BILL ANALYSIS                                                                                                                                                                                                    



                                                                     AB 148


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          Date of Hearing:  April 29, 2015


                           ASSEMBLY COMMITTEE ON EDUCATION


                              Patrick O'Donnell, Chair


          AB 148  
          (Holden) - As Amended March 26, 2015


          SUBJECT:  School facilities:  K-14 School Investment Bond Act of  
          2016


          SUMMARY:  Enacts the K-14 School Investment Bond Act of 2016, to  
          be operative only if approved by voters at an unspecified 2016  
          statewide election.  Specifically, this bill:  


          1)Establishes the 2016 State School Facilities Fund and  
            authorizes the State Allocation Board (SAB) to apportion funds  
            to school districts from funds transferred to the 2016 State  
            School Facilities Fund from any source for the purposes  
            specified in the SFP.  

          2)Authorizes an unspecified amount of general obligation (G.O.)  
            school facilities bond to be placed on an unspecified  
            statewide general election and specifies the funds to be  
            allocated as follows:

             a)   An unspecified amount for kindergarten through grade 12  
               (K-12) allocated to the following programs:

               i)     New Construction; and, 
               ii)    Modernization.









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             b)   Specifies that up to 5% of the amount for New  
               Construction and Modernization shall be available for  
               charter school facilities.

             c)   An unspecified amount allocated to the California  
               Community Colleges (CCC).

          3)Makes the following changes to the SFP:


             a)   Specifies that the requirement for the SAB to require  
               school districts to make all necessary repairs to ensure  
               that a project is maintained in good repair shall be as a  
               condition of participation in the SFP. 


             b)   Strikes obsolete provision relating to deferred  
               maintenance.


             c)   Strikes an obsolete provision requiring the SAB to  
               conduct an evaluation on the costs of new construction and  
               modernization of small high schools.

             d)   Requires the SAB to require a school district that  
               elects to participate in the new construction and  
               modernization programs to conduct an inventory of existing  
               facilities and submit this information to the SAB for the  
               purposes of maintaining a statewide school facilities  
               inventory.

             e)   Repeals the provisions that do the following:

               i)     Requires, for the purpose of determining existing  
                 school building capacity, the calculation to be adjusted  
                 for first priority status as that calculation would have  
                 been made under the policies of the SAB in effected  
                 immediately preceding September 1, 1998.









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               ii)    Requires the maximum school building capacity for  
                 each applicant district be increased by the number of  
                 pupils reported by the Superintendent of Public  
                 Instruction (SPI) as excess capacity as a result of  
                 participation in the Year-Round School Grant Program.   
                 Repeals the requirement that the adjustment be calculated  
                 on the basis, at the district's option, of either the  
                 district as a whole or the appropriate attendance area.

               iii)   Requires each school on a multitrack year-round  
                 calendar that has a density of 200 or more pupils  
                 enrolled per acre that is located in a school district  
                 with 40 percent of its pupils attending multitrack  
                 year-round schools be exempted from the increase in  
                 school building capacity required by Education Code (EC)  
                 Section 17071.35.

             f)   Authorizes a new construction grant to be used for  
               seismic mitigation purposes and related design, study, and  
               testing costs.

             g)   Specifies that in the development and guidelines and  
               regulations for new construction and modernization, the SAB  
               shall provide a school district with maximum flexibility in  
               the design, construction, and modernization of school  
               facilities.

             h)   Requires the Office of Public School Construction  
               (OPSC), in consultation with the California Department of  
               Education (CDE), to recommend to the SAB regulations that  
               will provide school districts with flexibility in designing  
               instructional facilities. These recommendations shall  
               propose revisions to any regulations that limit the ability  
               of school districts to use new construction grants to  
               construct instructional space approved by the State  
               Department of Education. The proposed revisions shall  
               ensure that a school district has the ability to design a  
               facility that provides a flexible learning environment,  
               provides for the integration and use of technology, and  








