BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | SB 114| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- 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. SB 114 Page 2 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. SB 114 Page 3 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. SB 114 Page 4 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. SB 114 Page 5 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 SB 114 Page 6 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 SB 114 Page 7 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 **** END ****