BILL ANALYSIS
AB 851
Page 1
ASSEMBLY THIRD READING
AB 851 (Brownley)
As Introduced February 26, 2009
Majority vote
EDUCATION 11-0 APPROPRIATIONS 16-0
-----------------------------------------------------------------
|Ayes:|Brownley, Nestande, |Ayes:|De Leon, Nielsen, |
| |Ammiano, Arambula, | |Ammiano, Charles |
| |Buchanan, Carter, Eng, | |Calderon, Davis, Duvall, |
| |Garrick, Miller, Solorio, | |Fuentes, Hall, Harkey, |
| |Torlakson | |Miller, John A. Perez, |
| | | |Price, Skinner, Solorio, |
| | | |Audra Strickland, |
| | | |Torlakson |
|-----+--------------------------+-----+--------------------------|
| | | | |
-----------------------------------------------------------------
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 (EC) Section 42241.2], and incentives to
increase beginning teachers salaries (EC Section 45023.4), all
divided by the district's average daily attendance; also applies an
annual cost-of-living adjustment (COLA) to this amount.
3)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 (EC Section 42241.7), Orange County bankruptcy
proceedings (EC Section 42238.21), and inter-district transfers (EC
Section 42238.22), all divided by the district's average daily
attendance (ADA).
4)Computes total revenue limit funding for each school district by
multiplying the sum of the base revenue limit and the amounts
AB 851
Page 2
calculated in 2) through 4) above by ADA.
5)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 :
1)Provides for revenue limit funding for school districts that is
based on a per pupil base revenue limit multiplied by ADA, and
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).
2)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 the Assembly Appropriations Committee,
no direct fiscal impact.
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 led to significant per pupil funding
differences and violated the state constitution. 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 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 were categorical funding programs, but have become simply
additions to discretionary funding without any spending restrictions.
AB 851
Page 3
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, but not in the base
revenue limit. 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 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 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, the add-ons merely add revenue
limit funding in a complicated fashion even though that revenue may
be used for any discretionary purpose, the amounts received vary
little from year to year, or the annual process for calculating
funding levels is complicated and cumbersome. 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 limit funding. A brief summary of the
five revenue limit add-ons addressed by this bill follows.
1)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.
AB 851
Page 4
2)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.
3)Unemployment insurance (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.
4)Orange County bankruptcy proceedings: The base revenue limit for
the Newport-Mesa Unified School District was adjusted as a 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.
5)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 limit funding 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; AB 60 (Nunez), held in the Assembly Appropriations Committee
in 2005; SB 1510 (Alpert), held on the Assembly Floor in 2004; AB
2153 (Daucher), held in the Assembly Appropriations Committee in
2004.
Analysis Prepared by : Gerald Shelton / ED. / (916) 319-2087
AB 851
Page 5
FN: 0000511