BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 2087
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          Date of Hearing:   April 22, 2014

                       ASSEMBLY COMMITTEE ON HIGHER EDUCATION
                                 Das Williams, Chair
                AB 2087 (Ammiano) - As Introduced:  February 20, 2014
           
          SUBJECT  :   Community colleges: Board of Governors of the  
          California Community Colleges.

           SUMMARY  :   Specifies that the California Community College (CCC)  
          Board of Governors (BOG) may not usurp, transfer, or limit, in  
          any way, the powers of the governing boards of community college  
          districts (CCD).  

           EXISTING LAW  :   

          1)Establishes the CCC BOG, appointed by the Governor, and a  
            Chancellor, appointed by the BOG, to prescribe minimum  
            standards for the formation and operation of CCC and to  
            exercise general supervision over the CCC (Education Code  
            §66700, 71000, 71090).

          2)Requires the CCC BOG in establishing specified minimum  
            standards for CCC operation and receipt of state funding to  
            maintain and continue, to the degree permissible, local  
            authority and control in the administration of the CCC (EDC  
            §70901).

          3)Requires each CCD to be under the control of a locally elected  
            board of trustees (governing board), requires the governing  
            board to operate the CCD in compliance with state law, and  
            authorizes the governing board to delegate powers to the CCD  
            executive officer, employee or committee (EDC §70902).

          4)Requires the CCC BOG to establish standards for fiscal  
            management practices of CCD governing boards and requires BOG  
            to develop procedures and actions for districts that fail to  
            achieve fiscal ability or to comply with BOG recommendations,  
            including the appointment of a special trustee to manage the  
            district.  The BOG is required to report to the Legislature,  
            the Department of Finance, and the Governor regarding any  
            corrective actions taken by the CCD or the BOG to ensure  
            fiscal stabilization (EDC §84040).

          5)Pursuant to BOG regulations (5 CCR §58312), the CCC Chancellor  








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            has authority to take corrective actions to ensure fiscal  
            stabilization if the Chancellor has determined a CCD:

             a)   Established plans for corrective action that are  
               insufficient to solve financial problems or implement sound  
               fiscal management;

             b)   Has failed to implement corrective plans; or,

             c)   College within the CCD is in imminent jeopardy of losing  
               its accreditation, which would create severe fiscal  
               problems.

          6)Regulations (5 CCR §58312) also direct the Chancellor to first  
            utilize measures that minimize interference with CCD  
            operations, unless the Chancellor determines that action is  
            necessary to prevent a worsening of fiscal conditions.  The  
            Chancellor is authorized to take the following actions:

             a)   Conduct a comprehensive management review of the  
               district and an audit of the financial condition of the  
               district;  

             b)   Direct the district to amend and readopt financial and  
               educational plans based on the findings of the audits;

             c)   Review and monitor the implementation of the plans and  
               direct the district to make any modifications necessary;  
               and, 

             d)   Appoint a special trustee at the district expense for  
               the period of time necessary to achieve fiscal solvency,  
               implement sound fiscal management, or maintain  
               accreditation status.  In appointing a special trustee:

               i)     The Chancellor is required to establish benchmarks  
                 that indicate local capacity to manage fiscal duties; 

               ii)    The special trustee is required to have recognized  
                 expertise in finance and, with the approval of the  
                 Chancellor, may employ short-term staff for assistance;  
                 and, 

               iii)   The Chancellor and the special trustee are required  
                 to specify in writing the special trustee's duties, which  








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                 may include:

                  (1)       Reviewing and monitoring plans, reports, and  
                    other financial material;

                  (2)       Requiring further modifications to the fiscal  
                    and educational plans;

                  (3)       Determining district spending levels and  
                    priorities to further achievement of fiscal stability;  
                    and, 

                  (4)       Approving or disapproving actions of the  
                    district which affect or relate to the implementation  
                    of the plans.

