BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                    AB 1064


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          Date of Hearing:  April 22, 2015


                           ASSEMBLY COMMITTEE ON EDUCATION


                              Patrick O'Donnell, Chair


          AB 1064  
          (Roger Hernández) - As Amended March 26, 2015


          SUBJECT:  Education finance:  indirect cost rates


          SUMMARY:  Removes the January 1, 2016 sunset date from  
          provisions of law that require the California Department of  
          Education (CDE) and any other state agency to allow the full  
          indirect cost rate established by the CDE for state or federal  
          grant programs administered by local education agencies unless a  
          lower rate is required by other state or federal law.  


          EXISTING LAW:  


          1)Requires the CDE and any other state agency to allow the full  
            indirect cost rate established by the CDE for state or federal  
            grant programs administered by local education agencies unless  
            a lower rate is required by other state or federal law.  


          2)Defines "indirect cost" to mean "the agencywide, general  
            management cost of the activities for the direction and  
            control of the agency as a whole [which] include, but are not  
            necessarily limited to, administrative activities necessary  
            for the general operation of the agency, such as accounting,  
            budgeting, payroll preparation, personnel services,  








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            purchasing, and centralized data processing."


          3)Defines "indirect cost rate" to mean the rate established by  
            the CDE for each local education agency.


          4)Becomes inoperative and is repealed January 1, 2016 unless  
            extended by statute enacted before that date.


          FISCAL EFFECT:  Unknown


          COMMENTS:  The United States Department of Education has  
          approved a delegation agreement with the CDE that authorizes the  
          CDE, as the recognized agency to establish indirect cost rates  
          for the state's local educational agencies (LEAs).  Indirect  
          costs are agency-wide general management costs (i.e., activities  
          for the direction and control of the agency as a whole).   
          General management costs consist of administrative activities  
          necessary for the general operation of the agency, such as  
          accounting, budgeting, payroll preparation, personnel services,  
          purchasing, and centralized data processing.


           


          This bill requires the CDE, or any other state agency, that  
          administers a grant or allocation of federal or state funds to a  
          school district, to allow an indirect cost rate that is not less  
          than the indirect cost rate established by CDE for each  
          district, unless federal or state law requires a lower cost  
          rate.  












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          Need for this bill.  The CDE determines the indirect cost rate  
          for each LEA.  This indirect cost rate is typically less than  
          10%, and this rate covers such general operating costs as  
          accounting, budgeting, personnel services, purchasing, payroll  
          and data processing.  However, LEAs cannot cover their operating  
          costs when the indirect rate allowed for certain grants and  
          allocations are less than the CDE determined rate.  If LEAs  
          cannot cover these operating costs, they cannot operate programs  
          that provide important services for students and families  
          without putting the LEA at financial risk.  According to the  
          author's office, statutory protections are necessary to ensure  
          that, unless otherwise provided in state or federal law, the CDE  
          allows LEAs to use the full indirect rate established for them. 





          REGISTERED SUPPORT / OPPOSITION:




          Support


          Antelope Valley Union High School District


          Claremont Unified School District 


          La Canada Unified School District


          Los Angeles County Office of Education










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          Lynwood Unified School District


          San Gabriel Unified School District


          Torrance Unified School District







          Opposition


          None received




          Analysis Prepared by:Rick Pratt / ED. / (916) 319-2087