BILL ANALYSIS
SENATE COMMITTEE ON EDUCATION
Gloria Romero, Chair
2009-2010 Regular Session
BILL NO: AB 220
AUTHOR: Brownley
AMENDED: June 23, 2010
FISCAL COMM: Yes HEARING DATE: June 30, 2010
URGENCY: Yes CONSULTANT:Kathleen Chavira
SUBJECT : Kindergarten-University Public Education
Facilities Bond Act of 2010
KEY POLICY ISSUES
Should the state authorize an education facilities
construction bond to be placed on the upcoming November
2010 ballot?
Does the potential for economic stimulus/job creation and
the need for construction and modernization of school
facilities outweigh concerns about increasing the state's
debt and exacerbating its current economic condition?
What should be the components of such a bond?
SUMMARY
This bill, an urgency measure, authorizes the
Kindergarten-University Public Education Facilities Bond
Act of 2010 to provide for the issuance of $6.1 billion in
general obligation bonds for construction and modernization
of education facilities (to become effective only if
approved by voters), and requires its submission to voters
at the November 2, 2010, statewide general election.
BACKGROUND
The last statewide general obligation bond, Proposition 1D
was approved by voters in November 2006. AB 127 (Nunez and
Perata), the Kindergarten-University Public Education
Facilities Bond Act of 2006, authorized the $10.4 billion
AB 220
Page 2
bond proposal, which provided $7.3 billion of this amount
for K-12 education facilities and $3.087 billion for higher
education facilities.
Of the $7.3 billion provided for K-12 education facilities
specified amounts from the sale of these bonds were
allocated 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.
Of the amount provided for higher education facilities,
$1.5 billion was provided for Community College facilities,
$890 million was provided for the University of California
(of which $200 million was provided for capital
improvements for medical education programs, with an
emphasis on telemedicine) and $690 million was provided for
the California State University.
ANALYSIS
This bill , an urgency measure, establishes the
Kindergarten-University Public Education Facilities Bond
Act of 2010 to provide for the issuance of $6.1 billion in
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 2, 2010 statewide general election.
2) Provides for allocation of the proceeds from the bond
sales. Specifically it:
a) Provides $4.6 billion for purposes
of K-12 education facilities and of this amount:
i) Provides $2.5 billion
for new construction projects.
AB 220
Page 3
ii) Provides $250 million for charter
school facility projects.
iii) Provides $1 billion for
modernization projects.
iv) Provides $250 million for
facilities related to career technical
education programs.
v) Provides $50 million
for joint use projects.
vi) Provides $500 million for
incentive grants to promote the use of
designs and materials that include high
performance attributes, pursuant to
regulations adopted by the State Allocation
Board (SAB).
vii) Provides $50 million for preschool
facilities to be located on elementary and
secondary schoolsites and requires the SAB
to adopt regulations for apportionment of
these funds.
b) Provides $1.5 billion for purposes
of education facilities for California's public
segments of higher education and of this amount:
i) Provides $800 million for
California Community Colleges.
ii) Provides $350 million for the
California State University.
iii) Provides $350 million for the
University of California and the Hastings
College of Law.
3) Waives specified Election Code provisions that require
that a bond measure submitted to the voters by the
Legislature meet specified timelines for passage,
AB 220
Page 4
notice and printing, thereby requiring preparation of
a supplemental ballot.
STAFF COMMENTS
1) Need for the bill . According to the author, bond
funds help generate and retain construction-related
jobs. During the June 2010 election, 15 out of 20
local bonds were approved by voters throughout the
state, signaling their willingness to support the
provision of bond funds for school construction, and
their recognition that facilities are an important
component of students' academic success. In addition,
the author notes, despite the current decline in
enrollment being experienced in some districts, the
Demographics Unit of the Department of Finance
projects an overall enrollment increase of more than
200,000 students between 2008-09 and 2018-19.
Proposition 1D funds are anticipated to be depleted by
the end of 2010. This bill is necessary to ensure
sufficient facilities are available to accommodate the
anticipated growth.
