BILL ANALYSIS
SENATE COMMITTEE ON EDUCATION
Gloria Romero, Chair
2009-2010 Regular Session
BILL NO: AB 851
AUTHOR: Brownley
INTRODUCED: February 26, 2009
FISCAL COMM: Yes HEARING DATE: June 25, 2009
URGENCY: No CONSULTANT: James Wilson
SUBJECT : School Finance
SUMMARY
This bill simplifies calculation of school district general
purpose funding (revenue limits) by consolidating five
"add-on" formulas into two fixed adjustments.
BACKGROUND
School district revenue limits were created in 1972 in
response to the Serrano v. Priest lawsuit that was then
pending in the courts. The Serrano case determined that the
state's then existent property tax based system of school
funding was unconstitutional and the state was ordered to
equalize per pupil revenues that had no rational basis to
be different. The Serrano courts excluded categorical
funding from equalization order because the need to
compensate districts for differential needs provided a
rational basis for unequal distribution.
Over the years the state has provided school districts with
various general aid allocations that, arguably, had a
rational basis for not being equalized. These "revenue
limit add-ons" were allocated to districts with their
revenue limit funding but not included in equalization
calculations and thus always kept separate from the
districts' "base revenue limits." Some of these "add-ons,"
such as the "meals for needy pupils" were allocations to
districts to allow them to maintain local initiatives that
had been funded from "voted overrides" of local property
tax rates. All such property tax increments were
eliminated by Proposition 13 in 1978 and local districts
had appealed to the state to maintain what had been locally
funded programs with "add-on" funding.
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In addition to preserving local initiatives, revenue limit
add-ons were created by statute to address costs that
varied among districts, and therefore did not make sense to
equalize, but still were basic funding needs that didn't
need to be restricted under a categorical program. The
minimum beginning teacher salary incentive was such an
add-on. Current law also requires the state to reimburse
school districts for costs of unemployment insurance that
exceed the amount incurred by the district in 1975-76 and
reimburse the Newport-Mesa Unified School District for
funding that was not received due to the bankruptcy of
Orange County in 1994-95.
Finally, current law requires that three school districts
in the Santa Cruz area receive a revenue limit adjustment
that equalizes funding among the districts participating in
an inter-district attendance agreement for middle school
pupils. The funding provided for this arrangement
constitutes a transfer in general purpose funding among the
districts.
ANALYSIS
This bill:
1) Commencing with 2010-11, requires the Superintendent
of Public Instruction (SPI) to compute an amount for
each school district equal to the sum of funding
received in 2007-08 (if any) for the Meals for Needy
Pupils and Beginning Teacher Salary Incentive divided
by the district's average daily attendance (ADA) and
further adjusted by the annual cost of living
adjustment applied to school district revenue limits.
2) Commencing with 2010-11, requires the SPI to compute
an amount for each school district equal to the sum of
funding received in 2007-08 (if any) for unemployment
insurance, Orange County bankruptcy, and the
inter-district transfer of middle school pupils in
three school districts, divided by the recipient
district's ADA.
3) Directs the SPI to increase affected school districts'
revenue limits per unit of ADA by the adjustments
computed above.
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4) Provides that the statutes authorizing the five
revenue limit "add-ons", which are replaced by the
above adjustments, shall become, inoperative as of
July 1, 2010, and repeal as of January 1, 2011.
5) Makes inoperative as of July 1, 2010, and repeals as
of January 1, 2011,
the program statutes authorizing school districts to
implement the beginning teacher salary incentive.
6) Authorizes county offices of education to maintain
their beginning teacher salary incentive.
STAFF COMMENTS
1) Previous legislation : AB 599 (Mullin) of 2008 was
substantially similar to this bill, except that it
also included 1983 instructional time incentive in the
adjustment that is created out of the Meals for Needy
Pupils and Beginning Teacher Salary Incentive add-ons.
AB 599 was vetoed with the following message:
While this bill attempts to simplify an overly complex
education finance system, this bill has several
technical concerns in the way it was drafted. I am
concerned that the consolidated "add-on" may not be
revenue neutral, as the author intended, since various
factors could result in unanticipated General Fund
costs or savings in future years. Furthermore, the
bill as crafted may diminish the incentives for
districts to offer longer instructional time.
2) Why two adjustments ? This bill proposes to
incorporate the Meals for Needy Pupils and Beginning
Teacher Salary Incentive add-ons into a single revenue
limit adjustment that would receive annual
cost-of-living adjustments (COLA), as did the add-ons
that the adjustment replaces.
The remaining add-ons, for unemployment insurance, Orange
County bankruptcy losses and the Santa Cruz
inter-district transfers, have never received an
annual COLA. Therefore, the second adjustment will
not be adjusted for COLA consistent with past
practice.
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3) Need for the bill. 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.
Consolidation of revenue limit add-ons makes sense since
the funding has long ago lost all connection to the
program that initially existed. These add-ons are
neither restricted in purpose nor related to current
program costs and may be used for any discretionary
purpose just like all other revenue limit funding. In
view of these facts, the Legislative Analyst's Office
has recommended that a number of revenue limit
add-ons, including those specified in this bill, be
rolled into revenue limits.
4) Technical amendment . Staff recommends the following
corrective amendments:
On page 4, line 10, strike 2010 - 11 and insert 2011- 12
On page 4, line 13, strike the adjustment to the add-on
and insert the amount
On page 4, line 17, after "average" insert daily
SUPPORT
Small School Districts' Association
California State PTA
OPPOSITION
None received.