BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 1016|
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UNFINISHED BUSINESS
Bill No: SB 1016
Author: Senate Budget and Fiscal Review Committee
Amended: 6/25/12
Vote: 21
PRIOR VOTES NOT RELEVANT
ASSEMBLY FLOOR : Not available
SUBJECT : Education Finance Budget Trailer Bill
SOURCE : Author
DIGEST : This bill makes various changes to state laws
regarding K-12 and higher education, including financial
aid programs, necessary for the implementation of the
Budget Act of 2012.
Assembly Amendments delete the Senate version of the bill
and insert the above language.
ANALYSIS : This bill includes the following provisions:
1. K-14 Education Crosscutting Issues
A. 2011-12 Overappropriation . Assumes an $894
million over-appropriation of the 2011-12 Proposition
98 guarantee. Scores $672 million of the 2011-12
over-appropriation in satisfaction of the state's
obligation resulting from the settlement of CTA v.
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Schwarzenegger, including a $450 million prepayment
for 2012-13 and a $222 million prepayment for
2013-14. Eliminates the remaining over-appropriation
by reducing various 2011-12 Proposition 98
appropriations, which are backfilled by one-time
Proposition 98 savings.
B. Quality Education Improvement Act (QEIA) Funding
in 2012-13 . Appropriates $361 million in Proposition
98 funding - instead of state General Fund - for the
QEIA program in 2012-13. Of this amount, $313
million is appropriated for K-12 education and $48
million is appropriated for the community colleges.
The QEIA program was created by statutes implementing
the CTA v. Schwarzenegger agreement.
C. 2011-12 General Fund Savings . Reduces 2011-12
appropriations for several K-12 Proposition 98
programs by approximately $222 million to reflect
lower expenditures and offsets from available prior
year funds in order to achieve state General Fund
savings.
D. Trigger Cuts . The overall 2012-13 Budget
architecture relies on state revenues that would be
raised only if approved by voters in November 2012.
The state Constitution requires that the annual state
budget be balanced, and this uncertainty requires
that the Legislature adopt contingency plans for
addressing the $8.5 billion in revenue that would not
be raised if the revenues are not approved by the
voters or if the initiative is approved but its
provisions that temporarily modify personal income
tax rates do not become operative due to a conflict
with another initiative measure that is approved at
the same election and receives a greater number of
affirmative votes. The Governor has proposed
"trigger reductions" effective January 1, 2013, as
the contingency plan, including a total of
approximately $5.4 billion for K-14 education. The
provisions of this bill implement reductions to K-14
programs if the trigger is implemented as follows:
(1) Eliminates approximately $2.3 billion in
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repayments of deferrals being made as part of the
2012-13 budget package, with about $2.1 billion
and $210 million of that total attributed to K-12
schools and community colleges, respectively;
(2) Enacts programmatic reductions of
approximately $3.1 billion by paying general
obligation debt service and the Early Start
Program from the Proposition 98 guarantee, with
approximately $2.7 billion and $340 million of
that total attributed to K-12 schools and
community colleges, respectively (under current
law, both of these obligations are paid for with
non-Proposition 98 General Fund);
(3) Authorizes K-12 schools to reduce the school
year by an additional 15 days - beyond the five
days currently authorized - in 2012-13 and
2013-14. This would allow schools to reduce the
instructional year to no less than 160 days (or
equivalent number of instructional minutes) in
each of these two years. Implementation of any
reductions by school districts, county offices of
education, and charter schools is subject to
collective bargaining. If instructional days are
reduced, members of the California Teacher's
Retirement System are held harmless from any
associated loss of service credits.
(4) Authorizes the Chancellor of the California
Community Colleges, as approved by the Department
of Finance, to reduce community college district
enrollment levels in proportion to the
programmatic reduction. States legislative intent
that districts, to the greatest extent possible,
implement any necessary reductions in courses and
programs outside of those needed for students to
achieve their basic skills, workforce training, or
transfer goals. Requires the Chancellor to report
by October 15, 2013, on the implementation of this
provision.
E. K-14 State Mandate Reform . Makes the statutory
changes necessary to implement a block grant funding
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mechanism for the majority of K-14 state mandates.
The Budget Act of 2012 includes nearly $200 million
to fund this block grant, split between K-12 and
community college districts based on the amount of
historical claims for each over the past five years.
