BILL ANALYSIS
AB 972
Page 1
Date of Hearing: January 13, 2010
ASSEMBLY COMMITTEE ON EDUCATION
Julia Brownley, Chair
AB 972 (Strickland) - As Amended: April 29, 2009
SUBJECT : School district administrative costs
SUMMARY : Places a limit on the level of expenditures for
administrative costs that can be made by large school districts.
Specifically, this bill :
1)Requires, commencing with the 2010-11 fiscal year, a school
district with annual enrollment greater than 300,000 pupils to
limit expenditures for administrative costs in each fiscal
year to no more than 5 percent of its total budget, including
monies from all fund sources.
2)Defines administrative costs to be the sum of expenditures on
general administration, instructional resources supervision
and supervision of instruction, and specifies the activities
included in each of those expenditure categories
3)Specifies that administrative costs do not include services
performed by classified employees.
EXISTING LAW :
1)Requires each school district to develop an annual budget and
to hold a public hearing of its governing board, on or before
July 1 of each year, to adopt that budget.
2)Requires the county superintendent of schools to examine the
adopted budget for each district within his or her county to
determine whether the budget complies with standards and
criteria adopted by the State Board of Education, and to
determine whether the adopted budget will allow the school
district to meet its financial obligations during the
specified fiscal year and is consistent with a financial plan
that will enable the district to satisfy its multiyear
financial commitments.
3)Places a maximum on the number of administrative employees per
100 teachers in a school district to be: 9 in elementary
districts, 8 in unified districts and 7 in high school
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districts; also provides for compliance to be subject to audit
in each district's required annual independent audit.
4)Levies a penalty equal to the proportion of state general fund
revenue in the district's general fund budget multiplied by
the average administrator's salary for each administrator in
excess of the ratio specified in 3) above for that type of
district.
5)Places a minimum on the proportion of a school district's
expenditures that must be allocated for the salaries of
classroom teachers to be: 60 percent in elementary districts,
55 percent in unified districts, and 50 percent in high school
districts.
6)Requires each school and school district to annually complete
a School Accountability Report Card, that is provided to the
public and contains specified information including numbers of
and expenditure information on both classroom and
administrative staff.
7)Requires each local education agency to provide for an annual
audit of its books and accounts, including all fund sources
and expenditures; requires the audit to be completed by a
certified public accountant or a public accountant, licensed
by the California Board of Accountancy, who is deemed by the
SCO as qualified.
FISCAL EFFECT : This bill is keyed non-fiscal.
COMMENTS : No background materials on this bill have been
received from the author.
Los Angeles Unified School District (LAUSD), with nearly 688,000
pupils enrolled, would be the only district immediately subject
to the provisions of this bill; the next largest districts in
the state fall well short of the 300,000 enrollment trigger. The
largest of those districts include San Diego (132,000), Long
Beach (87,500), Fresno (77,000), and Elk Grove (62,000); no
other district in the state has over 60,000 in enrollment.
LAUSD has nearly 900 schools, and serves students in 26 cities.
The district is operationally organized into eight "local
districts" or regions with up to 100,000 pupils; each has its
own local superintendent. The school district is 73% Hispanic,
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11% African-American, 9% White, and 7% Asian or other
ethnicities. Approximately 44% of the district's schools are
ranked above the bottom three deciles on the 2007 Base Academic
Performance Index (API), 85 percent of the district's schools
showed positive 2007 to 2008 API growth (the analogous statewide
proportion is 77 percent).
Two bills in the 1990s, AB 1635 (Karnette) in 1994 and SB 505
(Leonard) in 1995, would have implemented a 5 percent cap on
school district administrative expenditures as is proposed by
this bill; neither bill was passed by the Legislature.