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               serves as an instructional space and learning environment  
               that supports and enhances the educational delivery  
               process.

             i)   Authorizes a modernization apportionment to be used for  
               the following purposes:

               i)     Seismic mitigation purposes and related design,  
                 study, and testing costs; and,
               ii)    Demolish and construct a building(s) on an existing  
                 schoolsite if the total cost of providing a new school  
                 building, including land, on a new site would not protect  
                 the economic interest of the state and school district.   
                 Authorizes such a project to be eligible for grant equal  
                 to the New Construction grant level.  Requires the SAB to  
                 establish additional requirements necessary to ensure the  
                 economic interest of the state and the educational  
                 interests of children are protected.

             j)   Requires the CDE, Division of State Architect (DSA), the  
               OPSC, and the Department of Toxic Substances Control (DTSC)  
               to convene for the purposes of developing an interagency  
               plan to streamline the school facility construction  
               application, review, and audit processes in order to reduce  
               the time and improve the efficiency of the school  
               facilities construction process. Requires the interagency  
               plant to be submitted to the Legislature before July 1,  
               2017.

             aa)  Expresses the intent of the Legislature that operative  
               regulatory language adopted by the SAB before the effective  
               date of this section be reviewed and revised before July 1,  
               2016, to ensure that the SFP is being implemented in a  
               manner that reduces duplicative processes for the review,  
               approval, and audit of school facility new construction and  
               modernization projects.

          4)Transfers the unencumbered balance of the amount available for  
            seismic repair, reconstruction, or replacement from the 2006  








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            bond to the 2016 State School Facilities Fund for allocation  
            on the date that the bond proposed by this bill, if approved  
            by voters, becomes operative.

          5)Requires the SAB to assign the following priorities:

             a)   Highest priority for bond funding to applicant school  
               districts whose projects are emergency facility needs as  
               defined in the Emergency Repair Program. 

             b)   Priority for funding to applicant school districts that  
               demonstrate participation in a community-based effort to  
               coordinate educational, developmental, family, health, and  
               other comprehensive services by engaging in public and  
               private partnerships with local public entities and other  
               nonprofit or private community partners. Criteria that  
               demonstrate this participation shall include all of the  
               following:

               i)     Institutionalized structures for cross-agency  
                 collaboration, including, but not limited to, memoranda  
                 of understanding to coordinate activities and services.
               ii)    Agreements for joint use and operations of school  
                 facilities that provide for extended hours of use for  
                 pupils, families, and the community, integration of  
                 libraries, early childhood education, child care centers,  
                 senior centers, outdoor recreation or environmental  
                 education, arts education, and career technical education  
                 and adult education offerings for pupils and community  
                 members.
               iii)   Participation in the State Community Schools  
                 Network.
               iv)    Participation in technical assistance and training,  
                 including professional development, for full-service  
                 community schools.
               v)     Certification that the district's school facilities  
                 master plan is consistent with the regional sustainable  
                 communities strategy established pursuant to Section  
                 65080 of the Government Code.








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          6)Expresses the intent of the Legislature that the State School  
            Building Finance Committee consider a pay-as-you-go model of  
            financing that increases actual money for construction by  
            issuing short-term debt with faster repayment plans to lessen  
            the amount of state funds spent on interest and reduce overall  
            state debt.

          EXISTING LAW:  


          1)Requires, under the Leroy F. Greene School Facilities Act of  
            1998, the SAB to allocate to applicant school districts  
            prescribed per-unhoused-pupil state funding for construction  
            and modernization of school facilities, including hardship  
            funding, and supplemental funding for site development and  
            acquisition. 

          2)Provides that a school district's ongoing eligibility for new  
            construction funding is determined by making calculations  
            related to certain factors, including, but not limited to,  
            enrollment projections by utilizing a cohort survival  
            enrollment projection system, the number of students that may  
            be adequately housed in the existing school building capacity  
            of the district, and increases or decreases in enrollment  
            resulting from receipt of funding from the Year-Round School  
            Grant Program.  