This bill specifies a per pupil/student funding
amount as follows: (1) K-12 districts, $28 per
pupil; (2) community college districts, $28 per
student; (3) charter schools, $14 per pupil; and (4)
county offices of education, $28 + $1 "extra" per
pupil. Under the block grant, and per the provisions
of this bill, a school district, county office of
education, charter school, or community college
district will choose to either participate in the
block grant or to pursue the state mandate claiming
process. LEAs (local educational agencies)
participating in the block are also required to meet
specified annual reporting requirements.
F. Repeal Gas Tax Rebenching . Eliminates statute
requiring the Proposition 98 guarantee to be held
harmless from the effect of the gas tax swap
previously adopted by the Legislature, which
eliminated the sales tax on gasoline (previously
included in the Proposition 98 calculation) and
replaced it with an excise tax on gasoline (excluded
from the Proposition 98 calculation). With the
hold-harmless rebenching, the minimum guarantee was
unaffected by the gas tax swap.
G. Repeals RDA Rebenching . Repeals language from the
2011-12 Budget that authorized rebenching of the
Proposition 98 guarantee (to reflect receipt of funds
that formerly flowed to redevelopment agencies) only
in 2011-12, thus continuing the rebenching for
roughly $2.7 billion in General Fund savings.
H. Authorize Proposition 98 Split . Suspends the
statutory division of Proposition 98 funding among
K-12 educational agencies, community colleges, and
other state agencies, and instead conforms the
division of funding to actual appropriations in the
2012-13 Budget.
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2. K-12 Education
A. Offsets for Education Protection Account Funds .
Scores funds provided to school districts, county
offices of education, and charter schools from the
Education Protection Account - pursuant to passage of
the Schools and Local Public Safety Protection Act of
2012 by state voters - in satisfaction of the
Proposition 98 guarantee.
B. Offsets for Redevelopment Agency (RDA) Related
Funds . Scores funds provided to school districts,
county offices of education, and charter schools from
RDA related property tax increments and liquid
assets in satisfaction of the Proposition 98
guarantee.
C. RDA Adjustments for K-12 . Appropriates $19
million for special education in 2011-12, if needed,
to backfill any loss of anticipated local property
tax revenue that previously flowed to RDAs.
Appropriates an unspecified amount for special
education in 2012-13 for the same purpose.
D. Revenue Limit Adjustments and Deficit Factors .
Establishes a county office of education revenue
limit deficit factor of 22.549 percent and a school
district deficit factor of 22.272 percent to reflect
revenue limit adjustments in 2012-13. Revenue limit
apportionments provide general purpose funding to
school districts, county offices of education, and
charter schools. Revenue limit deficit factors keep
track of base reductions and foregone COLA increases
in recent years, so they may be restored in future
years when state funds are available.
E. Deferrals
(1) Inter-Year Deferral Payment Buydown .
Reduces inter-year deferrals for K-12 school
districts, county offices of education, and
charter schools by approximately $2.1 billion
contingent on passage of the Schools and Local
Public Safety Protection Act of 2012.
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(2) Intra-Year Deferral Adjustments . Specifies
adjustments in the schedule of intra-year
deferrals to reflect additional funding if the
Schools and Local Public Safety Protection Act of
2012 is passed by statewide voters.
(3) Ongoing Inter-Year Categorical Program
Deferrals . Continues up to $906 million in
inter-year categorical payment deferrals from June
to July of 2013. This amount is offset by no more
than $570 million in 2012-13 CSR (class size
reduction) deferral payments made in 2013-14.
Extends the period of availability of deferred
K-12 funds by one month, consistent with the
continuing one-month deferral authorized in this
bill.
F. Reappropriation of Proposition 98 Savings for
Selected Programs . Reappropriates approximately $221
million in one-time Proposition 98 savings to offset
other Proposition 98 expenditures in 2011-12 in order
to achieve state General Fund savings.
G. Statutory Appropriation for K-3 Class Size
Reduction (CSR) Program . Continues statutory
authorization for an unspecified amount of funding
for the K-3 CSR program in 2012-13, as determined by
the Superintendent of Public Instruction. This
statutory appropriation is provided in lieu of a
budget act appropriation for this program in 2012-13.
H. Suspends Cost-of-Living Adjustments (COLA) for
K-12 Programs . Establishes a zero percent COLA for
K-12 programs - revenue limits and categorical
programs - in 2012-13. (The K-12 COLA is estimated
at 3.24% for 2012-13.)
