BILL NUMBER: AB 625 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY APRIL 16, 2015
AMENDED IN ASSEMBLY MARCH 26, 2015
INTRODUCED BY Assembly Member Bonta
FEBRUARY 24, 2015
An act to amend Section 42127.3 41320.1
of the Education Code, relating to schools.
school finance.
LEGISLATIVE COUNSEL'S DIGEST
AB 625, as amended, Bonta. School finance: school
district budgets. emergency apportionments: compliance
audits.
Existing law authorizes the governing board of a school district
to request an emergency apportionment through the Superintendent of
Public Instruction if the governing board of the school district
determines during a fiscal year that its revenues are less than the
amount necessary to meet its current year expenditure obligations.
Under existing law, if a school district accepts an emergency
apportionment, that acceptance constitutes agreement by the school
district to numerous conditions, among which is an agreement that the
Controller, or his or her designee, shall conduct an annual audit of
the books and accounts of the school district, as specified. This
provision requires these audits to continue until the Controller
determines, in consultation with the Superintendent, that the school
district is financially solvent, but in no event earlier than one
year following the implementation of the school district's fiscal
plan or later than the time the apportionment is repaid, including
interest.
This bill would require the Controller and the Superintendent, or
their respective designees, to meet before each audit undertaken
under this provision, develop an audit plan, and coordinate the
audit.
(1) Existing law requires a school district to adopt a budget for
the subsequent fiscal year, as specified. Existing law requires the
county superintendent of schools to examine the adopted budget, make
certain determinations related to the adopted budget, and approve,
conditionally approve, or disapprove the adopted budget for each
school district, as specified.
If the adopted budget is conditionally approved or disapproved,
existing law specifies a process for revising the budget. If the
county superintendent of schools disapproves the revised budget,
existing law requires him or her to call for the formation of a
budget review committee, as specified. Existing law requires the
budget review committee to review the proposed budget of the school
district and the underlying fiscal policies of the school district
and to transmit to the Superintendent of Public Instruction, the
county superintendent of schools, and the governing board of the
school district either a recommendation that the school district
budget be approved or a report disapproving the school district
budget and setting forth recommendations for revisions to the school
district budget, as specified.
If the budget review committee disapproves the school district
budget, existing law authorizes the governing board of the school
district to submit a response to the Superintendent, as specified,
and, based upon the recommendations of the budget review committee
and any response to those recommendations provided by the governing
board of the school district, requires the Superintendent to either
approve or disapprove the budget. If the Superintendent disapproves
the budget, existing law requires the Superintendent to notify the
governing board of the school district in writing of the reasons for
that disapproval and requires the county superintendent of schools to
take certain actions as necessary, including, among others,
determining whether there are any financial problem areas and
employing, subject to approval by the Superintendent, a certified
public accounting firm to investigate financial problem areas.
This bill would add appointing a fiscal adviser to perform
specified duties of the county superintendent of schools to the list
of actions a county superintendent of schools is required to take as
necessary. To the extent this bill would impose additional duties on
a county superintendent of schools, the bill would impose a
state-mandated local program. The bill would also make various
nonsubstantive changes.
(2)The California Constitution requires the state to reimburse
local agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
This bill would provide that, if the Commission on State Mandates
determines that the bill contains costs mandated by the state,
reimbursement for those costs shall be made pursuant to these
statutory provisions.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: yes no .
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 41320.1 of the
Education Code is amended to read:
41320.1. Acceptance by the school district of the apportionments
made pursuant to Section 41320 constitutes the agreement by the
school district to all of the following conditions:
(a) The Superintendent shall appoint a trustee who has recognized
expertise in management and finance and may employ, on a short-term
basis, staff necessary to assist the trustee, including, but not
limited to, certified public accountants, as follows:
(1) The expenses incurred by the trustee and necessary staff shall
be borne by the school district.
(2) The Superintendent shall establish the terms and conditions of
the employment, including the remuneration of the trustee. The
trustee shall serve at the pleasure of, and report directly to, the
Superintendent.
(3) The trustee, and necessary staff, shall serve until the school
district has adequate fiscal systems and controls in place, the
Superintendent has determined that the school district's future
compliance with the fiscal plan approved for the school district
under Section 41320 is probable, and the Superintendent decides to
terminate the trustee's appointment, but in no event, for less than
three years. The Superintendent shall notify the county
superintendent of schools, the Legislature, the Department of
Finance, and the Controller no less than 60 days before the time that
the Superintendent expects these conditions to be met.
