BILL ANALYSIS Ó AB 1088 Page 1 Date of Hearing: April 29, 2015 ASSEMBLY COMMITTEE ON EDUCATION Patrick O'Donnell, Chair AB 1088 (O'Donnell) - As Amended April 22, 2015 SUBJECT: Education facilities: bond act: Greene Act SUMMARY: Places the Kindergarten-University Public Education Facilities Bond Act on an unspecified statewide general election, to be operative only if approved by voters at the unspecified statewide general election. Makes changes to the School Facility Program (SFP). Specifically, this bill: 1)Establishes the ___ State School Facilities Fund and authorizes the State Allocation Board (SAB) to apportion funds to school districts from funds transferred to the ___ State School Facilities Fund from any source for the purposes specified in the SFP. 2)Authorizes an unspecified amount of general obligation (G.O.) school facilities bond to be placed on an unspecified statewide general election and specifies the funds to be allocated as follows: a) An unspecified amount for kindergarten through grade 12 (K-12) allocated to the following programs: i) New Construction; ii) Modernization; and, AB 1088 Page 2 iii) Charter School Facilities Program. b) An unspecified amount for higher education facilities allocated to the following: i) California Community Colleges (CCC); ii) University of California (UC) and the Hastings College of Law; and, iii) California State University (CSU). 3)Establishes the ___ California Community College Capital Outlay Bond Fund and authorizes the deposit of funds from the proceeds of bonds issued and sold pursuant to this bill to be deposited into the fund for the purposes of construction; renovation and reconstruction of CCC facilities; site acquisition; the equipping of new, renovated or reconstructed facilities; and to provide funds for the payment of preconstruction costs, including, but not limited to, preliminary plans and working drawings for CCC facilities. 4)Establishes the ___ University Capital Outlay Bond Fund and authorizes the deposit of funds from the proceeds of bonds issued and sold pursuant to this bill to be deposited into the fund for the purposes of construction; renovation and reconstruction of facilities; site acquisition; the equipping of new, renovated or reconstructed facilities; and to provide funds for the payment of preconstruction costs, including, but not limited to, preliminary plans and working drawings for facilities of the UC, CSU, and Hastings College of Law. 5)Makes the following changes to the SFP: a) Requires the SAB to convene a workgroup comprised of representatives of the Office of Public School Construction (OPSC), the Department of Finance (DOF), the Division of State Architect (DSA), the California Department of Education (CDE), other state agencies, and interested stakeholders to recommend changes to the SFP that will shorten and streamline the process for the construction and AB 1088 Page 3 modernization of school facilities. Requires the SAB to submit a report with recommendations to the Legislature by September 1, 2016. b) Strikes an obsolete provision requiring the SAB to conduct an evaluation on the costs of new construction and modernization of small high schools. c) Authorizes the SAB to require the following: i) Each school district that elects to participate in the new construction program funded by the proceeds of any bond approved by voters after January 1, 2016 to reestablish eligibility pursuant to regulations adopted by the SAB; and, ii) Submit information describing existing facilities in the school district for the purpose of establishing a statewide inventory pursuant to regulations adopted by the SAB. d) Repeals the provisions that do the following: i) Requires, for the purpose of determining existing school building capacity, the calculation to be adjusted for first priority status as that calculation would have been made under the policies of the SAB in effected immediately preceding September 1, 1998. ii) Requires the maximum school building capacity for each applicant district be increased by the number of pupils reported by the Superintendent of Public Instruction (SPI) as excess capacity as a result of participation in the Year-Round School Grant Program. Repeals the requirement that the adjustment be calculated on the basis, at the district's option, of either the district as a whole or the appropriate attendance area. iii) Requires each school on a multitrack year-round AB 1088 Page 4 calendar that has a density of 200 or more pupils enrolled per acre that is located in a school district with 40 percent of its pupils attending multitrack year-round schools be exempted from the increase in school building capacity required by Education Code (EC) Section 17071.35. e) Expresses the intent of the Legislature to adjust the local match requirements for a new construction or modernization grant based on a school district's ability to raise local revenue, beginning with the proceeds from any bond approved by voters after January 1, 2016. f) Authorizes, beginning with the proceeds from any bond approved by voters after January 1, 2016, a new construction grant to be used for career technical education (CTE) facilities, joint use facilities, and preschool facilities located at a schoolsite. g) Requires the OPSC, in consultation with the CDE, to recommend to the SAB regulations that will provide school districts with flexibility in designing instructional facilities. h) Authorizes the SAB to require each school district that elects to