Proposition 223, the California Educational Efficiency Act, was
put before the electorate in 1998 and failed passage by a 45.5
percent to 54.5 percent vote. This initiative would have
prohibited school districts from spending more than 5 percent of
funds from all sources for administrative costs, including
instructional resources supervision and supervision of
instruction. The remaining 95 percent of funds would have been
required to have been spent on direct services to students,
school site employees and school facilities. Districts would
have been fined $175 per student for non-compliance, been
required to publish information on administrative costs
annually, been required to report expenditure information to the
state, do performance audits and fiscal efficiency reviews every
five years, and been required to develop and implement
performance budgeting systems. The 5 percent limit on
expenditures for administrative costs and the definition of what
constitutes an administrative cost that are proposed in this
bill are the same as the limit and definitions specified in
Proposition 223, and are consistent with the proposals in AB
1635 and SB 505.
The proposal in this bill raises a number of questions:
1)What is the rationale for the enrollment threshold of 300,000
pupils? The enrollment threshold that must be met before the
provisions of this bill become operative for any school
district would appear to be arbitrary, except for the fact
that only one school district in the state has enrollment
greater than this threshold. Thus it appears that this
threshold was chosen so as to apply to one school district,
LAUSD.
2)Why limit administrative expenditures to 5 percent? There
does not appear to be any rationale behind the choice of 5
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percent of the district's total budget as the effective cap on
administrative costs. According to the Legislative Analyst's
Office (LAO) in the 1998 analysis of the same administrative
expenditure restriction as proposed in Proposition 223, 95
percent of all California school districts were spending more
than 5 percent of their budget on administration; LAO also
estimated average expenditures on administration for districts
to be 7.3 percent. Based on the Common Core of Data, 2005-06,
maintained by the National Center for Education Statistics
(NCES) of the U.S. Department of Education, California school
districts employ 0.4 officials and administrators per 1,000
students, placing it 47th among the 50 states and the District
of Columbia; districts in Texas and Illinois, for example,
employ 1.8 administrators per 1,000 students. From the same
data, California also employs, on a per 1,000 students basis,
2.2 principals (placing 49th), 1.1 counselors (placing 51st),
and 0.2 librarians (placing 51st). NCES also estimates that
approximately 61.5 percent of current expenditures for public
elementary and secondary schools are spent nationally on
instruction, with the reminder spent on support services and
non-instruction; NCES reports that California expends
approximately 62 percent on instruction. None of these data
lead to a conclusion that 5 percent is or is not the
appropriate threshold, nor to a conclusion that California
school districts spend a disproportionate amount on
administration relative to their counterparts in other states.
3)Why should these restrictions only apply to school districts
and not other education entities such as county offices of
education, charter schools, joint powers administrations,
special education local planning areas, or regional occupation
centers and programs? No intent statement is provided in the
bill and no information as to intent was provided to the
Committee. It is presumed that the intent is to limit
administrative expenditures in favor of ensuring high levels
of resources flowing to direct instructional activities.
Since all educational entities, including county offices of
education and charter schools, make administrative
expenditures and provide direct instructional activities,
limiting the provisions of this bill to school districts, or
more specifically to one school district, does not seem to be
well founded.
4)Have other states adopted similar school district budget or
expenditure restrictions? The Education Commission of the
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States (ECS) reported in 2004 on budget and expenditure
limitation practices in a number of states. ECS found that
some states (e.g., Illinois and New Jersey) limited the growth
of administrative costs to an annual fixed percentage of
budget, some states (e.g., Arizona and Texas) required
auditing and/or reporting of administrative or instructional
costs, and other states (e.g., Alaska and Louisiana) required
70 percent of revenues to be allocated for instructional
expenditures. ECS reported no states limiting administrative
expenditures to an absolute level as proposed in this bill.
