BILL ANALYSIS                                                                                                                                                                                                    




                     SENATE GOVERNANCE & FINANCE COMMITTEE
                            Senator Lois Wolk, Chair
          

          BILL NO:  AB 2235                     HEARING:  6/25/14
          AUTHOR:  Buchanan                     FISCAL:  Yes
          VERSION:  6/19/14                     TAX LEVY:  No
          CONSULTANT:  Grinnell                 

            THE KINDERGARTEN-UNIVERSITY PUBLIC EDUCATION FACILITIES  
                                BOND ACT OF 2014
          

          Proposes the Kindergarten-University Education Facilities  
          Bond Act of 2014, a $9 billion bond act for the November,  
          2014 Ballot.


                           Background and Existing Law  

          I.   Bond Acts.  When public agencies issue bonds, they  
          essentially borrow money from investors, who provide cash  
          in exchange for the agencies' commitment to repay the  
          principal amount of the bond plus interest.  Bonds are  
          usually either revenue bonds, which repay investors out of  
          revenue generated from the project the agency buys with  
          bond proceeds, or general obligation bonds, which the  
          public agency pays out of general revenues and are  
          guaranteed by its full faith and credit.  

          Section 1 of Article XVI of the California Constitution and  
          the state's General Obligation Bond Law guide the issuance  
          of the state's general obligation debt.  The Constitution  
          allows the Legislature to place general obligation bonds on  
          the ballot for specific purposes with a two-thirds vote of  
          the Assembly and Senate.  Voters also can place bonds on  
          the ballot by initiative, as they have for parks, water  
          projects, high-speed rail, and stem cell research, among  
          others.  Either way, general obligation bonds must be  
          ratified by majority vote of the state's electorate.    
          Unlike local general obligation bonds, the state's  
          electorate doesn't automatically trigger an increased tax  
          to repay the bonds when they approve a state general  
          obligation bond.  Article XVI of the California  
          Constitution commits the state to repay investors from  
          general revenues above all other claims, except payments to  
          public education.   California voters approved $38.4  
          billion of general obligation bonds between 1974 and 1999,  





          AB 2235 - 6/19/14 -- PageB

          but approximately $95 billion since 2000.

          Bond acts have standard provisions that authorize the  
          Treasurer to sell a specified amount of bonds, and  
          generally include several uniform provisions that:
                 Establish the state's obligation to repay them, and  
               pledge its full faith and credit to repayment, 
                 Set forth issuance procedures, and link the bond  
               act to the state's General Obligation Bond Law,  
                 Create a finance committee with specified  
               membership, chaired by the State Treasurer,  
                 Charge the committee to determine whether it is  
               "necessary or desirable" to issue the bonds,
                 Add other mechanisms necessary for the Treasurer  
               and the Department of Finance to implement the bond  
               act, including allowing the board to request a loan  
               from the Pooled Money Investment Board to advance  
               funds for bond-funded programs prior to the bond sale,  
               among others.

          In bond acts, the Legislature generally:
                 Sets forth categories of projects eligible for bond  
               funds, such as library construction or school facility  
               modernization, 
                 Chooses an administrative agency to award the  
               funds, such as the State Librarian or the State  
               Allocation Board,   
                 Details the criteria to guide the administrative  
               agency's funding in each category,  
                 Enacts enforcement and audit provisions, and
                 Provide for an election to approve the bond act.

          Should the voters approve the bond act, the Legislature  
          then appropriates funds to the chosen agencies to fund  
          projects consistent with the criteria, generally as part of  
          the Budget Act.  The Department of Finance then surveys  
          agencies to determine need for bond funds based on a  
          project's readiness, and then asks the Treasurer to sell  
          bonds in a specified amount.  After the bond sale, the  
          Department of Finance determines which bond acts and  
          agencies receive bond proceeds.  

