BILL ANALYSIS                                                                                                                                                                                                    Ó






                         SENATE COMMITTEE ON EDUCATION
                             Alan Lowenthal, Chair
                           2011-2012 Regular Session
                                        

          BILL NO:       SB 821
          AUTHOR:        Fuller
          AMENDED:       April 28, 2011
          FISCAL COMM:   No             HEARING DATE:   May 11, 2011
          URGENCY:       No             CONSULTANT: Daniel Alvarez

           SUBJECT  :  Oversight of fiscal actions of newly organized or 
                    reorganized school districts.
          
           SUMMARY  

          This bill provides that a county superintendent of schools, 
          during the transition period of a school district 
          unification, merger, or formation may stop an action of an 
          outgoing governing board if that action would have a 
          material fiscal impact on the newly formed school district. 


           BACKGROUND  

          Current law:

           Specifies that effective upon the certification of the 
            election results for a newly organized school district, 
            the county superintendent of schools may intervene during 
            the transition period before the newly organized district 
            becomes operational if there is reason to believe that 
            any actions of the outgoing school districts may 
            jeopardize the fiscal solvency of the new district. 
            (Education Code § 42127.6 (j))

           Prescribes the duties, responsibilities, and general 
            powers of county superintendents of schools, including, 
            but not limited to: (a) superintend the schools of their 
            county, and (b) maintain the fiscal oversight of each 
            school district in his or her county pursuant to the 
            authority granted in throughout the education code. 
            (Education Code § 1240)

           States the intent of the Legislature that local 
            educational needs and concerns serve as the basis for 




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            future reorganizations of districts in each county.  In 
            addition, current law provides for a county committee on 
            school district organization in each county (county 
            committee) to consider locally developed reorganization 
            petitions to transfer territory among districts; unify, 
            merge or create new districts or revise the boundaries of 
            trustee areas. Proposals for transfer of territory may be 
            decided by the county committee in a public hearing, 
            although such decisions to transfer more than 10% of a 
            district's territory must be ratified by a vote of the 
            people in the affected districts. The decisions of the 
            county committee may be appealed to the State Board of 
            Education (SBE) for specified reasons. When the 
            reorganization proposal involves more than a transfer of 
            territory, the county committee holds a public hearing 
            and forwards the proposal, along with the committee's 
            recommendation, to the SBE.  Current law provides that if 
            the SBE approves a proposal for reorganization then the 
            proposal is returned to the County for approval of a vote 
            of the people in the territory being reorganized.
            (EC § 35500 et. seq.)

           ANALYSIS

          This bill  specifies, upon the voter approval of a petition 
          for reorganization and continuing after certification of 
          election results for a newly organized school district or 
          upon the appointment of an interim governing board, until 
          the effective date of the newly organized or newly formed 
          school district, the existing school district(s), as 
          specified, are subject to all of the following:

          1)   Requires the interim board or the governing board of 
               the existing school district(s), and, where 
               applicable, the administrators of the existing school 
               district(s), that during the transition period to a 
               newly organized school district, to notify the county 
               superintendent of schools in writing and provide 
               relevant documents or information no less than 10 
               school days before taking any action that would have a 
               material fiscal impact on, or impose a debt or 
               liability on the existing, proposed, newly formed, or 
               newly organized school district.

               Specifies that failure to provide notice nullifies the 
               action taken by the board or administrator of the 




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               school district(s).

          2)   Permits the county superintendent of schools to review 
               any action taken or proposed to be taken by any 
               interim or existing governing board to determine 
               whether the action would have a material fiscal 
               impact, debt, or liability on the existing, proposed, 
               newly formed, or newly organized school district.

               If, based on the review, the county superintendent 
               determines that the action would have a material 
               fiscal impact and that action is unnecessary for the 
               immediate functioning of the existing or newly formed 
               school district then the county superintendent may 
               stay or rescind that action.


               The county superintendent of schools is required to 
               inform the existing or interim reorganized school 
               district governing board of the school district in 
               writing on his/her justification for denying the 
               request.


          3)   Requires a school district to provide documents or 
               information requested by the county superintendent of 
               schools in a timely manner related to the proposed 
               action that is under review. 


          4)   Clarifies that requirements of this measure apply 
               irrespective of a school district's budget or 
               certification status, as specified.

           STAFF COMMENTS  

           1)   Additional background  .   In 2007, Sacramento voters 
               approved the reorganization / unification of the Grant 
               Joint Union High School District (GJUHSD) and three 
               smaller elementary school districts into one district 
               - effective July 1, 2008, the merger resulting in a 
               new, larger district known as the Twin Rivers Unified 
               School District.  
                