          7)Regulations (5 CCR §58312) authorize, with the approval of the  
            BOG, the Chancellor to authorize the special trustee to assume  
            management and control of the district, including the  
            assumption of legal rights and powers and duties of the  
            governing board, as necessary to achieve fiscal stability, to  
            implement sound fiscal management, or to maintain or recover  
            accredited status:

             a)   Pursuant to regulations, the Chancellor is only  
               authorized to elevate the special trustee powers to full  
               district management for one year, unless the BOG approves  
               one or more one-year extensions; and,

             b)   The special trustee, when managing the district, is  
               subject to all legal requirements applicable to the  
               district and the governing board is prohibited from  
               exercising any authority that has been assumed by the  
               special trustee.   

          8)Regulations (5 CCR §58312) authorize the Chancellor to require  
            the district to pay all costs incurred in performing the  
            duties necessary to restore fiscal stability or accreditation  
            status.

           FISCAL EFFECT  :  Unknown   

           COMMENTS  :    Purpose of this bill  .  According to the author, this  
          bill is necessary to "address the vague language found in the  
          Education Code that gives the BOG, as appointed body, the  








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          authority to take away decision making power from a college's  
          Board of Trustees, an elected body."  The author argues that,  
          "Citizens go to the ballot box to vote with the idea in mind  
          that their voice will be represented by the individual they  
          choose for elected office. San Francisco voters approved  
          Proposition A in 2012, a parcel tax that would aid the recovery  
          of San Francisco City College (SFCC). San Francisco voters also  
          elected SFCC District Board of Trustee members with the  
          knowledge that these elected officials could be held accountable  
          for managing the recently passed parcel tax (Prop. A). The BOG  
          and the Special Trustee are unelected individuals and voters  
          cannot hold either the board of the special trustee accountable  
          for their actions."
           
          Background  .  In July of 2012, SFCC was placed on "Show Cause"  
          status by its accrediting agency, Western Association of Schools  
          and Colleges-Accrediting Commission for Community and Junior  
          Colleges (ACCJC).  The ACCJC visiting team found that the  
          college had insufficient cash flow and reserves to maintain  
          financial stability and no realistic plans for the future.  The  
          institution was provided one year to establish compliance with  
          accrediting standards.  

          The CCC Chancellor's Office (CCCCO) and the Fiscal Crisis &  
          Management Assistance Team (FCMAT) released an audit, in  
          September of 2012, of SFCC fiscal stability and management  
          controls.  The audit found that SFCC was near fiscal insolvency  
          resulting from poor financial decisions and lack of  
          accountability.  In October 2012, the CCC BOG appointed Robert  
          Agrella as special trustee under the aforementioned limited  
          powers (See: Existing Law 6(d)) to assist SFCC in achieving  
          sound financial management.       

          In July of 2013, ACCJC terminated SFCC accreditation effective  
          July 31, 2014.  The ACCJC visiting team found that of the  
          recommendations, SFCC fully addressed only two, nearly addressed  
          just one, and eleven were inadequately addressed.  Also in July,  
          CCCCO and FCMAT released a second SFCC fiscal review which found  
          overall non-implementation of 2012 recommendations due to  
          "internal struggles and a general unwillingness to make hard  
          decisions and see change occur."  FCMAT found that "absent  
          strong and consistent leadership, progress will be extremely  
          difficult to achieve."

          On July 9, 2013, BOG voted to authorize the special trustee for  








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          SFCC District to assume the management and control of the  
          District (See: Existing Law 7).  This decision was based on a  
          BOG analysis that SFCC had not developed a plan to fund  
          liabilities and obligations, had not made ongoing funding  
          reductions necessary to maintain fiscal solvency, had employed  
          twice as many full-time faculty and incurred expenses $17  
          million higher than comparison districts, and that the magnitude  
          of employee contract obligations made it difficult for the  
          district to achieve fiscal health without change.  The BOG  
          analysis found that SFCC did not have an effective management  
          plan, which is necessary to effectively use available resources  
          and that faculty were provided an inordinate amount of expensive  
          faculty release time.  Finally, the BOG analysis identified as a  
          major barrier to financial stability that decisions with serious  
          fiscal implications were made without any individual having  
          accountability for those decisions.

          Currently, according to the CCCCO, SFCC special trustee and the  
          recently appointed chancellor, Arthur Tyler, are working to meet  
          the ACCJC accreditation standards and achieve fiscal stability,  
          with the goal of restoring accreditation to the college and  
          returning management control to the local governing board.  

