BILL ANALYSIS
AB 791
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Date of Hearing: April 29, 2009
ASSEMBLY COMMITTEE ON EDUCATION
Julia Brownley, Chair
AB 791 (Swanson) - As Amended: April 14, 2009
SUBJECT : The Oakland Unified School District: governance
SUMMARY : Establishes a process for the return of all rights,
duties and powers to the governing board of the Oakland Unified
School District (OUSD). Specifically, this bill :
1)Makes legislative findings and declarations regarding OUSD's
experiences while in state receivership and the progress and
improvements made during that time.
2)States legislative intent that the state administrator
governing OUSD begin a structured and orderly return of the
operational areas of pupil achievement and fiscal control back
to the governing board of the district.
3)Defines "operational areas" to community relations and
governance, pupil achievement, personnel management,
facilities management, and fiscal control.
4)Requires the Superintendent of Public Instruction (SPI) to
return to the governing board of OUSD by January 4, 2010, the
authority for each operational area that FCMAT has recommended
for return in its most recent annual progress report.
5)Requires that members of the governing board of OUSD be
entitled to draw compensation for their services once any
operational area is returned to OUSD as a result of these
provisions, and that such compensation be made in the same
amount as was received prior to the SPI assumption of control
of the district.
EXISTING LAW :
1)Establishes a process for state oversight and financial
assistance for school districts in financial trouble.
2)Authorizes the governing board of a school district that
determines that its revenues are insufficient to meet its
current year obligations to request an emergency apportionment
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(loan) from the state through the SPI.
3)Requires that acceptance of an emergency loan constitutes
agreement by the school district to specified conditions,
including the following:
a) The SPI assumes all the legal rights, duties, and powers
of the governing board of the district.
b) An audit, for the fiscal year in which the emergency
apportionments are disbursed and each year thereafter, is
to be conducted of the books and accounts of the district,
in lieu of the required annual school district; this audit
may be conducted by the SCO, his or her designee, or an
auditor selected by the district and approved by the SCO.
c) The SPI may appoint an administrator to act on behalf of
the SPI.
d) The school district governing board becomes advisory
only.
e) The authority of the SPI and the state-appointed
administrator shall continue until specified conditions
have been met, including SPI determination that future
compliance with recovery plans is probable.
FISCAL EFFECT : Unknown
COMMENTS : According to OUSD in 2003, district officials became
aware of a negative general fund balance for the 2001-02 fiscal
year, and of potential deficits in its 2002-03 budget, in August
2001. The district projected at the time that it would run out
of cash in May of 2003 and be unable to pay school employees.
In 1999, OUSD had negotiated a 24.4% teacher salary increase to
be phased in over three years. Also from 1999 to 2003, the
district estimated that it had lost 3,265 pupils, worth $15 to
$22 million in annual revenues. Despite making budget cuts for
the 2002-03 fiscal year that the district believed would save
approximately $31 million, the district continued to project a
negative fund balance at the close of the 2002-03 fiscal year
and the district governing board requested an emergency loan.
The district also noted at the time that, "in contrast to the
circumstances surrounding other school districts that have
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recently received state loans, there have not been any
accusations of intentional mismanagement or fraud in OUSD. The
budget deficits at the OUSD were inadvertently hidden by an
inadequate system of checks and balances in the district's
financial services division, and were exacerbated by declining
enrollment, increases in health care costs, and state education
budget cuts".