          3)Provides that a school district is eligible to receive an  
            apportionment for the modernization of a permanent school  
            building that is more than 25 years old or a portable  
            classroom that is at least 20 years old.  A school district is  
            eligible to receive an additional apportionment for  
            modernization of a permanent school building every 25 years  
            after the date of the previous apportionment or a portable  
            classroom every 20 years after the previous apportionment.


          FISCAL EFFECT:  Unknown








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          COMMENTS:  This bill places a bond on an unspecified statewide  
          election in 2016 to fund kindergarten through California  
          Community Colleges facilities.  The amount of the bond is  
          unspecified.  This bill is nearly identical to the introduced  
          version of SB 114 (Liu), pending in the Senate Appropriations  
          Committee.  The major difference is that SB 114 has been amended  
          to remove funding for California Community Colleges and is now a  
          K-12 bill.  This bill remains a K-14 bill.  


          Background.  The construction and rehabilitation of public  
          kindergarten through grade 12 (K-12) facilities are funded by a  
          combination of state and local G.O. bonds, developer's fees and  
          local assessments such as Mello Roos community facilities  
          districts.  The New Construction program requires a 50% match  
          from local educational agencies (LEAs), unless the LEA qualifies  
          for financial hardship, which pays up to 100% of project costs.   
          Modernization funds are awarded at 60% with a 40% match.  Since  
          the inception of the SFP in 1998, voters have approved $35.4  
          billion in state G.O. bonds for K-12 schools. 


           ----------------------------------------------------------------- 
          |   Ballot    |   Measure   |        Amount         |  % Passage  |
          |             |             |                       |             |
          |             |             |                       |             |
          |-------------+-------------+-----------------------+-------------|
          |November     |Proposition  |$9.2 billion           |    62.5     |
          |1998         |1A           |                       |             |
          |             |             |                       |             |
          |             |             |     ($6.7 billion     |             |
          |             |             |K-12 +                 |             |
          |             |             |                       |             |
          |             |             |                       |             |
          |             |             |     $2.5 billion      |             |
          |             |             |Higher Ed)             |             |
          |             |             |                       |             |








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          |             |             |                       |             |
          |-------------+-------------+-----------------------+-------------|
          |November     |Proposition  |$13.05 billion         |    59.1     |
          |2002         |47           |                       |             |
          |             |             |                       |             |
          |             |             |     ($11.4 billion    |             |
          |             |             |K-12 +                 |             |
          |             |             |                       |             |
          |             |             |                       |             |
          |             |             |     $1.65 billion     |             |
          |             |             |Higher Ed)             |             |
          |             |             |                       |             |
          |             |             |                       |             |
          |-------------+-------------+-----------------------+-------------|
          |March 2004   |Proposition  |$12.3 billion          |    50.9     |
          |             |55           |                       |             |
          |             |             |                       |             |
          |             |             |     ($10 billion K-12 |             |
          |             |             |+                      |             |
          |             |             |                       |             |
          |             |             |                       |             |
          |             |             |                       |             |
          |             |             |     $2.3 billion      |             |
          |             |             |Higher Ed)             |             |
          |             |             |                       |             |
          |             |             |                       |             |
          |-------------+-------------+-----------------------+-------------|
          |November     |Proposition  |$10.416 billion        |56.9         |
          |2006         |1D           |                       |             |
          |             |             |                       |             |
          |             |             |     ($7.329 K-12 +    |             |
          |             |             |                       |             |
          |             |             |                       |             |
          |             |             |      $3.087 billion   |             |
          |             |             |Higher Ed)             |             |
          |             |             |                       |             |
          |             |             |                       |             |
           ----------------------------------------------------------------- 









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          The last education bond on the statewide ballot was Proposition  
          1D, which was passed by voters on the November 2006 ballot.   
          Proposition 1D provided $10.416 billion for K-12 and higher  
          education facilities and established new K-12 grant programs,  
          specified through the following allocations:


          1)$7.329 billion for K-12 facilities as follows:

             a)   $1.9 billion for new construction projects (of which up  
               to $199.5 million can be set aside for seismic repairs);
             b)   $3.3 billion for modernization projects;
             c)   $1 billion for overcrowding relief grants through the  
               removal of  portables;
             d)   $500 million for charter school facilities;
             e)   $500 million for career technical education (CTE)  
               facilities and equipment;
             f)   $100 million for high performance (green) projects; and,
             g)   $29 million for joint-use projects.

