BILL ANALYSIS Ó
SENATE COMMITTEE ON EDUCATION
Senator Carol Liu, Chair
2015 - 2016 Regular
Bill No: AB 1064
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|Author: |Roger Hernández |
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|Version: |March 26, 2015 Hearing |
| |Date: July 1, 2015 |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant:|Lenin Del Castillo |
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Subject: Education finance: indirect cost rates
SUMMARY
This bill removes the January 1, 2016 sunset date that requires
the California Department of Education (CDE) and any other state
agency to allow an indirect cost rate established by the CDE for
state or federal grant programs unless federal or state law
requires a lower rate.
AB 1064 (Roger Hernández) Page 2
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BACKGROUND
Existing law requires the CDE and any other state agency to
allow an indirect cost rate established by the CDE for state or
federal grant programs administered by local educational
agencies (LEAs) unless a lower rate is required by state or
federal law.
Existing law further defines the following:
1)"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,
purchasing, and centralized data processing."
2)"Indirect cost rate" to mean the rate established by the CDE
for each LEA.
These provisions become inoperative and are repealed as of
January 1, 2016, unless extended by statute enacted before that
date.
ANALYSIS
This bill repeals the January 1, 2016 sunset date that 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.
AB 1064 (Roger Hernández) Page 3
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STAFF COMMENTS
1)Need for the bill. According to the author's office, the CDE
determines the indirect cost rate for each school district,
county office of education, and other educational agencies.
This indirect cost rate is typically less than ten percent,
and it covers such general operating costs as accounting,
budgeting, personnel services, purchasing, payroll and data
processing. However, local educational agencies (LEAs) cannot
cover their operating costs when the indirect rate allowed for
certain grants and allocations are less than the California
Department of Education (CDE) determined rate. The author's
office indicates that 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.
2)Indirect cost rates. 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 LEAs. Indirect costs are
agencywide 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.
Federal and state law often delineate the amount of indirect
costs or administration either the state or LEAs can utilize
from a grant allocation. For example, under the state After
School Education and Safety program, school districts are
limited to expending no more than five percent of their grant
amount for administration.
3)Fiscal impact. According to the Assembly Appropriations
Committee, there would be no direct state fiscal impact since
any potential funding distribution would occur within a
program and a set amount of grant funding already dedicated to
that program.
4)Related and prior legislation. AB 2435 (Hernández, Chapter 587,
Statutes of 2012) established the requirement for CDE to allow
the full indirect cost rate for state or federal programs
administered by LEAs.
AB 1064 (Roger Hernández) Page 4
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SUPPORT
Antelope Valley Union School District
Association of California School Administrators
Baldwin Park Unified School District
Downey Unified School District
Los Angeles County Office of Education (sponsor)
Lynwood Unified School District
Palmdale School District
Santa Clara County Office of Education
Small School Districts' Association
OPPOSITION
None received.
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