          The Legislature generally proposed, and voters enacted one  
          bond act every two years to finance school construction  
          from 1982-1992.  After voters rejected one in 1994, there  
          have been three bond acts in the following total amounts:
                 The Public Education Facilities Bond Act, a $2.065  






          AB 2235 - 6/19/14 -- PageC

               billion bond (AB 1168, Campbell, 1996),
                 The Leroy F. Greene School Facilities Construction  
               Act of 1998, a $9.2 billion bond (SB 50, Greene),
                 The Kindergarten-University Public Education  
               Facilities Bond Act of 2002, a $12.15 billion bond,  
               (AB 16, Hertzberg),
                 The Kindergarten-University Public Education  
               Facilities Bond Act of 2004, a $12.3 billion bond (AB  
               16, Hertzberg),
                 The Kindergarten-University Public Education  
               Facilities Bond Act of 2006, a $10.4 billion bond (AB  
               197, Nunez).

          II.  K-12 School Construction Finance.  School construction  
          in California often uses the metaphor of the "three legged  
          stool," where the state provides bond funds, local  
          government pays with special taxes, general obligation,  
          Mello-Roos and other bond proceeds, and the private sector  
          would provide funds through developer fees. 

          The Legislature created the State Allocation Board in 1947  
          to allocate state funds for school construction.  The board  
          consists of:
                 Two members of the Senate appointed by the Senate  
               Rules Committee,
                 Two members of the Assembly appointed by the  
               Speaker of the Assembly,
                 The Director of the Department of General Services  
               or his/her designee,
                 The Director of Finance or his/her designee; and  
               the
                 Superintendent of Public Instruction or his/her  
               designee.

          SAB is responsible for determining the allocation of State  
          resources used for the construction, modernization and  
          maintenance of local public school facilities.
          SAB is charged with the administration of the State School  
          Facility Program, and serves as the policy level body for  
          the programs administered by the Office of Public School  
          Construction.  

          Constructing or modernizing a school building begins with  
          the school district, which determines the type and size of  
          the school building needed using criteria set forth from  
          the California Department of Education (CDE).  Site  
          selection, approval and acquisition can take longer than a  






          AB 2235 - 6/19/14 -- PageD

          year, during which time the school district should have  
          passed a local bond or secured alternative funding for its  
          share of the project.  Without this funding, the school  
          district cannot meet the 50 percent local funding  
          requirement for new construction projects or the 40 percent  
          local funding requirement for modernization projects.   
          During this time, CDE reviews and approves the site  
          selection and construction plans.

          Districts then submit an application to the OPSC.  While  
          OPSC determines eligibility, the district can hire an  
          architect to develop plans and specifications for the  
          school.  Once the architect completes the plans and  
          specifications, the district sends them to the Division of  
          State Architects DSA for processing, and districts must  
          obtain DSA's written approval prior to signing the  
          project's construction contract to obtain state funding.   
          The district then applies to OPSC, and must include a  
          verification of the local 50 or 40 percent share of the  
          project cost, stamped DSA plans, and approval of the site  
          and plans by the CDE.  OPSC then presents the application  
          to the SAB for an unfunded approval, which if granted, SAB  
          funds as the Treasurer sells bonds, assuming bond  
          authorization exists.   

          In addition to new construction and modernization funding,  
          SAB also operates the charter school facilities program,  
          which provides a charter school with funding to construct  
          new facilities or to rehabilitate existing district-owned  
          facilities for charter school use.  To qualify for funding,  
          a charter must be deemed financially sound by the  
          California School Finance Authority and meet the  
          eligibility criteria outlined in law.  Title to the project  
          facilities may be held by the local school district a local  
          agency, or the charter school itself.  A charter, or school  
          district filing on behalf of a charter under this program,  
          may receive a reservation of funding by submitting a  
          preliminary application prior to receiving the necessary  
          approvals from other State entities. Once those approvals  
          are received, the preliminary apportionment must be  
          converted to a final apportionment within four years, with  
          a possible one-year extension. 

