BILL ANALYSIS Ó
AB 531
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Date of Hearing: May 13, 2015
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Jimmy Gomez, Chair
AB
531 (O'Donnell) - As Amended April 21, 2015
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Urgency: No State Mandated Local Program: YesReimbursable:
Yes
SUMMARY:
This bill provides that the limitation on the amount that school
districts may set aside in an assigned or unassigned ending fund
balance in the fiscal year immediately after a fiscal year in
AB 531
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which a transfer is made into the Public School System
Stabilization Account (PSSSA) does not apply to monies in a
committed reserve. Specifically, this bill:
1)Defines "committed reserve" to mean monies set aside for a
designated future purpose by a majority vote of the district
governing board.
2)Clarifies that district governing boards retain the ability to
redirect monies in a committed reserve to an alternative
purpose in any subsequent year.
FISCAL EFFECT:
No net Proposition 98/GF impact. This bill appears to be largely
technical and clarifying. To the extent districts accumulate
higher reserve levels at the local level, as currently
permitted; this could result in less Proposition 98/GF pressure
to assist with future school district budget deficiencies.
COMMENTS:
1)Background. Proposition 2 (Rainy Day Fund), approved by the
voters in November 2014, placed formulas into the State
Constitution that determine the minimum amount of debt
payments and budget reserve deposits to be made in a fiscal
year. Proposition 2 also established the PSSSA (also known as
the Proposition 98 reserve account) which is funded by a
transfer of capital gains-related tax revenues in excess of 8
percent of general fund revenues. Funds are deposited in the
PSSSA in years when the state is experiencing strong growth in
state revenue, among other factors.
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SB 858 (Committee on Budget), Chapter 32, Statutes of 2014
included a provision that caps districts' reserves in the year
following a deposit into the PSSSA. Specifically, the cap
prohibit districts from adopting a budget that contains total
assigned and unassigned reserves of more than twice the
applicable state minimums for unassigned reserves. The minimum
reserve requirement is 3% of total expenditures for most
districts. For Los Angeles Unified, the minimum reserve is 1%
of total expenditures and the cap on reserves is three times
the minimum.
2)Purpose. Some school advocates, including California School
Boards Association, have expressed concern that the cap on
reserves prevents districts from setting aside prudent
reserves to guard against an economic downturn and/or a
reduction in state funding for schools. Further, they argue
the reserve cap prevents districts from setting aside monies
for a specific purpose in future years. For example,
districts may need to accumulate monies over two or more years
to purchase technology, instructional materials, or deferred
maintenance.
According to the author, this bill specifies that "committed
reserves" are not subject to the cap and defines committed
reserves as monies set aside for a future purpose by a
majority vote of the district governing board.
Committee staff notes this bill appears to be largely
declaratory of existing law. According to the Legislative
Analyst's Office (LAO) January report, Analysis of School
District Reserves, "?other components of district reserves,
including nonspendable, restricted, and committed reserves, do
not count toward the caps." Further, the LAO offers the option
of redesignating assigned reserves as committed reserves to
avoid the cap restrictions.
AB 531
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Analysis Prepared by:Misty Feusahrens / APPR. / (916)
319-2081