I. Continues "Fair Share" Reductions for Basic Aid
Districts . Authorizes reductions to categorical
funding for basic aid districts, proportional to the
revenue limit reductions applied to non-basic-aid
districts in 2012-13. Basic Aid districts are
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defined as districts that do not receive state
funding for revenue limits.
J. Suspends Funding Emergency Repair Program .
Suspends funding for the Emergency Repair Program in
2012-13. This program was created as a result of a
settlement agreement for the Williams v. California
case in 2004.
K. Special Education Workability Program Eligibility .
Specifies that state special schools, charter
schools, and nonpublic, nonsectarian schools, as well
as, school districts and county offices of education
are eligible to apply for state Workability Program
grants to provide work transition services for
students with disabilities.
L. Special Education Maintenance of Effort . Scores
$12.133 million of 2011-12 special education funding
toward satisfaction of the state's 2008-09 federal
'maintenance of effort' requirement.
M. Developer Fees . Temporarily suspends provisions
of current law that authorize school districts to
levy Level 3 developer fees if state funds for new
facility construction are exhausted. The suspension
is in effect through December 31, 2014, or until an
earlier date if either (1) a statewide school
facilities bond passes; or (2) a statewide school
facilities bond has not been placed on the November
4, 2014 statewide ballot.
N. Categorical Program Flexibility "Cleanup" . Makes
a technical correction to the previously-approved
extension of K-12 education funding flexibility.
O. Charter Schools
(1) California School Finance Authority (CSFA) .
Conforms statute to current practice by
authorizing the CSFA to refinance (not just
finance) revenue bonds issued for school
facilities working capital and capital
improvements. Makes other technical/ cleanup
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changes to related statute.
(2) Charter School Revolving Fund . Authorizes
the Department of Education, with Department of
Finance approval, to transfer funds from the
Charter School Security Fund to the Charter School
Revolving Loan Fund to the extent necessary to
replace funds lost due to loan defaults.
(3) Access to External Borrowing . Authorizes,
but does not require, county or city and county
boards of supervisors and county superintendents
of schools to make short-term loans to charter
schools, as they currently can make to school
districts. Authorizes county offices of education
to borrow funds or issue Tax and Revenue
Anticipation Notes (TRANS) for the purpose of
providing temporary revenue-backed loans to
charter schools.
(4) Deferral Waiver Process . Authorizes charter
schools to seek hardship deferral waivers from the
Superintendent of Public Instruction and
Department of Finance rather than their charter
authorizers. Requires that charter schools notify
their authorizers of the waiver request.
(5) Lease or Purchase of Surplus School
Property . Requires school districts to offer
surplus property for sale or lease to charter
schools before selling or leasing surplus property
to other parties in 2012-13.
3. Child Care and Development
A. Alignment of Preschool Eligibility with
Kindergarten Start Dates . Specifically, defines that
state preschool programs are designed to facilitate
the transition to kindergarten for 3- and 4-year olds
children who have their 3rd or 4th birthday,
respectively, on or before November of the 2012-13
fiscal year, October 1 of the 2013-14 fiscal year,
and September 1 of the 2014-15 fiscal year and each
fiscal year thereafter.
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B. Preschool Part-Day and Wraparound Services
Defined . Clarifies distinction between part-day
preschool slots (funded with Proposition 98) and
supplemental wraparound care for preschool-age
children from families who need full-day care (funded
with the General Fund-supported General Child Care
program).
C. Family Fees for Part-Day State Preschool
Established . Requires fees to be assessed and
collected for families with children in part-day
preschool programs and/or families receiving
wraparound child care services.
D. Continuation of Existing Family Fee Schedule .
Effective for fiscal year 2012-13, the family fee
schedule for child care and development services that
was in effect for the 2011-12 fiscal year shall
remain in effect, and continues existing policy that
the family fees cannot exceed 10 percent of the
family's total income.
E. Consolidation of Pre-K Literacy Program into State
Preschool . Repeals specified components of the
Pre-Kindergarten Family Literacy Program and
consolidate these provisions into the state preschool
program, for preschool classrooms that apply for and
receive a family literacy supplemental grant.
F. Continuation of Existing State Median Income
Levels . Codifies in statute that the maximum
allowable family income to receive subsidized child
care and development services is 70 percent of the
State Median Income.