          The local share of school construction facilities is made  
          up for with district funds, local bonds, and fees on new  
          home construction.  Like most local agencies, school  
          districts can levy fees to fund infrastructure, but school  






          AB 2235 - 6/19/14 -- PageE

          district fees can depend on the amount of state aid for new  
          school construction.  SB 50 allowed school district  
          governing boards that assess Level I fees, currently $3.20  
          per square foot, but also allowed districts to impose Level  
          II fees under specified circumstances.  Additionally, when  
          SAB is no longer approving apportionments for new  
          construction, districts that have been assessing Level II  
          fees can assess Level III fees, which are double the Level  
          II fees.  However, the Legislature suspended Level III fees  
          from January 1, 2013 until January 1, 2015, but the  
          suspension ends unless the voters enact a new school  
          facilities construction bond on the November, 2014 ballot  
          (SB 1016, Committee on Budget and Fiscal Review, 2012).  

          III.  Higher Education Facility Finance.  Having  
          historically relied on General Obligation Bonds, capital  
          funding for higher education has been provided since 2008  
          in the annual Budget Act through lease revenue bonds, as  
          the bond authority authorized for higher education in the  
          2006 bond has long been exhausted.  The Legislature  
          appropriates bond funds in the State Budget Act in  
          accordance with the segments' five-year capital facility  
          plans; however, these funds have met less than half of the  
          segments' capital needs.  In April 2014, the University of  
          California (UC) identified four-year needs of $550 million  
          per year, the California State University (CSU) has  
          identified a need of $400-$500 million per year, and the  
          California Community Colleges (CCC) estimates a need of  
          about $35 billion over the next 10 years.  The CCC Office  
          of the Chancellor estimates that $19.1 billion of local  
          bond funds remain available, leaving over $15.9 billion in  
          unmet need, meaning approximately $3.2 billion is needed  
          from a state bond every two years.


                                   Proposed Law  

          Assembly Bill 2235 enacts the Kindergarten-University  
          Education Facilities Bond Act of 2014, which places a bond  
          of an unspecified amount on the November, 2014 ballot.  The  
          Bond funds K-12 Facilities, Community College Facilities,  
          and University Facilities in unspecified shares.  

          I.  K-12 Bond.  The bill establishes the 2014 State School  
          Facilities Fund, into which proceeds of bonds must be  
          deposited.  Moneys in the fund shall be available to  
          provide aid to school districts, county superintendents of  






          AB 2235 - 6/19/14 -- PageF

          schools, and county boards of education, to provide funds  
          to repay any funds advanced or loaned before the sale of  
          the bonds by an act of the Legislature.  

          AB 2235 funds the following K-12 facilities programs:
                 New School Construction,
                 Charter School Facilities,
                 School Facility Modernization.

          School districts can only use modernization funds for:
                 Purchasing and installing air conditioning  
               equipment,
                 Constructing projects, 
                 Purchasing furniture or equipment designed to  
               increase school security or playground safety,
                 Identifying, assessing, or abating hazardous  
               asbestos,
                 Project funding for high-priority roof replacement,
                 Any modernization under the 1998 Bond Act 

          The bill creates the State School Building Finance  
          Committee to determine whether it's necessary and desirable  
          for the Treasurer to sell bonds that fund its K-12  
          programs.  The Treasurer can sell the bonds at any  
          different times necessary to service expenditures required  
          by SAB apportionments.  The Committee is composed of:
                 The Governor,
                 The Controller,
                 The Treasurer, as chair,
                 The Director of Finance, who must provide  
               assistance to the Committee,
                 The State Superintendent of Public Instruction,

          The bill also provided that two members of the Senate,  
          appointed by the Senate Committee on Rules, and two members  
          of the Assembly, appointed by the Speaker of the Assembly,  
          must meet and provide advice to the Committee to the extent  
          that advisory participations doesn't conflict with their  
          current office.  The measure states that the members of the  
          Legislature constitute an interim investigating committee.  
          The Attorney General must serves as legal adviser.

          The bill allows the State Allocation Board to request a  
          loan from the Pooled Money Investment Board.  The measure  
          requires SAB to support the request with a statement of  
          apportionments.  







