BILL ANALYSIS �
AB 308
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Date of Hearing: May 1, 2013
ASSEMBLY COMMITTEE ON EDUCATION
Joan Buchanan, Chair
AB 308 (Hagman) - As Amended: March 19, 2013
SUBJECT : School facilities: sale or lease of surplus real
property: return of state school facilities funding program
funds
SUMMARY : Authorizes the State Allocation Board (SAB) to
establish a program that requires a school district that sells
or leases real property to return any state funds that were
provided to purchase the property or on which improvements were
constructed. Specifically, this bill :
1)Specifies that any moneys received from a state school
facilities funding program for the purchase or construction of
a property to be sold or leased by a school district shall be
returned to the SAB if all of the following conditions are
met:
a) The real property is not sold or leased to a charter
school.
b) The proceeds from the sale or lease of the real property
are not used for capital improvements.
c) The real property was purchased, or the improvements
were constructed on the real property within 10 years
before the real property is sold or leased.
EXISTING LAW :
1)Establishes the Leroy F. Greene School Facilities Act of 1998
(SB 50, Chapter 407, Statutes of 1998), also known as the SFP,
which governs the administration, allocation, and use of state
education bond funds. (Education Code (EC) Chapter 12.5)
2)Specifies that funds derived from the sale of surplus property
shall be used for capital outlay or for costs of maintenance
of school district property that the governing board
determines will not recur within a five-year period. Proceeds
from a lease of a school district property with an option to
purchase may be deposited into a restricted fund for the
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routine repair of district facilities for up to a five-year
period. (EC Section 17462)
3)Authorizes the proceeds from the sale or lease with option to
purchase to be deposited in the general fund of the district
if the governing board and the SAB have determined that the
district has no anticipated need for additional sites or
building construction for the ten-year period following the
sale or lease with option to purchase, and the district has no
major deferred maintenance requirements. Proceeds from the
sale or lease with option to purchase of school district
property shall be used for one-time expenditures, and may not
be used for ongoing expenditures, including, but not limited
to, salaries and other general operating expenses. (EC
Section 17462)
4)Authorizes, until January 1, 2014, a school district to
deposit the proceeds from the sale of surplus real property,
together with any personal property located on the property,
purchased entirely with local funds into the general fund of
the school district and authorizes the school district to use
the proceeds for any one-time general fund purpose. (EC
Section 17463.7)
5)Authorizes the governing board of a school district to sell
any real property or lease a property for no more than 99
years under specified conditions and requires the financing
proceeds to be expended solely for capital outlay purposes.
(EC Section 17456)
6)Requires the governing board of a school district seeking to
sell or lease surplus real property designed to provide direct
instruction or instructional support to first offer that
property to any charter school that has submitted a written
request to the school district and then to a contracting
agency to be used for child care and development services, any
city within which the land may be situated, any park or
recreation district, any regional park authority, or any
county within which the land may be situated. (EC Sections
17457.5, 17458 and 17489)
FISCAL EFFECT : Unknown
COMMENTS : Background . The construction and modernization of
public kindergarten through grade 12 (K-12) and higher education
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facilities are funded by a combination of state and local
general obligation (G.O.) bonds, private funds, local
assessments, and in some instances, lease revenue bonds. Since
the inception of the SFP in 1998, voters have approved $35.4
billion in state G.O. bonds for K-12 schools.
The SFP provides 50 percent of eligible state education bond
funds for the construction of new schools and 60 percent for the
modernization of school facilities. Districts considered
"financial hardship districts" receive 100 percent of eligible
grant funds. The SFP also provides funds to acquire sites and
supplemental funds for specified purposes, such as meeting fire
code, for multilevel construction, hazardous waste removal, and
others.
Existing law requires school districts to establish routine
facilities accounts and deferred maintenance accounts, and
requires proceeds from the sale of surplus property to stay in
capital facilities or maintenance funds to ensure that districts
protect and maintain their facilities. There are two methods by
which school districts can sell surplus property and use the
funds for one-time general fund expenditures. SB 1415 (Scott),
Chapter 810, Statutes of 2006, authorizes the proceeds from the
sale of surplus property to be deposited into the general fund
for one-time expenditures and prohibits the use for ongoing
expenditures. As a condition for using funds for one-time
general fund purposes, a district must show that it has no need
for additional sites or building construction for a ten-year
period following the sale of the property and may not apply for
state bond funds during the ten-year period. The district may
apply for funds after five years if the SAB determines that the
district demonstrates enrollment growth or a need for additional
sites it could not have anticipated.
The 2009-10 budget established a number of flexibility
provisions to provide school districts with tools to balance
their budgets, including the authority to use the funds for 39
categorical program funds for any educational purpose, relaxing
the penalties for violating class size reduction student to
teacher ratios and the authority to use proceeds from the sale
of surplus property, purchased entirely with local funds, for
any one-time general fund purposes (SBX3 4 (Ducheny), Chapter
12, Statutes of the 2009-10 Third Extraordinary Session and AB 2
(Evans), Chapter 2, Statutes of 2009-10 Fourth Extraordinary
Session). The authority to use proceeds from the sale of
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surplus property purchased with local funds was initially
provided until January 1, 2012. SB 70, Chapter 7, Statutes of
2011, extended this authority along with other flexibility
provisions until January 1, 2014. The Governor's proposed
2013-14 budget proposes to make this authority permanent. The
Governor's proposal allows school districts to continue seeking
state bond funds. According to the Office of Public School
Construction (OPSC), four districts have exercised this
authority thus far. Proceeds have been used to purchase
textbooks, IT equipment and upgrades, supplies, staff
development, with large portions going towards postemployment
benefits other than pensions.
