BILL ANALYSIS Ó AB 1163 Page 1 Date of Hearing: May 4, 2011 ASSEMBLY COMMITTEE ON APPROPRIATIONS Felipe Fuentes, Chair AB 1163 (Brownley) - As Introduced: February 18, 2011 Policy Committee: Higher EducationVote:8-0 Urgency: No State Mandated Local Program: No Reimbursable: SUMMARY This bill recasts the definition of "private college" to allow the California Educational Facilities Authority (CEFA) to facilitate tax-exempt bond programs for religious colleges, as specified, in conformance with a California Supreme Court decision. FISCAL EFFECT Negligible fiscal impact. COMMENTS Background and Purpose . CEFA, which is housed in the State Treasurer's Office, was established in 1973 for the purpose of provided conduit financing, through the issuance of revenue bonds, to assist private non-profit postsecondary education institutions in the expansion and construction of educational facilities. Since CEFA is authorized to issue tax-exempt bonds, it can often provide more favorable financing than private institutions might otherwise be able to obtain. According to the sponsor, Treasurer Bill Lockyer, current law is inconsistent with the California Supreme Court case, California Statewide Communities Development v. All Persons interested in the Matter of the Validity of a Purchase Agreement (2007) 40 Cal. 4th 788 (Communities Development case), in which the court held that government financiers, such as CEFA, may facilitate tax-exempt bond programs for religious colleges that limit entry on religious grounds or require students gaining admission to receive instructions in the tenets of faith so long as certain AB 1163 Page 2 conditions are met. The Treasurer argues that this inconsistency holds CEFA to a more stringent standard than comparable financing authorities. Without the statutory fix provided by AB 1163, CEFA is unable to provide constitutionally permissible financing to religious private schools that would expand educational opportunities within California and provide state oversight of financing for these programs. Analysis Prepared by : Chuck Nicol / APPR. / (916) 319-2081