BILL ANALYSIS
AB 851
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Date of Hearing: April 1, 2009
ASSEMBLY COMMITTEE ON EDUCATION
Julia Brownley, Chair
AB 851 (Brownley) - As Introduced: February 26, 2009
SUBJECT : Education finance
SUMMARY : Consolidates five revenue limit add-ons into two fixed
adjustments to be included in each district's total revenue
limit funding. Specifically, this bill :
1)States the intent of the Legislature to simplify the state's
system of education finance, while increasing transparency,
ease of administration, and local flexibility.
2)Requires the Superintendent of Public Instruction (SPI) to
compute an amount for each school district equal to the sum of
funding received in fiscal year (FY) 2007-08 for the Meals for
Needy Pupils program (Education Code Section 42241.2), and
incentives to increase beginning teachers salaries (Section
45023.4), all divided by the district's average daily
attendance.
3)Applies an annual cost of living adjustment to the amount
computed in 2) above.
4)Requires the SPI to compute an amount for each school district
equal to the sum of funding received in FY 2007-08 for
unemployment insurance (Section 42241.7), Orange County
bankruptcy proceedings (Section 42238.21), and inter-district
transfers (Section 42238.22), all divided by the district's
average daily attendance (ADA).
5)Computes total revenue limit funding for each school district
by multiplying the sum of the base revenue limit and the
amounts calculated in 2) through 4) above by average daily
attendance.
6)Makes statutory language, authorizing the five school district
funding streams being consolidated, inoperative as of July 1,
2010 and repeals those sections as of January 1, 2011, unless
a later statute is enacted.
EXISTING LAW :
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1)Provides for revenue limit funding for school districts that
is based on a per pupil base revenue limit multiplied by ADA.
2)Defines base revenue limit for any school district to be equal
to the prior year amount adjusted to account for
cost-of-living increases and any other adjustment specified by
statute (e.g., an adjustment implementing revenue limit
equalization).
3)Defines ADA to be calculated by dividing the number of days of
attendance for all pupils enrolled in the district by the
number of instructional days in the district's FY, and a day
of attendance as a minimum number of instructional minutes
(specific to grade level) in a classroom setting under the
immediate supervision of a certificated employee of the school
district.
4)Adjusts revenue limit funding further by making adjustments,
as specified in statute, for individual programs or district
characteristics; these adjustments are collectively referred
to as revenue limit add-ons.
FISCAL EFFECT : According to both the Assembly Appropriations
Committee and the Senate Appropriations Committee analyses of a
substantially similar bill in 2008, this bill should be cost
neutral in terms of state costs and school district funding.
This bill may generate minor administrative savings at the state
and local level.
COMMENTS : Revenue limits as a mechanism for providing general
purpose funds to school districts were created following the
Serrano v. Priest lawsuit that determined that the education
finance system used in California at the time violated the state
constitution. Pre-Serrano school finance relied on locally
established property taxes, which led to significant per pupil
funding differences. In order to conform to the court's
decision and reduce these differences, the state created the
revenue limit system that combines local property tax revenues
with state general aid and allows the state to control the two
revenue sources on a per pupil basis.
Each district's base revenue limit has been determined by a
series of historical actions based on statute. Each year a
district's base revenue limit is calculated to be its prior year
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base revenue limit adjusted in that year to account for cost of
living increases and other adjustments such as equalization.
This base revenue limit is then multiplied by ADA to convert the
per pupil base to a total level of funding. Further adjustments
are made to total revenue limit funding in the form of revenue
limit "add-ons." These adjustments initially existed as
categorical funding programs, but have become simply additions
to discretionary funding without any restrictions on spending.
Many of these add-ons provide a proportionally equal amount of
funding to all or nearly all districts each year, and/or provide
an amount that does not vary over time to some subset of
districts.
This bill proposes to incorporate two of these revenue limit
add-ons (Meals for Needy Pupils program and incentives to
increase beginning teachers' salaries), into a single, fixed
adjustment and to consolidate three additional revenue limit
add-ons (adjustments for unemployment insurance contributions,
Orange County bankruptcy proceedings, and inter-district
transfers) into a separate, fixed adjustment; both adjustments
would be included in the calculation of each district's total
revenue limit funding. The slightly different treatment given
to the two sets of add-ons results from the fact that the first
group of two add-ons has historically had the annual revenue
limit cost-of-living adjustment (COLA) applied, while the second
group of three has not; thus this proposal treats the two groups
separately and applies the revenue limit COLA to the first
adjustment in a manner consistent with historical practice.
According to the author, this proposal will simplify and provide
additional transparency for the state's education finance
system, goals that are consistent with the Getting Down to Facts
research studies released in 2007. The author also points to
reduced administrative costs at the state and local levels as a
benefit of this proposal.
