BILL ANALYSIS Ó SENATE COMMITTEE ON EDUCATION Carol Liu, Chair 2013-2014 Regular Session BILL NO: SB 594 AUTHOR: Steinberg AMENDED: April 18, 2013 FISCAL COMM: Yes HEARING DATE: May 1, 2013 URGENCY: No CONSULTANT:Lenin Del Castillo SUBJECT : Career Pathways Investment. SUMMARY This bill authorizes several forms of financing mechanisms to provide financial assistance for local educational agencies (LEAs), community college districts, and business partnerships to operate career pathways programs. BACKGROUND Existing law also establishes the following career technical education (CTE) programs for public schools: 1) Regional Occupational Centers and Programs . Existing law establishes various career technical education (CTE) programs for public schools including Regional Occupational Centers and Programs (ROCPs) that allow students from multiple schools or districts to participate in career technical training programs regardless of the geographical location of their residence in a county or region. Existing law authorizes the following types of ROCPs operational models: (Education Code § 52300 et seq.) a) County ROCP b) Joint Powers Agency ROCP c) Single District ROCP 2) Partnership Academies . The Partnership Academy model is a three-year program, for grades ten through twelve, structured as a school-within-a-school and incorporates (1) rigorous integrated academics with a career focus; SB 594 Page 2 (2) business partnerships that provide support through curriculum resources, classroom speakers, field trips, mentors, and internships; and (3) teachers who work as a team in preparing students for careers and postsecondary education. (Education Code § 54690 et seq.) 3) Specialized Secondary Programs . A specialized secondary program is a four-year grant program that provides opportunities for students to obtain advanced instruction, in addition to core course work, and skills in technology appropriate to the curriculum. Comprehensive high schools may use the grant funds for programs that provide students with advanced learning opportunities in a variety of subjects, including but not limited to English-language arts, mathematics, science, history and social science, foreign language, and the visual performing arts. The acquisition of technology skills and the use of technology as a tool for instruction and learning are also emphasized in these programs. Frequently, specialized secondary programs are established as a smaller learning community or a school-within-a-school. (Education Code § 58800 et seq.) 4) Agricultural Career Technical Education Incentive Program . The Agricultural Career Technical Education Incentive program provides local educational agencies (LEAs) with funds to improve the quality of their agricultural vocational education programs. The goal is to maintain a high-quality, comprehensive agricultural vocational program in California's public school system to ensure a constant source of employable, trained, and skilled individuals. (Education Code § 52460) ANALYSIS 1) This bill establishes the California Career Pathways Investment Committee (Committee) composed of the following members: a) The Chancellor of the California Community Colleges, who will serve as the Chair. b) The Superintendent of Public Instruction. SB 594 Page 3 c) The Chair of the California Workforce Investment Board. d) One appointee of the Senate Committee on Rules, who shall represent the business community and serve a four-year term. e) One appointee of the Speaker of the Assembly, who shall represent the business community and serve a four-year term. 2) Provides authority for the Committee to allocate to LEAs, community college districts, and applicants, monies appropriated to the Career Pathways State Revolving Fund for state financial assistance, including grants, loans, and the repayment of Workforce Development Bonds issued by the Committee. 3) Defines an applicant as a business entity that enters into a contract or memorandum of understanding with an LEA, community college, or workforce investment board to provide career technical education that connects pupils to real-world experience and provides sustained exposure to applied academics, skill development, work-related education, and potential future employment, and that applies to the Committee for state financial assistance, as specified. 4) Requires the Committee to establish criteria and guidelines for evaluating applications for state financial assistance, as specified, and give priority in the allocation of state financial assistance as follows: a) LEAs and community college districts that have an unemployment rate higher than the statewide average unemployment rate for the most recent calendar year, as determined by the Employment Development Department, or a high school graduation rate lower than the statewide high school graduation rate for the most recent calendar year, as determined by the Committee using the California Longitudinal Pupil Achievement Data System. SB 594 Page 4 b) Local education agencies (LEAs) and community college districts that include in their application a significant amount of private funding support from their business partners. c) LEAs and community college districts that include in their application articulated pathways connecting high school and postsecondary certificate and degree programs in their region. d) LEAs and community college districts that include in their application articulated pathways connecting high school and postsecondary certificate and degree programs in their region. e) LEAs and community college districts that are not seeking state financial assistance for existing activities. However, priority in allocating state financial assistance shall be given to applicants that seek to expand or augment existing investments in career pathways programs. 5) Defines career pathways programs as programs that support various functions, including integrated academic and technical learning that prepares pupils for both postsecondary education and careers in high-growth or high-need sectors of the economy, as specified, curriculum and professional development, middle school and early high school career exploration activities, and externship and fellowship opportunities that expose middle school and high school teachers and community college faculty to the skills and competencies that pupils need for successful employment in high-growth sectors of the economy. 