BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 677|
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CONSENT
Bill No: AB 677
Author: Skinner (D)
Amended: 4/26/11 in Assembly
Vote: 21
SENATE EDUCATION COMMITTEE : 9-0, 6/22/11
AYES: Lowenthal, Alquist, Blakeslee, Hancock, Huff, Liu,
Price, Simitian, Vargas
NO VOTE RECORDED: Runner, Vacancy
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
ASSEMBLY FLOOR : 77-0, 5/19/11 - See last page for vote
SUBJECT : Oakland Unified School District: sale of
surplus property
SOURCE : Oakland Unified School District
DIGEST : 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.
ANALYSIS :
Existing law:
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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) assume 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.
2. Authorizes, as of 2003, emergency financial assistance,
in the form of a loan to the OUSD in the amount of $100
million for apportionment by the SPI to the OUSD for the
purpose of an emergency loan. The OUSD is required to
repay the loan (principal and interest) over a 20-year
period.
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.
This bill reestablishes the authority of the 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.
In addition, this 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
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on the development of district-wide policies and
procedures governing the use or disposition of school
property.
Comments
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 (CDE). 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.
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
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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.
Status of current loan repayments . There are six school
districts (reported by the CDE as of July 2010) that have
an outstanding emergency loan balance with the state as
follows:
School District Authorized Loan AmountBalance owed
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 USD $28,525,000$10,627,181
Prior Legislation
AB 1874 (Evans), Chapter 147, Statutes of 2010, and AB 1948
(Evans), Chapter 636, Statutes of 2008, further extended
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the authorization for the sale of surplus property for
Vallejo City Unified School District for the purposes of
repaying its emergency loan.
SB 512 (Senate Education Committee), Chapter 677, Statutes
of 2005, Section 51 of the annual Education Omnibus bill
extended OUSD's 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. The bill extended the time period during which
OUSD was thus authorized to June 30, 2007.
SB 39 (Perata), Chapter 14, Statutes of 2003, provided OUSD
with a $100 million loan. A state administrator was
appointed in the district; an administrator is still
serving in that capacity.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
SUPPORT : (Verified 7/12/11)
Oakland Unified School District (source)
California Federation of Teachers
ARGUMENTS IN SUPPORT : 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 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 this bill is
consistent with previous legislation for Vallejo Unified
School District and other districts that have received
emergency loans from the state.
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ASSEMBLY FLOOR : 77-0, 5/19/11
AYES: Achadjian, Ammiano, Atkins, Beall, Bill Berryhill,
Block, Blumenfield, Bonilla, Bradford, Brownley,
Buchanan, Butler, Charles Calderon, Campos, Carter,
Cedillo, Chesbro, Conway, Cook, Davis, Dickinson,
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, Allen, Gorell
CPM:mw 7/12/11 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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