          According to estimates, without Legislative intervention,  
          declining enrollment at SFCC could result in $23 million in  
          reduced funding to the college in 2014-15.  SB 965 (Leno),  
          pending in the Senate Education Committee, would provide four  
          years of stabilization funding to SFCC to account for this  
          declining enrollment; CCC BOG appointment of a special trustee  
          is a condition of receipt of funding.  The Committee may wish to  
          consider the implications of removing state level oversight and  
          control of the SFCC District (and any future districts that face  
          fiscal insolvency and loss of accreditation) in the context of  
          the pending request for state funding.
           
          Arguments in support  .  The California Federation of Teachers  
          supports this bill, arguing that "community college governing  
          boards are elected and come from the community.  They strive to  
          be responsive to the immediate and long-term needs of their  
          community." 

          Gray Panthers of San Francisco writes, "This bill is necessary  
          to prevent future precipitous acts like the coup d'etat last  
          year against the elected Board of Trustees of City College of  
          San Francisco. This was based on allegations - neither proven  








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          nor unproven - that are currently being contested legally.  The  
          suspension of the college's Board is a blatant, egregious attack  
          on the principles of democracy in education." 
           
          According to information provided by the author's office, a  
          resolution recently approved by the San Francisco Board of  
          Supervisors urges the CCC Chancellor to restore the voice of San  
          Francisco voters and bring democratic decision-making,  
          transparency, and public accountability back to City College of  
          San Francisco by restoring the duly elected SFCC Board of  
          Trustees. 
           
          Arguments in opposition  .  The CCCCO argues "assigning a special  
          trustee is a rare step and only done after other, less intrusive  
          alternatives have been exhausted."  CCCCO notes that in most  
          cases special trustees have been assigned to only provide  
          advisory support to a struggling district.  Only in two cases  
          (SFCC and Compton Community College District) has the BOG  
          elevated the powers of a special trustee and suspended the  
          authority of a local governing board.  The CCCCO believes that  
          in these situations "State oversight was necessary and prudent  
          given impending fiscal crisis and imminent threats to  
          accreditation."

          The Community College League of California, which represents  
          locally-elected trustees and CEOs, argues that the BOG "has an  
          important oversight role to play in ensuring locally elected  
          boards are adequately serving students" and that in the two  
          cases where the BOG has intervened "state oversight was  
          necessary and prudent".   

          The CCC Chief Instructional Officers (CCCCIO) oppose this bill  
          and argues, "in some cases the local board may not have the  
          expertise necessary to lead the college out of a crisis; in  
          other cases, to be blunt, the local board itself may have caused  
          some of the issues."  The CCCCIO argues that "we do not believe  
          appointment of a special trustee should take place without much  
          deliberation and consideration of alternatives, but we also  
          believe removing that option from the BOG is not in the best  
          interest of the system."

           Alternative approach  .  In its current form, this bill would  
          eliminate the authority of the CCC BOG to intervene in when  
          districts face fiscal insolvency and/or loss of accreditation.   
          A state-level intervention process is currently in place when a  








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          K-12 district is fiscally insolvent.  The policy rationale for  
          proposing to treat CCC districts and K-12 districts differently  
          in these circumstances is unclear; both receive the majority of  
          funding from state moneys.  Rather than removing the CCC BOG  
          authority entirely, the author may wish to consider, similar to  
          requirements in K-12 district intervention, establishing  
          statutory parameters associated with the use of the CCC BOG  
          authority.  For example, the author could require the CCC BOG to  
          establish specific benchmarks for the return of local governance  
          authority and/or clear standards that provide meaningful  
          consultation on the part of the appointed special trustee with  
          the college stakeholders (governing board, faculty, students,  
          public, etc.). 

           REGISTERED SUPPORT / OPPOSITION  :   

           Support 
           
          California Federation of Teachers
          Gray Panthers of San Francisco
          Los Angeles College Faculty Guild
          Peralta Federation of Teachers
          Several Individuals from San Francisco

           Opposition 
           
          Board of Governors California Community College 
          California Community College Chief Instructional Officers 
          Community College League of California
           

          Analysis Prepared by  :    Laura Metune / HIGHER ED. / (916)  
          319-3960