BILL ANALYSIS
AB 980
Page 1
Date of Hearing: April 15, 2009
ASSEMBLY COMMITTEE ON EDUCATION
Julia Brownley, Chair
AB 980 (Swanson) - As Introduced: February 27, 2009
SUBJECT : Emergency apportionments: repayment: charter schools.
SUMMARY : Requires charter schools located within the boundaries
of a school district that is repaying an emergency apportionment
to pay a prorated amount of the annual payment made by the
district on the apportionment. Specifically, this bill :
1)Requires a charter school located within the geographic
boundaries of a school district that is repaying an emergency
apportionment and for which an administrator appointed by the
Superintendent is exercising the authority of the governing
board, to pay a prorated amount of the annual payment made by
the district on the apportionment.
2)Specifies that the prorated amount for each charter school
shall be determined by dividing the annual payment made by the
school district on the apportionment by the total number of
pupils enrolled in the school district, plus all of the pupils
who reside within the jurisdiction of the school district and
who are enrolled in charter schools that are located within
the geographic boundaries of the school district, and
multiplying that quotient by the number of pupils who reside
within the jurisdiction of the school district and who are
enrolled in the charter school.
3)Directs the Superintendent to deduct the prorated amount
determined for each charter school pursuant to this section
from the amount of general purpose entitlement funding
calculated for the charter school pursuant to Education Code
Section 47633 and apply the amount deducted to the outstanding
balance of the applicable emergency apportionment.
4)Makes findings and declarations that charter schools do not
contribute to the repayment of school district emergency
apportionments and that this creates an inequality in the
distribution of public resources between school districts and
charter schools.
EXISTING LAW provides for emergency apportionments to school
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districts subject to specified conditions, including, in certain
circumstances, the appointment by the Superintendent of Public
Instruction of an administrator to exercise the powers and
responsibilities of the governing board of the school district.
FISCAL EFFECT : Unknown
COMMENTS : Background on Emergency Apportionment . Oakland
Unified School District (OUSD) has been in State receivership
since 2003, having at that time been authorized a $100 million
emergency loan with a repayment period of 20 years. According
to California Department of Education (CDE), the outstanding
balance on the apportionment is $82,859,465 as of July 2008. A
State Administrator was appointed by Superintendent Jack
O'Connell and empowered to assume total control of all aspects
of OUSD's governing board. In 2003, as a result of being in
receivership, the governing board of OUSD had all of its rights,
duties and powers removed. In 2007, the following areas of
responsibility were returned to the governing board of OUSD:
Community Relations and Governance, Personnel Management and
Facilities Management. The State Administrator still retains
responsibility of the following areas: Pupil Achievement and
Financial Management.
According to the author, OUSD's recovery has been complicated by
a precipitous drop in pupil enrollment from 54,000 to 38,700
students in approximately seven years. Since that time, the
number of charter schools has grown significantly, and now house
approximately 7,000 students. This creates a large fiscal
impact on the district, as Average Daily Attendance (ADA)
funding is attached to individual students, and declines as
those students transfer to charter schools. The district is
unable to scale its budget accordingly, due to the rigidity of
human resources and physical infrastructure costs.
Oakland Unified School District and Charter School Enrollment
between 2000-2008
-----------------------------------------------------------------
| Year | District Enrollment | Charter School |
| | | Enrollment |
|---------------------+---------------------+---------------------|
| 2000-01 | 54,024 | 839 |
|---------------------+---------------------+---------------------|
| 2001-02 | 52,467 | 1,078 |
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|---------------------+---------------------+---------------------|
| 2002-03 | 50,424 | 2,077 |
|---------------------+---------------------+---------------------|
| 2003-04 | 47,650 | 2,787 |
|---------------------+---------------------+---------------------|
| 2004-05 | 44,925 | 4,289 |
|---------------------+---------------------+---------------------|
| 2005-06 | 41,467 | 6,668 |
|---------------------+---------------------+---------------------|
| 2006-07 | 39,854 | 7,158 |
|---------------------+---------------------+---------------------|
| 2007-08 | 38,720 |Not reported |
| | | |
-----------------------------------------------------------------
Source: OUSD FCMAT Report, November 2007. Figures for 2000-2007
are from Ed-Data (District figures do not include charter school
enrollment). Figure for 2007-08 is district reported.
According to the author, school districts in California may
qualify for an emergency loan apportionment from the state if
they face financial insolvency. School districts receive
funding based on the number of students who attend school, based
on a formula known as Average Daily Attendance (ADA). Declining
enrollment is often a contributing factor in these districts'
financial issues, as infrastructure and personnel costs do not
smoothly scale to match decreased student attendance. Charter
schools by definition exacerbate declining enrollment, as
students move from traditional public schools to charter
schools. The loss of pupils leads to decreased revenues for the
district, impacting their ability to repay the loan.
Additionally, charter schools are currently not required to
contribute to the repayment of the state loan, forcing students
in district schools to shoulder a disproportionate burden of the
debt.
