BILL ANALYSIS Ó
SENATE COMMITTEE ON EDUCATION
Senator Carol Liu, Chair
2015 - 2016 Regular
Bill No: SB 114
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|Author: |Liu |
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|Version: |March 19, 2015 Hearing |
| |Date: March 25, 2015 |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant:|Kathleen Chavira |
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Subject: Education facilities: Kindergarten-Grade 12 Public
Education Facilities Bond ????..Act of 2016
NOTE : This bill has been referred to the Committees on
Education and Governance ????and Finance. A "do pass" motion
should include referral to the Committee on ????Governance and
Finance.
SUMMARY
This bill makes changes to the existing School Facility Program
and authorizes the Kindergarten-Grade 12 Public Education
Facilities Bond Act of 2016 to provide for the issuance of an
unspecified amount of general obligation bonds for construction
and modernization of education facilities to become effective if
approved by voters at the November 8, 2016 statewide general
election.
BACKGROUND
Existing law establishes the School Facility Program (SFP) under
which the state provides general obligation bond funding for
various school construction projects, including new
construction, modernization, joint-use facilities, and programs
to specifically address the construction needs of overcrowded
schools, charter schools, career technical education facilities,
and seismic mitigation.
(Education Code § 17070.10 - 17070.99)
The last statewide general obligation bond, Proposition 1D was
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approved by voters in November 2006. Proposition 1D, authorized
$7.3 billion for K-12 education facilities and $3.087 billion
for higher education facilities and allocated specified amounts
from the sale of these bonds for modernization, new
construction, charter schools, career technical education
facilities, joint use, projects for new construction on severely
overcrowded schoolsites, and high performance incentive grants
to promote energy efficient designs and materials. In addition,
portions of the amounts allocated for new construction and
modernization were authorized for purposes of funding smaller
learning communities and high schools and for seismic retrofit
projects.
(EC §101010-101031)
ANALYSIS
This bill establishes the K-12 Public Education Facilities Bond
Act of 2016 to provide for the issuance of an unspecified amount
of general obligation (GO) bonds for construction and
modernization of education facilities, to take effect only if
approved by voters. More specifically it:
1. Requires submission of the Act to voters at the November 8,
2016, statewide general election.
2. As a condition of participation in the program, requires a
school district to:
A. Comply with existing deferred
maintenance provisions.
B. Certify that it has a long-range school
facilities master plan consistent with the regional
sustainable communities strategy plans established
pursuant to specified Government Code provisions.
C. Conduct an inventory of existing
facilities and submit this information to the SAB for
purposes of maintaining a statewide school facilities
inventory.
3. Requires the Office of Public School Construction (OPSC),
in consultation with the California Department of Education
(CDE), to recommend regulations to the SAB that provide
school districts with flexibility in designing
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instructional facilities.
4. Requires that the SAB provide a school district with the
maximum flexibility in design, new construction, and
modernization of school facilities, and further:
A. Requires that an applicant who receives
a new construction grant ensure that the project
incorporates high performance attributes.
B. Modifies the use of modernization funds in the
following ways:
i) Authorizes the use of a
modernization apportionment for seismic
mitigation purposes including related design,
study, and testing costs.
ii) Requires that an applicant who receives
a modernization grant ensure that the project
incorporates high performance attributes.
iii) Expands the definition of modernization
to include "replacement" as well as modification
and authorizes the use of the apportionment to
demolish and construct on the existing site if
the total cost of providing a new building,
including land, would not protect the economic
interest of the state and school district.
iv) Makes a replacement project eligible
for the same grant amount as that authorized for
a new construction project.
v) Authorizes the SAB to
establish any additional requirements deemed
necessary to protect the economic interests of
the state and educational interests of children.
5. Expands the allowable match for joint use funding to
include operational costs and, if the joint use agreement
specifies the partner will be responsible for 100 percent
of the operational costs for the project for a term of no
less than 10 years, eliminates the requirement that the
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partner contribute no less than 25 percent of project
costs.
6. Requires the California Department of Education (CDE),
Division of the State Architect (DSA), Office of Public
School Construction (OPSC), and Department of Toxic
Substances Control (DTSC) to develop an interagency plan,
by July 1, 2016, to:
A. Streamline the school facility construction
application, review and audit processes to reduce time
and improve efficiency.
