BILL ANALYSIS SENATE COMMITTEE ON EDUCATION Gloria Romero, Chair 2009-2010 Regular Session BILL NO: SB 1380 AUTHOR: Hancock AMENDED: April 15, 2010 FISCAL COMM: Yes HEARING DATE: April 21, 2010 URGENCY: No CONSULTANT:Kathleen Chavira SUBJECT : Career Technical Education Facilities KEY POLICY ISSUES Should a portion of bond funds authorized by voters for the purpose of providing relief to overcrowded school sites be redesignated for the purpose of constructing career technical education facilities? Is it necessary to impose additional requirements/conditions on the use of career technical education facilities constructed with bond funds to ensure their use as intended? SUMMARY This bill transfers $200 million of the proceeds from the sale of bonds authorized for school facility construction within Proposition 1D from the Overcrowded Relief Grants Program to the Career Technical and Education Facilities Program (CTEFP), adds new requirements and conditions to be met by districts that apply for and receive CTEFP funding, and requires the California Department of Education (CDE) to review and make recommendations on specified elements of the CTEFP. BACKGROUND Proposition 1D AB 127 (Nunez and Perata), the Kindergarten-University Public Education Facilities Bond Act of 2006, authorized Proposition 1D a statewide general obligation bond proposal for $10.4 billion. Proposition 1D, approved by the voters SB 1380 Page 2 in November 2006, provided $7.3 billion for K-12 education facilities and allocated specified amounts from the sale of these bonds for modernization, new construction, charter schools, career technical education facilities, joint use projects for new construction on severely overcrowded schoolsites, and high performance incentive grants to promote energy efficient designs and materials. In addition, portions of the amounts allocated for new construction and modernization were authorized for purposes of funding smaller learning communities and high schools and for seismic retrofit projects. Proposition 1D also authorized the Legislature to adjust the amounts expended for each of the above programs, but prohibited the increase or decrease of the total amount to be expended pursuant to the Proposition. Adjustment of the funding requires legislative enactment of statute which is consistent with, and furthers the purposes of, Proposition 1D by a two-thirds membership vote of each house. In addition, amounts may be adjusted via a voter approved statute. (Education Code 101012) Career Technical Education Facilities Program Proposition 1D established the Career Technical Education Facilities Program (CTEFP) within the SFP and provided $500 million for school districts and joint powers authorities to construct or modernize facilities and to purchase equipment with an average useful life expectancy of at least 10 years for career technical education programs at existing high schools. Current law requires a school district to contribute from local resources a dollar amount equal to the amount of the state grant provided and authorizes the contribution to come from private industry groups, the school district, or a joint powers authority. Local agencies may enter into a loan agreement with the Office of Public School construction to cover their share of the project costs. Grants are calculated on a square foot basis, with a maximum of $3 million for each new facility and $1.5 million for each modernization project purpose. (Education Code 17078.70-17078.72) Overcrowded Relief Grants Program (ORG) Proposition 1D established the Overcrowded Relief Grants Program within the SFP and provided $1 billion for school SB 1380 Page 3 districts with overcrowded school sites to build new permanent facilities. As with other new construction projects, districts are required to match the state's contribution toward the project costs (fifty percent). To be eligible for a relief grant, districts must have at least one overcrowded school (defined as at least 175 percent of the state recommended pupil density). The size of the relief grant is based on the number of pupils in portable classrooms at eligible schools. As a condition of receiving a relief grant, school districts are required to replace portable classrooms with new permanent classrooms, remove portable classrooms from overcrowded schools, and reduce the total number of portable classrooms in the district. (Education Code 17079-17079.30) ANALYSIS This bill : 1) Transfers $200 million of the proceeds from the sale of bonds authorized for school facility construction by Proposition 1D, from the Overcrowded Relief Grant (ORG) Program to the Career Technical and Education Program (CTEFP). More specifically it: a) Reduces the amount authorized for providing new construction funding to severely overcrowded schoolsites from $1 billion to $800 million. b) Increases the amount authorized for purposes of facilities for career technical education (CTE) programs from $500 million to $700 million. 2) Changes the requirements and conditions to be met by school districts that apply for and receive CTEFP funding. Specifically it: a) Requires that facilities constructed or modernized using CTEFP funding be used for CTE purposes for a minimum of 25 years and requires that a school district provide certification of such in the first year of occupancy and every five years thereafter. b) Requires the inclusion of teachers of CTE and members of the local CTE advisory SB 1380 Page 4 committee in the design and planning process leading to the submission of an application for a CTEFP grant. c) Authorizes the use of up to 10% of funds provided for equipment to be expended on items or equipment with at least a five-year life expectancy. 3) Requires the California Department of Education (CDE) to examine the "reservation of funds" component of the program, as specified, and to make recommendations to facilitate the timely use of state bond funds to be submitted to the State Allocation Board (SAB) by December 31, 2011. STAFF COMMENTS 1) Need for the bill . According to the author, there have been requests to replenish the nearly depleted Proposition 1D Career Technical Education Facilities account by transferring funds from the Overcrowded Relief Grant account, as those monies may exceed current need. The author contends that, given the strong demand for CTE facility construction and modernization, a timely shift in funds could lead to new jobs in the near future. In addition, the author contends the CTEFP is in need of modification to assure that classrooms built or modernized with these funds are truly used for CTE in the future. 