BILL ANALYSIS Ó AB 2087 Page 1 ASSEMBLY THIRD READING AB 2087 (Ammiano) As Amended April 24, 2014 Majority vote HIGHER EDCUATION 13-0 APPROPRIATIONS 17-0 ----------------------------------------------------------------- |Ayes:|Williams, Chávez, Bloom, |Ayes:|Gatto, Bigelow, | | |Fong, Fox, Jones-Sawyer, | |Bocanegra, Bradford, Ian | | |Levine, Achadjian, | |Calderon, Campos, | | |Medina, Olsen, | |Donnelly, Eggman, Gomez, | | |Quirk-Silva, Weber, Wilk | |Holden, Jones, Linder, | | | | |Pan, Quirk, | | | | |Ridley-Thomas, Wagner, | | | | |Weber | |-----+--------------------------+-----+--------------------------| | | | | | ----------------------------------------------------------------- SUMMARY : Requires that regulations of the California Community Colleges (CCC) Board of Governors (BOG) regarding the appointment of the special trustee to manage a community college district must include specific benchmarks to indicate the district's capacity to resume its management and standards. EXISTING LAW requires the CCC BOG to establish standards for fiscal management practices of community college districts (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 (Education Code Section 84040). FISCAL EFFECT : According to the Assembly Appropriations Committee, minor absorbable cost to the Chancellor's Office of the CCC to develop regulations for consideration and adoption by the BOG. Depending on the parameters of the regulations regarding consultation, a CCD under the management of a special trustee could incur costs related to conducting such meetings. Depending on the specific requirements for consultation, decision-making by a special trustee could be delayed, with AB 2087 Page 2 unknown fiscal consequences for the college's recovery. COMMENTS : In July of 2012, San Francisco City College (SFCC) was placed on "Show Cause" status by its accrediting agency, the Western Association of Schools and Colleges-Accrediting Commission for Community and Junior Colleges (ACCJC). The ACCJC visiting team found, among other deficiencies, 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 BOG appointed Robert Agrella as special trustee under the aforementioned limited powers to assist SFCC in achieving sound financial management. In July 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 SFCC District to assume the management and control of the SFCC District. 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 AB 2087 Page 3 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. Prior to the amendments taken in the Assembly Higher Education Committee, this bill would have eliminated the BOG's authority to intervene when districts face fiscal insolvency and/or loss of accreditation. The author was concerned that an unelected trustee was managing SFCC in lieu of elected district board members accountable to the citizens of the district. Since a state-level intervention process is also in place when a K-12 school district is fiscally insolvent, the policy rationale for proposing to treat CCC districts and K-12 districts differently in these circumstances was unclear, as both receive the majority of funding from state funds. Rather than removing the BOG authority, this bill, as amended by the Assembly Higher Education Committee, requires the BOG to promulgate regulations to require benchmarks for the return of local governance authority, and clear standards that provide meaningful consultation on the part of the appointed special trustee with college stakeholders. Analysis Prepared by : Laura Metune / HIGHER ED. / (916) 319-3960 FN: 0003369