B. Identify a single entity within the CDE as a
full-service agency to assist school districts in
navigating the school facilities construction process.
7. Declares the Legislature's intent that the State Allocation
Board (SAB) review and revise operative regulatory language
before July 1, 2016, to reduce duplicative review, approval
and audit processes.
8. Requires the board to assign priority for funding to school
districts that demonstrate participation in a
community-based effort to coordinate educational,
developmental, family, health, and other comprehensive
services through public and private partnerships and
outlines the criteria that demonstrate such participation.
9. Makes the following technical changes:
A. Repeals provisions requiring an
evaluation of the construction and modernization costs
of small high schools.
B. Repeals provisions establishing
eligibility calculation adjustments on the basis of
multi-track year-round operation.
C. Repeals other obsolete eligibility
calculation adjustments.
D. Corrects an erroneous cross-reference.
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E. Makes various technical changes.
STAFF COMMENTS
1. Need for the bill. Funding for the School Facilities
Program is virtually gone and there is a backlog in
applications for state assistance. At the same time there
have been ongoing complaints about the current program's
complexity and design, as well as questions about whether
the program created in 1998 is aligned to the state's
current policy objectives. The "winding down" of the
current program, and the Governor's call for change (see
staff comment #3), present an opportunity to rethink the
administrative and programmatic structure of the State
Facilities Program, learn from its strengths and
weaknesses, and better align program design with the
state's policy objectives. This bill begins that process.
2. Current status of the School Facilities Program (SFP).
According to the Office of Public School Construction
(OPSC), as of February 2015, approximately $200.7 million
remained in bond authority in the SFP. The majority of
this bond authority exists for the Seismic Mitigation and
Charter School programs (about $171 million). Bond
authority for new construction and modernizations programs
has essentially been depleted, respectively, since July
2012 and May 2012.
Since 2009, the SAB has been making "unfunded approvals"
which represented approved projects waiting to convert to
funding apportionments when bonds are sold and cash becomes
available. In addition, since November 1, 2012, the State
Allocation Board (SAB) has maintained an "Applications
Received Beyond Bond Authority" list. This list is
presented to SAB for acknowledgement, but not approval.
Because the applications are not fully processed for final
grant determination, the project funding amounts on the
list are only estimates. As of January 2015, the list
indicated 116 new construction applications totaling $571
million and 200 modernizations applications of about $330
million.
3. Related budget activity. Amid concerns about the
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complexity and structure of the current program and the
state's increasing debt service obligations, the Governor
has proposed significant changes to the way school
facilities are funded. In order to allow districts to
better meet their facilities needs at the local level, the
Governor's 2015-16 budget proposes to:
A. Expand revenue generation tools at the local
level by expanding local funding capacity and
increasing caps on local bond indebtedness;
B. Restructure developer fees to set one level for
all projects at a level between existing Level II and
Level III fees subject to local negotiation; and
C. Expand allowable uses of Routine Restricted
Maintenance Funding to authorize the pooling of these
funds over multiple years for modernization and new
construction projects.
The Governor has also noted that he is prepared to engage
with the Legislature and education stakeholders to shape a
future state program that is focused on districts with the
greatest need, including communities with low property
values and few borrowing options, as well as overcrowded
schools.
4. Debt Service. According to a recent report by the
Legislative Analyst Office (LAO), Addressing California's
Key Liabilities, as of April 1, 2014, the state has $75.1
billion in general obligation bonds, and about $10.2
billion in lease revenue bonds (10 percent of which is for
the California State University) outstanding. This does
not include $31 billion in general obligation and lease
revenue bonds authorized but not yet sold. According to
the Legislative Analyst's Office (LAO), debt service is
expected to make up about 6 percent of the General Fund for
the next few years, if no new bonds are issued, as General
Fund (GF) revenues and debt service are expected to grow at
similar rates. The LAO noted that bond payments are the
first funding priority of the GF. The debt service must be
paid annually, even if it means that other spending
priorities (including education, health, social services,
and prisons) have to be cut or taxes have to be raised in
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order to balance the budget.
Since 1998, voters have approved approximately $35 billion
in statewide general obligation bonds to construct or
renovate K-12 school facilities and almost $10 billion for
higher education facilities. This bill would authorize an
unspecified amount of bonds for this purpose. The
Committee may wish to consider:
A. What is the fiscal capacity of the state to
issue yet more debt in order to meet its
infrastructure needs?
