BILL ANALYSIS                                                                                                                                                                                                    

                                                                AB 18
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        AB 18 (Brownley)
        As Amended  May 27, 2011
        Majority vote 

         EDUCATION           9-1         APPROPRIATIONS      17-0        
        |Ayes:|Brownley, Norby, Ammiano, |Ayes:|Fuentes, Harkey,          |
        |     |Butler, Carter, Eng,      |     |Blumenfield, Bradford,    |
        |     |Halderman, Wagner,        |     |Charles Calderon, Campos, |
        |     |Williams                  |     |Davis, Donnelly, Gatto,   |
        |     |                          |     |Hall, Hill, Lara,         |
        |     |                          |     |Mitchell, Nielsen, Norby, |
        |     |                          |     |Solorio, Wagner           |
        |     |                          |     |                          |
        |Nays:|Buchanan                  |     |                          |
        |     |                          |     |                          |
         SUMMARY  :  Restructures, commencing in fiscal year (FY) 2015-16, 
        California's system for allocating state funding for public schools. 
         Specifically,  this bill  :  

        1)Makes legislative findings and declarations related to problems 
          with California's current education finance system, and the lack 
          of information on and understanding of how money is allocated to 
          school districts and to schools within any school district.

        2)States legislative intent to implement comprehensive school 
          finance reform that builds on previous research, provides 
          appropriate incentives, establishes simpler allocation formulas 
          that provide base funding along with an amount that is tied to the 
          specific needs of pupils, improves rationality and equity in the 
          system, supports accountability and local flexibility, and holds 
          local education agencies harmless by transitioning to the new 
          system as new funds become available.

        3)Consolidates, commencing in FY 2015-16, the funding for 25 
          existing revenue limit add-ons and categorical programs (see Table 
          1) into a base funding apportionment to school districts, and 
          provides this funding on the basis of average daily attendance 

        4)Consolidates, commencing in FY 2015-16, the allocations for eight 


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          existing categorical programs (see Table 2) into Targeted Pupil 
          Equity funding for the purpose of creating weighted pupil funding, 
          and provides this funding to school districts and charter schools 
          on the basis of the number of English learner and economically 
          disadvantage pupils; also requires school districts and charter 
          schools to use these monies as a supplement to funds otherwise 
          provided for English learners and low-income pupils, and for any 
          educational purpose that provides instruction or support services, 
          with the goal of improving the academic performance or workforce 
          preparation, to those pupils.

        5)Consolidates, commencing in FY 2015-16, the funding for nine 
          existing categorical programs (see Table 3) into Quality 
          Instruction funding as a restricted portion of base funding, 
          requires these funds to be used for class-size reduction or 
          professional development, and provides this funding to school 
          districts and charter schools on the basis of ADA.

        6)States legislative intent to:

           a)   Use the base funding apportionment, in conjunction with 
             other base funding provided to school districts, for any 
             educational purpose necessary to maintain and improve the 
             educational services provided to all pupils in the district;

           b)   Use the Targeted Pupil Equity funding, in conjunction with 
             funding provided to school districts and charter schools for 
             all pupils, to appropriately weight educational funding so as 
             to provide additional resources for the instruction of English 
             learners and low-income pupils and to enable school districts 
             and charter schools to direct resources toward improving the 
             academic performance of those pupils; and, 

           c)   Use the Quality Instruction funding, in conjunction with 
             other base funding provided to school districts and charter 
             schools, to maintain and improve high quality instruction in 
             all classrooms and to enable school districts and charter 
             schools to direct resources toward improving the academic 
             performance of all pupils by supporting teaching and 
             instructional leadership.

        7)Specifies that nothing in these funding provisions authorizes a 
          school district, which receives funding on behalf of a dependent 
          charter school, to redirect this funding for another purpose 
          unless otherwise authorized.


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        8)Requires the Superintendent of Public Instruction (SPI) to study 
          and report to the Legislature and the Governor on or before 
          December 1, 2012, regarding:

           a)   Modifications to the standardized account code structure 
             (SACS) to provide school-level reports on revenue and 
             expenditures so as to facilitate easy comparisons across 
             schools and districts, including comparisons of school, 
             district, and statewide demographics and academic performance, 
             and data on program-level expenditures; and, 

           b)   An evaluation mechanism to facilitate continuous 
             improvement, maximum transparency, and accountability of the 
             primary funding structures, as well as a consistent process to 
             evaluate the effectiveness of any specific programs that are 
             funded separately.

         EXISTING LAW  :

        1)Provides for Revenue Limit (base discretionary) funding for school 
          districts that is, in part, based on ADA, and establishes and 
          funds categorical programs that focus resources and/or compliance 
          requirements on specific classes of students or schools, or on 
          specific uses of funds, identified by the Legislature as 
          priorities; also consolidates a number of historical categorical 
          programs into a smaller set of block grants, where a block grant 
          gives funding recipients the flexibility to spend the funds across 
          any of the previously individual programs consolidated into that 
          block grant, and provides for temporary flexibility to spend the 
          funds appropriated for nearly all categorical programs in order to 
          relieve local budget pressure created by the current economic 

        2)Requires the development of the California Longitudinal Pupil 
          Achievement Data System, and authorizes the use of standardized 
          account code structure (SACS), developed by the California 
          Department of Education, to account for revenues and expenditures.

         FISCAL EFFECT  :  According to the Assembly Appropriations Committee:

        1)General Fund (GF), Proposition 98 reallocation of specified, 
          existing categorical program funds, in the hundreds of millions.

        2)GF administrative costs to the California Department of Education 


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          (CDE), likely between $150,000 and $300,000, to make 
          recommendations regarding statutory and regulatory changes that 
          would be necessary to support the development, implementation, and 
          use of comprehensive school-level financial data.  These costs 
          include system changes to support the reporting of this 
          information by school districts.

