BILL ANALYSIS Senate Appropriations Committee Fiscal Summary Senator Christine Kehoe, Chair 1136 (Cox) Hearing Date: 05/27/2010 Amended: 04/19/2010 Consultant: Dan Troy Policy Vote: ED 8-0 _________________________________________________________________ ____ BILL SUMMARY: SB 1136, an urgency measure, would prohibit the deferral of a school district's revenue limit apportionment from exceeding the district's required reserve for economic uncertainties if the district average daily attendance (ADA) is equal to or less than 500. _________________________________________________________________ ____ Fiscal Impact (in thousands) Major Provisions 2010-11 2011-12 2012-13 Fund Interest Loss Approximately $150 to $200, depending General on the applicable interest rate _________________________________________________________________ ____ STAFF COMMENTS: SUSPENSE FILE. AS PROPOSED TO BE AMENDED. Current law specifies that local education agencies (LEAs) shall have up to a total of $2.5 billion in statewide apportionment funding deferred during the 2010-11 school year with a maximum of three deferrals during the fiscal year. The first possible deferral is scheduled for July 2010. However, the latest any funding deferral can take place would be March 2011; in this instance the deferral would be paid by April 29, 2011. Current law also specifies that various state payments to local governments may be deferred up to three times during 2010-11, with no more than $1 billion being deferred at any point in time. In addition, current law exempts counties with a population less than 50,000 or a city within a county with a population less 50,000 from any deferral of funding. The intent of the bill is to ease the cash and administrative burdens of the deferrals on small districts that may not have the necessary economies of scale to manage the deferrals. By restricting the deferral of funds from the over 300 districts with fewer than 500 ADA, the General Fund absorbs a loss of interest for up to 6 months. Assuming interest at 3 percent for this time period, costs to the state would be at least $200,000. However, the Department of Education suggests that the bill would not be implementable in its current form, as district reserve figures are not stable and are not reported to them. Also, current statute regarding deferrals refers to "principal apportionments" as opposed to revenue limit apportionments, further complicating the workload required to meet the bill's specifications. The Department has suggested several changes to make the bill implementable, which staff understands the author has taken under consideration. Page 2 SB 1136 (Cox) Author's proposed amendments would limit deferrals to $225 per ADA and restrict application to intra-year deferrals.