BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | AB 1064| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: AB 1064 Author: Roger Hernández (D) Amended: 7/16/15 in Senate Vote: 21 SENATE EDUCATION COMMITTEE: 7-0, 7/1/15 AYES: Liu, Runner, Leyva, Mendoza, Monning, Pan, Vidak NO VOTE RECORDED: Block, Hancock SENATE APPROPRIATIONS COMMITTEE: 7-0, 7/13/15 AYES: Lara, Bates, Beall, Hill, Leyva, Mendoza, Nielsen ASSEMBLY FLOOR: 78-0, 5/14/15 (Consent) - See last page for vote SUBJECT: Education finance: indirect cost rates SOURCE: Los Angeles County Office of Education DIGEST: 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. ANALYSIS: Existing law: 1)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 AB 1064 Page 2 (LEAs) unless a lower rate is required by state or federal law. 2)Defines the following: a) 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. b) 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 These provisions become inoperative and are repealed as of January 1, 2016, unless extended by statute enacted before that date. 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. Comments 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 10%, and it 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. 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. Indirect cost rates. The United States Department of Education AB 1064 Page 3 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 5% of their grant amount for administration. FISCAL EFFECT: Appropriation: No Fiscal Com.:YesLocal: No 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. SUPPORT: (Verified7/30/15) Los Angeles County Office of Education (source) Antelope Valley Union School District Association of California School Administrators Baldwin Park Unified School District Downey Unified School District Lynwood Unified School District Palmdale School District Santa Clara County Office of Education Small School Districts' Association OPPOSITION: (Verified7/30/15) None received ASSEMBLY FLOOR: 78-0, 5/14/15 AB 1064 Page 4 AYES: Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang, Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Harper, Roger Hernández, Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Perea, Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams, Wood, Atkins NO VOTE RECORDED: Linder, Medina Prepared by:Lenin Del Castillo / ED. / (916) 651-4105 8/13/15 13:38:27 **** END ****