          2)$3.087 billion for higher education facilities as follows:

             a)   $1.507 billion for CCC;
             b)   $890 million for UC, of which $200 million was available  
               for medical education programs; and, 
             c)   $690 million for CSU.



          K-12 remaining bond authority.  Due to the state's budget crisis  
          and poor credit ratings, the Pool Money Investment Board halted  
          the regular sale of all G.O. bonds in December 2008 and slowed  
          the disbursement of funds.  The SAB, comprised of ten members  
          that include appointments by the Governor, the Speaker of the  
          Assembly and the Senate President pro Tem, is the body that  
          allocates bond funds and oversees the administration of the SFP  
          staffed by the OPSC, within the Department of General Services.   








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          The SAB has been making unfunded approvals since 2009 to enable  
          districts to continue their facilities planning.  The unfunded  
          approvals are converted to apportionments when bonds are sold  
          and cash becomes available.  


          According to the OPSC, as of April 15, 2015, approximately  
          $195.4 million remains in bond authority from the 2002, 2004,  
          and 2006 bonds, as follows:











           ----------------------------------------------------------------- 
          |         Remaining Bond Authority - as of April 15, 2015         |
          |                                                                 |
          |                                                                 |
           ----------------------------------------------------------------- 
          |--------------------------------+--------------------------------|
          |Program                         |Amount in millions              |
          |                                |                                |
          |                                |                                |
          |--------------------------------+--------------------------------|
          |New Construction                |$17.8*                          |
          |                                |                                |
          |                                |                                |
          |Modernization                   |$4.5*                           |
          |                                |                                |
          |                                |                                |
          |Seismic Mitigation              |$141.2                          |
          |                                |                                |
          |                                |                                |








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          |Career Technical Education      |$2.3                            |
          |                                |                                |
          |                                |                                |
          |Charter                         |$27.1                           |
          |                                |                                |
          |                                |                                |
          |High Performance                |$.5                             |
          |                                |                                |
          |                                |                                |
          |Overcrowding Relief             |$2                              |
          |                                |                                |
          |                                |                                |
          |--------------------------------+--------------------------------|
          |Total                           |$195.4                          |
          |                                |                                |
          |                                |                                |
          |*Due to project rescissions     |                                |
          |                                |                                |
          |                                |                                |
           ----------------------------------------------------------------- 
          Source:  Office of Public School Construction


          The majority of remaining authority is derived from funds for  
          seismic projects.  Proposition 1D authorized up to 10.5% of New  
          Construction funds to be used for seismic repair,  
          reconstruction, or replacement.  Seismic dollars have gone out  
          slowly, partly due to fairly narrow eligibility criteria.  New  
          Construction and Modernization funds have been exhausted since  
          2012.  The funds currently available are due to funds returned  
          to the program.    


          SFP changes.  The bill makes a number of changes to the SFP that  
          are also contained in SB 114, with the exception of three  
          provisions: 


          Seismic funds:  The bill transfers any unencumbered balance from  








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          Proposition 1D authorized to be used for seismic purposes to the  
          2016 bond.  It is unclear why this is necessary.  Proposition 1D  
          authorizes up to 10.5% of the New Construction funds to be used  
          for seismic; it is not a standalone program.  The SAB can  
          redirect the funds for New Construction purposes anytime.  


