BILL ANALYSIS Ó
SB 533
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Date of Hearing: August 16, 2012
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
SB 533 (Wright) - As Amended: August 15, 2012
Policy Committee: Not
relevantVote:Not relevant
Urgency: No State Mandated Local Program:
No Reimbursable: No
SUMMARY
This bill appropriates $29 million for an emergency loan to the
Inglewood Unified School District (IUSD) and authorizes an
additional $26 million of lease financing through the California
Infrastructure and Economic Development Bank (I-Bank). It also
requires the Superintendent of Public Instruction (SPI) to
assume all the rights, duties, and powers of the governing board
of IUSD and, in consultation with the Los Angeles County
Superintendent of Schools, appoint an administrator to serve in
the district, as specified.
FISCAL EFFECT
Appropriates $29 million from the GF to the SPI for
apportionment to IUSD, as specified. This allocation is
expected to be reimbursed to the GF within one year via the sale
of bonds by the I-Bank. This bill authorizes IUSD to augment
the $29 million emergency loan with an additional $26 million of
lease financing through the I-Bank in order to increase the
emergency loan to a total of no more than $55 million. Also,
this measure authorizes funds to be disbursed from the proceeds
of the loan only if the state administrator and Fiscal Crisis
Management Assistance Team (FCMAT) jointly determine the
disbursement is necessary to support the immediate cash flow
needs of the district.
SUMMARY CONTINUED
1)Requires the SPI and the state administrator to maintain
control of the district until specified provisions are met,
including: one fiscal year has elapsed and the administrator
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determines that future compliance by IUSD with the improvement
plan is probable; the SPI has approved all recovery plans and
the FCMAT completes the improvement plan; the state
administrator certifies that all necessary collective
bargaining agreements are consistent with the terms of the
recovery plans; and the SPI determines that future compliance
by the district with the recovery plan is probable.
2)Requires FCMAT to provide assistance to the state
administrator in the development of the first annual multiyear
financial recovery plan and adopted budget, as specified.
This bill also requires FCMAT to recommend to the SPI any
studies or activities that should be undertaken by the state
administrator to enhance revenue or achieve cost savings.
3)Requires IUSD to bear 100% of all costs associated with
implementing this measure, including the activities of FCMAT.
This bill also requires FCMAT to continue assisting the
district until it is certified as positive (as determined
through the annual local budget process) or until all legal
rights, duties, and powers are returned to IUSD's governing
board (whichever is first).
4)Requires the improvement plan for personnel management to
include training for members of IUSD's governing board in
fiscal management from the California School Boards
Association, as specified. This measure requires FCMAT, after
it completes its first written report, to file subsequent
reports annually, as determined by the SPI.
5)Requires the State Controller, for each year that loan
apportionments are disbursed to the district, to conduct an
audit of the district's books and accounts, as specified.
This bill also requires the costs of these audits to be borne
by IUSD.
6)Requires IUSD to repay the emergency loan as a straight line
loan amortized over a 20-year term. This measure also
requires the loan amount to be repaid by the district, plus
interest calculated at a rate equal to the rate earned by the
PMI on the date this bill becomes effective, for a period not
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to exceed 20 years.
7)Requires IUSD to enter into a lease financing agreement with
I-Bank for the purpose of financing the emergency
apportionment, including a repayment to the GF of the $29
million appropriated in this bill.
8)Authorizes the school district to sell property owned by the
district and use the proceeds from the sale to reduce or
retire the emergency loan, provided that the district will be
ineligible for financial hardship assistance under the state
school facilities program from June 1, 2012 to June 30, 2015.
COMMENTS
1)Rationale . Inglewood Unified School District (IUSD) is located
in Los Angeles County and enrolled approximately 15,000 pupils
in 26 schools in the 2010-11 school year.
In April 2012, the Los Angeles County Office of Education
(LACOE) certified IUSD's fiscal status as negative, which
means (based upon current projections); the school district
will not meet its financial obligations for the 2011-12 or
2012-13 FYs. According to LACOE, the district's financial
information reflected "a negative GF ending balance of $1.51
million for the 2011-12 FY resulting in a negative 1.21%
reserve for economic uncertainties."
LACOE further stated the positive financial projections the
district made for the 2012-13 and 2013-14 FY were overstated
due to assuming more average daily attendance (ADA) funding
than it will receive (i.e., the number of pupils attending
school in the district) and the reduction of furlough days for
certificated staff from ten to five. Likewise, the county
office of education also noted a projected operating deficit
of $4.86 million, representing 3.89% of IUSD's projected
expenditures for the 2011-12 FY.
According to FCMAT's latest analysis, IUSD is projected to
have a negative cash flow balance of $8 million by March 2013,
ending the 2012-13 FY with a negative cash balance of
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approximately $28.9 million. This bill makes the statutory
changes necessary to provide a $55 million emergency loan to
IUSD.
2)FCMAT's analysis of IUSD's fiscal health . FCMAT, established
as part of AB 1200, Chapter 1213, Statutes of 1991, is a
statewide resource that provides fiscal and management
guidance to assist monitoring agencies in the performance of
their tasks and to assist local education agencies that
request help in school business management and related areas.
According to FCMAT, IUSD did not assume the worst case
scenario of the $457 per ADA reduction due to the failure of
the November 2012 tax initiative for budgeting purposes in the
2012-13 FY. As such, FCMAT projects the district will deficit
spend by approximately $12.2 million and cannot meet its 3%
reserve for economic uncertainties of $3.364 million for a
total reduction of $15.6 million. It further projects this
reduction will increase to a negative $24 million in the
2013-14 FY and $36.29 million in the 2014-15 FY.
3)Current law . Due to school districts becoming financially
insolvent, the state developed a process (AB 1200) that
outlines the duties and responsibilities of both the state and
school districts when emergency loans need to be granted to
districts. The process provides that if the state makes a loan
to a school district the SPI shall assume all legal rights,
duties, and powers of the governing board of the school
district. The SPI may appoint an administrator to act on his
or her behalf in exercising specified authority over the
district and may, on a short-term basis, assign any staff
necessary to assist the administrator. The following table
details the current school districts with outstanding
emergency loans.
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aFormerly South Monterey County Joint Union High School
District
Analysis Prepared by : Kimberly Rodriguez / APPR. / (916)
319-2081