BILL ANALYSIS Ó SENATE COMMITTEE ON APPROPRIATIONS Senator Ricardo Lara, Chair 2015 - 2016 Regular Session SB 111 (Fuller) - School facilities: military installations ----------------------------------------------------------------- | | | | | | ----------------------------------------------------------------- |--------------------------------+--------------------------------| | | | |Version: March 4, 2015 |Policy Vote: ED. 6 - 0 | | | | |--------------------------------+--------------------------------| | | | |Urgency: No |Mandate: No | | | | |--------------------------------+--------------------------------| | | | |Hearing Date: May 28, 2015 |Consultant: Mark | | |McKenzie/Jillian Kissee | | | | ----------------------------------------------------------------- SUSPENSE FILE. AS AMENDED. Bill Summary: SB 111 would include Legislative intent to provide assistance to school districts to meet the matching share requirement of a school construction grant made by the Office of Economic Adjustment of the federal Department of Defense for public schools located on military installations. This bill requires the Department of Finance to explore options on how to assist school districts, including making low interest loans available to school districts through the California Infrastructure and Economic Development Bank. Fiscal Impact (as approved on May 28, 2015): Unknown cost pressure to implement the option identified by the Department of Finance. Staff estimates that costs for the Department of Finance to explore options are minor and absorbable. SB 111 (Fuller) Page 1 of ? Background: Current law establishes the School Facility Program (SFP) under which the state provides general obligation bond funding for various school construction projects. Proposition 1D, the Kindergarten-University Public Education Facilities Bond Act of 2006, was approved by the voters in November of 200 and authorized the sale of $10.4 billion in general obligation bonds, including $7.3 billion for K-12 education facilities. Proposition 1D allocated specified amounts from the sale of these bonds for modernization, new construction, charter schools, career technical education facilities, joint use projects, new construction on severely overcrowded school sites, and high performance incentive grants to promote energy efficient design and materials. In addition, portions of the amounts allocated for new construction and modernization were authorized for purposes of funding smaller learning communities and small high schools and for seismic retrofit projects. In 2010, the United States Department of Defense evaluated and reviewed the physical condition of the 160 public schools on military installations in the United States. Based on the findings of this assessment, the DOD developed a "Priority List" of public schools on military installations with the most serious condition and/or capacity deficiencies. The federal Office of Economic Adjustment (OEA) was tasked with administering the Public Schools on Military Installations (PSMI) program to provide construction, renovation, and repair funding to address these deficiencies. Congress has provided $945 million in federal funds to the OEA for the program since 2011, including a recent $175 million increase in funding provided in House Resolution 83 in 2015. That measure also established a 20 percent non-federal matching requirement from the state and local education authority (LEA) as a condition of federal funding. If a local match is not provided, the OEA may skip eligible school projects on the Priority List if the match is not provided. According to the OEA, once a project on the list has been skipped it will no longer be considered for funding. The OEA indicates that there is approximately $464 million remaining in the PSMI, and estimates that as many as 33 schools on the list could be assisted. California has 11 schools in six SB 111 (Fuller) Page 2 of ? districts that are within the top 33 on the Priority List. Proposed Law: This bill appropriates $61 million from the General Fund to the CDE for the 2015-16 fiscal year for apportionment to school districts to meet the matching share requirements of the PSMI program to construct, renovate, repair, or expand elementary and secondary public schools located on military installations. Related Legislation: SB 121 (Fuller) requires that school construction projects on military installations that are eligible for specified federal grants be given priority for funding under the state SFP. That bill has been referred to the Education Committee, but has not been heard. Staff Comments: This bill is intended to provide the full 20 percent state/local match for approximately $240 million in federal funds that would be available for construction grants to 11 schools on military installations in California. State bond authority for new construction and modernizations programs has essentially been depleted since 2012. Since 2009, the State Allocation Board (SAB) has been making "unfunded approvals" for approved projects waiting to convert to funding apportionments when bonds are sold and cash becomes available. In addition, since November 1, 2012, the SAB has maintained an "Applications Received Beyond Bond Authority" list. According to the Office of Public School Construction, one of the 11 schools that this bill seeks to assist has an unfunded application pending under the School Facility Program. In addition, four of the schools have modernization eligibility but have not applied for state funding, and six of the schools previously applied for, and received modernization funding through the School Facilities Program. SB 111 would provide a direct General Fund appropriation for these projects on the basis of their eligibility for federal funds. The Committee may wish to consider whether it is appropriate to provide General Funds for these 11 schools, when there are numerous other schools awaiting state funding that may have a greater need based on state priorities, or whether there are other priorities SB 111 (Fuller) Page 3 of ? for limited General Funds. In 2012, the SAB established a subcommittee to explore alternatives for assisting districts with providing the required 20 percent local match for projects on the DOD Priority List. The subcommittee considered a number of options, including reservation of bond authority, transfer of bond authority, loans for the matching share, waiver of the local matching share requirement, and facility hardship funding, but none of these options were determined to be viable. Ultimately, the SAB recommended that the Legislature provide funding for military base schools in California in the next bond proposal in order to cover the total need for these types of projects. The CDE indicates that costs to administer the distribution of funds to affected school districts would be minor. Staff notes that the funds appropriated by this bill would count towards the Proposition 98 minimum guarantee of funding for K-14 education. Committee amendments (as adopted on May 28, 2015): Amendments: (1) delete the appropriation and include Legislative intent to provide assistance to school districts in the 2015-16 fiscal year in meeting the matching share requirement, and (2) require the Department of Finance to explore options on how to assist school districts, including making low interest loans available to school districts through the California Infrastructure and Economic Development Bank. -- END --