SB 39 (Perata), Chapter 14, Statutes of 2003, appropriated $100
million for an emergency loan to OUSD, and required the
Superintendent of Public Instruction to assume all the rights,
duties, and powers of the governing board of the district and to
appoint an administrator to act on behalf of the Superintendent
of Public Instruction in exercising the Superintendent's
authority over the school district. The bill authorized the
administrator, with the approval of the Superintendent, to enter
into agreements on behalf of the school district and to change
any existing district rules, policies, or practices, as
provided. The bill also specified that the governing board of
the school district not receive any compensation during the
period of the Superintendent's authority over the district, and
continued the authority of the Superintendent and the
administrator over the school district until certain conditions
were met, including the completion of an improvement plan for
the district. The bill required the Kern County Office Fiscal
Crisis and Management Assistance Team (FCMAT) to prepare an
improvement plan for the school district by July 1, 2003, and to
report on the implementation of the plan in written progress
reports until September 2004; budget actions subsequently
extended these reports through 2008. The bill required the
district to repay the loan as a straight line loan amortized
over a 20-year term, with interest as provided, and required the
district, except as specified, to bear 100% of all costs
associated with implementing its provisions.
SB 39 also stated six conditions which, when met, would trigger
return of all rights, duties, and powers to the governing board
of OUSD:
1)Two complete fiscal years have elapsed following the
appointment of the administrator or, at any time after one
complete fiscal year has elapsed following that appointment,
if the administrator determines, and so notifies the
Superintendent of Public Instruction, that future compliance
by the Oakland Unified School District with the improvement
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plan is probable.
2)FCMAT completes the improvement plan as specified.
3)FCMAT, after consultation with the administrator, determines
that for at least the immediately previous six months the
school district made substantial and sustained progress in
implementation of the plan in the major functional areas.
4)The administrator certifies that all necessary collective
bargaining agreements have been negotiated and ratified, and
that the agreements are consistent with the terms of the
improvement plan specified in Section 7 of this act.
5)The district completes all reports required by the
Superintendent of Public Instruction and the administrator.
6)The SPI concurs with the assessment of the administrator and
FCMAT that future compliance by the Oakland Unified School
District with the improvement plan and the multiyear financial
recovery plan is probable.
The current FCMAT review-recommendation process focuses on five
areas of responsibility to be considered for return to the
district: 1) Community Relations and Governance, 2) Financial
Management, 3) Personnel Management, 4) Facilities Management,
and 5) Student Achievement. FCMAT scores the district's efforts
in each of these categories and compares that score to an
established standard. In its September 2005 Third Progress
Report, FCMAT found the district to be above the evaluative
threshold marking satisfactory performance in the area of
Community Relations and Governance, and recommended the return
of this function to the OUSD board. FCMAT's Fourth Progress
Report, issued in September 2006, yielded the same findings and
recommendation. In July 2007, the SPI acted on this
recommendation and returned this operational area to the control
of the governing board. In its November of 2007 Fifth Progress
Report, FCMAT also found the district to be above the evaluative
threshold marking satisfactory performance in the areas of
Personnel Management and Facilities Management; in April 2008,
the SPI acted on this recommendation and returned these
operational areas to the control of the governing board. In its
Sixth Progress Report issued in December 2008, FCMAT found the
final two operational areas, Student Achievement and Financial
Management, to be above the evaluative threshold marking
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satisfactory performance, and recommended that the SPI consider
returning the remaining operational areas to control of the
governing board. No action has been taken by the SPI on this
recommendation.
Existing law provides no specific criteria to be used to
determine when the district's future compliance with the
improvement plan and the recovery plan is probable (i.e., when
condition 6) above has been met), and provides no direct
evaluative link between this determination and the reviews
completed by FCMAT. Having no clear statutory criteria for
return of full control could lead to results ranging from a
premature return of control, which is not in the students' or
the state's best interest, to an overly prolonged period of
Superintendent / State Administrator control, which may not be
in the best interest of any party; in addition, either of these
extreme results could occur despite FCMAT recommendations to the
contrary. The author and members of the Oakland community also
state that the ambiguity of OUSD's current situation of "hybrid"
control makes it difficult to work with students, parents,
staff, and the community at large to continue toward improvement
in the district.
The OUSD Board voluntarily underwent training in Boardsmanship
and the responsibilities of a Board during the first half of
2007; there has also been a complete turnover in board
membership since the 2003 state takeover.