                In early 2008, the GJUHSD (one of the outgoing 
               governing boards) adopted, among other things, the 




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               awarding of severance buyout packages to 14 
               administrators.  At that time, the county 
               superintendent of schools raised concerns about the 
               legal propriety of the actions and how the issues were 
               presented to the outgoing board, and refused to 
               process the payroll warrants associated with the 
               severance buyout package. The GJUHSD filed suit in 
               Superior Court of Sacramento seeking to compel the 
               county superintendent and the county office of 
               education (COE) to process the approved payroll 
               warrants - citing that the county superintendent of 
               schools and COE did not have the right to substitute 
               their judgment for that of the governing board of the 
               GJUHSD and that none of the concerns about legal 
               propriety had merit. The Superior Court, in June 2008, 
               ruled in favor of GJUHSD determining that the county 
               superintendent abused his discretion under the 
               Education Code in refusing to process the payroll 
               warrants and that the county superintendent failed to 
               produce substantial evidence that the severance 
               buyouts were improperly adopted.  The county 
               superintendent and the Sacramento County Office of 
               Education (SCOE) filed an appeal.

               After examination of the respective roles of the 
               GJUHSD and the county superintendent of schools, the 
               Third Appellate Court, in December 2009, concluded 
               that the county superintendent in his refusal to 
               process the severance payroll warrants had the 
               authority to do so and did not abuse his discretion in 
               exercising it.  The Appellate Court pointed out that 
               statute vests to county superintendents of schools 
               general oversight powers and, specifically, the 
               authority to act as a watchdog for each school 
               district's fiscal affairs, and that current law, 
               through review of legislative history, gave the county 
               superintendent of schools a prompt, effective means of 
               stopping wasteful or unnecessary expenditures by the 
               outgoing governing boards of school districts within 
               his/her jurisdiction.  Accordingly, the Appellate 
               Court overturned the writ of mandate. 

           2)   The need for this bill  is prompted by the events of 
               the aforementioned court cases and the need to clearly 
               articulate the role and responsibilities of county 
               superintendent of schools during the transition period 




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               after a vote of reorganization of a school board(s) 
               has been passed by voters, and when the newly formed 
               or organized school district takes effect.



           3)   Authority granted under this measure consistent with 
               AB 1200  .  AB 1200 (Chapter 1213, Statutes of 1991) was 
               created because of the need to ensure that local 
               educational agencies throughout California adequately 
               prepare to meet their financial obligations. 

               AB1200 is a statewide plan for county offices of 
               education and school districts to work together on the 
               local level to improve fiscal procedures, standards 
               and accountability. AB1200 expands the role of county 
               offices of education and county superintendents of 
               schools in monitoring school districts and mandates 
               intervention by the county superintendent of schools 
               to ensure fiscal stability of a district if it is 
               determined the district has become unable to meet its 
               obligations in the current and future year(s). 

               In crisis situations county offices can call upon the 
               Fiscal Crisis and Management Assistance Team (FCMAT) 
               to help determine appropriate steps toward fiscal 
               recovery. AB1200 provisions also apply to the state in 
               its monitoring role over county offices of education. 

               There are several defined "fiscal crises" that can 
               prompt a county office of education to intervene in a 
               district: a disapproved budget, a qualified or 
               negative interim report or recent actions by a 
               district that lead the county office to conclude that 
               the district will not be able to meet its financial 
               obligations. AB1200 spells out the procedures by which 
               a county office monitors, assists, warns, or 
               intervenes in the fiscal operation of a school 
               district. A district can appeal a disapproved budget 
               or a negative or qualified interim certification all 
               the way up to the State Superintendent of Public 
               Instruction. In any of these situations, a county 
               office or even the state could ask for FCMAT's 
               assistance and assessment.






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            4)    Results of reorganizations  . According to information 
                provided by the California Department of Education, 
                the impact of voluntary reorganization has not been 
                dramatic. From 1971-72 through 2009-10, the total 
                number of school districts declined as indicated 
                below.

                        Change in Number of School Districts

                      ----------------------------------------------- 
                     |Type of     |           |           |          |
                     |School      |  1971-72  |  2009-10  |  Change  |
                     |District    |           |           |          |
                     |------------+-----------+-----------+----------|
                     |Unified     |   242     |   334     |   +92    |
                     |------------+-----------+-----------+----------|
                     |Elementary  |   709     |   546     |  -163    |
                     |------------+-----------+-----------+----------|
                     |High        |   117     |    83     |   -34    |
                     |------------+-----------+-----------+----------|
                     |Total       | 1,068     |   963     |-105      |
                      ----------------------------------------------- 

               Since 1931-32, when there were 3,595 school districts 
               in California, the total number of districts has 
               decreased by 2,632, or 73 percent. The pace of change 
               in school district organization may have slowed, but 
               it is still proceeding at a steady rate. 


           5)   Staff recommends  technical amendments to provide 
               greater clarity and operationalization of this 
               measure:

               a)        On page 3, line 14, after "notice" insert: 
                    "and relevant documents and information".

               b)        On page 3, line 33, strike "administrators"

           SUPPORT  

          California County Superintendents Educational Services 
          Association
          Kern County Superintendent of Schools
          Riverside County Superintendent Schools
          Twin Rivers Unified School District




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           OPPOSITION

           None received.