          AB 2235 - 6/19/14 -- PageG

          II.  Community College Bond.  AB 2235 also creates the  
          California Community College Capital Outlay Bond Fund in  
          the State Treasury, into which an unspecified amount of the  
          proceeds of bonds authorized by the bill must be deposited.  
           Bond proceeds may be appropriated for:
                 Construction on existing campuses,
                 Construction used by more than one segment of  
               public higher education,
                 Renovation and reconstruction of facilities,
                 Site acquisition,
                 Equipping new, renovated, or reconstructed  
               facilities with equipment with a useful life of more  
               than ten years, and
                 Providing funds for the payment of preconstruction  
               costs.

          The bill creates the Higher Education Facilities Finance  
          Committee to authorize bond issuance only to the extent  
          necessary to fund appropriations made by the Legislature in  
          the Budget Act, and determine whether it's necessary and  
          desirable for the Treasurer to sell bonds pursuant to this  
          legislative direction.  The Treasurer can sell the bonds at  
          any different times necessary to service expenditures  
          required by the apportionments.  The Committee is composed  
          of:
                 The Governor,
                 The Controller,
                 The Treasurer, as chair,
                 The Director of Finance, who must provide  
               assistance to the Committee,
                 The President of the University of California,
                 The Chancellor of the California State University,
                 The Chancellor of the California Community  
               Colleges.

          The bill allows each state agency administering an  
          appropriation may request a loan from the Pooled Money  
          Investment Board.  The measure also requires any request  
          forwarded to the Legislature and the Department of Finance  
          for funding to include the five-year capital outlay plan  
          that reflects the needs and priorities of the community  
          college system on a statewide basis.  Requests must include  
          a schedule that prioritizes the seismic retrofitting needed  
          to significantly reduce seismic hazards identified as high  
          priority.  The measure also makes a legislative finding and  
          declaration that the California Community Colleges annually  
          consider the inclusion of facilities of intersegmental use,  






          AB 2235 - 6/19/14 -- PageH

          and report their findings to the Budget Committee of each  
          house of the Legislature on or before May 15th of each  
          year.  

          III.  University Bond.  AB 2235 also creates the University  
          Capital Outlay Bond Fund in the State Treasury, into which  
          an unspecified amount of the proceeds of bonds authorized  
          by the bill must be deposited, an unspecified amount for  
          the University of California and the Hastings College of  
          the Law, and an unspecified amount for the California State  
          University.  Funds may be appropriated for:
                 Construction on existing campuses,
                 Construction used by more than one segment of  
               public higher education,
                 Renovation and reconstruction of facilities,
                 Site acquisition,
                 Equipping new, renovated, or reconstructed  
               facilities with equipment with a useful life of more  
               than ten years, and
                 Providing funds for the payment of preconstruction  
               costs.

          The bill copies the same provisions from the Community  
          College component of the bond described above, including  
          directing the Higher Education Facilities Finance Committee  
          to authorize bond issuance only to the extent necessary to  
          fund appropriations made by the Legislature in the Budget  
          Act, and determine whether it's necessary and desirable for  
          the Treasurer to sell bonds pursuant to this legislative  
          direction.  

          The bill allows each state agency administering an  
          appropriation may request a loan from the Pooled Money  
          Investment Board.  The measure also requires any request  
          forwarded to the Legislature and the Department of Finance  
          for funding to include the five-year capital outlay plan  
          that reflects the needs and priorities of the University of  
          California, Hastings College of the Law, and the California  
          State University on a statewide basis.  Request must  
          include a schedule that prioritizes the seismic  
          retrofitting needed to significantly reduce seismic hazards  
          identified as high priority.  The measure also makes a  
          legislative finding and declaration that the University of  
          California and the California State University should  
          annually consider the inclusion of facilities of  
          intersegmental use, and report their findings to the Budget  
          Committee of each house of the Legislature on or before May  






          AB 2235 - 6/19/14 -- PageI

          15th of each year.  
          