6) Provides that the Committee allocate proceeds from the sale of Workforce Development Bonds to applicants that have entered into a memorandum of understanding with an LEA or community college district to fund career pathways programs. Repayment of the bonds will be linked to performance-based contracts that measure the academic progress and employment records of students participating SB 594 Page 5 in the programs. 7) Requires the Committee to develop performance criteria for determining the financial returns to private entities investing in Workforce Development Bonds. The performance criteria shall include, but are not limited to, high school pupil and community college student achievement and opportunity in the following areas: a) High school graduation. b) Completion of postsecondary programs that culminate in a certificate or degree. c) Attainment of industry-recognized credentials that are valued in high- growth, high-need, or emerging economic sectors. d) Provision of internships to high school pupils and community college students. e) Provision of paid summer jobs for high school pupils and community college students. f) Provision of externships for high school teachers and community college faculty. g) Provision of scholarships or other financial assistance for students pursuing postsecondary education or training in a relevant career pathway. h) Offer of paid employment or apprenticeship to high school pupils or community college students who are participants or graduates of a career pathways program. 8) Provides that the Committee prepare forms, establish procedures, set priorities, assess, and perform other administrative functions as necessary. SB 594 Page 6 9) Requires the Superintendent of Public Instruction, the Chancellor of the Community Colleges, and the California Workforce Investment Board to enter into a memorandum of understanding to allocate staff resources to the Committee. The costs to these entities shall be offset by fees charged to applicants for Career Pathways Tax Credits. 10) Allows local educational agencies (LEAs) and community college districts to issue lease revenue bonds secured by the lease of any of their property or enter into loan or lease agreements not subject to the California Constitution's debt limits with the California Career Pathways Investment Committee, to finance the operation of career pathways programs. 11) Establishes the Career Pathways Investment Trust Fund in each LEA or community college district for the purpose of financing program and administrative costs relating to the operation of career pathways programs. The trust fund may accept revenues from any source, including one-time property tax revenues resulting from the dissolution of the assets of the former redevelopment agencies, proceeds from the sale of Workforce Development Bonds, other tax revenues, grants, loans, and contributions or employment training funds made available through the employment training panel or workforce investment boards. The trust fund shall be administered by each LEA or community college district and shall be used for qualified expenditures, administrative costs, and grants, loans, and program costs associated with career pathways programs. 12) Establishes the Career Pathways State Revolving Fund for the purpose of providing financial assistance to LEAs, community college districts, and business entities that have entered into agreements to implement and operate career pathways programs. Within the fund there shall also be established a Career Pathways Financing Account, a Career Pathways Grant Account, a Career Pathways Loan Account, and additional accounts and subaccounts that the Committee may establish from time to time, for purposes as specified. 13) Provides that all monies in the Career Pathways State Revolving Fund shall be continuously appropriated without SB 594 Page 7 regard to fiscal year for the support of the Committee and for expenditures for career pathways programs. The bill also provides that expenses incurred in carrying out these purposes shall be payable solely from funds provided pursuant to the bill's provisions and no liability or obligation shall be imposed upon the state and none shall be incurred by the Committee beyond the extent to which money shall have been provided. 14) Requires for the calendar years beginning on or after January 1, 2014, the Committee to allocate the Career Pathways Investment Credit in an amount authorized in the Budget Act for that calendar year. 15) Requires the Committee to: a) Allocate the Career Pathways Investment Credit for up to five calendar years for each application the Committee approves, as long as the amount allocated does not exceed the amount authorized in the Budget Act. b) Give priority in allocating tax credits to the following: i) Applicants that have entered into contracts or memorandums of understanding with Local education agencies (LEAs), community colleges, or workforce investment boards in communities that have an unemployment rate higher than the statewide unemployment rate, as determined by the United States Census, and a high school graduation rate lower than the statewide high school graduation rate, as determined by the Committee using the California Longitudinal Pupil Achievement Data System. ii) Applicants that have entered into a contract or memorandum of understanding with LEAs, community colleges, or workforce investment boards with proportions of private funding support that exceed the one-to-one match requirement as specified. SB 594 Page 8 iii) Applicants that have entered into a contract or memorandum of understanding with LEAs or community colleges that offer articulated pathways connecting high school and postsecondary certificate and degree programs in their region. iv) Applicants that are not seeking tax credits for existing activities. However, priority shall be given to applicants that seek to expand or augment existing investments in career pathways programs. c) To the maximum extent practicable, give priority in allocating career pathways investment credits to applicants that seek to expand or augment existing investments in career pathways programs. d) The Committee shall not give priority to any applicant by virtue of the date of submission except to break a tie between two applicants with the same rating. 16) Requires applicants to enter into an enforceable contract or memorandum of understanding with the Committee to comply with the requirements of this bill. The contract or memorandum of understanding shall provide for legal action to obtain specific performance or monetary damages for breach of contract and shall require regular programmatic audits. 