BILL ANALYSIS Ó
AB 1859
Page 1
Date of Hearing: May 9, 2012
ASSEMBLY COMMITTEE ON EDUCATION
Julia Brownley, Chair
AB 1859 (Buchanan) - As Amended: April 30, 2012
SUBJECT : School facilities: charter schools
SUMMARY : Requires a charter school applying for the federal
qualified school construction bond (QSCB) volume cap, or any
other federal bond borrowing authority to notify, in writing and
at least 30 days before submitting the application, the district
superintendent of schools and the governing board of the school
district in which the charter is physically located of its
intent to rehabilitate, encumber, or otherwise alter school
district property.
EXISTING LAW :
1)Establishes the Leroy F. Greene School Facilities Act of 1998
and requires the State Allocation Board (SAB) to allocate to
applicant school districts prescribed per-unhoused-pupil state
funding for construction and modernization of school
facilities, including hardship funding, and supplemental
funding for site development and acquisition. (Education Code
(EC) Section 17070.35)
2)Establishes the Charter School Facilities Program (CSFP),
under the administration of the SAB, to provide funding to
qualifying entities for the purposed of establishing charter
school facilities for charter school pupils. Authorizes
preliminary applications to be submitted by a school district
on behalf of a charter school that is physically located
within the geographical jurisdiction of the school district,
or a charter school on its own behalf if the charter school
has notified both the superintendent and the governing board
of the school district in which it physically located of its
intent to do so in writing at least 30 days prior to
submission of the preliminary application. (EC Sections
17078.52 and 17078.53)
3)Authorizes the California Department of Education (CDE) to
assign and distribute the state's 2009 and 2010 federal tax
credit bond volume cap for QSCBs to school districts and
county offices of education (COEs) if the project is funded by
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local voter-approved bonds issued by the school district or
bond anticipation notes as authorized by EC Section 15150.
Specifies that COEs and a school district with an enrollment
of 2,500 or less may use other forms of financing with the
submission of a resolution adopted by the county board of
education or governing board of the school district
authorizing the issuance of the financing. (EC Section 12000
et seq.)
4)Authorizes the California School Finance Authority (CSFA) to
assign and distribute the state's 2009 and 2010 federal tax
credit bond volume cap for QSCBs for the benefit of charter
schools, or to be further assigned and distributed to one or
more issuers in the state for the benefit of charter schools,
as determined by CSFA. (EC Section 12000 et seq.)
5)Specifies the following QSCBs eligibility criteria and
requirements for charter schools:
a) The charter school is operated as, or is operated by, a
nonprofit entity;
b) The charter school has an approved charter in place that
is current at the time of application and continuously
through the date of bond issuance;
c) The chartering authority certifies that the charter
school is in good standing and is in compliance with the
terms of its charter;
d) The charter school provides the level of classroom-based
instruction specified EC Section 47612.5(e)(1);
e) The applicant has completed at least three full school
years of instructional operation as a charter school as of
the end of the previous school year; and,
f) Applicants shall not apply for more than $25 million of
QSCBs per project. (EC Section 12001.6)
FISCAL EFFECT : This bill has been keyed non-fiscal by the
Legislative Counsel.
COMMENTS : Background . In February 2009, the federal government
passed the federal American Recovery and Reinvestment Act of
2009 (ARRA), which allocated approximately $100 billion
nationwide for education programs with the purpose of
stimulating the economy, including $22 billion in tax credits
over two years under the QSCB program. The QSCB program
provides savings for school districts issuing local bonds for
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the construction and renovation of school facilities by lowering
or eliminating interest payments. The federal government
provides federal tax credits for bondholders in lieu of interest
normally paid by issuers (school districts). According to the
CDE, interest payments typically equal about 50% of the cost of
a bond. The maximum term of a bond using QSCB tax credits is
determined by the United States Treasury Department, which is
approximately 15 years.
ARRA's allocations were based on a state's Title 1 (poor, needy
pupils) allocation, of which 40% is allocated directly by the
federal government to large school districts and the remaining
allocated to local educational agencies (LEAs) by the state.