          AB 2235 imports all the standard provisions for general  
          obligation bonds explicitly or by reference, except it  
          doesn't allow amounts derived from premium to be reserved  
          and use to pay the cost of bond issuance prior to any  
          transfer to the General Fund.   Instead, they must be  
          reserved as a credit for expenditures for bond interest.   
          Additionally, the measure does not allow the Treasurer's  
          cost of issuance to be paid out of bond proceeds.

          IV.  Other Provisions.  AB 2235 includes standard  
          provisions from bond acts, and incorporates other  
          provisions from the General Obligation Bond Law by  
          reference.  

          The bill makes a conforming change to the 1998 Bond Act to  
          ensure that all moneys from the Fund are continuously  
          appropriated to SAB to apportion to districts in an amount  
          of bonds authorized by the finance committee, but not yet  
          sold by the Treasurer.  The measure also deletes obsolete  
          provisions added by prior bond acts.   

          The Office of Public School Construction must recommend to  
          SAB regulations that provide districts with flexibility in  
          designing facilities.  SAB may require each district that  
          participates in the new construction or modernization  
          program funded by any future bond to reestablish  
          eligibility for each school site pursuant to its  
          regulations.  SAB must also adopt regulations to adjust per  
          pupil amounts in current law for projects with school  
          buildings more than 50 years old.  The bill also includes a  
          severability clause.



                               State Revenue Impact
           
          No estimate.


                                     Comments  

          1.   Purpose of the bill  .  According to the author, "the  
          state is an important partner with school districts and the  
          developer community in ensuring that students have adequate  
          and safe school facilities.  Voters understand this and  






          AB 2235 - 6/19/14 -- PageJ

          have consistently shown support for school bonds, and  
          voters pass local bonds with the expectation of receiving  
          state matching funds.  The $35 billion in K-12 bonds passed  
          since 1998 has been matched by over $70 billion in local  
          bonds and developer fees.  Together, these funds have built  
          new schools, modernized aging schools to ensure that they  
          are safe and updated, and relieved overcrowding.   
          Additionally, these funds help the economy by generating  
          tens of thousands of jobs."  

          2.  Sixteen tons .  Debt is an essential part of almost every  
          government, business, and personal balance sheet, as  
          borrowers seek funds from lenders in exchange for a future  
          commitment to repay them.  However, evaluating the State's  
          general obligation debt is difficult; both the State  
          Treasurer and the Legislative Analyst's Office suggest  
          there's no correct amount.  Instead, experts suggest that  
          states should look at three criteria: affordability,  
          comparability, and optimality<1>:

          California's debt is affordable. The State Treasurer  
          estimates that the state will spend 7.7% of General Fund  
          revenues on debt service in 2012-13.  However, these costs  
          reduce the funding that is available for other priorities.   
          Debt service is one of the fastest growing state costs,  
          expected to reach $8.6 billion in 2017-18 assuming no new  
          authorizations, according to the Governor's Five-Year  
          Infrastructure Plan.  The Plan proposes no new general  
          obligation bonds, instead relying on more limited  
          lease-revenue bonds because of this increased debt burden.

          California's comparability to other states is less  
          favorable.  The State Treasurer's Debt Affordability Report  
          contains the following chart:


           ------------------------------------------------------------ 
          |Debt Ratios Of 10 Most Populous States, Ranked By Ratio Of  |
          |Debt To Personal Income                                     |
          |                                                            |
           ------------------------------------------------------------ 
          |----------------+-----------+--------+---------+-----------|
          -------------------------
           <1>
           Robert Wassmer and Ronald Fisher "Debt Burdens of  
          California State and Local Governments: Past, Present and  
          Future." As requested and supported by the California Debt  
          and Investment Advisory Commission.  July 2011.
                                                                 




