BILL ANALYSIS Ó Senate Appropriations Committee Fiscal Summary Senator Christine Kehoe, Chair AB 189 (Eng) Hearing Date: 08/25/2011 Amended: 05/27/2011 Consultant: Jacqueline Wong-HernandezPolicy Vote: Education 7-2 _________________________________________________________________ ____ BILL SUMMARY: AB 189 modifies requirements local education agencies (LEAs) must adhere to in order to participate in categorical flexibility. Specifically, this bill: 1) Requires LEAs to hold the regularly scheduled public hearing prior to and independent of a meeting where the school district or the governing board of the county office of education (COE) adopts a budget, as specified. 2) Requires the Department of Education (CDE) to establish a unique resource code for these funds and to inform LEAs that these funds are required to be considered general purpose nonrevenue limit funding for the purposes of reporting expenditures. 3) Authorizes the governing board of a school district to charge for a class in English and citizenship until July 1, 2015. _________________________________________________________________ ____ Fiscal Impact (in thousands) Major Provisions 2011-12 2012-13 2013-14 Fund Public hearings / notice Likely minor, non-reimbursable district costs Local Fee authority extension Likely minor revenue / cost avoidance for districts Local New resource code / reporting Minor CDE costs to create / use code General AB 189 (Eng) Page 1 Potentially significant LEA workload Local _________________________________________________________________ ____ STAFF COMMENTS: SUSPENSE FILE. Categorical flexibility was implemented in order to assist schools in absorbing extensive budget reductions imposed on them in recent years. SB 4 (Chapter 12, 2009) and extended by SB 70 (Chapter 7, 2011), authorized LEAs through the 2014-15 fiscal year, to use funding for approximately 38 categorical programs for virtually any educational purpose, to the extent permitted by federal law. These measures also deem LEAs to be in compliance with program and funding requirements related to the 38 categorical programs, and require LEA governing boards to make flexible expenditure decisions in a regularly scheduled public meeting as a conditional of fund flexibility. This bill modifies existing public hearing requirements on LEAs that choose to utilize categorical flexibility. It requires an LEAs to hold the public meeting at which flexible expenditure decisions will be made, prior to, and independent of, a meeting where the school district or the COE adopts its budget. Additionally, this bill requires the governing board, if it intends to close a program funded by a budget item specified within the categorical flexibility statute, to identify in the notice of the agenda of the public hearing or at another public hearing, the program(s) proposed to be closed. These additional meeting requirements would be borne by LEAs, as a condition of categorical flexibility. The cost to individual LEAs would depend upon the number of programs they intend to close, their meeting procedures, and their staffing levels. This bill only requires one additional public meeting (at which all proposed program closures could be discussed), and is unlikely to incur a significant cost for any single LEA. This bill requires the CDE to establish a unique resource code for categorical programs subject to the flexibility provision, and to inform LEAs that these funds shall be considered general purpose nonrevenue limit funding for the purposes of reporting expenditures. The CDE is required to provide this information to the Department of Finance and the Legislature annually on April 15 until, and including, April 15, 2016, consistent with AB 189 (Eng) Page 2 existing law. This provision, which places additional reporting requirements on schools that utilize categorical flexibility, is unlikely to result in any additional useful information regarding how funds subject to flexibility are uniquely spent by schools. Under this bill, schools would receive a lump sum of all flexed categorical funding under a single, new resource code, and then that sum of money would become part of the school's general purpose funding. Subsequently, all expenditures would be made from the new general purpose fund which includes both amounts (regular general purpose, and new resource code money). Schools would have to decide whether a program was being funded from regular general purpose or new resource code funds, which would be mixed together and permitted to be used for the exact same purposes. Because those funds functionally come from one account, at the school level, for school expenditures, any determination of the origin of a specific dollar would be arbitrary. Two schools that continue to fund a particular categorical program at the exact same level might report differently as to where the money originated from that is funding the program. One school could report that it was funding the program from flexed categorical funds, and the other school would report that it was not using any flexed categorical funds for that program (because it was using regular general purpose funding). At best, the information is meaningless; at worst, schools will feel compelled to report in a way that they think the state wants to see funding used, and devote staff time to figuring out how to most advantageously report expenditures. Staff recommends that the resource code provisions be removed from the bill. They increase local and CDE workload without increasing accountability. This bill extends the sunset on existing authority of school districts to charge a fee for a class in English and citizenship until July 1, 2015. This provision will result in local revenue for school districts offering those classes. AB 189 (Eng) Page 3