BILL ANALYSIS Ó ------------------------------------------------------------ |SENATE RULES COMMITTEE | AB 202| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ THIRD READING Bill No: AB 202 Author: Brownley (D) Amended: 8/15/11 in Senate Vote: 21 SENATE EDUCATION COMMITTEE : 8-0, 6/22/11 AYES: Lowenthal, Alquist, Blakeslee, Hancock, Liu, Price, Simitian, Vargas NO VOTE RECORDED: Runner, Huff, Vacancy SENATE APPROPRIATIONS COMMITTEE : 6-3, 8/25/11 AYES: Kehoe, Alquist, Lieu, Pavley, Price, Steinberg NOES: Walters, Emmerson, Runner ASSEMBLY FLOOR : 78-0, 5/19/11 (Consent) - See last page for vote SUBJECT : Local educational agencies: reimbursable state mandates SOURCE : Author DIGEST : This bill makes various changes to the states process for the determination and reimbursement of educational mandates that streamline the reimbursement process, and augments the reporting requirements placed on the Legislative Analyst's Office with respect to mandates filed by a local education agency. ANALYSIS : The California Constitution requires the state CONTINUED AB 202 Page 2 to provide a subvention of funds to reimburse costs to local governments, including local educational entities, whenever the Legislature, executive order, or a state agency through adoption of regulations mandates a new program or higher level of service, with specified exceptions. Existing law specifies the process to determine whether or not a reimbursable state mandate is created and establishes a procedure for local governmental agencies, including local education agencies (LEAs), to file claims for reimbursement of these costs with the Commission on State Mandates (CSM) that requires the CSM to hear and decide upon each claim for reimbursement and then determine the amount to be paid for reimbursement, adopt parameters and guidelines to guide the payment of claims, and adopt a reasonable reimbursement methodology (RRM). The CSM is required to consult with the Department of Finance (DOF), among other state officials, when adopting parameters and guidelines for reimbursement. In addition, existing law requires the CSM to establish procedures for dealing with incorrect reduction claims. The State Controller may reduce the amount of any reimbursement claim that it determines to be excessive or unreasonable. If the State Controller takes such an action and the claimant disputes it, the claimant may file an incorrect reduction claim with the CSM. An incorrect reduction claim alleges that the Controller incorrectly reduced the amount paid on a reimbursement claim for a state-mandated program. The CSM hears and decides whether the State's Controller reduction was correct. This bill implements changes related to the state's process for the determination and reimbursement of educational mandates that streamline the reimbursement process, and augments the reporting requirements placed on the Legislative Analyst's Office (LAO) with respect to mandates filed by a local education agency. More specifically, this bill: 1. Defines LEA for the purposes of these provisions to mean a school district or county office of education, but not a community college district. CONTINUED AB 202 Page 3 2. Expresses legislative intent that statues creating a reimbursable state mandate on LEAs be periodically reviewed, and the Legislature consider recommendations on whether these statutes be amended, repealed, or remain unchanged. 3. Requires the State Controller, consistent with legislative intent, to notify the appropriate fiscal and education policy committees of the Legislature within 30 days of the date upon which the State Controller determines total reimbursement claims filed in a fiscal year, on any mandate where the LEA test claim exceeds the adopted statewide estimate of costs for that mandate by more than 25 percent. 4. Requires the CSM to notify the Legislature within 30 days of the date upon which a test claim is filed by an LEA, where the LEA submits a written narrative that identifies the effective date and register number of any regulation alleged to contain a mandate. 