          AB 2235 - 6/19/14 -- PageK

          |     State      | Moody's/  |Debt To |Debt Per | Debt As A |
          |                |   S&P/    |Personal|Capita(b)|    %      |
          |                | Fitch(a)  |        |         | Of State  |
          |                |           |Income(b|         | GDP(b)(c) |
          |                |           |   )    |         |           |
          |----------------+-----------+--------+---------+-----------|
          |Texas           |Aaa/AA+/AAA|  1.5%  |  $580   |   1.16%   |
          |                |           |        |         |           |
          |----------------+-----------+--------+---------+-----------|
          |Michigan        |Aa2/AA-/AA |  2.2%  |  $800   |   2.05%   |
          |                |           |        |         |           |
          |----------------+-----------+--------+---------+-----------|
          |North Carolina  |Aaa/AAA/AAA|  2.4%  |  $853   |   1.89%   |
          |                |           |        |         |           |
          |----------------+-----------+--------+---------+-----------|
          |Pennsylvania    |Aa2/AA/AA+ |  2.8%  | $1,208  |   2.66%   |
          |                |           |        |         |           |
          |----------------+-----------+--------+---------+-----------|
          |Ohio            |Aa1/AA+/AA+|  2.8%  | $1,047  |   2.50%   |
          |                |           |        |         |           |
          |----------------+-----------+--------+---------+-----------|
          |Florida         |Aa1/AAA/AAA|  2.8%  | $1,087  |   2.78%   |
          |                |           |        |         |           |
          |----------------+-----------+--------+---------+-----------|
          |Georgia         |Aaa/AAA/AAA|  3.0%  | $1,061  |   2.51%   |
          |                |           |        |         |           |
          |----------------+-----------+--------+---------+-----------|
          |Illinois        | A3/A-/A-  |  5.7%  | $2,526  |   4.85%   |
          |----------------+-----------+--------+---------+-----------|
          |California      |  A1/A/A   |  5.8%  | $2,565  |   4.98%   |
          |----------------+-----------+--------+---------+-----------|
          |New York        |Aa2/AA/AA  |  6.3%  | $3,174  |   5.36%   |
           ----------------------------------------------------------- 
           ------------------------------------------------------------ 
          |                             |        |         |           |
          |Moody's Median All States    |  2.8%  | $1,074  |   2.47%   |
          |                             |        |         |           |
          |-----------------------------+--------+---------+-----------|
          |                             |        |         |           |
          |Median For The 10 Most       |  2.8%  | $1,074  |   2.59%   |
          |Populous States              |        |         |           |
          |                             |        |         |           |
           ------------------------------------------------------------ 
           ------------------------------------------------------------ 
          |                                                            |
          |(a) Moody's, Standard & Poor's, and Fitch Ratings as of     |
          |September 2012.                                             |






          AB 2235 - 6/19/14 -- PageL

          |                                                            |
          |(b) Figures as reported by Moody's in its 2012 State Debt   |
          |Medians Report released May 2012. As of calendar year end   |
          |2011.                                                       |
          |                                                            |
          |(c) State GDP numbers have a one-year lag.                  |
          |                                                            |
          |                                                            |
           ------------------------------------------------------------ 

          Determining optimality or whether government is investing  
          in the quantity and quality of public capital desired by  
          residents, and financing the appropriate share with debt,  
          is very difficult.  LAO recommends that the Legislature  
          consider the recently released Five-Year Infrastructure  
          Plan as a starting point to developing a coordinated  
          approach to infrastructure funding, and establish a  
          committee to focus on statewide infrastructure. 

          3.   Need  .  The Senate Committee on Education notes:  
          "According to the Office of Public School Construction  
          (OPSC), as of March 26, 2014, approximately $351.1 million  
          remained in bond authority in the SFP.  At its March, 2014  
          meeting, the State Allocation Board (SAB) took action to  
          reserve $52.7 million of existing bond authority for the  
          ongoing administration of the program over the next five  
          years, reducing the remaining bond authority to $298.4   
          million.  The majority of this bond authority exists for  
          the Seismic Mitigation and Charter School programs (about  
          $259 million).  Bond authority for new construction and  
          modernizations programs has essentially been depleted,  
          respectively, since July 2012 and May 2012.    In addition,  
          since November 1, 2012, the SAB has maintained an  
          "Applications Received Beyond Bond Authority" list.  This  
          list is presented to SAB for acknowledgement, but not  
          approval. Because the applications are not fully processed  
          for final grant determination, the project funding amounts  
          on the list are only estimates.  As of March 31, 2014, the  
          list indicated new construction applications totaling $237  
          million and modernizations applications of $198 million.   
          These applications are currently unable to be funded unless  
          projects are rescinded or monies revert back to the fund."   


