BILL ANALYSIS Ó
SENATE COMMITTEE ON EDUCATION
Alan Lowenthal, Chair
2011-2012 Regular Session
BILL NO: AB 677
AUTHOR: Skinner
AMENDED: April 26, 2011
FISCAL COMM: Yes HEARING DATE: June 15, 2011
URGENCY: No CONSULTANT:Daniel Alvarez
SUBJECT : Oakland Unified School District: sale of surplus
property.
SUMMARY
This bill reestablishes the authority of the Oakland
Unified School District (OUSD) to sell district owned
property, for the period of January 1, 2012, through June
30, 2016, and use the proceeds to reduce or retire its
emergency loan from the state. The OUSD previously had this
authority through June 30, 2007.
BACKGROUND
Current law:
1) Requires that emergency loans to school districts in
fiscal crisis be provided by legislative
appropriation. Requires, upon a district's acceptance
of a loan exceeding 200 percent of a district's
recommended reserve, that the Superintendent of Public
Instruction (SPI) assumes all the legal rights, duties
and powers of the district governing board, authorizes
the SPI to appoint an administrator to act on his or
her behalf, and requires that the district governing
board become advisory to the administrator. The
authority of the SPI and the state-appointed
administer shall continue until the loan has been
repaid, the district has adequate fiscal systems and
controls in place, and the SPI has determined that the
district's future compliance with the fiscal plan
approved for the district is probable. (Education Code
§ 41325 et. seq.)
2) Authorizes, as of 2003, emergency financial
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assistance, in the form of a loan to the Oakland
Unified School District (OUSD) in the amount of $100
million for apportionment by the Superintendent of
Public Instruction (SPI) to the OUSD for the purpose
of an emergency loan. The OUSD is required to repay
the loan (principal and interest) over an
approximately 20-year period. (Chapter 14, Statutes of
2003)
In addition, OUSD was authorized, from June 2003 to
June 30, 2005 (since extended until June 30, 2007), to
sell surplus district owned property for the purposes
of reducing or retiring the emergency loan debt.
ANALYSIS
This bill reestablishes the authority of the Oakland
Unified School District (OUSD) to sell district owned
property, for the period of January 1, 2012, through June
30, 2016, and use the proceeds to reduce or retire its
emergency loan from the state. The OUSD previously had this
authority through June 30, 2007.
In addition, the bill:
1) Provides that OUSD is ineligible to participate in the
financial hardship assistance program under the School
Facility Program for the period of January 1, 2012,
through June 30, 2016.
2) Exempts OUSD, during the same time period, from a
current requirement in Section 17388 of the Education
Code that the district governing board appoint an
advisory committee to provide the district with advice
on the development of district-wide policies and
procedures governing the use or disposition of school
property.
STAFF COMMENTS
1) Need for measure . According to the author, "statewide
school districts face tremendous difficulty meeting
their financial obligations. Over the past few budget
cycles, the Legislature has made attempts to provide
school districts with flexibility to manage their
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school budgets. While OUSD has responsibly made
payments throughout the duration of the loan period,
the state's severe fiscal crisis and looming budget
shortfalls for OUSD necessitates that OUSD have the
ability to examine the possibility of selling unused
property in the next few years. This measure is a
fiscal planning tool that the OUSD like many other
school districts may use to avoid insolvency." The
extension proposed in AB 677 is consistent with
previous legislation for Vallejo USD and other
districts that have received emergency loans from the
State.
2) Additional information on status of OUSD . According
to OUSD, the district has no pending sales of district
property, but plans, in the context of continuing
budget reductions, to use the information developed
through a recent district/community-based property
inventory and analysis process to determine whether
property sales would be a feasible tool to use both to
pay down the outstanding emergency loan balance and to
deal with future budget uncertainties.
OUSD was one of 97 local educational agencies in the
state that received a qualified certification of its
financial status at the 2010-11 First Interim Report
provided by the California Department of Education. A
qualified certification is assigned to a school
district or county office of education when it is
determined that, based upon current projections, the
school district or county office of education may not
meet its financial obligations for current or two
subsequent fiscal years. Thirteen school districts
received a negative certification, which is assigned
to a school district or county office of education
when it is determined that, based upon current
projections, the school district or county office of
education will not meet its financial obligations for
the current and/or next fiscal year. If OUSD sells
district-owned real property as a result of the
authority provided in this bill, then the current
pressure on the district's budget might be relieved
and the state's emergency loan might be repaid more
quickly.
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3) No unique precedent for allowing sale of school
district property . Though previous legislation, as
well as this bill, extending the authority to sell
district property in order to pay down an emergency
loan, have all exempted the district from numerous
requirements on the sale of that property (in the
interest of streamlining the process), none of that
previous legislation has included an exemption from
the provision that requires the appointment of a
district advisory committee. The Legislature has
generally sided in transparency and public involvement
in local governing board decisions; in addition, it is
clear, in OUSD as well as other districts, that school
closures and the sale of school property is an issue
of great interest to the community as a whole. An
exemption from the requirement to appoint an advisory
board on these issues would appear to be contrary to
an interest in transparency and public involvement in
an issue of great community importance.
OUSD, however, has recently embarked on an effort to
conduct a complete inventory and analysis of all real
property held by the district. This effort has been
transparent and inclusive, and has included numerous
opportunities for public input to be provided in open,
public meetings. This district/community process will
provide the informational foundation for decisions on
the sale of district property that might occur during
the period of time authorized by this bill. This
process, and the fact that any final decisions on
property sales will have to be made in an open, public
meeting of the district governing board, appears to
meet the legislative intent behind Section 17388 of
the Education Code - that the sale of district owned
property be done in a transparent manner that involves
input from the community.
4) Status of current loan repayments . There are six
school districts (reported by the California
Department of Education as of July 2010) that have an
outstanding emergency loan balance with the state as
follows:
-------------------------------------------------------
|School District | Authorized Loan | Balance owed|
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| | amount | |
|-----------------+------------------+------------------|
|King City JUHSD | $13,000,000| $5,000,000|
|-----------------+------------------+------------------|
|Vallejo City USD | $ 60,000,000| $45,480,517|
|-----------------+------------------+------------------|
|Oakland USD | $100,000,000| $73,754,847|
|-----------------+------------------+------------------|
|West Fresno ESD | $2,000,000| $549,988|
|-----------------+------------------+------------------|
|Emery USD | $2,300,000| $902,273|
|-----------------+------------------+------------------|
|W. Contra Costa | $28,525,000| $10,627,181|
|USD | | |
-------------------------------------------------------
5) Previous related legislation :
AB 1874 (Evans), Chapter 147, Statutes of 2010,
and 1948 (Evans), Chapter 636, Statutes of 2008,
further extended the authorization for the sale of
surplus property for Vallejo City Unified School
District (VCUSD) for the purposes of repaying its
emergency loan.
SB 512 (Committee on Education), Chapter 677,
Statutes of 2005; Section 51 of the annual Education
Omnibus bill extended Oakland Unified School
District's (OUSD) authority to sell property owned
by the district and to use the proceeds from the
sale to reduce or retire their emergency loan.
Existing law at the time provided this authority to
OUSD from June 1, 2003, to June 30, 2005; this bill
extended the time period during which OUSD was thus
authorized to June 30, 2007.
SB 39 (Perata), Chapter 14, Statutes of 2003,
provides Oakland Unified School District with a $100
million loan; a state administrator was appointed in
the district, an administrator is still serving in
that capacity.
SUPPORT
California Federation of Teachers
Oakland Unified School District (sponsor)
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OPPOSITION
None on file.