B. How much of that debt can/should the state be
issuing for purposes of constructing and renewing
public school facilities versus other infrastructure
needs?
C. Are there other sources of revenue for meeting
school district facility needs? What is the fiscal
capacity at the local level for this purpose?
D. How much of the overall need can realistically
be met at the local level?
This bill has also been referred to the Committee on
Governance and Finance which has jurisdiction over
legislation pertaining to state and local government
revenue mechanisms. The Governance and Finance Committee
may more appropriately consider this bill in the context of
the state's overall debt service and infrastructure needs.
1. Related Joint Informational hearing. On February 18, 2015,
this Committee held a joint informational hearing with the
Budget Subcommittee on Education on K-12 SCHOOL FACILITY
PROGRAM: HISTORY, CURRENT STATUS, AND FUTURE OPTIONS to
review the Governor's school facilities proposals. Among
other things, the Committee heard testimony from several
participants about the need to simplify the current program
processes and regulations, the need for a "one-stop-shop"
to assist in navigating the program, and the need for
greater flexibility in design of school facilities as well
as the use of funding to incentivize and support joint use
projects and community schools. Additionally, while the
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state's growing debt service is of concern, it was unclear
whether local districts have the capacity to generate
sufficient revenue at the local level to meet their ongoing
facility needs for deferred maintenance, modernization and
new construction. This bill begins to respond to some of
these issues through the proposal of various programmatic
changes.
2. Related and prior legislation. There have been several
attempts to authorize education facility construction bonds
since 2009. A summary of current and prior efforts includes
the following:
RELATED LEGISLATION
AB 148 (Holden, 2015) declares the Legislature's intent to
place a $1.1 billion bond measure before voters in 2016 to
fund modernization and new construction of school
facilities.
AB 1088 (O'Donnell, 2015) declares the Legislature's intent
to enact legislation to create a Kindergarten-University
Public Education Facilities Bond Act, to be placed before
voters in an as yet to be specified year, and provide for
the issuance of an unspecified amount of general obligation
bonds for construction and modernization of education
facilities. The bill also deletes a number of obsolete
School Facility Program provisions.
AB 1433 (Gray, 2015) authorizes a Higher Education
facilities: Recommitment to Higher Education Bond Act of
2016 to provide for the issuance of an unspecified amount
of general obligation bonds to provide aid to the
California Community Colleges, the University of
California, the Hastings College of the Law, and the
California State University to construct and modernize
education facilities.
PRIOR LEGISLATION
AB 2235 (Buchanan, 2014) made changes to the School
Facility Program and authorized the Kindergarten-University
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Public Education Facilities Bond Act of 2014 to provide for
the issuance of $4.3 billion in general obligation (GO)
bonds for construction and modernization of education
facilities, to become effective only if approved by voters
at the November 4, 2014, statewide general election. Some
provisions of AB 2235 were similar to those in this bill.
AB 2235 awaited action on the Senate Floor but was
subsequently moved to the Inactive File.
AB 41 (Buchanan, 2013) expressed the Legislature's intent
to place a Kindergarten-University facilities bond on the
2014 ballot. AB 41 was held by the author in the Assembly
Education Committee.
SB 45 (Corbett, 2013) expressed 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, 2013) expressed the Legislature's intent to
place a Kindergarten-University facilities bond on the 2014
ballot. SB 301 was held by the author in the Senate Rules
Committee.
AB 331 (Brownley, 2011) expressed the Legislature's intent
to place a Kindergarten-University facilities bond on the
2012 ballot. AB 331 was held in the Assembly
Appropriations Committee in 2012.
AB 822 (Block, 2011) would have placed a higher education
facilities bond on the November 2012 ballot. AB 822 was
held in the Assembly Appropriations Committee in 2012.
AB 220 (Brownley, 2009) would have placed a $6.1 billion
Kindergarten-University facilities bond on the November
2010 ballot. AB 220 was held in the Senate Appropriations
Committee.
SB 271 (Ducheny, 2009) would have placed an $8.6 billion
higher education facilities bond on the November 2010
ballot. SB 271 was held in the Senate Appropriations
Committee.
SUPPORT
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California Association of School Business Officials (CASBO)
OPPOSITION
None received.
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