California received $1.3 billion for 2009 and another $1.3
billion for 2010. Of the amount for 2009 and 2010, $582 million
and $547 million, respectively, were allocated directly to 11
large school districts and $773.5 and $720 million,
respectively, were reserved for school districts, COEs, and
charter schools.
QSCBs for charter schools . Of the 2009 allocation, $73.5
million of the state's $773.5 million allocation was reserved
for charter school facilities, administered by the CSFA. Of the
2010 allocation, $68.4 million was reserved for charters. The
charter allocations were based on charter schools receiving
almost 10% of new construction funding in the last two statewide
education school facility bonds.
The CSFA is located within the State Treasurer's Office and was
created to finance educational facilities and provide school
districts and community college districts access to working
capital. The CSFA developed eligibility criteria and procedures
for the QSCB program, which are similar to the criteria used for
the Charter School Facilities Program. The CSFA guidelines
prioritize charters that are deemed "credit worthy" and that are
"shovel ready". Because charter schools do not have authority
to issue bonds, the CSFA sells the bonds and provides low- or
no-interest loans to charter schools.
This bill requires charter schools seeking loans through the
QSCB or other federal program to notify the superintendent and
the local governing board in which it is physically located in
writing of its intent to rehabilitate or alter school property
at least 30 days prior to submitting an application. According
to the author, this bill stems from a situation in the Livermore
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Unified School District where the district learned of a charter
school's intent to seek federal bond authority to build,
encumber or otherwise alter school district property through a
notice in a newspaper. The federal Internal Revenues Code
requires public approval of private activity bonds, which can be
met through a "public hearing following reasonable public
notice," which, according to the author, is frequently a legal
notice in a newspaper of general circulation.
Proposition 39 requirements . School districts are required,
under Proposition 39 passed by voters in 2000, to provide
charter schools with facilities that are sufficient and
reasonably equivalent to other buildings, classrooms, or
facilities in the district. Charters may also lease facilities
from a school district. Title 5 regulations adopted by the
State Board of Education specify requirements and establish the
guidelines through which districts provide and charter schools
request facilities. The regulations require a school district
and a charter school to negotiate an agreement regarding use of
and payments for the facilities provided by a school district,
and specify that the school district is responsible for any
modifications necessary to maintain the facility in accordance
with the California Building Standards. The regulations are
silent on guidelines for charter schools that wish to make
modifications on their own. However, districts can and some, if
not all, do require charter schools to notify and receive
permission to rehabilitate or modify a district-owned building.
According to the author, while the Livermore Unified School
District agreement does contain the requirement for district
approval of any modifications, the charter school was able to
get approval for QSCB loans to modify school district facilities
without first informing the district or getting its approval.
State law requires charter schools to notify the district in
which it is physically located at least 30 days prior to
submitting an application for funds from the Charter School
Facilities Program. This bill is consistent with that
requirement for charters seeking QSCB or other federal loans.
Status of QSCB volume cap . According to the CSFA, 12 charter
school projects have received QSCB loans totaling $126.1
million. There is one application pending for the remaining $15
million. There is currently no other federal loan program. As
such, this bill is only necessary if any of the projects that
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have received QSCB loans decide not to proceed with approved
projects, thereby making funds available for new projects; or if
the federal government makes additional QSCBs or other federal
funds available in the future.
Prior related legislation . AB 2560 (Brownley), Chapter 266,
Statutes of 2010, authorizes the CDE and the CSFA to assign and
distribute the state's 2010 federal tax credit bond volume cap
for QSCB.
SB 205 (Hancock), Chapter 11, Statutes of 2010, authorizes the
CDE and the CSFA to assign and distribute the state's 2009
federal tax credit bond volume cap for QSCB.
REGISTERED SUPPORT / OPPOSITION :
Support
California Charter Schools Association Advocates
Opposition
None on file
Analysis Prepared by : Sophia Kwong Kim / ED. / (916) 319-2087