BILL ANALYSIS ------------------------------------------------------------ |SENATE RULES COMMITTEE | SB 1161| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ THIRD READING Bill No: SB 1161 Author: Lowenthal (D) Amended: 4/20/10 Vote: 21 SENATE EDUCATION COMMITTEE : 7-0, 4/14/10 AYES: Romero, Huff, Alquist, Hancock, Liu, Simitian, Wyland NO VOTE RECORDED: Maldonado, Price SENATE APPROPRIATIONS COMMITTEE : 9-0, 5/3/10 AYES: Kehoe, Cox, Corbett, Denham, Leno, Price, Walters, Wolk, Yee NO VOTE RECORDED: Alquist, Wyland SUBJECT : Education: school finance SOURCE : Author DIGEST : This bill (1) deletes the current statutory definition of a material inaccuracy, (2) authorizes, rather than requires, the State Allocation Board (SAB) to prohibit a school district from self-certifying certain project information as a consequence of a determination that an apportionment or fund release of school construction bonds was made based upon materially inaccurate information, (3) requires the SAB to set forth the reasons for its decision on the prohibition on self-certification and the term of prohibition, if applicable, in a regularly scheduled public meeting, and (4) deletes the authority of the SAB to impose CONTINUED SB 1161 Page 2 a self-certification penalty where no funding apportionment or fund release has been made. ANALYSIS : Current law requires the Office of Public School Construction (OPSC) to notify the SAB in the event of a material inaccuracy, referenced in statute as information found to have been falsely certified by school districts, architects or design professionals. Regulations further define a material inaccuracy as a falsely certified eligibility or funding application related information submitted by school districts, architects or other design professionals that allowed the school district an advantage in the funding process. If an apportionment or fund release has been made based upon information or materials that constitute a material inaccuracy, the SAB is required to impose the following penalties: 1. Require the school district to repay to the SAB an amount proportionate to the additional funding received as a result of the material inaccuracy including interest at the rate paid on monies in the Pooled Money Investment Account or at the highest rate of interest for the most recent issue of state general obligation bonds, whichever is greater, pursuant to a maximum five-year repayment schedule as approved by the SAB. 2. Prohibit the school district from self-certifying certain project information for any subsequent applications for project funding for a period of up to five years following the date of the finding of a material inaccuracy or until the district's repayment of the entire amount owned. However, the SAB may not prohibit the school district from applying for state funding under the School Facility Program. 3. Establish an alternative process for state or independent certification of compliance that includes, but is not limited to, procedures for payment by the school district of any increased costs associated with the alternative certification process. If a funding apportionment has occurred, but no fund SB 1161 Page 3 release has been made, the SAB is required to reduce the apportionment to the district as necessary to reflect the actual nature of the project and to disregard the inaccurate information or material. In addition, the district is subject to the loss of self-certification penalty delineated in #2 above. If no funding apportionment or fund release has been made, the inaccurate information or materials are not to be considered and the district is subject to the loss of self-certification penalty delineated in #2 above. The project may continue if the application, minus the inaccurate materials, is still complete. This bill: 1.Deletes the current statutory reference to a "material inaccuracy" as information which has been falsely certified by school districts, architects or design professionals. 2.Deletes the requirement, and instead authorizes, the SAB to prohibit a school district form self-certifying project information for any subsequent applications for project funding for a period of up to five years following the date of the finding of the material inaccuracy. 3.Requires the SAB to set forth the reasons for its decision regarding both the prohibition on self-certification and the term of the prohibition, if applicable, in a regularly scheduled public meeting. 4.Deletes the authority of the SAB to impose a self-certification penalty if no funding apportionment or fund release has been made. 5.Makes other conforming and clarifying changes. Comments How Does it Currently Work ? The SAB adopted regulations that define "Material Inaccuracy" as any falsely certified eligibility or funding application related information SB 1161 Page 4 submitted by school districts, architects or other design professionals that allowed the school district an advantage in the funding process. Staff presents research, analysis, and recommendations to the SAB for material inaccuracy consideration. According to the Office of Public School Construction (OPSC), it is not necessary for the SAB to determine that the certification was knowingly false. No finding of any intent or specific knowledge on the part of a district is necessary. According to the OPSC, the most common form of material inaccuracy is a premature fund release certification, where the district receives a funding advantage through the false certification of documents necessary to have apportioned funds released to the district. Under current regulations, the OPSC will release state funds apportioned to the district once the district certifies it has entered into a binding contract for at least 50 percent of the construction included in the plans applicable to the state funded project. Current law requires that a district that has received an apportionment must meet the criteria for fund release within a period established by the SAB, but not to exceed 18 months. If the 18 months has elapsed ad the district does not secure a fund release, the apportionment is rescinded and becomes available for other state School Facility Program projects. FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes Local: No Fiscal Impact (in thousands) Major Provisions 2010-11 2011-12 2012-13 Fund Self-certification -- Minor impact -- Bond SUPPORT : (Verified 5/4/10) California Coalition for Adequate School Housing County Schools Facilities Consortium SB 1161 Page 5 Los Angeles Unified School District San Francisco Unified School District ARGUMENTS IN SUPPORT : According to the author's office, eligibility and funding applications contain dozens of complex and detailed documents and it is not uncommon for these self-certified documents to contain errors. Currently, the author's office asserts, all false certifications are deemed material inaccuracies regardless of the significance of the error to the state. The author's office contends that striking "false certification" from current law will allow the ability to distinguish between material inaccuracies that unfairly provide funding to school districts and simple errors that have no material impact to the state. In addition, the author's office believes that the bill will provide consistency between the law and SAB regulations and will result in savings to districts and the state via the elimination of unnecessary reviews, reports, and appeals, when there is no benefit to the state. CPM:cm 5/4/10 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END ****