BILL ANALYSIS �
AB 308
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB 308 (Hagman)
As Amended June 26, 2013
Majority vote
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|ASSEMBLY: |74-0 |(May 23, 2013) |SENATE: |> |(>) |
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Original Committee Reference: ED.
SUMMARY : Authorizes the State Allocation Board (SAB) to
establish a program that requires a school district, county
office of education (COE), or charter school that sells real
property to return any state funds that were provided to
purchase the property or on which improvements were constructed.
Specifically, this bill specifies that:
1)Any moneys received from a state school facilities funding
program for the purchase, modernization, or construction of a
property to be sold by a school district, COE or charter
school shall be returned to the SAB if all of the following
conditions are met:
a) The real property is not sold to a charter school,
school district, COE, or an agency that will use the
property exclusively for the delivery of child care and
development services.
b) The proceeds from the sale of the real property are not
used for capital outlay.
c) The real property was purchased, or the improvements
were constructed or modernized on the real property within
10 years before the real property is sold.
2)The moneys to be returned to the SAB are those received within
10 years before the real property is sold.
3)If a portion of the real property is sold, a proportionate
amount of funds received from a state school facilities
funding program shall be returned to the SAB based on the
percentage of the real property sold.
The Senate amendments strike the requirement to return funds to
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the SAB for property that is leased.
FISCAL EFFECT : According to the Senate Appropriations
Committee, minor costs to the SAB if it chooses to implement the
program. Potentially significant revenue to be returned to the
SAB and available for the School Facility Program (SFP).
COMMENTS : The construction and modernization of public
kindergarten through grade 12 (K-12) and higher education
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% of eligible state education bond funds for
the construction of new schools and 60% for the modernization of
school facilities. Districts considered "financial hardship
districts" receive up to 100% 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.
Proceeds from the sale of surplus property are to remain 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 10-year
period following the sale of the property and may not apply for
state bond funds during the 10-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
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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 (SB 4 X3 (Ducheny), Chapter
12, Statutes of the 2009-10 Third Extraordinary Session and AB 2
X4 (Evans), Chapter 2, Statutes of 2009-10 Fourth Extraordinary
Session). The authority to use proceeds from the sale of
surplus property purchased with local funds was initially
provided until January 1, 2012. SB 70 (Budget and Fiscal Review
Committee), Chapter 7, Statutes of 2011, extended this authority
along with other flexibility provisions until January 1, 2014.
AB 86 (Budget Committee), Chapter 48, Statutes of 2013, the
education budget trailer bill, extended this authority to
January 1, 2016. This authority allows school district to use
proceeds from the sale of surplus property for any one-time
general fund expenditures while 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, the body established to administer
state bond funds and the SFP, to establish a program to require
a school district, COE, or charter school that sells 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 occurs within 10 years after the
purchase, modernization or construction; the property is not
sold to a charter, COE, or an agency to be used for child care
and development purposes; and the proceeds from the sale 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, COEs or charters that utilize the
provisions enacted by SB 1415 (Scott) to use the proceeds from
the sale of property 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, COEs or charters that sell properties that were
purchased, constructed or modernized using state funds to use
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the proceeds from the sale 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,
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."
Analysis Prepared by : Sophia Kwong Kim / ED. / (916) 319-2087
FN: 0001717