5)Are there existing restrictions on administrative staff and
budget expenditures on instructional salaries; if so, are they
not being implemented to the point that we need further
restrictions? State law currently places a maximum on the
administrator/teacher ratio in each school district, such that
no more than 9, 8 or 7 administrators can be employed per 100
teachers, in elementary districts, unified districts and high
school districts, respectively. Current law also provides for
a penalty to be assessed, equal to the proportion of state
general fund revenue in the district's general fund budget
multiplied by the average administrator's salary for each
administrator in excess of the ratio defined above for that
type of district, and offset against the district's principle
apportionment if the district fails to comply with this
requirement. Current law also places a minimum on the
proportion of a school district's expenditures that must be
allocated for the salaries of classroom teachers to be: 60, 55
and 50 percent in elementary districts, unified districts and
high school districts, respectively. These requirements are
subject to audit in each district's required annual
independent audit, and, according to the California Department
of Education (CDE), audit findings are made and penalties
assessed in one to two cases per year. School districts are
also required to publicly post information related to
expenditures and staffing as part of each district's and
school's School Accountability Report Card required under the
constitutional provisions of Proposition 98. All of these
requirements are operable and binding on school districts.
6)Are the definitions of administrative costs clear, do they
correspond to centralized (versus school-site) expenditures,
and are they coordinated with the state's school accounting
system? The expenditure categories defined in this bill are
ambiguous - a problem shared with any attempt to establish a
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set of simplistic accounting standards. For example, there
are not clear differences between 'instructional resources
supervision' and 'supervision of instruction', or between
'curriculum development' (activities that aid teachers" in
terms of curriculum and instruction) and 'instructional staff
development'. Ambiguities such as this would likely lead to
compliance problems. The defined categories do not appear to
correspond to central office versus school site activities or
expenditures, though this distinction has often been at the
core of such proposals. It should also be noted that the
expenditure categories defined in this bill have no
relationship to the Standardized Account Code Structure (SACS)
that is administered by the CDE and forms the basis for the
school accounting system used by every local educational
agency in California to track both revenues and expenditures.
7)This bill exempts the cost of services performed by classified
employees from the definition of administrative costs, what
impact does this have on the proposal? With very few minor
exceptions, personnel in school districts fall into one of two
categories; either a staff person is certificated (e.g.,
teachers, principals, assistant/associate/deputy
superintendents, superintendents, counselors, psychologists,
nurses), or a person is classified staff. A high proportion
of staff at a school site would be certificated, while an even
higher proportion of staff in the central office of a district
would be classified. The result of this provision would be
that the cost of some activities that are very closely linked
to providing services to students (e.g., program evaluation,
managing resources used to instruct pupils) would be limited
as administrative costs associated with certificated staff,
while other activities more closely associated with
centralized administration (e.g., payroll, personnel services,
printing) would not be limited because they are administrative
services performed by classified staff. Oddly enough, the
most administrative of functions in a school district, that
are also the most removed from direct interaction with the
classroom, - the business and administrative services provided
in the district's business office - would be entirely exempted
from the administrative limits in this bill, since those
activities are performed by classified staff. This provision
by itself invalidates any ability of this bill to provide a
clear and rational method for limiting school district
administrative expenditures.
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8)What actions will school districts be able to take in order to
comply with these provisions? A district that found itself
out of compliance with the 5 percent cap on administrative
expenditures proposed in this bill would have a number of
options for dealing with this situation. Districts could:
a) Ensure they are accurately accounting for administrative
costs. For example, a district might now be accounting for
an administrator's time entirely within central
administration even if the person spends time providing
direct services at schools. Under this bill, the district
would probably more precisely track the time that employees
work on direct service and administrative tasks.
b) Move central office duties to the school sites so as to
more closely link those duties with direct instruction.