          Emergency facility needs:  The bond act in this bill requires  
          the SAB to give the "highest priority" for funding for emergency  
          facility projects consistent with those funded by the Emergency  
          Repair Program pursuant to the Williams v. California  
          settlement.  The SFP, under EC Section 17075.10, authorizes  
          funding for facility hardship projects that pose health and  
          safety risks to pupils.  Funds approved as facility hardship are  
          not charged to a school district's eligibility for New  
                                                      Construction or Modernization.  The SAB is currently placing  
          facility hardship projects at the top of the unfunded approvals  
          list.  If enacted, it will create confusion in the  
          implementation of the SFP.  It is also unclear what "highest  
          priority" means.  Projects are funded as applications are  
          submitted as long as there is bond authority.  Giving priority  
          makes sense when there is lack of funding.  It is not clear how  
          priority is given when funding is available.  Staff recommends  
          urging the author to remove this provision or amend the facility  
          hardship provision to incorporate repairs in the ERP that may  
          not be covered under facility hardship.               


          School Building Finance Committee:  The bond act in the bill  
          expresses the intent of the Legislature that the State School  
          Building Finance Committee consider a pay-as-you-go model of  
          financing that increases actual money for construction by  
          issuing short-term debt with faster repayment plans to lessen  
          the amount of state funds spent on interest and reduce overall  
          state debt.  The author may be urging the School Building  
          Finance Committee to consider issuing shorter-term bonds, but it  
          is unclear.  

          Other SFP changes.  Program changes include requiring school  








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          districts to provide information to establish a statewide  
          inventory, requiring state agencies to create an interagency  
          plan to streamline the process, authorizing New Construction and  
          Modernization apportionments to be used for seismic projects,  
          requiring the OPSC to develop regulations that will provide  
          school districts flexibility in designing school facilities.

          The bond act in this bill requires the SAB to give priority for  
          funding to school districts that demonstrate participation in a  
          community-based effort to coordinate educational, developmental,  
          family, health, and other comprehensive services through all of  
          the following:

          1)Institutionalized structures for cross-agency collaboration,  
            including, but not limited to, memoranda of understanding to  
            coordinate activities and services.

          2)Agreements for joint use and operations of school facilities  
            that provide for extended hours of use for pupils, families,  
            and the community, integration of libraries, early childhood  
            education, child care centers, senior centers, outdoor  
            recreation or environmental education, arts education, and  
            career technical education and adult education offerings for  
            pupils and community members.

          3)Participation in the State Community Schools Network.

          4)Participation in technical assistance and training, including  
            professional development, for full-service community schools.

          5)Certification that the district's school facilities master  
            plan is consistent with the regional sustainable communities  
            strategy established pursuant to Section 65080 of the  
            Government Code.

          While the goal of encouraging school districts to work in a  
          larger context with the community is a good goal, the Committee  
          may wish to consider whether these requirements may be  
          challenging to meet.  It is also unclear what "assigning  








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          priority" means.  Projects are funded as applications are  
          submitted as long as there is bond authority. Giving priority  
          makes sense when there is lack of funding.  It is not clear how  
          priority is given when funding is available.  By enacting this  
          provision in the bond act rather than in the SFP, if and when  
          funding is limited, the SAB may not be able to prioritize health  
          and safety projects without going back to the voters.  Staff  
          recommends amending the bill to provide additional funds for  
          school districts that meet all of the conditions, rather than  
          making it a priority for funding.    

          Governor's Budget.  The Governor has indicated concerns  
          regarding the use of bonds to fund school facilities and  
          questions whether the State should have any role in student  
          housing.  The Governor has also highlighted problems he sees  
          with the SFP, including the processes for plan approvals and  
          funding.   The 2015-16 budget suggests increasing local  
          contribution while minimizing state participation.   
          Specifically, the Governor proposes to provide limited state  
          support for districts that may not be able to generate local  
          bond dollars due to low assessed valuations.  The proposal  
          does not specify the threshold for eligibility, level of  
          funding or source of funding (presumably General Fund).  The  
          Governor also proposes to lift Proposition 39 rate caps to  
          increase funds generated through local bonds, adjust  
          developer fees, and authorize districts to use funds set  
          aside for maintenance of facilities for construction and  
          modernization.  Some of the provisions in this bill,  
          including the provisions to streamline the process and  
          establish a facilities inventory, attempt to address some of  
          the concerns of the Governor.    