5. Authorizes an LEA test claimant to designate another LEA for the purposes of drafting and submitting the proposed parameters and guidelines to the CSM. 6. Changes the process relating to development of an RRM, as follows: A. Provides for only one extension of 90 days, in addition to the initial 180 days allowed for the development of an RRM. B. Eliminates the ability of an LEA test claimant or DOF to unilaterally end the development of an RRM once this process has begun, and instead authorizes the parties to jointly request that the RRM process be ended. C. Establishes an arbitration process, if a draft of an RRM is not submitted by the required deadline or extended deadline, or a joint notification requesting termination of the RRM process has been submitted. CONTINUED AB 202 Page 4 7. Requires all of the following to occur if an LEA test claimant and DOF notify the Executive Director of the CSM that no further progress in developing the RRM is possible: A. The Executive Director declares the development of the RRM is at an impasse and that binding arbitration is necessary. B. The Executive Director notifies the Chief Executive Officer of Fiscal Crisis and Management Assistance Team (FCMAT) the test claimant and DOF are at an impasse. C. Requires the LEA and DOF to give all available support materials to the arbitrator within 10 days of the declared impasse, including but not limited to, estimates, local cost projections, sample information, and input from associations or other interested parties. D. Requires the Chief Executive Officer of FCMAT to serve as the sole arbitrator for the RRM impasse and, within 90 days, mediate or arbitrate a draft RRM and provide it to the LEA and DOF, as specified. E. Requires the LEA and DOF, within 30 days of receiving the draft RRM from the arbitrator, to jointly submit to the Executive Director the draft RRM and proposed statewide estimate of costs for the initial claiming period and budget year. 8. Requires any LEA filing a reimbursement claim to provide with the reimbursement claim a signed certification from the superintendent attesting to the accuracy of the data used to calculate the amount claimed under the approved RRM. 9. Requires the LAO, in addition, to information currently required in statute, to also report at least once in each regular session of the Legislature, on each LEA reimbursable state mandate that meets the following criteria: CONTINUED AB 202 Page 5 A. The CSM has determined the existence of a state reimbursable mandate. B. A claim for reimbursement has been filed with the State Controller by a school district, county office of education, or other eligible LEA. C. The Legislature has not provided an appropriation to fully fund current and pending claims for reimbursement filed with the State Controller. 10.Requires the LAO to include specified information in the report, due to the Legislature on or before January 1, following the adjournment of the regular session for which the review was made on each mandate, including: A. A summary of the mandate and its statutory source. B. Fiscal information, including but not limited to, the claims paid to date, unpaid claims, pending claims, and the history of appropriations for the mandate. C. Recommendations as to whether the mandate should be amended, repealed or remain unchanged. Comments The motivation for the elements in this bill come from an October 2009, California State Auditor report concerning state mandate determination and payment processes. According to this audit report, "while the Commission on State Mandates has made progress in reducing its backlog of test claims for state mandates, the continuing backlog is large." The State Auditor finds that high workload and insufficient resources exist at the CSM, and goes on to say that, "This situation, combined with the long time that elapses before the Commission makes determinations, means that substantial costs will continue to build before the Legislature has the information it needs to take any necessary action." Automatic repeal or inoperability of education bills keyed with a mandate . The State Auditor in their October 2009 CONTINUED AB 202 Page 6 report, after discussion with other states, points out that some mandates represent permanent solutions to temporary problems. The State Auditor suggested the sunset of each mandate, to enable a legislative "reassessment of mandate activities and costs" at a later time. This bill makes any bill that imposes a state-mandated local program on an LEA, as determined by Legislative Counsel, to include an automatic repeal or makes the requirement inoperative five years following the date from which the requirement becomes operative, unless the particular bill includes a provision "?that expressly notwithstands" this section in this bill. Though an automatic trigger that would make a prospective LEA mandate inoperable is one way to activate the recommendation of the State Auditor and force the reintroduction and passage of legislation that initially creates a mandate; arguably, the additional reporting by the Legislative Analyst, as envisioned in this measure, should promote the regular "evaluation" of each mandate. In addition, one Legislature cannot bind a future Legislature. Additional background . In 1979, Proposition 4 amended the California Constitution by adding Article XIII B, Section 6 requiring the state to reimburse local governments for the