participate in the modernization program funded by the proceeds of any bond approved by voters after January 1, 2016 to reestablish baseline eligibility for each schoolsite pursuant to regulations adopted by the SAB. i) Expresses the intent of the Legislature to adjust the local match requirements for a modernization grant based on a school district's ability to raise local revenue, beginning with the proceeds from any bond approved by voters after January 1, 2016. j) Authorizes, beginning with the proceeds from any bonds approved by voters after January 1, 2016, a modernization grant to be used for rehabilitating CTE facilities, seismic AB 1088 Page 5 retrofits, and rehabilitating existing facility for use by a preschool located at an existing schoolsite. aa) Finds and declares that the state has an aging and deteriorating school facilities inventory and in certain circumstances, it would be prudent to replace those facilities rather than to expend state and local modernization bond funds. Requires the OPSC to provide to the SAB recommendations on the value of allowing school districts to replace existing facilities on existing schoolsite. EXISTING LAW: 1)Requires, under the Leroy F. Greene School Facilities Act of 1998, the SAB to allocate to applicant school districts prescribed per-unhoused-pupil state funding for construction and modernization of school facilities, including hardship funding, and supplemental funding for site development and acquisition. 2)Provides that a school district's ongoing eligibility for new construction funding is determined by making calculations related to certain factors, including, but not limited to, enrollment projections by utilizing a cohort survival enrollment projection system, the number of students that may be adequately housed in the existing school building capacity of the district, and increases or decreases in enrollment resulting from receipt of funding from the Year-Round School Grant Program. 3)Provides that a school district is eligible to receive an apportionment for the modernization of a permanent school building that is more than 25 years old or a portable classroom that is at least 20 years old. A school district is eligible to receive an additional apportionment for AB 1088 Page 6 modernization of a permanent school building every 25 years after the date of the previous apportionment or a portable classroom every 20 years after the previous apportionment. FISCAL EFFECT: Unknown COMMENTS: Background. The construction and rehabilitation of public kindergarten through grade 12 (K-12) facilities are funded by a combination of state and local G.O. bonds, developer's fees and local assessments such as Mello Roos community facilities districts. The New Construction program requires a 50% match from local educational agencies (LEAs), unless the LEA qualifies for financial hardship, which pays up to 100% of project costs. Modernization funds are awarded at 60% with a 40% match. Since the inception of the SFP in 1998, voters have approved $35.4 billion in state G.O. bonds for K-12 schools. ----------------------------------------------------------------- | Ballot | Measure | Amount | % Passage | | | | | | | | | | | |-------------+-------------+-----------------------+-------------| |November |Proposition |$9.2 billion | 62.5 | |1998 |1A | | | | | | | | | | | ($6.7 billion | | | | |K-12 + | | | | | | | | | | | | | | | $2.5 billion | | | | |Higher Ed) | | AB 1088 Page 7 | | | | | | | | | | |-------------+-------------+-----------------------+-------------| |November |Proposition |$13.05 billion | 59.1 | |2002 |47 | | | | | | | | | | | ($11.4 billion | | | | |K-12 + | | | | | | | | | | | | | | | $1.65 billion | | | | |Higher Ed) | | | | | | | | | | | | |-------------+-------------+-----------------------+-------------| |March 2004 |Proposition |$12.3 billion |50.9 | | |55 | | | | | | | | | | | ($10 billion K-12 | | | | |+ | | | | | | | | | | | | | | | | | | | | $2.3 billion | | | | |Higher Ed) | | | | | | | | | | | | |-------------+-------------+-----------------------+-------------| |November |Proposition |$10.416 billion |56.9 | |2006 |1D | | | | | | | | | | | ($7.329 K-12 + | | | | | | | | | | | | | | | $3.087 billion | | | | |Higher Ed) | | | | | | | | | | | | ----------------------------------------------------------------- AB 1088 Page 8 The last education bond on the statewide ballot was Proposition 1D, which was passed by voters on the November 2006 ballot. Proposition 1D provided $10.416 billion for K-12 and higher education facilities and established new K-12 grant programs, specified through the following allocations: 1)$7.329 billion for K-12 facilities as follows: a) $1.9 billion for new construction projects (of which up to $199.5 million can be set aside for seismic repairs); b) $3.3 billion for modernization projects; c) $1 billion for overcrowding relief grants through the removal of portables; d) $500 million for charter school facilities; e) $500 million for career technical education (CTE) facilities and equipment; f) $100 million for high performance (green) projects; and, g) $29 million for joint-use projects. 