BILL ANALYSIS Ó
SENATE COMMITTEE ON EDUCATION
Alan Lowenthal, Chair
2011-2012 Regular Session
BILL NO: AB 2279
AUTHOR: Swanson
AMENDED: May 2, 2012
FISCAL COMM: Yes HEARING DATE: June 20, 2012
URGENCY: No CONSULTANT:Daniel Alvarez
SUBJECT : School districts: emergency apportionments:
trustees.
SUMMARY
This bill removes the requirement, as specified, that a
trustee appointed by the Superintendent of Public
Instruction (SPI) who works in a school district that
received an emergency loan serve until the loan is repaid.
However, the bill includes a provision that the county
superintendent of schools may stay or rescind an action of
the governing board that in their judgment may affect the
financial condition of the school district.
BACKGROUND
Existing law establishes a process for state oversight and
financial assistance for schools in financial trouble, and
authorizes the governing board of a school district that
determines that its revenues are insufficient to meet its
current year obligations to request an emergency
apportionment (loan) from the state through the SPI. An
emergency apportionment (loan) from the state results in
the state taking control of the school district. The degree
of state control is determined by the size of the loan
relative to the district's budget.
Specifically, if the emergency loan is less than twice the
size of the district's required reserve level, a State
Trustee is assigned and assumes authority over the
financial aspects of the school district's activities. If
the size of the loan exceeds twice the size of the
district's required reserve level, the following takes
place: (a) the governing board loses its powers and becomes
advisory only; (b) the local superintendent is no longer
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employed by the district; and (c) a State Administrator is
assigned and assumes the powers of the local governing
board and superintendent.
In the case of a state appointed trustee, existing law
requires the trustee to serve until the loan is repaid, the
district has adequate fiscal systems and controls in place,
and the SPI determines that the district's future
compliance with its approved fiscal plan is probable. In
addition, existing law provides that-before the district
repays the loan-it shall select an auditor from a list
established by the SPI and State Controller to conduct an
audit of its fiscal systems. If the fiscal systems are
deemed to be inadequate, then the SPI may retain the
trustee until the deficiencies are corrected. (Education
Code § 41320, et. seq.)
ANALYSIS
This bill removes the requirement that a trustee appointed
by the Superintendent of Public Instruction (SPI) who works
in a school district that received an emergency loan serve
until the loan is repaid. Specifically, this bill:
1) Requires the trustee to serve for at least three
years and until the school district has adequate
fiscal systems/controls in place and the SPI
determines the district's future compliance with the
fiscal plan is probable, as specified.
2) Authorizes the county superintendent of schools
(CSS) to stay or rescind an action of the governing
board of the school district that may affect the
financial condition of the district after the
trustee's period of service and until the emergency
loan is repaid.
3) Modifies current law, by clarifying that if a
school district violates a provision of their recovery
plans within five years after the trustee is removed
or after the loan is repaid, whichever occurs later,
the SPI may reassume either directly or through an
administrator all of the legal rights, duties, and
powers of the governing board of the school district,
as specified.
STAFF COMMENTS
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1) Need for the bill . According to the author, while the
SPI has the authority to appoint a trustee, the SPI
does not have discretion to remove a trustee prior to
the full repayment of an emergency loan. This measure
would allow the SPI to remove the trustee and restore
the district governing board's full power after a
minimum of three years if he or she determines that
school district's future compliance with their
approved fiscal plan is probable. In addition, this
measure authorizes the county superintendent to stay
or rescind any action of the local school district
after the trustee's period of service and until the
state loan is repaid.
2) Additional background on appointed trustees . As
previously stated, depending on the size of an
emergency apportionment (loan), the SPI may appoint
either a trustee or administrator to act on his/her
behalf. A trustee must have recognized expertise in
management and finance. The trustee serves until the
emergency loan is repaid and the school district has
adequate fiscal systems and controls in place. The
trustee serves at the pleasure of, and reports
directly to, the SPI. The trustee is authorized to do
all of the following:
a) Monitor and review the operation of the
school district.
b) During the period of his or her service,
stay or rescind any action of the local governing
board that, in the judgment of the trustee, may
affect the financial condition of the school
district.
The necessity of accepting an emergency apportionment
and therefore, the appointment of either a state
administrator or trustee generally is the result of
poor local district leadership and decision making and
ineffective governance, typically over multiple years.
If not corrected, past management decisions can lead
to cash insolvency and the need for state fiscal
intervention in order to ensure a school district is
able to maintain an appropriate fiscal and financial
viability.
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The term of an emergency loan is typically 20 years.
It could be argued that having a trustee in place for
this length of time may undermine the community's
engagement with its schools, because the powers and
authority of the locally elected governing board is
constrained. And over time, this can discourage
qualified members of the community from choosing to
serve on the board, leading to further disengagement,
and making self-government more difficult when full
authority returns to the board.
A goal of this bill, therefore, is to transition from
a trustee to the local governing board sooner than 20
years, but with adequate safeguards. For example,
permitting the local county superintendent of schools
to stay or rescind governing board actions that may
affect the financial condition of the school district.
Consistent with the overall intent of the measure,
staff recommends amendments that:
a) Makes clear the SPI is authorized, and not
required, to remove a trustee after three years
if adequate fiscal systems and controls are in
place and compliance with fiscal plans (Section
41320) is probable;
b) Clarifies the county superintendent which
has jurisdiction of the local school district has
the stay and rescind authority, as specified;
c) Specifies that if a county superintendent
takes action to stay or rescind a local governing
board decision that he/she report this within
five business days to the SPI, the notification,
at a minimum, should include; (a) a description
and financial implications of the action the
local governing board intended to take and (b)
provide the rationale and findings for the county
superintendent's action; and
d) Requires the SPI to provide an annual report
to the Legislature, no later than December 30,
specifying whether the school district is
maintaining compliance with their fiscal recovery
plans.
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1) According to the Assembly Appropriations Committee ,
for a school district with an emergency loan, this
bill will result in local school district general fund
savings, likely in excess of $150,000, per year by
repealing the requirement for a trustee to serve in
the district until its loan is repaid.
Of the eight emergency loans the state has issued,
four have been paid off. Of the four districts that
paid off their loan, it took three of them more than
10 years to pay the loan in full. As a result, the
trustee appointed by the SPI served in the school
district, alongside the district's superintendent, for
a number of years. During this time, the district was
paying the salary of both the trustee and its
superintendent.
2) Related legislation . AB 2278 (Swanson) permits a
school district with a state-appointed administrator
to annually evaluate that administrator and requires
the advisory evaluation to be submitted to the
Governor, the Legislature, the Superintendent of
Public Instruction (SPI), and the County Office Fiscal
Crisis and Management Assistance Team (FCMAT). The
measure passed this Committee, as amended, on a 6-0
vote.
SUPPORT
California School Boards Association
OPPOSITION
None on file