In 2008, the Select Committee on State School Financial
takeovers convened a hearing to discuss the effectiveness of the
State receivership system. One issue that local stakeholders in
different districts repeated was the impact that charter school
growth had on their finances.
Loan repayments are generally a fixed amount over a designated
period of time. Thus, as district revenues decline, the loan
payment assumes a larger percentage of the district budget,
leaving a shrinking percentage that can be devoted to
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educational programs. One district noted that in the course of
its receivership, charter school enrollment nearly tripled,
composing approximately 20% of remaining public school
enrollment. The result was that students in the traditional
public schools were each shouldering a larger burden of the debt
than before.
According to the California Charter Schools Association, the
argument that Oakland Unified School District will be unable to
meet its obligation to repay the emergency appropriation because
too much is being redirected to charter schools is undercut by
the fact that "nearly a third of all charter schools that get
Proposition 39 facilities from OUSD have written into their
agreements that they will pay their fair share of the repayment.
As each additional charter school gets a Proposition 39
facility, that same provision will be written into their
agreements as well."
What do Charter Schools Currently Contribute ? According to
Oakland Unified School District, 8 out of the 32 charter schools
authorized by the district pay a debt service fee to the
district to pay their share of the district's emergency loan
repayment. The debt service fee's paid by the charter schools
are accessed either as a "per student fee" or a "per square foot
fee." When accessed per student, charters paid $180 per student
in 2007-08. When accessed per square foot, charters paid $1.50
per square foot in 2007-08. The "per student" rate is
calculated by the district using the total annual cost of the
debt service divided by the total enrollment of district and
charter school students. The "per square foot" rate is
calculated by the district using the total annual cost of the
debt service divided by the total square footage of all district
facilities. Under this bill, all charter schools located within
the boundaries of Oakland Unified School District would be
required to pay approximately $130 per student annually toward
the debt obligation, based on current enrollment in the district
of 38,634 and current enrollment in charter schools of 7,492.
This means the charter schools located within the boundaries of
the Oakland Unified School District would contribute $973,960
annually toward the districts $6 million annual payment toward
the emergency loan. The 8 charter schools that currently pay
toward the debt service, contributed $511,200 in 2008-09. Under
this bill, the existing charter schools would pay less in per
student debt service than they currently pay since the bill
would require each school to contribute approximately $130 per
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student instead of the $180 per student they currently pay.
The California Teachers Association supports the bill and argues
that education funding laws should protect school districts from
catastrophic financial situations that might result from the
formation of charter schools. Normally, many cost impacts that
develop among charters and their authorizing districts are
mitigated, at least in part, through oversight and/or pro rata
facility charges or other financial arrangements between a
charter school and the district. However, if the welfare of all
of a District's students, in both traditional and charter
schools is to be given weight, special attention must be paid to
the impacts of charter schools operating in school districts
being overseen by a state administrator. Charters should be
'revenue neutral' to the districts in which they operate and
should not inadvertently or unduly impact the resources
available to students remaining in traditional district schools.
ADA that moves from traditional schools to charter schools in
the district will have the consequence of increasing the burden
of repayment of the state loan to a shrinking foundation of
revenue derived from District non-charter ADA. AB 980 strikes
an appropriate balance to remedy this situation in requiring
charter schools to pay a pro-rated 'fair share' of the
outstanding balance of a state emergency loan. Not to strike
this balance may create a financial 'death spiral' from which a
district already in distress may never recover.
The California Charter Schools Association opposes the bill and
argues, "The bill is intended to compel charter schools in the
Oakland Unified School District to help pay off the emergency
apportionment OUSD is seeking to retire. The massive debt that
led to the emergency apportionment was incurred before many OUSD
charter schools were approved. Moreover, the charter schools
are separately funded and operated and, hence, are not part of
the causes or solutions to OUSD's financial problems."
Committee Amendment : The bill currently limits the requirement
that charter schools participate in the repayment of an
emergency apportionment if the school district has "an
administrator appointed by the Superintendent that is exercising
the authority of the governing board." Committee staff
recommends the bill be amended to delete this requirement so
that the obligation of charter schools to participate in the
repayment of an emergency apportionment covers the entire length
of the term of the loan, and not only the time during which a
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state appointed administrator is exercising the authority of the
governing board.
Previous legislation . AB 2008 (Swanson) from 2008 would have
prohibited any chartering authority from approving a petition to
establish a charter school within the geographic boundaries of
the Oakland Unified School District while the State
Administrator continues to exercise any powers or the district
has an outstanding balance on the emergency apportionment. The
bill was held on the Assembly Appropriations suspense file.
REGISTERED SUPPORT / OPPOSITION :
Support
California School Boards Association
California Teachers Association
Several Individuals
Opposition
California Charter Schools Association
Analysis Prepared by : Chelsea Kelley / ED. / (916) 319-2087