cost of new programs or higher levels of service mandated by the Legislature or any state agency. In 1984, the Legislature created the CSM, as a quasi-judicial body, to decide test claims alleging that the State imposed a reimbursable state-mandated local program. If the CSM identifies a state-mandated program as eligible for reimbursement, it adopts parameters and guidelines defining what activities will be reimbursed and adopts statewide cost estimates. The CSM is also authorized to hear incorrect reductions claims (IRCs) from local agencies if the Controller reduces reimbursement claims upon audit and the claimant chooses to dispute that reduction. From beginning to end, the mandate determination process is sometimes excessively lengthy, often taking five years or more to be resolved by the CSM. In November 2004, state voters approved Proposition 1A, which requires the Legislature to appropriate funds in the CONTINUED AB 202 Page 7 annual budget to pay outstanding mandate claims, "suspend" the mandate, or "repeal" the mandate. However, these provisions apply to local governments only and - by definition - do not include school districts or community colleges. The CSM consists of the State Treasurer, the State Controller, the Director of DOF, the Director of the Office of Planning and Research, two local elected officials (with the restriction that they come from different categories of local government, including school district governing boards, city councils, or county boards of supervisors), and a public member with experience in public finance. No current member of the CSM is an elected member of an LEA board. Prior Legislation AB 2082 (Assembly Education Committee), 2009-10 Session, similar to this bill with regard to provisions relating to legislative review of new mandates and the information on educational mandates the LAO is required to provide the Legislature. (Held in Senate Education Committee) Related Legislation SB 64 (Liu), 2011-12 Session, provides for a specialized mandate test claim process for K-12 school districts that has many of the same process elements as that for local agencies, with the exception of creating a school district test claim advisory committee tasked with assisting CSM by providing recommendations, as specified. (Held under submission in Senate Appropriations Committee Suspense File) SB 887 (Emmerson), 2011-12 Session, enacts the Streamlined Temporary Mandate Process Act of 2011, a voluntary, temporary, streamlined alternative mandate reimbursement process for LEA from the 2011-12 through the 2014-15 fiscal years. (In Senate Education Committee) FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes Local: No CONTINUED AB 202 Page 8 According to the Senate Appropriations Committee: Fiscal Impact (in thousands) Major Provisions 2011-12 2012-13 2013-14 Fund Arbitration process Likely minor, possible significant ongoing costs General Streamline LEA Potential future costs; some offsetting savings General mandates Notifications/reports Minor to significant ongoing workload General SUPPORT : (Verified 8/29/11) California Association of School Business Officials California Association of Suburban School Districts California School Boards Association Education Mandated Cost Network Manhattan Beach Council of PTAs Public Advocates Small School Districts' Association ARGUMENTS IN SUPPORT : According to the author's office, the intent of this bill is to implement changes in the mandate reimbursement process in order to (1) reduce the impact of ineffective and unnecessary mandates placed on local educational agencies, (2) reduce the long-term liability to the state for mandate reimbursements, and (3) streamline the process and reduce the workload of the CSM, other state agencies and local educational agencies, so as to reduce processing time and administrative costs for all claims. ASSEMBLY FLOOR : 78-0, 5/19/11 (Consent) AYES: Achadjian, Allen, Ammiano, Atkins, Beall, Bill Berryhill, Block, Blumenfield, Bonilla, Bradford, Brownley, Buchanan, Butler, Charles Calderon, Campos, Carter, Cedillo, Chesbro, Conway, Cook, Davis, Dickinson, CONTINUED AB 202 Page 9 Donnelly, Eng, Feuer, Fletcher, Fong, Fuentes, Furutani, Beth Gaines, Galgiani, Garrick, Gatto, Gordon, Grove, Hagman, Halderman, Hall, Harkey, Hayashi, Roger Hernández, Hill, Huber, Hueso, Huffman, Jeffries, Jones, Knight, Lara, Logue, Bonnie Lowenthal, Ma, Mansoor, Mendoza, Miller, Mitchell, Monning, Morrell, Nestande, Nielsen, Norby, Olsen, Pan, Perea, V. Manuel Pérez, Portantino, Silva, Skinner, Smyth, Solorio, Swanson, Torres, Valadao, Wagner, Wieckowski, Williams, Yamada, John A. Pérez NO VOTE RECORDED: Alejo, Gorell CPM:mw 8/29/11 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END **** CONTINUED