Incorporation and consolidation of many revenue limit add-ons
makes sense in that often the funding has lost all historical
connection to the program as it initially existed. In these
cases the add-ons merely add revenue limit funding in a
complicated fashion, even though that revenue may be used for
any discretionary purpose as is the case with any other revenue
limit funding. Thus there is no clear justification for these
add-ons to exist as separate funding streams. In other cases
program requirements for eligibility to receive funds are still
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relevant, but the funds may be used in a completely
discretionary manner, the amounts received vary little from year
to year, and the annual process for calculating funding levels
is complicated and cumbersome; these add-ons are candidates for
consolidation in the interest of simplification. The
Legislative Analyst's Office (LAO) has often recommended to the
Legislature that a number of revenue limit add-ons, including
those specified in this bill, be rolled into revenue limits.
A brief summary of the revenue limit add-ons addressed by this
bill follows; these descriptions are drawn in part from past LAO
reports. The first group (the two revenue limit add-ons
receiving COLA) includes:
Meals for needy pupils : This program provides funding to
districts that enacted property tax levies to support free or
reduced-price meals prior to Proposition 13 and thus lost that
funding with the passage of Proposition 13. Despite the name of
the program, the districts receiving these funds have complete
freedom over their use and are not obligated to use the revenues
to pay for subsidized meals. Districts currently receive other
state and federal categorical funding that must be used only for
subsidized meals.
Minimum teacher salary incentives : Minimum Teacher Salary
incentive funding provides participating school districts with
additional unrestricted revenues for increasing the salaries for
beginning teachers; the funds need not be used for this purpose.
The second group (three revenue limit add-ons that historically
have not received COLA), proposed to be built into an adjustment
to be included in the calculation each district's total revenue
limit funding, includes:
UI funding : The Education Code requires the state to pay
district UI costs that exceed the amount incurred by the
district in 1975-76. This "additional cost" mechanism was put in
place as a result of litigation, though the decision against
the state was eventually overturned. All districts are required
to participate in the UI program and receive this funding. By
paying for these costs, the state backfills district UI costs
and increases general purpose funding to districts.
Orange County bankruptcy proceedings : The base revenue limit
for the Newport-Mesa Unified School District was adjusted as a
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result of funding that was not received in 1994-95 due to the
county of Orange filing of a voluntary Chapter 9 petition in the
United States Bankruptcy Court.
Inter-district attendance agreements : A small number of
districts receive a revenue limit adjustment pursuant to an
inter-district attendance agreement affecting districts in the
Santa Cruz area. As a result, funding provided for this
arrangement constitutes a transfer in general purpose funding
between the districts.
Previous legislation: AB 599 (Mullin), vetoed in 2008, was
substantially similar to this bill, except that it also included
longer day-longer year incentive funding (commencing with
Section 46200) in the fixed adjustment that receives the annual
COLA. A number of bills have proposed rolling revenue limit
add-ons into revenue limits as part of a larger proposal to
reform or equalize revenue limits, or to consolidate categorical
funding; in general these bills have had opposition related more
to the larger proposal than to the treatment of add-ons. AB
2531 (Mullin), vetoed in 2006, made numerous changes to the
method for calculating revenue limit funding, including rolling
many add-ons into the revenue limit. AB 60 (Nunez), held in the
Assembly Appropriations Committee in 2005, included revenue
limit add-ons in an adjustment made for the purpose of
equalizing revenue limits, thus rolling those add-ons into the
revenue limit. SB 1510 (Alpert), held on the Assembly floor in
2004, consolidated many K-12 categorical funding programs and
most supplemental instruction hourly reimbursement programs into
several categorical block grants, and allowed the add-ons for
unemployment insurance, Meals for Needy Pupils, and necessary
small schools to be rolled into the base revenue limit. AB 2153
(Daucher), held in the Assembly Appropriations Committee in
2004, required existing add-ons for Meals for Needy Pupils,
continuation high schools [no longer treated as a revenue limit
add-on, but included in block granting done pursuant to AB 825
(Firebaugh), Chapter 871, Statutes of 2004,] necessary small
schools, longer day and year incentives, and specified
inter-district attendance adjustments to be rolled into the base
revenue limit AB 2153 also required the beginning teacher salary
incentive funding to be allocated as a grant rather than a
revenue limit add-on.
REGISTERED SUPPORT / OPPOSITION :
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Support
American Federation of State, County and Municipal Employees,
AFL-CIO
Small School Districts' Association
Opposition
None on file
Analysis Prepared by : Gerald Shelton / ED. / (916) 319-2087