For example, districts could move centralized facilities
management or printing to the schools. Generally speaking,
this option would not change the tasks that a district
currently performs, but it would change how and where those
tasks are done.
c) Create a non-profit foundation to support the activities
of the district. All donations or private funding could be
directed to the foundation, and these proceeds could be
used to provide many activities classified as
administrative under this bill. For example, a district
could move all printing of school directories, annual
reports, school bulletins, newsletters and notices to the
foundation, or could move all professional development
activities for teachers to the foundation; in both cases
this would remove both the revenue and the associated
expenditure on administrative tasks from the district
budget, and act to lower the proportion of (remaining)
administrative costs in the district's budget.
d) Move administrative activities to classified staff even
more so than is currently the case. For example, by
changing the minimum qualifications for many administrative
positions, and thus excluding qualified certificated staff
from those positions, the positions could be filled with
classified staff. Examples might be releasing certificated
librarians or licensed nurses, in favor of classified staff
to administer the library or first aid, or simply cutting
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library and health services.
e) A district could ignore the law, since there are no
compliance reporting, oversight or audit requirements, and
no penalties for non-compliance mentioned in this bill.
Earlier versions of the 95/5 proposal, including
Proposition 223 in 1998, had compliance provisions and
penalties that were applied if a district was in
non-compliance.
f) Make real reductions in spending on administration,
primarily by reducing personnel costs through elimination
or combining of administrative positions, and a redirection
of those savings to direct instructional services at
schools. This, however, begs the question as to what
activities or services would be cut as a result of this
reduction; it seems likely that activities related to
newsletters, bulletins, school social activities, or parent
participation might be among the first casualties of this
reduction, but this would not clearly be in the public's
best interests.
Note that f) above is presumed to be the intent of this bill,
since the other possible reactions by school districts would
either have no effect on the underlying administration
activities of the district, have impacts only at the accounting
level, have impacts that may negatively effect instructional
services, or may actually increase administrative costs (since
the task of strategizing how to avoid the administrative cap in
itself would create new administrative costs). The League of
Women Voters in its summary of Proposition 223 stated this point
very clearly, "Districts are likely to simply restructure or
shift spending from one category to another in an attempt to
comply with the measure, and may make changes that are neither
efficient nor cost effective."
In light of the ambiguities that are inherent in trying to
simply define administrative costs and to cap those costs, it is
unclear that the gains from using this approach to attempt to
reduce administrative expenditures in LAUSD outweigh the cost of
the unintended consequences and new administrative costs that it
would generate.
In his budget proposal released on January 8, 2010, the Governor
notes that he is "proposing a reduction of approximately ten
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percent in funding for administration, overhead, and other
non-instruction related spending by school districts to offset
increases in workload; these reductions are targeted to school
district and county office of education central administration
costs?" No details were available on this proposal at the time
this analysis went to print.
Previous legislation: AB 146 (Smyth), which was not heard (at
author's request) in the Assembly Education Committee in 2007,
would have required the reorganization of any unified school
district having annual enrollment greater than 500,000 students
into several school districts, each with an enrollment of no
more than 50,000 pupils; also would have prohibited
administrative costs as a percentage of total funding for each
new school district from exceeding the percentage of total
funding spent for that purpose in the existing school district
two years before the reorganization became effective. AB 1865
(Smyth), failed passage in the Assembly Education Committee in
2008, was substantially similar to AB 146.
SB 505 (Leonard), failed passage in the Senate Appropriations
Committee in 1995, would have required each school district in
the state, over a five-year phase-in, to expend not more than 5
percent of district revenues on administrative costs and not
less than 95 percent directly to school sites. AB 1635
(Karnette), failed passage in the Senate Education Committee in
1994, would have required LAUSD and all schools in the district
to develop a standards based education system, and required that
LAUSD allocate no more than 5 percent of its available funding
for administrative costs. Proposition 223 (1998), the
California Educational Efficiency Act, would have prohibited
school districts from spending more that 5 percent of funds from
all sources for administrative costs, and imposed penalties for
non-compliance.
REGISTERED SUPPORT / OPPOSITION :
Support
None on file
Opposition
Association of California School Administrators
California Association of School Business Officials
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California School Boards Association
Los Angeles County Superintendent of Schools, Dr. Darline P.
Robles
Los Angeles Unified School District
Analysis Prepared by : Gerald Shelton / ED. / (916) 319-2087