BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
851 (Brownley)
Hearing Date: 08/17/2009 Amended: 07/15/2009
Consultant: Dan Troy Policy Vote: ED 9-0
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BILL SUMMARY: AB 851 would repeal the underlying statutes for
certain revenue limit add-ons and consolidate them into two
ongoing funding adjustments based on 2007-08 factors.
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Fiscal Impact (in thousands)
Major Provisions 2009-10 2010-11 2011-12 Fund
Revenue limit add-on Significant savings, General*
consolidation depending on the UI
contribution rate in
a given fiscal year
* Counts toward meeting the Proposition 98 minimum funding
guarantee
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STAFF COMMENTS:
School district revenue limits were established in the 1970s in
reaction to the Serrano v. Priest lawsuit that challenged
whether or not the differences in distribution of general school
aid throughout the state was equitable and conducted on a
rational basis. The revenue limit system allowed the state to
achieve greater equalization of general purpose funding per unit
of average daily attendance (ADA) by backfilling local property
taxes with the state's general fund. Ultimately, the court
ruled that general purpose school aid would be considered equal
if base funding fell within a $100 band (this amount is adjusted
for inflation over time) by different school district types
(elementary, high school, unified) and size (large and small).
The state has provided numerous funding allocations to further
equalize revenue limits over time.
In addition to the base revenue limit (BRL), the state funds
several add-ons on a differential basis. Add-ons relevant to
this bill include Meals for Needy Pupils (which backfills local
programs overridden by Proposition 13), the Unemployment
Insurance Adjustment (this compensates districts for
unemployment insurance (UI) costs in excess of 1975-76 costs),
and the Minimum Teacher Salary Incentive programs that encourage
districts to raise beginning teacher salaries. In addition to
these add-ons are certain district-specific adjustments that
encourage the provision of middle school for pupils of the Live
Oak and Soquel Union Elementary School Districts.
This bill would consolidate 4 of these revenue limit add-ons
into two separate adjustments by requiring the Superintendent of
Public Instruction to do the following:
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AB 851 (Brownley)
1. Calculate one adjustment for the 2010-11 fiscal year by
dividing the sum of each district's 2007-08 funding for the
Meals for Needy Pupils and Minimum Teacher Salary program
by their 2007-08 average daily attendance. In subsequent
years, this adjustment would be increased by the statutory
revenue limit COLA (if applied), similar to how these
factors are treated in current law.
2. Calculate a second adjustment for the 2010-11 fiscal
year by dividing the sum of each district's funding for the
Unemployment Insurance Adjustment and the district-specific
adjustments described earlier by the district's 2007-08
average daily attendance. This second adjustment would be
a fixed amount.
These adjustments would be added to the district's revenue limit
funding.
The bill would repeal the underlying statutes of the relevant
add-ons as of the 2011-12 fiscal year. Additionally, this bill
would repeal an obsolete section of law that ensured the proper
attribution of property taxes to the Newport-Mesa Unified School
District in the 1990s, owing to complications relating to the
Orange County bankruptcy proceedings.
According to the author's office, these consolidations are
intended to maintain current funding steams while eliminating
some of the state and local administrative burden of
implementing current law.
While these add-ons provide differential levels of district
funding based on historical conditions or response to
incentives, the funds provided are unrestricted in their use.
For example, the Meals for Needy Pupils program provides about
370 districts with widely varying rates of funding (from pennies
per ADA to thousands of dollars per ADA), though there is no
requirement that any of this money actually be expended on
meals. For these reasons, some have advocated for repeal or
reform of these add-ons. The Legislative Analyst's Office
recommended eliminating most of these add-ons in a 2003 report,
and there have been various legislative efforts to accomplish
that goal.
The provisions regarding the Meals for Needy Pupils, Minimum
Teacher Salary, and the district-specific adjustments would
essentially be cost neutral. Repealing the Unemployment
Insurance Adjustment (UI), however, could result in significant
savings for Proposition 98 funding obligations, as the UI
contribution rate varies from year to year. This bill would
effectively freeze in the rate at the statutory floor of .05
percent, reflecting the rate of the 2007-08 fiscal year. The UI
add-on was worth $11.4 million in that year. The rate for the
2009-10 fiscal year is set at .30 percent, and the cost of
reimbursement for the year is estimated to be $110.2 million - a
difference of almost $99 million. This bill, then, will result
in significant Proposition 98 savings relative to current law
for years in which the UI contribution rate is higher than the
statutory minimum. Some of these savings could counteracted by
increases in equalization costs in future years.
AB 599 (Mullin, 2008), legislation similar to this bill except
that it also proposed to consolidate instructional time
incentive funding, was vetoed by the Governor last year.