G. Across-the Board Reductions . Implements
across-the-board budget reductions of $80 million for
child care programs in 2012-13 by decreasing funding
for the General Child Care Program, the Migrant Day
Care Program, the Alternative Payment Program, the
CalWORKs Stage 3 Program, and the Allowances for
Handicapped Program by 8.7 percent, effective July 1,
2012. (Excludes CalWORKs Stage 1 and 2, and State
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Preschool.) Requires the Department of Education to
reduce the maximum allowable contract amounts for
each of these programs. Allows the department to
consider the contractor's performance or whether the
contractor serves children in underserved areas when
determining contract reductions as long as overall
reductions for each program match budget
appropriations.
H. Pilot Program Continued . Extends authorization of
a San Francisco child care pilot program by one year
to allow the City and County of San Francisco to
implement an individualized county child care subsidy
plan until July 1, 2014. Requires the city and
county to phase out the plan and implement the
state's requirements for child care subsidies as of
July 1, 2016. A final report shall be submitted by
the city and county on or before June 30, 2014.
I. Multi-Year Suspension of Cost-of-Living
Adjustments . Suspends the cost of living adjustment
for child care and development programs for fiscal
years 2012-13, 2014-15, and 2014-15.
J. Administrative Authority Specified . Allows the
Department of Education to implement the changes to
child care authorized in this bill through management
bulletins and similar instructions. Specifies that
the child care changes in this bill are not subject
to appeal by the agencies holding child care
contracts.
4. Higher Education: California Community Colleges
Apportionment funding, which community college districts
use for general purposes, comes from three main sources:
(a) enrollment fee revenues; (b) local property taxes;
and (c) the General Fund (GF), with local property taxes
and the GF accounting for districts' funding under
Proposition 98. In addition to the "regular" local
property tax, and due to the dissolution of
Redevelopment Agencies (RDAs), local property taxes will
also now include ongoing RDA property tax (i.e.,
increment) and one-time RDA property tax related to the
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recovery of "liquid assets." Unlike K-12 education, the
community colleges do not have an automatic GF backfill
if property tax or enrollment fee revenues fail to
materialize in a given year. It is a reasonable
expectation that there will be increased local property
tax revenues in 2012-13 (and ongoing) from the
dissolution of RDAs. There is still uncertainty with
these estimates; when coupled with the lack of a
guaranteed backfill, the community colleges have
legitimate concerns about budget estimates related to
RDA revenues.
A. 2011-12 GF Offset for Increased RDA Revenues,
Including Hold Harmless Language . Reduces 2011-12
apportionment funding by $116.9 million to reflect an
identical increase in offsetting local property taxes
available to districts due to the dissolution of
RDAs. Should these RDA-related revenues not
materialize on or before June 30, 2012, and other
funding adjustments do not offset the loss, requires
the Director of the Department of Finance to provide
a backfill of necessary funds from the GF.
B. 2012-13 GF Offset for Increased RDA Revenues,
Including Backfill Provisions . The 2012 Budget Act
estimates that community college districts will
receive $451.1 million in additional local property
tax revenues from the dissolution of RDAs, thereby
reducing GF support by a like amount. The total
includes roughly $211 million from one-time recovery
of "liquid assets" and $239.7 million from local
property taxes (i.e., increment), both from the
dissolution of RDAs. Of the $239.7 million in
RDA-increment revenues, roughly $98 million is
attributable to 2011-12 that is expected to be
received in 2012-13. The provisions of this bill
provide for a guaranteed GF backfill to the extent
that these RDA-related revenues do not materialize by
June 30, 2013.
C. Deferrals . Repeals the current statutory schedule
for community college deferrals, which total $961
million. Contingent on the passage of the Schools
and Local Public Safety Protection Act of 2012,
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provides that $159.9 million of that total deferral
will be "bought down" in 2012-13, specifies a
schedule for the remaining $801.1 million in deferred
funds, and provides $50 million to the community
colleges as growth funding. Provides that should the
voters reject the Schools and Local Public Safety
Protection Act of 2012, a total of $961 million will
again be deferred per the schedule specified in this
bill.
D. Neighboring State Student Fees . Increases student
fees for qualifying neighboring state students that
attend a CCC based on reciprocal state attendance
agreements to an amount that is twice the California
resident student fee effective with the enactment of
the bill. Effective July 1, 2013, and ongoing,
institutes a fee level for qualifying neighboring
state students that is three times the California
resident student fee.