This bill authorizes the SAB to establish a program to require a
school district that sells or leases surplus property to return
to the SAB funds that were used to purchase or on which
improvements were constructed using state education bond funds
if the sale or lease occurs within 10 years after the purchase
or construction, the property is not sold or leased to a charter
school, and the proceeds from the sale or lease will not be used
for capital improvements. This includes site acquisition funds
or any of the funds used to construct a school.
This bill affects districts that utilize the provisions enacted
by SB 1415 (Scott) to use the proceeds from the sale of property
that may have been constructed or modernized using state bond
funds for one-time general fund expenditures. According to the
OPSC, five districts have triggered this provision.
It is not sound policy to use one-time funds for expenditures
that are continuous and ongoing. Facilities funds should be
kept for facilities use. This bill will provide a disincentive
for districts that sell or lease properties that were purchased,
constructed or modernized using state funds to use the proceeds
from the sale or lease of those funds for general fund purposes.
The author states, "Currently the funds [state bond funds] are
nearing exhaustion; however it is still uncertain whether a
school construction bond will be on the ballot in 2014.
California and taxpayers cannot maintain interest payments on
thirty year bonds when we exhaust the funds in ten years.
According to the Center for Cities and Schools (UC Berkeley)
report, it is estimated that over the next decade we need to
invest $117 billion in total capital improvements. Therefore,
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it is inefficient use of state funds to allow a school district
to build or modernize a school, sell that property, and then
apply for more money. In addition, the Legislative Analyst's
Office (LAO) has echoed these sentiments and encouraged the
legislature to prevent school districts from selling their
assets to simply cushion their general fund."
Committee amendments .
1)Staff recommends clarifying that properties purchased,
constructed, or modernized with state funds that are sold are
subject to the return of state funds.
2)Staff recommends applying the requirements of the bill to
county offices of education (COE) and charter schools. The
bill requires only school districts to return state funds;
COEs and charter schools are also eligible to receive state
bond funds and should also be required to return state funds
if property is sold or leased.
3)Staff recommends clarifying that the funds to be returned are
those that were received within the last ten years. If state
funds were received to construct and modernize a facility,
funds received to construct the facility should not have to be
returned as the facility would have been used for at least 25
years old, when local educational agencies are eligible for
modernization funds.
4)The bill does not require state funds to be returned if the
property is sold to a charter school. The author's office
states that this is to encourage property to be sold to
educational institutions. Staff recommends expanding this
provision to other K-12 districts, COEs or an agency that will
use the facility for child care/preschools.
5)Staff recommends an amendment to require a proportionate share
to be returned if only a portion of land that was purchased
with state funds is sold. A possible scenario is one where a
district receives site acquisition funds to purchase land, but
decides to use only a portion of the land for the construction
of a school. If a district chooses to sell the portion not
used, a proportionate share should be returned.
Previous related legislation . AB 2434 (Block), introduced in
2012, extends the sunset of the provisions authorizing a school
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district to deposit proceeds from the sale of surplus real
property, purchased with local funds, into the general fund and
use the proceeds for any one-time general fund purpose, from
January 1, 2014 to January 1, 2016. The bill was held in the
Assembly Appropriations Committee suspense file.
AB 1622 (Eng), introduced in 2012, authorizes the San Marino
Unified School District to sell the site of the former Stoneman
Elementary School to the City of San Marino and use the proceeds
from the sale for school district education programs. The bill
was held in the Assembly Appropriations Committee suspense file.
AB 2 (Evans), Chapter 2, Statutes of the 2009-10 Fourth
Extraordinary Session, authorizes, until January 1, 2012, school
districts to use the proceeds from the sale of surplus school
property for any one-time general fund purposes, among many
other provisions.
SB 70 (Committee on Budget and Fiscal Review), Chapter 7,
Statutes of 2011, extended the authority to use proceeds from
the sale of surplus school property for one-time general fund
purposes by two years, among many other provisions.
AB 1022 (Nava), introduced in 2009, authorizes the Ventura
Unified School District to deposit $10 million of the proceeds
from the sale of surplus property, purchased with local funds
and sold before January 1, 2005, into the general fund of the
school district and use the proceeds for any one-time general
fund purposes. The bill was gutted and amended into another
bill by the author.
SB 1415 (Scott), Chapter 810, Statutes of 2006, authorizes the
use of proceeds from the sale of surplus school property for any
one-time expenditures and prohibits the use for ongoing
expenditures.
REGISTERED SUPPORT / OPPOSITION :
Support
California Charter Schools Association Advocates
Opposition
AB 308
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None on file
Analysis Prepared by : Sophia Kwong Kim / ED. / (916) 319-2087