17) Requires the Committee to adopt criteria that awards credits to applicants that demonstrate that either the applicant or the local education agency (LEA), community college, or workforce investment board meets the following criteria: a) The effectiveness of the career pathways program toward preparing students for productive, high-wage employment in growing or high-need sectors of the California economy, as specified. b) The level of the applicant's investment in, SB 594 Page 9 oversight of, and ability to leverage and sustain current career pathways programs and current career technical education programs. 18) Requires the Committee to develop and provide forms for the purposes of informing potential applicants. 19) Provides that the amount of credit reserved for a calendar year shall not exceed 50 percent of the qualified expenditures by the applicant for the calendar year. 20) Requires the Committee to report to the Franchise Tax Board, once each year, the identity of the qualified taxpayers for whom the career pathway credits are allocated each year. 21) Provides that the Committee may consult with the Treasurer or the Tax Credit Allocation Committee regarding allocation of credits, and they must aid the Committee upon request. The bill also provides that the Committee shall adopt audit requirements. 22) Defines various terms for purposes of the bill. 23) Expresses legislative intent to appropriate $250 million from the General Fund in 2013-14 to the Career Pathways State Revolving Fund. The source of the funds may include Proposition 98 apportionments and offsetting budget savings resulting from reforms to the Enterprise Zone Program and the New Jobs Tax Credit. The bill also expresses legislative intent to reduce the statutory cap on the authorization for the New Jobs Tax Credit from $400 million to $300 million and to authorize $100 million for the Career Pathways Investment Credit, effective January 1, 2014. 24) Makes a number of related declarations and findings. STAFF COMMENTS 1) Need for the bill . According to the author's office, California suffers from too many high school dropouts, too little meaningful career pathways programs at the middle and high school levels, and shortages of skilled SB 594 Page 10 workers in high-growth sectors such as biotechnology, nursing, and advanced manufacturing to fuel these sectors of our economy. Investments in high quality career pathways programs at the secondary school level through public-private partnerships would bring a greater return on the state's tax expenditure investment by enhancing our workforce and leading to wage and employment growth. 2) What are career pathways programs ? This bill defines an "applicant" as a business entity that enters into a contract or memorandum of understanding with a local education agency (LEA), community college, or workforce investment board to provide career technical education. According to the bill, the business entities would be required to connect pupils to real-world experience and provide sustained exposure to applied academics, skill development, work-related education, and potential future employment. Career pathways programs would support various functions, including integrated academic and technical learning that prepares pupils for both postsecondary education and careers in high-growth or high-need sectors of the economy, curriculum and professional development, middle school and early high school career exploration activities, and externship and fellowship opportunities that expose middle school and high school teachers and community college faculty to the skills and competencies that pupils need for successful employment in high-growth sectors of the economy. Programs include academically relevant and rigorous curriculum working in tandem with local industry experts, paid and unpaid jobs or internships, and permanent or part-time hires of recent graduates. 3) Will it work ? Will the bill's financial assistance and tax credits lead to better education outcomes for students? SB 594 is premised on the belief that better linkages between public school curriculum and real world work experience will result in more engaged and successful students, increased graduation rates, and better prepared students for both college and career. According to a 2006 study of California Regional Occupational Centers and Programs (CROCP) conducted by the School Improvement Research Group at the University of California, Riverside and funded by the State SB 594 Page 11 Department Education, ROCP students improve their high school grade point averages at a greater rate than comparison students, enroll in post-secondary education in large numbers, earn higher wages than comparison group peers, have more success in securing raises and promotions on the job, prefer ROCP classes over other subjects, and question the value and relevance of many of their high school courses. A 2010 study conducted by the Career Academy Support Network finds that, after more than four decades of development and three decades of evaluation, career academies (small learning communities that provide a college-preparatory curriculum with a career-related theme) have been effective in improving outcomes for students during and after high school and declares them a proven strategy to prepare high school students for college and careers. 4) Priorities . The Committee may wish to consider whether career technical education program partnerships between local educational agencies and private business entities should be encouraged through the use of tax credits and the other financing tools proposed. The bill would provide significant state assistance for the establishment of career pathways programs at a time when schools have many other compelling needs such as hiring quality teachers and providing professional development for existing teachers. Additionally, the bill would allow local educational agencies and community college districts to issue lease revenue bonds to establish career pathways programs allowing them to further increase their existing debt levels. Is this the appropriate time for additional borrowing? SUPPORT America's Edge California Bay Area Council California Association of Regional Occupational Centers and Programs California School Boards Association Sacramento City Unified School District San Bernardino County District Advocates for Better Schools San Francisco Unified School District OPPOSITION SB 594 Page 12 None received.