BILL ANALYSIS Ó
AB 2429
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ASSEMBLY THIRD READING
AB
2429 (Thurmond)
As Amended March 18, 2016
Majority vote
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|Committee |Votes|Ayes |Noes |
| | | | |
| | | | |
| | | | |
|----------------+-----+----------------------+--------------------|
|Education |5-2 |O'Donnell, McCarty, |Olsen, Kim |
| | |Santiago, Thurmond, | |
| | |Weber | |
| | | | |
|----------------+-----+----------------------+--------------------|
|Revenue & |5-3 |Ridley-Thomas, |Brough, Patterson, |
|Taxation | |Dababneh, Gipson, |Wagner |
| | |Mullin, O'Donnell | |
| | | | |
| | | | |
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SUMMARY: Increases the level of bonded indebtedness for school
districts and community college districts. Specifically, this
bill:
1)Increases the cap on bonded indebtedness for elementary and
high school districts from 1.25% to 2% of the taxable property
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of the district.
2)Increases the cap on bonded indebtedness for unified and
community college districts from 2.5% to 4% of the taxable
property of the district.
FISCAL EFFECT: None. This bill is keyed non-fiscal by the
Legislative Counsel.
COMMENTS: School districts and community college districts pay
for the construction and rehabilitation of school and community
college facilities through a combination of state education bond
funds, developer fees, and local bond funds. General obligation
(GO) bonds must be approved by voters, who agree to an ad
valorem (per assessed value of property) tax to pay for the
bonds. School districts in California had traditionally
financed their operations through local property taxes.
However, Proposition 13 (1978) limited the property tax rate to
1% of the full cash value of the property, which resulted in
cuts across districts and curtailed districts' ability to raise
revenues. Parcel taxes, as a special district tax, can
generally be used by school districts for any purpose; but those
taxes require two-thirds voter approval. Prior to 2001, passage
of a local bond required a 2/3 supermajority vote. In 2000,
voters approved Proposition 39, which provided an option for
approval of a local education bond based on a 55% vote rather
than a 2/3 vote. Concurrent to the initiative, the Legislature
passed AB 1908 (Lempert), Chapter 44, Statutes of 2000, an
accountability measure that required school districts to appoint
a local bond citizens' oversight committee to oversee bond
expenditures and imposed limitations on bonded indebtedness and
tax rates as follows:
--------------------------------------------------------------
| |Limit on Bonded |Limit on Tax |
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| |Indebtedness |Rate per |
| | |Assessed |
| | |Valuation |
| | | |
| | | |
|--------------------------+------------------+----------------|
|Elementary and High |1.25% of taxable |$30/$100,000 |
|School Districts |property | |
| | | |
| | | |
|--------------------------+------------------+----------------|
|Unified School Districts |2.5% of taxable |$60/$100,000 |
| |property | |
| | | |
| | | |
|--------------------------+------------------+----------------|
|Community College |2.5% of taxable |$25/$100,000 |
|Districts |property | |
| | | |
| | | |
| | | |
| | | |
--------------------------------------------------------------
Once bonds are authorized or approved by voters, districts can
issue or sell the bonds. The amount of bonds a district can
sell at any given time is limited by the caps on bonded
indebtedness and the limits on tax rates. These limits affect
the amount of revenue that can be generated because they are
based on the assessed valuation of the properties in the
district. When the economy is good and property values are
high, a district is able to sell more bonds. When property
values are depressed, the amount that can be generated is less.
Therefore, bonds approved by voters can sometimes take a number
of years to issue. Smaller districts and districts with lower
assessed valuations are more likely to reach the caps before
larger school districts and/or districts with higher assessed
valuations.
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K-12 school districts can seek a waiver from the State Board of
Education (SBE) to waive the limits. Since 2001, the SBE has
approved approximately 60 waiver requests to increase a school
district's level of bonded indebtedness. The SBE has not denied
a request, but has established conditions for the approvals,
such as limiting the waiver for a specified number of years.
The approved waivers are generally within those proposed by this
bill, although some exceed the proposed caps. The SBE has never
approved a waiver to increase a school district's tax rate.
This bill increases the statutory bonded indebtedness limits
from 1.25% to 2% for an elementary and high school district and
from 2.5% to 4% for a unified school district and a community
college district. This bill does not alter the limits on tax
rates. If enacted, this bill will enable districts to generate
revenue up to the new limits for bonds approved by voters
without seeking a SBE waiver, thereby reducing administrative
costs for the SBE and for districts.
Over the past two budget cycles, the Governor has indicated
unwillingness to support a state bond and has instead expressed
support for expanding a district's ability to generate funds
locally. One of the tools identified by the Governor is to
increase the caps by the rate of inflation since they were
established in 2000. The proposed adjustments in this bill are
consistent with an inflation adjustment from 2000.
Supporters state that the bill will provide certainty and give
school districts the ability to make longer-term plans.
Opposition states that there is no need to make the change
statutorily since the SBE waiver process works.
Analysis Prepared by:
AB 2429
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Sophia Kwong / ED. / (916) 319-2087 FN: 0002792