(4) Before the school district repays the loan, including
interest, the recipient of the loan shall select an auditor from a
list established by the Superintendent and the Controller to conduct
an audit of its fiscal systems. If the fiscal systems are deemed to
be inadequate, the Superintendent may retain the trustee until the
deficiencies are corrected. The cost of this audit and any additional
cost of the trustee shall be borne by the school district.
(5) Notwithstanding any other law, all reports submitted to the
trustee are public records.
(6) To facilitate the appointment of the trustee and the
employment of necessary staff, for purposes of this section, the
Superintendent is exempt from the requirements of Article 6
(commencing with Section 999) of Chapter 6 of Division 4 of the
Military and Veterans Code and Part 2 (commencing with Section 10100)
of Division 2 of the Public Contract Code.
(7) Notwithstanding any other law, the Superintendent may appoint
an employee of the department to act as trustee for up to the
duration of the trusteeship. The salary and benefits of that employee
shall be established by the Superintendent and paid by the school
district. During the time of appointment, the employee is an employee
of the school district, but shall remain in the same retirement
system under the same plan as if the employee had remained in the
department. Upon the expiration or termination of the appointment,
the employee shall have the right to return to his or her former
position, or to a position at substantially the same level as that
position, with the department. The time served in the appointment
shall be counted for all purposes as if the employee had served that
time in his or her former position with the department.
(b) (1) The trustee appointed by the Superintendent shall monitor
and review the operation of the school district. During the period of
his or her service, the trustee may stay or rescind an action of the
governing board of the school district that, in the judgment of the
trustee, may affect the financial condition of the school district.
(2) After the trustee's period of service, and until the loan is
repaid, the county superintendent of schools that has jurisdiction
over the school district may stay or rescind an action of the
governing board of the school district that, in his or her judgment,
may affect the financial condition of the school district. The county
superintendent of schools shall notify the Superintendent, within
five business days, if he or she stays or rescinds an action of the
governing board of the school district. The notice shall include, but
not be limited to, both of the following:
(A) A description of the governing board of the school district's
intended action and its financial implications.
(B) The rationale and findings that support the county
superintendent of school's decision to stay or rescind the action of
the governing board of the school district.
(3) If the Superintendent is notified by the county superintendent
of schools pursuant to paragraph (2), the Superintendent shall
report to the Legislature, on or before December 30 of every year,
whether the school district is complying with the fiscal plan
approved for the school district.
(4) The Superintendent may establish timelines and prescribe
formats for reports and other materials to be used by the trustee to
monitor and review the operations of the school district. The trustee
shall approve or reject all reports and other materials required
from the school district as a condition of receiving the
apportionment. The Superintendent, upon the recommendation of the
trustee, may reduce an apportionment to the school district in an
amount up to two hundred dollars ($200) per day for each late or
unacceptable report or other material required under this part, and
shall report to the Legislature a failure of the school district to
comply with the requirements of this section. If the Superintendent
determines, at any time, that the fiscal plan approved for the school
district under Section 41320 is unsatisfactory, he or she may modify
the plan as necessary, and the school district shall comply with the
plan as modified.
(c) At the request of the Superintendent, the Controller shall
transfer to the department, from an apportionment to which the school
district would otherwise have been entitled pursuant to Section
42238, the amount necessary to pay the expenses incurred by the
trustee and associated costs incurred by the county superintendent of
schools.
(d) For the fiscal year in which the apportionments are disbursed
and every year thereafter, the Controller, or his or her designee,
shall cause an audit to be conducted of the books and accounts of the
school district, in lieu of the audit required by Section 41020. At
the Controller's discretion, the audit may be conducted by the
Controller, his or her designee, or an auditor selected by the school
district and approved by the Controller. The costs of these audits
shall be borne by the school district. These audits shall be required
until the Controller determines, in consultation with the
Superintendent, that the school district is financially solvent, but
in no event earlier than one year following the implementation of the
plan or later than the time the apportionment made is repaid,
including interest. The Controller and the Superintendent, or
their respective designees, shall meet before each audit,
develop an audit plan, and coordinate the audit. In addition,
the Controller shall conduct quality control reviews pursuant to
subdivision (c) of Section 14504.2.
(e) For purposes of errors and omissions liability insurance
policies, the trustee appointed pursuant to this section is an
employee of the local educational agency to which he or she is
assigned. For purposes of workers' compensation benefits, the trustee
is an employee of the local educational agency to which he or she is
assigned, except that a trustee appointed pursuant to paragraph (7)
of subdivision (a) is an employee of the department for those
purposes.