2)$3.087 billion for higher education facilities as follows: a) $1.507 billion for CCC; b) $890 million for UC, of which $200 million was available for medical education programs; and, c) $690 million for CSU. K-12 remaining bond authority. Due to the state's budget crisis and poor credit ratings, the Pool Money Investment Board halted the regular sale of all G.O. bonds in December 2008 and slowed the disbursement of funds. The SAB, comprised of ten members that include appointments by the Governor, the Speaker of the Assembly and the Senate President pro Tem, is the body that AB 1088 Page 9 allocates bond funds and oversees the administration of the SFP staffed by the OPSC, within the Department of General Services. The SAB has been making unfunded approvals since 2009 to enable districts to continue their facilities planning. The unfunded approvals are converted to apportionments when bonds are sold and cash becomes available. According to the OPSC, as of April 15, 2015, approximately $195.4 million remains in bond authority from the 2002, 2004, and 2006 bonds, as follows: ----------------------------------------------------------------- | Remaining Bond Authority - as of April 15, 2015 | | | | | ----------------------------------------------------------------- |--------------------------------+--------------------------------| |Program |Amount in millions | | | | | | | |--------------------------------+--------------------------------| |New Construction |$17.8* | | | | | | | |Modernization |$4.5* | | | | | | | |Seismic Mitigation |$141.2 | | | | | | | |Career Technical Education |$2.3 | | | | | | | |Charter |$27.1 | AB 1088 Page 10 | | | | | | |High Performance |$.5 | | | | | | | |Overcrowding Relief |$2 | | | | | | | |--------------------------------+--------------------------------| |Total |$195.4 | | | | | | | |*Due to project rescissions | | | | | | | | ----------------------------------------------------------------- Source: Office of Public School Construction The majority of remaining authority is derived from funds for seismic projects. Proposition 1D authorized up to 10.5% of New Construction funds to be used for seismic repair, reconstruction, or replacement. Seismic dollars have gone out slowly, partly due to fairly narrow eligibility criteria. New Construction and Modernization funds have been exhausted since 2012. The funds currently available are due to funds returned to the program. What does this bill do? This bill will place a K-12 and higher education school facilities bond on an unspecified statewide ballot. The bill currently contains unspecified amounts for K-12 and higher education. According to the author, the amounts will be determined pending further examinations of need and discussions with the Administration and other parties. Contrary to the three prior bonds, this bill proposes to fund just the basic programs: New Construction, Modernization and Charter School Facilities Program (charter Schools do not receive funds from New Construction or Modernization). AB 1088 Page 11 Need. The amount of funding needed for K-12 school facilities is hard to calculate, as there is no statewide inventory or mechanism to collect projected need information from LEAs and charter schools. Eligibility for New Construction is done using the cohort survival projection method, which, generally, is based on projected need after accounting for existing capacity (or seats). LEAs established their baseline eligibility in 1999, and update the eligibility as needed, usually prior to submitting an application for funding. At the informational hearing this Committee held on February 11, 2015, the assistance Executive Officer of the State Allocation Board estimated a need of $3.54 billion for New Construction over the next eight years. LEAs are eligible for Modernization funds based on the age of a building - 25 years for permanent buildings and 20 years for portable buildings - and enrollment at the schoolsites. Based on the number of schoolsites that have established eligibility, OPSC estimates a need of $4.4 billion for Modernization. However, OPSC cautions that this estimate is based only on 36% of schoolsites that have established eligibility. The $4.4 billion estimate may be low. Another factor to take into consideration is the amount in funding requests submitted to the OPSC despite lack of funds for New Construction or Modernization. Since 1998, voters have authorized $17.6 billion for New Construction and $11.23 billion for Modernization projects. Bond authority for the New Construction program has been depleted since July, 2012 and Modernization since May, 2012. According to the OPSC, the annual average funding approved by the SAB annual is $1.237.5 billion for New Construction and $788 million for Modernization. Applications received since 2012 were initially placed on an Unfunded "Lack of Authority" list. Since November 1, 2012, the SAB established an "Applications Received Past Existing AB 1088 Page 12 Authority" list. A total of $1.3 billion have been submitted between the "Lack of Authority" and the "Past Existing Authority" lists. There are likely many districts not submitting applications because no funding is available and it is unclear whether applications on either list will receive funding. SFP changes. State bond funds are allocated pursuant to the SFP, also called the Leroy Greene School Facilities Act of 1998, and administered by the SAB. In 2012, the SAB formed a Program Review Subcommittee that spent more than a year meeting monthly to review various aspects of the SFP. In January, 2014, the Subcommittee, chaired by former Assemblymember Joan Buchanan (D-Alamo), submitted recommendations to the SAB, including the following regarding a new bond: "There is demand for new construction and modernization funding. The Subcommittee recognizes that the State has