         COMMENTS  :  The "Getting Down to Facts" studies published in 2007, 
        the Governor's Committee on Education Excellence and subsequent 
        researchers have all described California's education finance system 
        as being complex, irrational, administratively costly and 
        inequitable.  According to the author, "AB 18 is a vehicle for 
        comprehensively reforming the state's public school finance system.  
        The first step in this reform process is to simplify the number of 
        funding streams provided to school districts and to provide 
        continuing flexibility in the expenditure of those funds."  The 
        author also states that the bill "provides a transition over time by 
        allowing the Legislature to direct funding toward increasing the 
        weight given to the targeted funding, or providing COLA or 
        equalization to any of the funding pieces, as new funding becomes 
        available.  In this way districts will continue to receive their 
        pre-transition levels of funding and no district would lose funding 
        as a result of the move to the new system."

        Commencing in 2015-16 after the end of the current budget 
        flexibility provisions, this bill:

           1)   Adds approximately $2.4 billion in existing categorical 
             funding to school district base discretionary funding provided 
             on the basis of ADA (see Table 1).

           2)   Targets approximately $2.1 billion in current categorical 
             funding on services for English learners and low-income 
             students and provides the funding on the basis of the number of 
             those pupils.  These funds serve as the weighted targeted 
             funding in what can be viewed as a weighted pupil funding 
             system (see Table 2).

           3)   Provides $1.8 billion in Quality Instruction funding from 
             existing categorical allocations, and provides it on the basis 
             of ADA; these funds are required to be expended on a broad set 
             of instructional support activities, including class-size 
             reduction, professional development, or school staff training 
             (see Table 3).


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        This proposal, since it enacts changes commencing in FY 2015-16, 
        would also serve to eliminate the uncertainty that school districts 
        are facing with respect to the lack of an exit strategy from the 
        current budget flexibility provisions.  At this point in time, 
        budget planning at the local level beyond 2014-15 is impossible in 
        that it is unknown whether some flexibility provisions will continue 
        or whether categorical funding will return to its pre-flexibility 
        state.  Enactment of this proposal would constitute something of a 
        compromise between continuing full flexibility and full return to 
        restricted categorical funding.

        This bill also requires the SPI to make recommendations for the 
        modification of the state's existing fiscal systems to support more 
        comprehensive school-level financial reporting.  There are clear 
        benefits to school-level fiscal reporting - many related to 
        increased transparency and sensitivity to possible intra-district 
        funding and service inequities.  In addition, school-level financial 
        data reveals the effectiveness of expenditures at the intended point 
        of impact - the school and classroom.  School-level financial 
        information would serve a variety of audiences, including the 
        general public, education researchers, school administrators, other 
        district and school employees (e.g., program coordinators, classroom 
        teachers or non-instructional employees), local governing boards, 
        the Legislature, and investors and creditors (e.g., bondholders and 
        prospective bondholders, commercial banks, other creditors, 


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          |   Table 1 - Added to  Base    |
          |            Funding            |
          |Unemployment Insurance RL      |
          |Add-on - 15 year avg.          |
          |PERS Adjustment Add-on - 15    |
          |year avg.                      |
          |Supplemental School Counseling |
          |Program                        |
          |Home to School Transportation  |
          |(except Special Ed)            |
          |Specialized Secondary Program  |
          |Grants                         |
          |Gifted and Talented Program    |
          |Educational Technology - CTAP  |
          |Emergency Repair Program       |
          |Deferred Maintenance           |
          |Instructional Materials Block  |
          |Grant                          |
          |Community Day Schools          |
          |National Board Certification   |
          |Incentives (excluding funds    |
          |for prior awards)              |
          |California School Age Families |
          |Education (CalSAFE)            |
          |California High School Exit    |
          |Exam-Instructional Support and |
          |Services                       |


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          |Civic Education                |
          |Teacher Dismissal              |
          |Apportionment                  |
          |School Safety Block Grant      |
          |(8-12)                         |
          |Class Size Reduction (9th      |
          |Grade)                         |
          |Advanced Placement and         |
          |International Baccalaureate    |
          |Programs                       |
          |Pupil Retention Block Grant    |
          |School and Library Improvement |
          |Block Grant                    |
          |School Safety Consolidated     |
          |Competitive Grants             |
          |Arts and Music Block Grant     |
          |Child Oral Health Assessments  |
          |Adult Education - Schedule (1) |
          |   Table 2 - Targeted Pupil    |
          |        Equity Funding         |
          |Supplemental Instruction       |
          |(Summer School)                |
          |Economic Impact Aid            |
          |American Indian Early          |
          |Childhood Education Centers    |
          |Adult Education Schedule (2) & |
          |(3)                            |


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          |Charter School Categorical     |
          |Block Grant (proportional to T |
          |programs)                      |
          |New School Categorical Funding |
          |(proportional to T programs)   |
          |Community-Based English        |
          |Tutoring Program               |
          |Targeted Instructional         |
          |Improvement Block Grant        |
          |                               |

          |Table 3 - Quality Instruction  |
          |Funding                        |
          |Mathematics and Reading        |
          |Professional Development       |
          |Program                        |
          |Administrator Training Program |
          |Bilingual Teacher Training     |
          |Assistance Program - Schedule  |
          |(1)                            |
          |Teacher Peer Review - Schedule |
          |(2)                            |
          |Class Size Reduction (K-3)     |
          |Teacher Credentialing Block    |
          |Grant                          |
          |Professional Development Block |
          |Grant                          |
          |Physical Education Teacher     |
          |Incentive Grants               |
          |Certificated Staff Mentoring   |


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           Analysis Prepared by  :    Gerald Shelton / ED. / (916) 319-2087 

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