          4.   The good news  .  Investors ultimately determine a  
          state's creditworthiness and the interest rate paid on a  
          bond when they bid to purchase one.  However, ratings  






          AB 2235 - 6/19/14 -- PageM

          issued from the three major ratings agencies often inform  
          investors and the public regarding the investment risk of  
          purchasing a California general obligation bond.  These  
          ratings change over time in response to a state's fiscal  
          situation and economy, among other factors.  In January,  
          ratings agency Standard and Poor's raised the outlook on  
          the state's general obligation debt from stable to  
          positive, which often portends an upgrade, following on the  
          agency's boost for California from A- to A last year, as  
          well as Fitch's upgrade last August.  However, the state  
          still has the second lowest rating in the nation.  

          5.   The bad news  . California has a distinct problem: of the  
          $127 billion that voters have authorized, almost $25  
          billion hasn't been issued yet.  The state hasn't issued  
          almost $7 billion in transportation bonds, and $9.2 billion  
          in high speed rail bonds, because the projects haven't yet  
          received the needed approvals.  Should the voters approve  
          new general obligation debt for school, community college,  
          and university construction, the state would either have to  
          sell sufficient debt to fund everything, and increase debt  
          service costs accordingly, or choose which of these  
          projects should be funded first.  Additionally, the  
          Committee approved SB 848 (Wolk), which would reduce the  
          current $11.1 billion water bond, and SB 1086 (DeLeon)  
          which calls for bonds in unspecified amounts for parks.   
          However, school bonds are generally spent in steady amounts  
          over a long period of time as projects get the necessary  
          approvals, so AB 2235's debt impacts could be less acute  
          than other kinds of bonds.

          6.   Local bonds  .  State Treasurer Bill Lockyer wrote in his  
          April 28th weekly update that some $30 billion of K-12  
          bonds approved by local voters that school districts have  
          yet to sell, questioning the need for a State bond measure.  
           The update notes that provided the Board in January,  
          placed the total statewide construction/modernization need  
          through 2021 at $21.03 billion. That's about $9 billion  
          less than the amount of unused local bonds.  Proponents  
          respond by stating that many districts have seen assessed  
          value declines prevent districts that prevent them from  
          selling bonds up to currently authorized amounts given tax  
          limits.  Proponents also add that the $30 billion is evenly  
          distributed:  many districts don't have the political will  
          or tax base to approve a local bond. 

          7.   Upstairs, downstairs  .  In his 2014-15 Budget, the  






          AB 2235 - 6/19/14 -- PageN

          Governor proposed to continue a dialogue on the future of  
          school facilities funding, including consideration of what  
          role, if any, the state should play.  The Governor noted  
          that this infrastructure discussion should include the  
          growing debt service costs associated with the state's  
          increased reliance on debt financing, and issued several  
          concerns with the existing program, including, the complex,  
          cumbersome and costly nature of the current program, the  
          first-come, first serve allocation process which provides a  
          competitive advantage to larger districts with dedicated  
          facilities personnel, and the lack of adequate local  
          control over school facility design and its impact on  
          modern educational delivery methods.   The Governor also  
          stated that any future program should be designed to  
          provide districts with the tools and resources to address  
          their core facility gaps, but should also avoid the  
          unsustainable reliance on debt issuance that characterizes  
          the current school facilities program.

          8.   Recent amendments  .  When the Committee on Education  
          heard AB 2235 at its June 18th hearing, it adopted  
          amendments striking the overall bond amount, as well as the  
          bill's individual allocations for each category of  
          facilities.  As such, it's difficult to assess AB 2235's  
          impacts on state debt.


