BILL ANALYSIS
AB 791
Page 1
ASSEMBLY THIRD READING
AB 791 (Swanson)
As Amended May 6, 2009
Majority vote
EDUCATION 7-3 APPROPRIATIONS 11-4
---------------------------------------------------------------------
|Ayes:|Brownley, Ammiano, |Ayes:|De Leon, Ammiano, Charles |
| |Buchanan, Carter, Eng, | |Calderon, Davis, Fuentes, |
| |Solorio, Torlakson | |Hall, John A. Perez, Price, |
| | | |Skinner, Solorio, Torlakson |
| | | | |
|-----+--------------------------+-----+------------------------------|
|Nays:|Nestande, Garrick, Miller |Nays:|Nielsen, Duvall, Harkey, |
| | | |Audra Strickland |
---------------------------------------------------------------------
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 in receivership, and the progress and improvements
made during that time; also 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 to the OUSD governing board.
2)Requires the Superintendent of Public Instruction (SPI) to
return to the governing board of OUSD by July 1 of each fiscal
year (FY), the authority for any operational area that the
Kern County Office Fiscal Crisis and Management Assistance
Team (FCMAT) has recommended for return in its most recent
annual progress report, and requires 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.
3)Requires FCMAT to use the same methodology as employed in
their Sixth Progress Report on the OUSD Assessment and
Recovery Plan in any future reports, should any occur, and
defines "operational areas" to be community relations and
governance, pupil achievement, personnel management,
AB 791
Page 2
facilities management and financial management..
4)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, and
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
(loan) from the state through the SPI.
2)Requires the SPI to assume all the rights, duties, and powers
of the governing board of the OUSD and to appoint an
administrator to act on behalf of the SPI in exercising the
authority of the SPI over the school district, and continues
the authority of the SPI and the administrator over the school
district until certain enumerated conditions, in the judgment
of the SPI, are met.
FISCAL EFFECT : The Assembly Appropriations Committee analysis
notes that this bill requires FCMAT progress reports to be the
basis for the SPI's return of authority to the district, and
that these progress reports are paid for by the district; the
committee also notes that there remains an outstanding balance,
in excess of $80 million, on the emergency loan received by the
district, and that the loan requires an annual payment of
approximately $6 million.
COMMENTS : According to OUSD in 2003, district officials became
aware of a negative general fund balance for FY 2001-02, 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 FY
AB 791
Page 3
2002-03 that the district believed would save approximately $31
million, the district continued to project a negative fund
balance at the close of FY 2002-03 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
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 SPI 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 SPI in exercising the SPI's authority over the school
district. The bill authorized the administrator, with the
approval of the SPI, 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 SPI's authority over the
district, and continued the authority of the SPI 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 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; these conditions included
that the SPI concurs with the assessment of the administrator
and FCMAT that control should be returned to the OUSD governing
board.
AB 791
Page 4
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
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.
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 FY, 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
AB 791
Page 5
those responsibilities and, at the same time, protects the
interests of the state.
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.
Related and previous legislation: AB 1377 (Swanson), pending in
the Assembly Appropriations Committee, requires the SPI to allow
a school district, that is under state control and that has a
State Controller ordered audit conducted instead of the required
annual audit, 180 days in which to address any findings from
that audit before penalties are assessed. AB 45 (Swanson),
vetoed in 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 SPI to
assume all the rights, duties, and powers of the governing board
of the district.
Analysis Prepared by : Gerald Shelton / ED. / (916) 319-2087
FN: 0000940