5. California Student Aid Commission: Cal Grant Program
A. Maximum Cal Grant A and B Tuition Award Amounts
for Private For-Profit and Independent Non-Profit
Institutions Reduced Beginning in 2013-14 .
Implements reductions in maximum tuition award levels
beginning in 2013-14 as follows: (1) for new
recipients attending independent non-profit
institutions and private for-profit, Western
Association of Schools and Colleges (WASC)-accredited
institutions as of July 1, 2012, maximum grant awards
will be reduced by 6.5%, from $9,708 to $9,084; and
(2) for new recipients attending all other private
for-profit institutions, maximum grant awards will be
reduced by 59%, from $9,708 to $4,000. In 2014-15,
new maximum tuition awards at non-profit institutions
and WASC-accredited for-profit institutions will be
reduced by an additional 10.5%, from $9,084 to $8,056
(maximum awards for all other for-profits remain at
$4,000). In 2013-14, these changes are estimated to
result in $16 million in program savings with
increased savings in the following years.
B. Institutional Eligibility, Renewal Awards, and
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Notification to Students . Implements a maximum
cohort default rate (CDR) of 15.5% and a minimum
graduation rate of 30% for institutions to be
eligible to participate in the Cal Grant program.
For institutions with a CDR of less than 10% and
graduation rates between 20 and 30%, provides five
years for these institutions to increase their
six-year graduation rates to the 30% threshold. In
2013-14, eliminates renewal awards for recipients who
choose to remain at ineligible institutions (under
current law, maximum awards are reduced by 20% for
students who choose to renew their award and remain
at ineligible institutions). Also requires
additional notification and disclosure to students
attending institutions that become ineligible. These
changes result in savings of $55 million in 2012-13
and savings of $87 million in 2013-14, with increased
savings in the following years. Consistent with
current law, these changes will not apply to any
participating institution with 40% or fewer of its
students borrowing federal student loans to attend
college. These proposals expand upon 2011 Budget Act
changes, which instituted new restrictions on
institutional eligibility for the Cal Grant program,
excluding institutions if more than 24.6% of their
former students default on federal student loans
within three years of loan repayment, as defined and
calculated by the federal government.
C. Cal Grant B to Cal Grant A Switches upon Renewal .
Corrects an unintended consequence of Chapter 7,
Statutes of 2011 (SB 70), which established tighter
eligibility criteria for Cal Grant renewals, by
ensuring that co-eligible students can switch from
Cal Grant B to Cal Grant A if they meet all
eligibility requirements for Cal Grant A awards upon
renewal. Under Chapter 7, a co-eligible student who
is assigned a Cal Grant B may become ineligible for a
renewal award due to increased family income, even if
that student remains well within the eligibility
range for Cal Grant A. Current law is not clear that
students could switch to a different award type once
they have received a grant payment. This is an
unintended consequence of the new Chapter 7
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requirement resulting from a technical issue that was
not evident when the Legislature approved the policy.
D. California Community College (CCC) Transfer
Entitlement Award Eligibility . Reverses the recent
California Student Aid Commission decision to expand
access to CCC transfer entitlement awards, thereby
avoiding $70 million in new GF costs for the Cal
Grant Program in 2012-13. Current practice requires
students to begin university studies in the academic
year immediately following community college
enrollment to qualify for the transfer award. The
CSAC decision would have allowed an interruption in
studies prior to transferring. Also allows, for the
2011-12 student cohort only, an additional year of
eligibility because of the possibility that this
group of CCC students will have limited public
four-year institution transfer options.
6. Financial Aid: Miscellaneous
A. Scholarshare Investment Board: Reverts to the GF
excess funds from Governor's Scholarship Program .
Reverts $63.1 million to the GF of moneys previously
set aside for the now-defunct Governor's Scholarship
Program. These are unused funds from scholarship
grants provided to high school students for
performance on standardized tests in 2000 through
2002. The grant program was repealed in 2003;
recipients have access to disbursement through age
30, after which time their funds revert to the state
GF. This provision results in $20 million remaining
in the reserve to assure funding for participants
thereby ensuring the state continues to honor program
obligations for tests taken in 2000-2002.
FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes
Local: Yes
PQ:k 6/26/12 Senate Floor Analyses
SUPPORT/OPPOSITION: NONE RECEIVED
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