BILL ANALYSIS                                                                                                                                                                                                    



                                                                       



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          |SENATE RULES COMMITTEE            |                  SB 1161|
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                                 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  
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          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  







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          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  







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          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







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          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

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