          Related legislation.  AB 1088 (O'Donnell), also scheduled for  
          the April 29, 2015 hearing, places a Kindergarten-University  
          Public Education Facilities Bond Act on an unspecified statewide  
          general election, to be operative only if approved by voters at  
          the unspecified statewide general election.   









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          AB 1433 (Gray), pending in the Assembly Higher Education  
          Committee, places the Recommitment to Higher Education Bond Act  
          of 2016 with unspecified amounts for higher education facilities  
          on the November 8, 2016 statewide general election.  


          SB 114 (Liu), pending in the Senate Appropriations Committee,  
          would place the Kindergarten Through Grade 12 Public Education  
          Facilities Bond Act of 2016 with unspecified dollar amounts on  
          the November 8, 2016 ballot.


          Prior legislation.  AB 2235 (Buchanan), would have authorized  
          the Kindergarten-University Public Education Facilities Bond Act  
          of 2014 to provide for the issuance of $4.3 billion in G.O.  
          bonds for construction and modernization of school facilities,  
          to become effective only if approved by voters at the November  
          4, 2014, statewide general election.  The bill also made changes  
          to the SFP.  The bill was held on the Senate Floor by the  
          author.  


          AB 41 (Buchanan), introduced in 2013, expresses the  
          Legislature's intent to place a Kindergarten-University  
          facilities bond on the 2014 ballot.  The bill was held by the  
          author in the Assembly Education Committee.


          SB 45 (Corbett), introduced in 2013, expresses the Legislature's  
          intent to place a Kindergarten-University facilities bond on the  
          next statewide general election.  The bill was held by the  
          author in the Senate Rules Committee.


          SB 301 (Liu), introduced in 2013, expresses the Legislature's  
          intent to place a Kindergarten-University facilities bond on the  
          2014 ballot.  The bill was held by the author in the Senate  
          Rules Committee.








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          AB 331 (Brownley), introduced in 2011, expressed the  
          Legislature's intent to place a Kindergarten-University  
          facilities bond on the 2012 ballot.  The bill was held in the  
          Assembly Appropriations Committee in 2012.


          AB 822 (Block), introduced in 2011, would have placed a higher  
          education facilities bond on the November 2012 ballot.  The bill  
          was held in the Assembly Appropriations Committee in 2012.  


          AB 220 (Brownley), introduced in 2009, would have placed a $6.1  
          billion Kindergarten-University facilities bond on the November  
          2010 ballot.  The bill was held in the Senate Appropriations  
          Committee. 


          SB 271 (Ducheny), introduced in 2009, would have placed an $8.6  
          billion higher education facilities bond on the November 2010  
          ballot.  The bill was held in the Senate Appropriations  
          Committee.


          Arguments in support.  The author states, "Historically under  
          the school facilities program, the state has paid 50 percent  
          of the cost of new school facilities, 80 percent of the cost  
          of modernizing existing facilities, and 100 percent of the  
          cost of either new facilities or modernization in "hardship  
          cases."  Presently, there is less than $300 million in  
          remaining bond authority and the State Allocation Board is  
          not accepting any applications for school facilities  
          projects.  This situation is forcing school districts to  
          either additionally finance the state's share of school  
          construction or not be able to meet the growing need for new  
          schools and modernizing aging school facilities."










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          REGISTERED SUPPORT / OPPOSITION:




          Support


          County School Facilities Consortium




          Opposition


          None on file




          Analysis Prepared by:Sophia Kwong Kim / ED. / (916) 319-2087