BILL ANALYSIS                                                                                                                                                                                                    Ó



          SENATE COMMITTEE ON APPROPRIATIONS
                             Senator Ricardo Lara, Chair
                            2015 - 2016  Regular  Session

          AB 531 (O'Donnell) - School finance: budget calculations.
          
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          |Version: June 9, 2015           |Policy Vote: ED. 8 - 0          |
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          |Urgency: No                     |Mandate: Yes                    |
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          |Hearing Date: July 6, 2015      |Consultant: Jillian Kissee      |
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          This bill does not meet the criteria for referral to the  
          Suspense File.


          Bill  
          Summary:  This bill provides that the cap on school district  
          reserves in a fiscal year immediately after a fiscal year in  
          which a transfer is made into the Public School System  
          Stabilization Account does not apply to monies in a committed  
          fund balance.


          Fiscal  
          Impact:  
           There is no anticipated fiscal impact as the provisions  
            included in this bill appear to be declaratory of existing  
            law.  The State Department of Education indicates that costs  
            related to providing technical assistance to the field on this  
            bill's provisions would be absorbable.


          Background:  As part of the 2014-15 Budget Act, the state enacted a new  
          requirement to cap school district reserves in years following a  







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          deposit in the state school reserve established by Proposition 2  
          of 2014.  The legislation also created a separate requirement  
          for districts to disclose certain information about their  
          reserves each year.  Specifically, existing law requires that in  
          a fiscal year immediately after a fiscal year in which a  
          transfer is made into the Public School System Stabilization  
          Account, a school district budget that is adopted or revised  
          shall not contain a combined assigned or unassigned ending fund  
          balance that is in excess of the following:

          1)For school districts with fewer than 400,000 units of average  
            daily attendance (ADA), the sum of the school district's  
            applicable minimum recommended reserve for economic  
            uncertainties adopted by the State Board of Education, as  
            specified, multiplied by two.

          2)For school districts with more than 400,000 units of ADA, the  
            sum of the school district's applicable minimum recommended  
            reserve for economic uncertainties adopted by the State Board  
            of Education, as specified, multiplied by three.  

          Existing law authorizes a county superintendent of schools to  
          grant a school district under its jurisdiction an exemption from  
          the cap for up to two consecutive fiscal years within a  
          three-year period if the school district, among other things,  
          provides documentation indicating that extraordinary fiscal  
          circumstances, including, but not limited to, multi-year  
          infrastructure or technology projects, substantiate the need for  
          a combined assigned or unassigned ending fund balance that is in  
          excess of the minimum recommended reserve for economic  
          uncertainties.  (Education Code § 42127.01)


          Proposed Law:  
            This bill:

          1)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 which a transfer is made into the Public School System  
            Stabilization Account does not apply to monies in a committed  
            fund balance, as defined in the California School Accounting  
            Manual.  









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          2)Provides that school district governing boards retain the  
            ability to redirect monies in a committed fund balance to an  
            alternative purpose in any subsequent year.


          Related  
          Legislation:  SB 774 (Fuller) repeals the existing statutory cap  
          on the amount of fiscal reserves that a school district is  
          allowed to maintain.  This bill is pending before the Senate  
          Education Committee.

          AB 1048 (Baker), similar to SB 774, proposes to repeal the  
          statutory cap on the amount of fiscal reserves that a school  
          district would be allowed to maintain under specified  
          conditions.  This bill failed passage in the Assembly Education  
          Committee on May 13, 2015.

          AB 1318 (Gray) proposes to modify the calculation of the  
          statutory cap on fiscal reserves.  This bill is pending before  
          the Assembly Education Committee.

          Staff Comments: This bill is flagged as potentially imposing a  
          new reimbursable mandate on school districts.  However, since  
          this bill is consistent with current law, it is unlikely that  
          the Commission on State Mandates would determine this bill to  
          impose a higher level of service.  

          According a recent Legislative Analyst's Office report, school  
          districts are currently required to categorize monies in their  
          reserves.  The categories reflect varying levels of discretion  
          that districts have in spending their reserves.  School  
          districts can use the committed category to indicate amounts  
          that have been earmarked through an action by the school board.   
          The assigned category indicates amounts that have been earmarked  
          by a district official.  The unassigned category indicates all  
          amounts not designated for a specific purpose.

          Existing law specifies that school district fund balances must  
          not have a combined assigned or unassigned ending fund balance  
          that is in excess of specified amounts.  This bill provides that  
          the caps triggered by Proposition 2 deposits not apply to monies  
          in a committed fund balance.  Since the state accounting manual  
          provides a district category for a committed fund balance, this  








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          bill appears to be declaratory of existing law.  In its report,  
          the Legislative Analyst's Office indicates that districts that  
          classify some part of their reserves as committed, assigned, or  
          unassigned may later reclassify those amounts if desired.  This  
          interpretation of the law is consistent with the provisions of  
          this bill.


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