal repercussions on school districts. Clarifying the potential ambiguities that result from the interaction of SB 1197 and SB 4 X3 could be accomplished in one of two ways. 1)If the Legislature intended to protect funding for JPA ROC/Ps from the flexibility provisions extended to school districts SB 307 Page 5 and COEs, then this bill clarifies existing law so that under any circumstances COEs transfer the appropriated 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. 2)If the Legislature's intent was to include funding for JPA ROC/Ps in the flexibility provision, then this bill violates that assumption. In other words, the flexibility provisions of SB 4 X3 were intended to dominate SB 1197. Clarification of this intent could be achieved by clearly notwithstanding Education Code Section (EC) 52321 (that implements the SB 1197 requirement) while the flexibility provisions are in effect through the end of the 2012-13 fiscal year. It is clear that 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 subject to flexibility in that those previously restricted monies could be used by the recipient school district or COE for any discretionary purpose? Three less significant issues should also be raised in this analysis: 1)This bill's protection from the flexibility provisions only bear on that part of the ROC/P budget appropriation (Item 6110-105-0001) that is apportioned to school districts that are members of a JPA operating an ROC/P; these provisions have no effect on ROC/Ps operated by a single school district or by a COE. This raises a question about equitable treatment across ROC/Ps, since non-JPA member school district or COE operating a ROC/P would have the authority to shift the ROC/P funding to another higher priority budget use while (under this bill) the JPA member district would not have that same opportunity. 2)Under this bill 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 resign its position in and remove itself from the JPA. Since SB 4 X3 requires the CDE to apportion "an amount to recipients based on the same SB 307 Page 6 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; in this way the district could use the funds flexibly. Creating a chilling effect on district participation in JPA ROC/Ps may not be an optimal policy in the long run. 3)Either the situation under current law or the situation described in 2) above could lead to litigation if a COE were to transfer a member or former member district's ROC/P apportionment to the JPA. This bill, as currently written, does not clarify all of the ambiguities that may currently exist regarding this issue. If the Committee should choose to pass this bill, then Committee staff recommends that the bill be amended to explicitly notwithstand the flexibility provisions in EC 42605 as created by SB 4 X3 and amended by AB 2 X4, rather than to rely on the conditional trigger in the bill. The provisions of this bill are currently triggered by any action that makes the requirements of SB 1197 (EC 52321) inoperable; however, part of the problem described above is that it may not be clear whether the requirements of EC 52321 are currently inoperable. Since the ambiguities that this bill is attempting to clarify are generated by the interaction between the SB 1197 requirements and the provisions of SB 4 X3, a clearer approach would be to simply notwithstand that part of SB 4 X3 that creates the conflict. This approach would also have the added benefit of narrowing the solution to address only the problem at hand, and thus avoid any unintended consequences. Thus lines three and four on page two of the bill would be replaced by: "52322.5. Notwithstanding EC 42605 and for the 2009-10 fiscal year to the 2012-13 fiscal year, inclusive, a regional occupational?" If the Committee should choose not to pass this bill, then Committee staff recommends that the Legislature move to further clarify its intent that funding for JPA ROC/Ps be included in the flexibility provisions of SB 4 X3, that the flexibility provisions of SB 4 X3 were intended to dominate SB 1197, and that ROC/P funds should be transferred by the COE to the member districts. Because of Legislative deadlines, any amendments to this bill approved by the Committee on Education will be taken in the SB 307 Page 7 Assembly Appropriations Committee. REGISTERED SUPPORT / OPPOSITION : Support Association of California School Administrators California Association of Regional Occupational Centers and Programs California Association of School Business Officials California County Superintendents Educational Services Association Capistrano-Laguna Beach Regional Occupational Program Central County Occupational Center Central Sierra ROP Coastline Regional Occupational Program Colton Redlands Yucaipa JPA-ROP Eden Area Regional Occupational Program Imperial Valley Regional Occupational Program Metropolitan Education District Mission Trails Regional Occupational Program Mission Valley ROP North County Regional Occupational Center, JPA North Orange County ROP Santa Lucia Regional Occupational Program Solano County Office of Education Southern California Regional Occupational Center Tri-Valley Regional Occupational Program West Side Regional Occupational Program One individual Opposition None on file Analysis Prepared by : Gerald Shelton / ED. / (916) 319-2087