                                 Assembly Actions  

          Assembly Floor                     75-0
          Assembly Appropriations                 16-0
          Assembly Higher Education          13-0
          Assembly Education                 7-0


                        Support and Opposition  (06/14/14)

           Support  :  Advancement Project; All American Inspection,  
          Inc.; American Council of Engineering Companies California;  
          Antelope Valley College; Associated General Contractors;  
          Association of California Construction Managers;  
          Association of California School Administrators;  
          Bakersfield City School District; Baldwin Park Unified  
          School District; Barstow Community College District; BCA  
          Architects; BlueGreen Alliance; Board of Governors,  
          California Community Colleges; BSK Associates; Butte County  
          Office of Education; Cabrillo Community College; California  






          AB 2235 - 6/19/14 -- PageO

          Apartment Association; California Association of School  
          Business Officials; California Association of Sheet Metal  
          and Air Conditioning Contractors' National Association;  
          California Association of Suburban School Districts;  
          California Building Industry Association; California  
          Chamber of Commerce; California Federation of Teachers;  
          California School Boards Association; California State PTA;  
          California State University; California Teachers  
          Association; California Workforce Association; Central  
          Valley Education Coalition; Central Valley Higher Education  
          Consortium; Chaffey Community College District; Citrus  
          College; Coalition for Adequate School Housing; College of  
          the Desert; College of the Redwoods; Community College  
          Facility Coalition; Community College League of California;  
          Contra Costa County Office of Education; County School  
          Facilities Consortium; Dougherty + Dougherty Architects  
          LLP; El Dorado County Office of Education; Elk Grove  
          Unified School District; Foothill-De Anza Community College  
          District; Fresno Unified School District; Glendale  
          Community College District; Higginson + Cartozian  
          Architects, Inc.; Imperial County Office of Education; John  
          Swett Unified School District; Kern Community College  
          District; Kern County Superintendent of Schools; Lake Tahoe  
          Community College; Los Angeles Community College District;  
          Los Angeles County Superintendent of Schools; Los Angeles  
          Unified School District; Los Rios Community College  
          District; Madera County Office of Education; Martinez  
          Unified School District Merced County Office of Education;  
          Monterey Peninsula Community College District; Monterey  
          County Office of Education; Napa County Office of  
          Education; Palm Springs Unified School District; Palos  
          Verdes Peninsula Unified School District; Paramount Unified  
          School District; Pasadena City College; Peralta Community  
          College District; Place Works; PMSM Architects; Public  
          Advocates;  Rancho Santiago Community College District;   
          Regional Asthma Management and Prevention; RGM and  
          Associates; Rio Hondo Community College District; Riverside  
          Community College District; Riverside County Superintendent  
          of Schools; San Benito County Office of Education; San  
          Bernardino Community College District; San Diego County  
          Superintendent of Schools; Dr. Randy Ward; San Diego  
          Unified School District; San Francisco Unified School  
          District; San Leandro Unified School District; San Luis  
          Obispo County Office of Education; Santa Ana Unified School  
          District; Santa Barbara County Office of Education; Santa  
          Clara County Office of Education; San Clarita Community  
          College District; Santa Cruz County Office of Education;  






          AB 2235 - 6/19/14 -- PageP

          School Air; School Employers Association of California;  
          School Energy Coalition; Sierra College; Siskiyou Joint  
          Community College District; Small School Districts;  
          Association; Solano Community College District; Sonoma  
          County Office of Education; South Orange County Community  
          College District; St. Helena Unified School District; State  
          Building and Construction Trades Council, AFL-CIO; State  
          Center Community College District; Stockton Unified School  
          District; Superintendent of Public Instruction Tom  
          Torlakson; Tracy Unified School District; University of  
          California; Visalia Unified School
          District; West Hills Community; West Kern Community College  
          District; William S. Hart Union High School District;  
          Wiseburn School District; Yosemite Community College  
          District; Yuba Community College District.

           Opposition  :  None  
          received.