2) Total funding provided . The table below reflects the total amounts allocated under Proposition 1D and their current disposition as reflected in the March 2010 agenda of the SAB. As noted in the background of this analysis, the Legislature is authorized to adjust the amounts provided within each program subject to a two-thirds vote of the membership of each house. Staff notes that, contrary to this statutory language, Legislative Counsel has flagged this as a majority vote bill. 3) Current status of ORG . The State Allocation Board recently took action to amend the regulations governing the ORG program to create an additional SB 1380 Page 5 funding cycle. According to the Notice of Proposed Regulatory Action distributed on March 19, 2010, five funding cycles through January 29, 2010, have allocated/requested about half of the $1 billion authorized. The proposed amendments to the regulations add an additional application submittal date of July 30, 2010 and authorize the SAB to establish subsequent funding cycles in order to apportion any or all remaining ORG funds. According to the OPSC, about $128 million in applications is pending approval at the April meeting of the SAB, leaving approximately $459 million in the ORG program. Staff notes that this program was intended and specifically designed to respond to facilities issues faced by primarily low-income and low-performing schools in urban settings. It is unclear what the demand for these remaining funds is likely to be or whether the issue of severely overcrowded schoolsites which the program was designed to resolve has been fully addressed. 4) Current status of CTE . Current SFP regulations established two funding cycles for the program and authorize subsequent funding cycles to continue every six months thereafter at the discretion of the SAB. In March 2009, the SAB reported that it had apportioned $417.2 million in the first and second funding cycles and a third funding cycle was established. There is currently $90.9 million available for distribution for CTE projects. OPSC reports that the deadline for receipt of applications for these funds was March 31, 2010 and they are currently in the process of reviewing these applications for presentation to the SAB. The program is currently oversubscribed and it is expected that all remaining CTEFP funds will be exhausted in this funding cycle. 5) Solomon's choice ? This bill requires the transfer of funding authority for 50 percent of the remaining authorization from one school facility construction program to another. Staff notes that, like CTE funding, new construction funding is also nearly depleted and, absent a new bond authorization, funding SB 1380 Page 6 authority in all categories, except modernization, is projected to be exhausted by early summer. The largest category of funding authority remaining is in modernization with about $1.5 billion available. Given this context, the Committee may wish to consider the following: Which program(s) within the SFP should be the priority to receive remaining funding? If funds are to be transferred across programs, is CTE a higher priority than new construction? If a transfer of $200 million is warranted, should we take 50 percent of the remaining ORG funds or, transfer approximately 1 percent from modernization funds instead? With no current proposal to authorize a new construction bond, what is gained by transferring funds between any programs at this time? Do some districts benefit more than others as the result of a transfer? Who wins and who loses? Staff recommends, in light of the aforementioned, the bill be amended to delete the transfer of funds provisions in order to focus future discussions on the underlying issue, i.e. how to ensure funding to realize all the policy objectives associated with the School Facility Program. 1) CDE report . The CTEFP offers two options to districts applying for funding. The first option is to request full funding if the project is "construction-ready". A "construction-ready" project must have plans and specifications approved by the Division of State Architect (DSA) and the CDE prior to submitting a funding application. The second option is to submit the project as a reservation of funds if the project is not "construction-ready." The CTEFP funds can be reserved for up to 12 months. This bill requires the CDE to examine and report on the reservation of funds portion of the program. Under current law, the SAB SB 1380 Page 7 would have the regulatory authority to make any changes to the CTEFP it deems necessary, as a result of the report findings and recommendations. 2) How much is enough ? Below are some of the statutory and procedural requirements which must be met by applicants for SFP funding relative to CTE: As a part of its application for large construction and modernization projects, a school district is required to certify, in consultation with its Career Technical Education Advisory Committee (CTEAC), that it has considered the need for vocational and career technical facilities to adequately meet its program needs consistent with specified state law (EC 17070.95) As a condition of the receipt of funds for a project, the CTEAC for a district is required to provide written confirmation that the need for vocational and career technical facilities is being adequately met within the district consistent with specified state law (EC 17070.955). The OPSC requires school districts to certify that they have met the requirements for CTE when signing an application for funding form and to provide proof of compliance with CTE requirements at the time the application is accepted by the Office of Public School Construction (OPSC) or during the audit of the project. The CDE requires districts to certify compliance with EC 17070.95 and to provide the date of consultation with the CTEAC. This bill would additionally require the inclusion of teachers of CTE and members of the local CTEAC in the design and planning process leading to the submission of an application for a CTEFP grant. Why is it necessary to include yet another layer of consultation? What expertise do these individuals SB 1380 Page 8 offer relevant to the design and planning process? 1) Or else ? This bill imposes a significant new requirement on districts that receive CTEFP by requiring that facilities constructed with these funds be used for this purpose for 25 years and to verify such use every five years. Presumably, this term is intended to ensure the full use of the facility (consistent with the term of the underlying bond financing) for the purposes authorized under the voter approved initiative. It is unclear what consequence a district faces if it fails to comply with these requirements. 2) Life-expectancy of equipment. A unique feature of the CTEFP is that funding for a new construction or modernization project can include CTE equipment or consist solely of equipment with an average useful life expectancy of 10 years. This bill reduces the minimum required life expectancy for equipment purchased with this funding from 10 years to 5 years for a small portion of the funds provided for equipment purchase. According to the author many districts find themselves without the funds to purchase expensive equipment (such as video cameras and high tech automotive machines) key to preparing students for jobs in the new economy. The author opines that CTEFP needs some revision in this regard to ensure that funds can be used for equipment students will encounter as they enter the work world. SUPPORT California Business Education Association California Space Authority Small School Districts' Association OPPOSITION None received.