BILL ANALYSIS Ó
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THIRD READING
Bill No: AB 1859
Author: Buchanan (D)
Amended: 4/30/12 in Assembly
Vote: 21
SENATE EDUCATION COMMITTEE : 8-0, 6/13/12
AYES: Lowenthal, Alquist, Hancock, Huff, Liu, Price,
Simitian, Vargas
NO VOTE RECORDED: Runner, Blakeslee, Vacancy
ASSEMBLY FLOOR : 75-0, 5/17/12 (Consent) - See last page
for vote
SUBJECT : School facilities: charter schools
SOURCE : Author
DIGEST : This bill 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.
ANALYSIS :
Existing law :
CONTINUED
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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.
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.
3. Authorizes the 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 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.
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.
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5. Specifies the following QSCBs eligibility criteria and
requirements for charter schools:
The charter school is operated as, or is operated
by, a nonprofit entity.
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.
The chartering authority certifies that the charter
school is in good standing and is in compliance with
the terms of its charter.
The charter school provides the level of
classroom-based instruction specified EC Section
47612.5(e)(1).
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.
Applicants shall not apply for more than $25
million of QSCBs per project.
This bill requires a charter school applying for the
federal 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.
Comments
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 the
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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 percent 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 percent is allocated
directly by the federal government to large school
districts and the remaining allocated to local educational
agencies 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 percent 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.
According to the author's office, this bill stems from a
situation in the Livermore Unified School District where
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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's office, 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 SBE 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's office,
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
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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 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
FISCAL EFFECT : Appropriation: No Fiscal Com.: No
Local: No
SUPPORT : (Verified 6/13/12)
Alameda County Board of Education
Alameda County Superintendent of Schools
California Charter Schools Association Advocates
California Teachers Association
Dublin Unified School District
Livermore Valley Joint Unified School District Board of
Education
ARGUMENTS IN SUPPORT : Supporters argue that this bill
requires a charter school to provide notice to its home
district board and superintendent 30 days prior to applying
for federal financing that would result in any improvements
to school district property. When a charter school applies
for state funding to either build a new school or
rehabilitate an existing facility, the school must notify
its home district within a 30 day time frame. This bill
will improve notification to school districts by employing
the same notification requirement as it is in state law for
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state funds.
ASSEMBLY FLOOR : 75-0, 5/17/12
AYES: Achadjian, Alejo, Allen, 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, Fong, Fuentes, Furutani, Beth
Gaines, Galgiani, Garrick, Gatto, Gordon, Gorell, Grove,
Hagman, Halderman, Hall, Harkey, Hayashi, Roger
Hernández, Hill, Huber, Hueso, Huffman, Jeffries, Jones,
Knight, Lara, Logue, Ma, Mansoor, Mendoza, Miller,
Mitchell, Monning, Morrell, Nestande, Nielsen, Norby,
Olsen, Pan, V. Manuel Pérez, Portantino, Silva, Smyth,
Solorio, Swanson, Torres, Valadao, Wagner, Wieckowski,
Williams, John A. Pérez
NO VOTE RECORDED: Fletcher, Bonnie Lowenthal, Perea,
Skinner, Yamada
PQ:do 6/14/12 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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