2) Current status of bond sales . Due to the state's
budget crisis and poor credit ratings, the Pooled
Money Investment Board (PMIB) halted the sale of all
GO bonds in December 2008. The State Allocation Board
(SAB) has been making unfunded approvals since 2009 ,
enabling districts to obtain alternative financing
should they choose to pursue their projects without
State funding. The unfunded approvals are converted
to apportionments as bonds are sold and funds become
available. Although the PMIB has authorized some bond
sales since 2008, as of May 2010, the Office of Public
School Construction (OPSC) reports that $1.78 billion
in unfunded approvals are still awaiting the sale of
authorized bonds.
3) Current status of bond funds . Bonds funds are
allocated to school districts by the State Allocation
Board (SAB) pursuant to statute and adopted
regulations. The following chart reflects the total
amounts allocated under Proposition 1D for K-12 and
their disposition as of the June meeting of the
AB 220
Page 5
SAB.
Higher education bond funds are allocated for specific
projects through the budget process based on capital
facility plans prepared by each higher education segment.
All Proposition 1D higher education facilities funds have
been apportioned.
4) How do they compare ? The following chart summarizes
and compares the allocation of bond funds by
Proposition 1D and as proposed by this bill:
This bill, generally, provides additional funding for
existing programs which were established and
administered under AB 127 (the exception being the
Overcrowded School Facility Grant Program which receives no
funding). It expands funding for the High Performance
Grant program in recognition of recent SAB action to modify
the regulations to increase participation. It
also creates a new facilities construction program for
the funding of pre-school facilities on elementary and high
school campuses to be apportioned
pursuant to SAB adopted regulations.
5) Expansion to pre-school ? As noted in staff comment #3,
this bill proposes to expand the existing School
Facility Program to additionally fund construction of
pre-schools on schoolsites. This would be the only new
program authorized under the bill's provisions. The
committee may wish to consider the following:
Should an already heavily subscribed school
construction program be expanded and even greater
demand placed on these bond funds?
Is providing $50 million for a new program a
higher priority than expanding funds available
for existing programs that have in the past,
quickly exhausted their allocations, such as
joint facilities or career technical education
facilities?
AB 220
Page 6
Is it prudent to authorize the expansion of
school-based preschool facilities absent a policy
framework to provide direction regarding who they
should serve and the role/relationship to
community licensed child care providers? Should
the Legislature delegate the authority for
development of the conditions and regulations for
distribution of these funds to the SAB?
Will the inevitable staffing needs that
accompany construction of these facilities on
school sites create additional pressure on an
already heavily burdened General Fund (GF)?
1) Other bond activity for November 2010 . The November
2010 statewide general election already contains a GO
bond proposal for voters' consideration. SBx7 2
(Cogdill, Chapter 3, Statutes of 2009) enacts the
Safe, Clean, and Reliable Drinking Water Supply Act of
2010, which, if approved by the voters, authorizes the
issuance of bonds in the amount of $11.14 billion to
finance a safe drinking water and water supply
reliability program. This bond proposal was one of a
package of five bills enacted in November 2009 to
address an array of water issues.
2) Debt service and the state's fiscal condition .
According to the LAO, based upon the State Treasurer's
Office's most recent Debt Affordability Report, annual
debt-service payment obligations may soon total about
9 percent of GF revenues. The Treasurer has forecasted
that these payments eventually will exceed 10 percent
of revenues for much of the next decade. The LAO
noted that debt-service payments equaled under 2
percent of revenues in the late 1980s, climbed to
about 4 percent of revenues in 1992-93, and reached
about 5.5 percent of revenues in 1994-95. Voter
approval of the 2006 bond package and the resulting
large bond issuances, coupled with the recent, sharp
decline in GF revenues, have brought the current debt
service ratio to 6.7 percent of GF revenues.
According to the LAO and State Treasurer, debt service
will continue to be one of the fastest-growing items
AB 220
Page 7
in the state's GF budget. 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 order to
balance the budget.
3) Related legislation . SB 271 (Ducheny, 2009) authorized
the Higher Education Facilities Bond Act of 2010 to
fund the construction and modernization of education
facilities at the CCC, CSU, UC, and the Hastings
College of Law. SB 271 passed this committee in May
2009 by a vote of 7-0, but was subsequently held under
submission in the Senate Appropriations Committee.
SUPPORT
Advancement Project
Association of California School Administrators
California Association of School Business Officials
Coalition for Adequate School Housing
County School Facilities Consortium
School Facility Manufacturers' Association
Small School Districts' Association
OPPOSITION
None received.