BILL NUMBER: AB 18 INTRODUCED BILL TEXT INTRODUCED BY Assembly Member Brownley DECEMBER 6, 2010 An act to add Section 41055 to, and to add and repeal Section 41054 of, the Education Code, relating to education finance. LEGISLATIVE COUNSEL'S DIGEST AB 18, as introduced, Brownley. School-based financial reporting system. Existing law establishes the public school system in this state, and, among other things, provides for the establishment of school districts throughout the state and for their provision of instruction at the public elementary and secondary schools they operate and maintain. Existing law establishes a public school funding system that includes, among other elements, the provision of funding to local educational agencies through state apportionments, the proceeds of property taxes collected at the local level, and other sources. This bill would require the Superintendent of Public Instruction, on or before December 1, 2012, to make recommendations to the Legislature and the Governor regarding prescribed topics relating to the statutory and regulatory changes that would be necessary to support the development, implementation, and use of comprehensive school-level financial data. These provisions would be repealed on December 1, 2015. The bill would require the Superintendent, on or before July 1, 2012, to make all ministerial changes that are necessary to support the future reporting of school-level financial data by local educational agencies, as specified. The bill also would require the Superintendent, on or before July 1, 2012, and annually thereafter, to notify the superintendent of each school district and county office of education, and the administrator of each charter school, of specified items relating to tracking and reporting school-level financial data. Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. The Legislature finds and declares all of the following: (a) The 22 studies of the Getting Down to Facts Project and the Governor's Committee on Education Excellence were consistent in their conclusions that California's current education finance system is overly complex, irrational, and burdensome, and is in need of a long-term plan for comprehensive reform. (b) The complexity of the current system poses a major obstacle to transparency and effectiveness. It is almost impossible to determine how much revenue each school district receives or how those revenues are spent, let alone to report this information to local communities, stakeholders, and the state. (c) The current system is not logical, with district revenues that are largely a historical artifact of spending in the 1970s combined with a confusing, bureaucratic, report-driven, and burdensome system of categorical programs. Disparities in school and district revenues are substantial and are not aligned to pupil or educator needs. (d) The system places substantial restrictions on the use of resources by schools and districts, creating high compliance costs and making it difficult for local educators to respond to the needs of their pupils. Fewer paperwork requirements and more flexibility in allocating resources are cited by school principals as two of the most important factors in improving pupil outcomes. (e) Many schools and districts lack the proper tools or capacity to ensure that money is spent on the most effective programs and practices. Research consistently finds that successful schools use data to inform teaching practices and innovation. However, California schools and districts vary widely in their use of data and in their capacity to use data to improve pupil performance. (f) Ensuring that money is spent efficiently and effectively requires a complete understanding of how money is allocated by school districts and spent within schools. However, California does not collect financial data that is useful for determining the effectiveness of resources at the state, district, or school levels. (g) California is currently facing lawsuits which claim that the state's system for funding public education is deficient. One lawsuit claims that the system is unconstitutional in that it fails to provide all pupils with equal access to the required educational program, while a second lawsuit seeks to have the state take the individual educational needs of each pupil into consideration when it makes funding decisions pursuant to the system. (h) Therefore, it is the intent of the Legislature to do all of the following: (1) Build on previous research and recommendations to produce a comprehensive plan for finance reform to support pupil achievement, with specific consideration given to the interactions of incentives in school finance formulas. (2) Establish simpler pupil-based formulas for allocating funding to each local educational agency that provide base funding along with an amount that is tied to the specific needs of the pupils in the local educational agency and the costs of educating those pupils. (3) Make the allocation of funding more rational and equitable so that the revenues received by each local educational agency reflect the actual cost of educating pupils with varying needs in varying environments, so that all pupils are prepared, at the end of their elementary and secondary education, for college, careers, and successful participation in our democratic institutions, no matter where they live or what their economic, racial, or ethnic background may be. (4) Support accountability and local flexibility by increasing the transparency of state funding mechanisms and of expenditure decisions at the local level, and by facilitating the equitable allocation of funds across schools within each school district in a manner that reflects the specific needs of the pupils in those schools and the costs of educating those pupils. (5) Improve the reporting of financial data so that programmatic investments can be linked to programs that increase pupil achievement. (6) Support continuous improvement by requiring periodic review of the school finance system and of local resource decisions. (7) Hold local educational agencies harmless, and transition to the new system gradually, as new moneys become available. SEC. 2. Section 41054 is added to the Education Code, to read: 41054. (a) On or before December 1, 2012, the Superintendent shall make recommendations to the Legislature and the Governor concerning statutory and regulatory changes that would be necessary to support the development, implementation, and use of comprehensive school-level financial data that would be used to produce all of the following: (1) Simple to use, transparent, and informative school-level financial reports showing both the source of school-level revenue and the expenditures made by each school. (2) In-depth analyses of school-level financial data including, but not necessarily limited to, analyses by fund source, function, program, and object. (3) Comparisons of financial data across schools, both within the district and outside of the district, and over time. (4) Linkages between school-level financial, demographic, programmatic, and academic achievement data so as to facilitate program and policy evaluation. (5) A comprehensive means for the education community, policymakers, researchers, and the public to easily access information about all aspects of the performance of each school in the state. (b) The Superintendent's recommendations made pursuant to subdivision (a) shall focus on all changes that are necessary to support the future reporting of school-level financial data by local educational agencies and to support the comprehensive uses described in subdivision (a). These recommendations shall address, but not necessarily be limited to: (1) Modifications to the School Accountability Report Card. (2) Changes to existing data collections or the implementation of new data collections. (3) Changes to the state's Education Information System, especially to facilitate the linking of school financial, demographic, and pupil program data. (4) Changes to the state's hardware and software support or capacity, or other information technology needs that would be necessary to support publicly available school-level data analysis and evaluative tools, as well as publicly available school-level reports. (c) It is the intent of the Legislature that the Superintendent, in making the recommendations pursuant to this section, shall do both of the following: (1) Build upon previous research, reports, evaluations, audits, and studies. (2) Develop the recommendations in consultation with policymakers, members of the education community, members of the public, and other stakeholders. (d) (1) A report to be submitted pursuant to subdivision (a) shall be submitted in compliance with Section 9795 of the Government Code. (2) Pursuant to Section 10231.5 of the Government Code, this section is repealed on December 1, 2015. SEC. 3. Section 41055 is added to the Education Code, to read: 41055. (a) On or before July 1, 2012, the Superintendent shall make all ministerial changes that are necessary to support the future reporting of school-level financial data reporting by local educational agencies. These changes shall include, but are not limited to, all of the following: (1) Modifications to the standardized account code structure. (2) Modifications to the California School Accounting Manual. (3) Modifications to financial regulations imposed upon or other instructions provided to school districts, county offices of education, or charter schools. (b) On or before July 1, 2012, and annually thereafter, the Superintendent shall notify the superintendent of each school district and county office of education, and the administrator of each charter school, of both of the following: (1) The capacity for the tracking and reporting of school-level financial data using the standardized account code structure developed by the department and used for the purpose of financial accounting and reporting in public schools and districts. (2) Directions for using the standardized account code structure to track and report school-level financial data. (c) The notification made pursuant to subdivision (b) shall be updated as necessary each year to include any changes that result from the recommendations made by the Superintendent pursuant to Section 41054, and any ministerial changes made by the Superintendent pursuant to subdivision (a).