BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 308
                                                                  Page  1

          Date of Hearing:   May 15, 2013

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                                  Mike Gatto, Chair

                     AB 308 (Hagman) - As Amended:  May 6, 2013 

          Policy Committee:                              Education  
          Vote:7-0

          Urgency:     No                   State Mandated Local Program:  
          No     Reimbursable:              No

           SUMMARY  

          This bill authorizes the State Allocation Board (SAB) to  
          establish a program that requires a school district or county  
          office of education (COE) that sells or leases real property  
          purchased with state school facilities program (SFP) funds  
          (i.e., modernization or construction funds) to return to the SAB  
          the moneys received for these purposes, as specified.   
          Specifically, this bill: 

          1)Requires the money to be returned to SAB if all of the  
            following conditions are met: 

             a)   The real property is not sold or leased to a charter  
               school pursuant to existing law that sunsets in July 2013.   

             b)   The proceeds from the sale or lease of the real property  
               are not used for capital outlay. 
             c)   The real property was purchased, or the improvements  
               were constructed on the real property, within 10 years  
               before the property is sold or leased.  

          2)Requires a proportionate amount of funds received from the SFP  
            to be returned to the SAB based on the percentage of the  
            property sold or leased, as specified.    

           FISCAL EFFECT  

          Potential one-time SFP savings if the SAB establishes a program  
          pursuant to this measure.  As referenced below, not many LEAs  
          have taken advantage of existing surplus property provisions and  
          as such, any SFP funding returned to the state will likely be  








                                                                  AB 308
                                                                  Page  2

          minimal.  The state no longer has any modernization or new  
          construction funds available for allocation under the SFP.    

           COMMENTS  

           1)Purpose  .  SB 50 (Greene), Chapter 407, Statutes of 1998,  
            established the SFP. This program drastically altered how  
            school facilities are constructed and modernized in the state.  
            Specifically, the program provides state school construction  
            bond funds to local education agencies (LEAs) to construct  
            school facilities. Chapter 407 established new per pupil  
            construction and modernization grants meant to provide 50% of  
            the total cost of the facility project; this is considered the  
            state portion. The LEA is required to provide the other 50% of  
            the cost from local revenue.

            Given the state's lack of state school construction bond funds  
            and the need for billions of dollars in school facilities  
            funding, it is prudent to enact legislation that requires  
            districts who sell facilities constructed or modernized with  
            SFP funds to return a portion of this money to the state.  

           2)Technical amendment  .  This bill applies to school districts  
            and COEs; however, COEs are not referenced appropriately  
            throughout the bill.  As such, the committee recommends the  
            bill be amended on page 2, line 8, after the word "district,"  
            to include COEs.  

           3)Existing law regarding the use of proceeds from the sale of  
            surplus property  . Due to the state's severe budget crisis and  
            its effect on K-12 school funding, the Legislature, with  
            approval from Governor Schwarzenegger, enacted several  
            provisions designed to provide flexibility to school districts  
            to mitigate their loss of funding, including allowing  
            districts to utilize the sale of surplus property for one-time  
            GF purposes. Specifically, AB 2 X4 (Evans), Chapter 2, Fourth  
            Extraordinary Session, Statutes of 2009, authorized school  
            districts to deposit the proceeds from the sale of surplus  
            property (purchased entirely with local funds) into the GF of  
            the district, and authorized the district to use the proceeds  
            for any one-time GF purpose. Chapter 2 established this  
            authorization until January 1, 2012.  SB 70 (Committee on  
            Budget and Fiscal Review), Chapter 7, Statutes of 2011,  
            extended this authorization until January 1, 2014.  The  
            governor's 2013 proposed budget repeals the sunset date of  








                                                                  AB 308
                                                                  Page  3

            these surplus property provisions, thereby allowing districts  
            to permanently use the proceeds of the sale of surplus  
            property (purchased entirely with local funds) for any  
            one-time GF purpose.  

            According to the Office of Public School Construction (OPSC),  
            five school districts have exercised this authority to  
            purchase a variety of things for schools, including  
            instructional materials, IT equipment, school supplies, and  
            staff development. OPSC reports a large portion of districts  
            have used these proceeds for postemployment benefits other  
            than pensions. 

            Prior to the enactment of Chapter 2 in 2009, school districts  
            were restricted in their use of proceeds from the sale of  
            surplus property. Specifically, a district could use the  
            proceeds for one-time GF purposes, but it had to demonstrate  
            it had no need for additional schoolsites or construction for  
            a 10-year period following the sale of the property. In  
            addition, the school district could not apply for state bond  
            funds for at least five years.  According to OPSC, six school  
            districts have utilized this provision since its enactment.  

           4)Existing law regarding surplus property and charter schools  .  
            SB 1028 (Committee on Budget and Fiscal Review), Chapter 575,  
            Statutes of 2012, required school districts to offer charter  
            schools the option to purchase or lease surplus property  
            designed for instruction or instructional support prior to  
            offering the property to other agencies or soliciting  
            competitive bids, as specified.  Chapter 575 specifies the  
            price of the sale or lease of the property is subject to  
            certain caps and can be significantly below market value.  

            Likewise, under either a sale or lease agreement, the charter  
            school is required to use the property exclusively for  
            instructional activities or support for at least five years.  
            After five years, Chapter 575 provides no further restrictions  
            on the usage or sale of the property. These sale and lease  
            provisions are operative only from July 1, 2012 through June  
            30, 2013.

            The governor's 2013 proposed budget extends these surplus  
            property provisions for charter schools until June 30, 2018.  

           5)Previous legislation  .  AB 2234 (Block) extended the sunset of  








                                                                  AB 308
                                                                  Page  4

            provisions authorizing a school district to deposit the  
            proceeds from the sale of surplus property into its general  
            fund (GF) for any one-time GF purpose from January 1, 2014 to  
            January 1, 2016.  This bill was held on this committee's  
            Suspense File in May 2012.  


           Analysis Prepared by  :    Kimberly Rodriguez / APPR. / (916)  
          319-2081