appropriately been a partner in building new schools and modernizing aging facilities. To date, the School Facility Program has successfully provided $33.93 billion for 11,106 projects and should be continued." The Subcommittee also made a number of recommendations relating to New Construction, Modernization, financial hardship, special programs, portable buildings, facility maintenance, statewide school facilities inventory, and county offices of education. This bill incorporates several of the recommendations made by the Subcommittee as well as additional provisions in response to the Governor's concerns, as follows: 1)New Construction. As mentioned previously, the baseline eligibility was established in 1999, after the enactment of the SFP in 1998. School districts update the baseline eligibility on an ongoing basis, or when they are applying for funding. The Subcommittee members acknowledged that the reported eligibility may be inaccurate. School districts that have not applied for funding have not updated their eligibility. School districts may have constructed facilities using local funds that affect their eligibility for state AB 1088 Page 13 funding. New developments that may have been captured in the eligibility calculation may have changed due to the housing downturn. This bill: a) Gives the SAB the authority to require school districts interested in seeking future bond funds (any bond passed after January 1, 2016) to reestablish eligibility. b) Authorizes the SAB to require school districts to submit data on existing school buildings in the district in order to establish an inventory. c) Authorizes New Construction funds to be used to incorporate CTE, joint use, and preschool facilities operating on a schoolsite. 2)Modernization. LEAs submit modernization eligibility for specific schoolsites prior to or when seeking bond funding. As mentioned previously, eligibility is based on the age of the building and enrollment at the site. The Subcommittee had similar concerns that modernization eligibility may not be updated. This bill: a) Gives the SAB authority to require LEAs seeking modernization funds from any bonds passed by voters after January 1, 2016 to reestablish modernization eligibility. The bill does not include authorizing the SAB to require school districts to submit data for the purposes of the inventory. Staff recommends an amendment to apply the requirement on districts seeking modernization funds. b) Authorizes Modernization funds to be used to rehabilitate facilities for CTE and seismic retrofits and to rehabilitate existing facilities for use by a preschool located at a schoolsite. c) Directs OPSC to provide a recommendation to the SAB on the value of allowing school districts to replace existing facilities on existing schoolsites. This is to address AB 1088 Page 14 school districts' concern that many of the existing facilities are very old, and it may make more fiscal sense to provide funding that will enable school district to demolish and replace an existing building. 3)Instructional facilities flexibility. Based on regulations adopted by the CDE, the SFP generally funds classrooms that are 960 square foot spaces. Teaching and learning have changed over time. Teachers do not stand in front of a classroom with a blackboard six hours a day anymore. Today, teachers may utilize more project based learning, with students working in small groups, which require larger common areas with movable furniture. The Subcommittee recommends aligning the SFP regulations with the CDE regulation to give LEAs more flexibility. This bill: a) Directs the OPSC to make recommendations to the SAB that will provide school districts with flexibility in designing instructional facilities. Governor's Budget. The Governor has indicated concerns regarding the use of bonds to fund school facilities and questions whether the State should have any role in student housing. The Governor has also highlighted problems he sees with the SFP, including the processes for plan approvals and funding. To address this concern, the bill includes a provision requiring the SAB to form a workgroup that includes state agencies, such as the DSA and CDE, the DOF, and stakeholders to develop recommendations on how the process for constructing and modernizing schools can be streamlined and shortened. The bill directs the workgroup to consider requirements that can be done through self-certification. The 2015-16 budget suggests increasing local contribution while minimizing state participation. Specifically, the Governor proposes to provide limited state support for districts that may not be able to generate local bond dollars AB 1088 Page 15 due to low assessed valuations. The proposal does not specify the threshold for eligibility, level of funding or source of funding (presumably General Fund). The bill expresses the intent of the Legislature to adjust the local match (currently 50% for New Construction and 40% for Modernization) based on a school district's ability to generate local funds. The Governor also proposes to lift Proposition 39 rate caps to increase funds generated through local bonds (assuming voter approval), adjust developer fees, and authorize districts to use funds set aside for maintenance of facilities for construction and modernization. Impact of school facilities on student learning. Studies have found a positive relationship between condition of school facilities and student achievement. According to the CDE, facility condition, design