There is a considerable state's interest in this issue, in that
a return to dysfunction in the district (either because the
district is not yet ready for a return of full control or
because the district "backslides" once control is returned)
should be the paramount concern, both because of the resulting
impact on students and the state's outstanding receivable, the
unpaid balance, $82,859,465 as of the start of this fiscal year,
of the $100 million loan.
Supporters of the bill have argued that having a set of
performance evaluations conducted by an independent expert on a
certain timeline, where positive evaluations trigger the return
of specific areas of responsibility to the OUSD Board, meets a
standard for a defined, unambiguous return process; and that the
return of control should be triggered by an external evaluation
of performance that determines when the district is ready for
those responsibilities and, at the same time, protects the
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interests of the state. According to the author, "The lack of a
transparent and orderly return to local control aggravates the
long-existing friction between the State and local stakeholders,
including the school board, superintendent, teachers, parents,
and the community at large. Additionally, the hybrid structure
of control continues to cause confusion in management,
particularly on issues where the areas of authority under board
control overlap with those under state control. With no
established timeline for return of full control, the district's
ability to effectively conduct its mission of educating its
students is negatively impacted."
Opposing arguments would include that the interest of the state
is so compelling that it overrides any local interest and
suggests that control by the State Administrator should
continue. It has also been argued that there should be a
greater compelling interest, than that argued by supporters,
before the Legislature considers changing current law, which
makes a statewide elected Constitutional Officer responsible for
the administration of school districts in fiscal crisis and for
making decisions on the return of power to those districts.
Committee amendments : Committee staff recommends the following
amendments:
1)Clarify that FCMAT use the same standards, scoring
methodology, and evaluative threshold as employed in their
Sixth Progress Report on the OUSD Assessment and Recovery Plan
to make any future evaluations, should one occur, of the
district's progress and recommendations as to operational
areas that should be returned to the control of the governing
board of OUSD.
2)Make the requirement that any area of responsibility
previously returned to OUSD be reverted to the control of the
State Administrator upon such recommendation by FCMAT in any
subsequent progress report and at the sole discretion of the
SPI.
3)Apply the provisions of this bill annually, rather than on a
one-time basis.
4)Use the FCMAT definition of operational areas that includes
"financial management" rather than "fiscal control".
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5)Change the date by which the SPI is required to return control
to the OUSD governing board for each operational area that
FCMAT has recommended for return in its most recent annual
progress report; specify that date to be July 1, 2010 in order
to avoid any conflicts or unintended consequences that might
occur with a management transition in the middle of a fiscal
year, and also to provide the state with clear delineation as
to who has fiduciary responsibility for OUSD in which fiscal
year.
Related legislation: AB 1377 (Swanson), pending in the Assembly
Appropriations Committee, requires the SPI to allow a school
district, that has been taken over by the SPI and that has a
State Controller ordered audit conducted instead of the required
annual audit, an appropriate period of time in which to address
any findings from that audit before penalties are assessed for
those findings. AB 788 (Swanson), pending in the Assembly
Education Committee, prohibits the SPI from transferring or
allocating to a charter school any funds appropriated or
allocated to a school district for which a state administrator
or trustee has been appointed.
Previous legislation: AB 2008 (Swanson), held in the Assembly
Appropriations Committee in 2008, would have prohibited any
chartering authority from approving a petition to establish a
charter school within the geographic boundaries of the Oakland
Unified School District while the State Administrator continues
to exercise any powers or the district has an outstanding
balance on the emergency apportionment. AB 45 (Swanson), vetoed
in the 2007, would have established a process for the return of
rights, duties, and powers to the governing board of OUSD. SB
39 (Perata), Chapter 14, Statutes of 2003, appropriated $100
million for an emergency loan to OUSD, and required the
Superintendent of Public Instruction to assume all the rights,
duties, and powers of the governing board of the district.
REGISTERED SUPPORT / OPPOSITION :
Support
Numerous individuals
Opposition
None on file
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Analysis Prepared by : Gerald Shelton / ED. / (916) 319-2087