BILL ANALYSIS                                                                                                                                                                                                    Ó






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          |SENATE RULES COMMITTEE            |                        SB 114|
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                                    THIRD READING


          Bill No:  SB 114
          Author:   Liu (D)
          Amended:  6/3/15  
          Vote:     27 - Urgency

           SENATE EDUCATION COMMITTEE:  6-0, 3/25/15
           AYES:  Liu, Block, Hancock, Leyva, Mendoza, Pan
           NO VOTE RECORDED:  Huff, Vidak

           SENATE GOVERNANCE & FIN. COMMITTEE:  5-1, 4/22/15
           AYES:  Hertzberg, Beall, Hernandez, Lara, Pavley
           NOES:  Moorlach
           NO VOTE RECORDED:  Nguyen

           SENATE APPROPRIATIONS COMMITTEE:  5-2, 5/28/15
           AYES:  Lara, Beall, Hill, Leyva, Mendoza
           NOES:  Bates, Nielsen

           SUBJECT:   Education facilities:  Kindergarten Through Grade 12  
                     Public Education Facilities Bond Act of 2016


          SOURCE:    Author


          DIGEST:  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.









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          Senate Floor Amendments of 6/3/15 add an urgency clause.


          ANALYSIS:   Existing law establishes the School Facility Program  
          (SFP) under which the state provides general obligation (GO)  
          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 GO bond, Proposition 1D was 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)

          This bill establishes the K-12 Public Education Facilities Bond  
          Act of 2016 (Act) to provide for the issuance of an unspecified  
          amount of 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 SFP, requires a school  
             district to:

                a)        Comply with existing deferred maintenance  
                provisions.







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                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 State Allocation Board  
                (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 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.








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                     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% of the operational  
             costs for the project for a term of no less than 10 years,  
             eliminates the requirement that the partner contribute no  
             less than 25% of project costs.  
           
        6)Requires the CDE, Division of the State Architect, OPSC, and  
             Department of Toxic Substances Control (DTSC) to develop an  
             interagency plan, by July 1, 2016, to streamline the school  
             facility construction application, review and audit processes  
             to reduce time and improve efficiency.

        7)Requires the Superintendent of Public Instruction, as part of  
             the interagency plan, to identify an entity within the CDE to  
             act as a full-service agency and to assist school districts  
             in navigating the school facilities construction process. 

        8)Declares the Legislature's intent that the SAB review and revise  
             operative regulatory language before July 1, 2016, to reduce  
             duplicative review, approval and audit processes.

        9)Requires the SAB 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.

        10)Makes the following technical changes:

                a)        Repeals provisions requiring an evaluation of  
                the construction and modernization costs of small high  
                schools.








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                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.

                e)        Makes various technical changes.

          Comments

       1)Need for the bill.  Funding for the SFP 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  
            comment #2), present an opportunity to rethink the  
            administrative and programmatic structure of the SFP, learn  
            from its strengths and weaknesses, and better align program  
            design with the state's policy objectives.  This bill begins  
            that process.

       2)Related budget activity.  Amid concerns about the 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  







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               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. 

       3)Related joint informational hearing.  On February 18, 2015, the  
            Senate Education 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 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. 

          FISCAL EFFECT:   Appropriation:    No          Fiscal  
          Com.:YesLocal:   No

          According to the Senate Appropriations Committee:

           Bonds:  Unknown, but assuming similar bond authority amounts  
            authorized in past measures, it will likely result in state  
            costs in the low tens of billions of dollars in principal and  
            interest over 30 years (mid hundreds of millions General Fund  
            annually). 

           Administration:  Substantial new workload for the CDE and the  
            Department of General Services (DGS).  The level of new work  
            would depend on the size of the bond.  The DGS estimates that  
            its OPSC would require significant staffing increases of over  
            100 positions if assuming a $7.3 billion bond.  This bill will  







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            also drive significant workload at the CDE related to review  
            and approval of site selection and construction plans.   
            Administrative workload would likely be bond-funded.

           Interagency agreement:  DTSC estimates costs ranging from  
            $85,000 to $120,000 for its participation in developing an  
            interagency agreement as required by this bill.

           Ballot costs:  Likely $200,000 General Fund for a statewide  
            ballot pamphlet, assuming four pages.


          SUPPORT:   (Verified6/4/15)


          California Faculty Association
          California School Boards Association
          County School Facilities Consortium
          Los Angeles Unified School District
          Riverside County Superintendent of Schools


          OPPOSITION:   (Verified6/4/15)


          None received



          Prepared by:Kathleen Chavira / ED. / (916) 651-4105
          6/4/15 14:47:21


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