BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 2087
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          ASSEMBLY THIRD READING
          AB 2087 (Ammiano)
          As Amended  April 24, 2014
          Majority vote 

           HIGHER EDCUATION    13-0        APPROPRIATIONS      17-0        
           
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          |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  








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          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  








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          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 


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