and utilization affect student and staff attendance, retention of teachers, student disruptions, time teachers and students spend on instruction/learning activities, curriculum offerings, teacher and student time in school (school calendar), participation by staff and students in extra-curricular activities, parent visits, and extent of local school program innovations. Students cannot focus on learning if they are too cold or too hot in a classroom. They cannot learn if poor air quality affects their health. Students also cannot focus on learning when classrooms are so overcrowded that they do not have their own desks. According to the CDE, a 2007 report indicates that half of school funding equity lawsuits nationally have included or focused on conditions of school facilities. Arguments in support. The author states, "I appreciate the Governor's concerns regarding bonded indebtedness. However, from the overwhelming support for last year's bond bill authored by the former chair of this Committee, AB 2235, and the support AB 1088 Page 16 expressed by Members at the Assembly Education Committee at the Committee's informational hearing in February, there is strong sentiment in the Legislature that bond funding is an appropriate tool for ensuring that our students have facilities that are safe and conducive to learning. With local matching funds and developer's fees, state bond funds have the added benefit of creating thousands of jobs and helping our economy." When should the bond be placed on the ballot? While there is a need to replenish school facilities funding through a bond as soon as possible, there are other factors to take into consideration. The author may wish to consider placing the bond on the 2018 statewide general election. Related legislation. AB 148 (Holden), also scheduled for the April 29th hearing, places the K-14 School Investment Bond Act of 2016 with unspecified dollar amounts on the November 8, 2016 statewide ballot. The bill is substantially similar to the introduced version of SB 114 (Liu), pending in the Senate Appropriations Committee. AB 1433 (Gray), pending in the Assembly Higher Education Committee, places the Recommitment to Higher Education Bond Act of 2016 with unspecified amounts for higher education facilities on the November 8, 2016 statewide general election. SB 114 (Liu), pending in the Senate Appropriations Committee, would place the Kindergarten Through Grade 12 Public Education Facilities Bond Act of 2016 with unspecified dollar amounts on the November 8, 2016 ballot. Prior legislation. AB 2235 (Buchanan), would have authorized the Kindergarten-University Public Education Facilities Bond Act of 2014 to provide for the issuance of $4.3 billion in G.O. AB 1088 Page 17 bonds for construction and modernization of school facilities, to become effective only if approved by voters at the November 4, 2014, statewide general election. The bill also made changes to the SFP. The bill was held on the Senate Floor by the author. AB 41 (Buchanan), introduced in 2013, expresses the Legislature's intent to place a Kindergarten-University facilities bond on the 2014 ballot. The bill was held by the author in the Assembly Education Committee. SB 45 (Corbett), introduced in 2013, expresses the Legislature's intent to place a Kindergarten-University facilities bond on the next statewide general election. The bill was held by the author in the Senate Rules Committee. SB 301 (Liu), introduced in 2013, expresses the Legislature's intent to place a Kindergarten-University facilities bond on the 2014 ballot. The bill was held by the author in the Senate Rules Committee. AB 331 (Brownley), introduced in 2011, expressed the Legislature's intent to place a Kindergarten-University facilities bond on the 2012 ballot. The bill was held in the Assembly Appropriations Committee in 2012. AB 822 (Block), introduced in 2011, would have placed a higher education facilities bond on the November 2012 ballot. The bill was held in the Assembly Appropriations Committee in 2012. AB 220 (Brownley), introduced in 2009, would have placed a $6.1 billion Kindergarten-University facilities bond on the November 2010 ballot. The bill was held in the Senate Appropriations AB 1088 Page 18 Committee. SB 271 (Ducheny), introduced in 2009, would have placed an $8.6 billion higher education facilities bond on the November 2010 ballot. The bill was held in the Senate Appropriations Committee. REGISTERED SUPPORT / OPPOSITION: Support Association of California School Administrators California Association of Suburban School Districts California Association of School Business Officials California Community Colleges Board of Governors California School Boards Association Community College Facility Coalition County School Facilities Consortium Kern Community College District AB 1088 Page 19 Los Angeles Community College District Los Angeles Unified School District Los Rios Community College District Mt. San Jacinto Community College District Pasadena Community College District Peralta Community College District Rio Hondo Community College District San Bernardino Community College District San Diego Community College District San Francisco Community College District South Orange County Community College District State Building and Construction Trades Council University of California AB 1088 Page 20 West Kern Community College District Yuba Community College District Opposition None on file Analysis Prepared by:Sophia Kwong Kim / ED. / (916) 319-2087