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 SB 821 Page 2 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 SB 821 Page 3 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 SB 821 Page 4 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 SB 821 Page 5 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. SB 821 Page 6 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 SB 821 Page 7 OPPOSITION None received.