(f) Except for an individual appointed by the Superintendent as
trustee pursuant to paragraph (7) of subdivision (a), the
state-appointed trustee is a member of the State Teachers' Retirement
System, if qualified, for the period of service as trustee, unless
the trustee elects in writing not to become a member. A person who is
a member or retirant of the State Teachers' Retirement System at the
time of appointment shall continue to be a member or retirant of the
system for the duration of the appointment. If the trustee chooses
to become a member or is already a member, the trustee shall be
placed on the payroll of the school district for the purpose of
providing appropriate contributions to the system. The Superintendent
may also require that an individual appointed as trustee pursuant to
paragraph (7) of subdivision (a) be placed on the payroll of the
school district for purposes of remuneration, other benefits, and
payroll deductions. For purposes of workers' compensation benefits,
the state-appointed trustee is deemed an employee of the local
educational agency to which he or she is assigned, except that a
trustee who is appointed pursuant to paragraph (7) of subdivision (a)
is an employee of the department for those purposes.
SECTION 1. Section 42127.3 of the Education Code
is amended to read:
42127.3. (a) If the budget review committee established pursuant
to Sections 42127.1 and 42127.2 recommends approval of the school
district budget, the county superintendent of schools shall accept
the recommendation of the budget review committee and approve the
budget.
(b) If the budget review committee established pursuant to
Sections 42127.1 and 42127.2 disapproves the school district budget,
the governing board of the school district, not later than five
working days after receipt of the report described in paragraph (2)
of subdivision (b) of Section 42127.2, may submit a response to the
Superintendent, including any revisions to the adopted final budget
and any other proposed actions to be taken as a result of the
recommendations of the budget review committee. Based upon the
recommendations of the budget review committee and any response to
those recommendations provided by the governing board of the school
district, the Superintendent shall either approve or disapprove the
budget. If the Superintendent disapproves the budget, he or she shall
notify the governing board of the school district in writing of the
reasons for that disapproval and, until the county superintendent of
schools certifies the school district's first interim report pursuant
to Section 42131, the county superintendent of schools shall do the
following as necessary:
(1) Not later than November 30, develop and adopt, in consultation
with the Superintendent and the governing board of the school
district, a fiscal plan and budget that will govern the school
district and will allow the school district to meet its financial
obligations, both in the current fiscal year and with regard to the
school district's multiyear financial commitments. The Superintendent
may extend the date by which the county superintendent of schools is
required to develop and adopt a fiscal plan and budget. The
governing board of the school district shall govern the operation of
the school district for the current fiscal year in accordance with
that adopted budget.
(2) Cancel purchase orders, prohibit the issuance of nonsalary
warrants, and otherwise stay or rescind any action that is
inconsistent with the budget adopted pursuant to paragraph (1). The
county superintendent of schools shall inform the governing board of
the school district in writing of his or her justification for any
exercise of authority under this paragraph.
(3) Monitor and review the operation of the school district.
(4) Appoint a fiscal adviser to perform any or all of the duties
of the county superintendent of schools prescribed by this section.
(5) Determine the need for additional staff and may employ,
subject to approval by the Superintendent, short-term analytical
assistance or expertise to validate financial information if the
school district staff does not have the expertise or staff.
(6) Require the school district to encumber all contracts and
other obligations, to prepare appropriate cashflow analyses and
monthly or quarterly budget revisions, and to appropriately record
all receivables and payables.
(7) Determine whether there are any financial problem areas and
may employ, subject to approval by the Superintendent, a certified
public accounting firm to investigate financial problem areas.
(8) Withhold compensation of the members of the governing board of
the school district and the superintendent of the school district
for failure to provide requested financial information. A forfeiture
may be appealed to the Superintendent pursuant to subdivision (b) of
Section 42127.6.
(c) If, during the selection of the budget review committee or
during the committee's review of the budget, an agreement is reached
between the governing board of the school district and the county
superintendent of schools, and the school district revises its budget
to comply with this agreement, the county superintendent of schools
shall approve the school district budget and the budget review
committee selection, or its review of the budget, shall be canceled.
(d) The school district shall pay 75 percent and the county office
of education shall pay 25 percent of the actual administrative
expenses incurred pursuant to subdivision (b), or costs associated
with improving the school district's financial management practices.
The Superintendent shall develop, and distribute to affected school
districts and county offices of education, advisory guidelines
regarding the appropriate amount of any fees charged pursuant to this
subdivision.
(e) This section shall not be construed to authorize the county
superintendent of schools to abrogate any provision of a collective
bargaining agreement that was entered into by a school district
before the date upon which the county superintendent of schools
disapproved the budget of the school district pursuant to subdivision
(b).
SEC. 2. If the Commission on State Mandates
determines that this act contains costs mandated by the state,
reimbursement to local agencies and school districts for those costs
shall be made pursuant to Part 7 (commencing with Section 17500) of
Division 4 of Title 2 of the Government Code.