BILL ANALYSIS
SENATE COMMITTEE ON EDUCATION
Gloria Romero, Chair
2009-2010 Regular Session
BILL NO: AB 1022
AUTHOR: Nava
AMENDED: April 29, 2009
FISCAL COMM: Yes HEARING DATE: July 1, 2009
URGENCY: No CONSULTANT:Kathleen Chavira
SUBJECT : Ventura Unified School District: surplus property
proceeds.
SUMMARY
This bill authorizes the Ventura Unified School District to
deposit $10 million of the proceeds from the sale of
surplus real property purchased entirely with local funds
and sold prior to January 1, 2005, into the general fund of
the school district to be used for any one-time general
fund purpose.
BACKGROUND
Current law requires school districts to use the funds
derived from the sale of surplus property for capital
outlay or maintenance of school district property.
Current law authorizes the deposit of proceeds from the
sale or lease with option to purchase into the district's
general fund if: 1) the school district governing board and
the State Allocation Board have determined that the
district has no anticipated need for additional sites or
building construction for the ten-year period following the
sale or lease with option to purchase, and 2) the district
has no major deferred maintenance requirements.
Current law, established by SB 1415 (Scott, Chapter 810,
Statutes of 2006), requires that the proceeds from the sale
or lease with option to purchase of school district
property be used only for one-time expenditures, and
prohibits the use of these funds for ongoing expenditures
including, but not limited to, salaries and other general
operating expenses. In exchange for this consideration,
districts are unable to participate in the School Facility
Program (SFP) for a period of ten years.
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Current law also provides for an exception to the 10-year
exclusion from the SFP if two conditions are met. First,
five years must have elapsed since the date upon which the
sale or lease with option to purchase was executed and
second, the State Allocation Board must make a
determination that the district has
demonstrated enrollment growth or a need for additional
sites or building construction that the district could not
have easily anticipated at the time the board made its
original determination, that the district had no need for
additional sites or building construction for the ten-years
following the sale or lease with option to purchase of
surplus property.
ANALYSIS
This bill :
1) Authorizes the Ventura Unified School District
(District) to deposit $10 million dollars of the
proceeds from the sale of surplus real property
purchased entirely with local funds and sold prior to
January 1, 2005, into the general fund of the school
district to be used for any one-time general fund
purpose.
2) Specifies that if the purchase of the surplus property
was made using the proceeds of a general obligation
bond act or revenue derived from developer fees, the
amount of the proceeds of the transaction that may be
deposited into the general fund of the school district
cannot exceed the percentage computed by the
difference between the purchase price of the property
and the proceeds from the transaction, divided by the
proceeds of the transaction, as defined.
3) Defines "proceeds of the transaction" for purposes of
the bill as follows:
a) For a cash sale, the amount from
the sale of the property less reasonable related
expenses.
b) For a sale that did not result in
a lump-sum cash payment, the amount from the sale
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of the property that is the sum of all cash
received and the net present value of the future
cashflow generated by the transaction, less
reasonable related expenses.
4) Requires the State Allocation Board (SAB), if the
district exercises the authority granted by the bill,
to reduce an apportionment of hardship assistance
awarded to the District by an amount equal to the
amount of the proceeds of the sale used for general
fund purposes.
5) Specifies that if the school district exercises the
authority granted by the bill it is ineligible for
hardship funding from the State School Deferred
Maintenance Fund for five years after the enactment of
the bill.
6) Specifies that the deposit of proceeds into the
District's general fund pursuant to the bill's
provisions does not disqualify the school district
from eligibility for state funding for any school
facilities program authorized by the state.
7) Requires the governing board of the District, before
it exercises the authority granted by the bill to:
a) Certify specified information to
the State Allocation Board.
b) Present a plan for expenditure of
the one-time resources at a regularly scheduled
board meeting, as specified.
8) Sunsets these provisions on January 1, 2010, and
repeals them unless deleted or extended by a later
enacted statute.
9) Declares that the unique circumstances make a general
statute inapplicable and that the bills provisions are
necessarily applicable only to the Ventura Unified
School District.
STAFF COMMENTS
1) More information . According to the author, the
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Ventura Unified School District (District) is
increasing class size, reducing teachers, support
staff and administrators, eliminating programs,
eliminating summer school, reducing academic and
social interventions, yet they have approximately $30
million in proceeds from the sale of surplus property.
This is the year that flexibility has been given in
areas that have never been considered before and, the
author contends, it is perplexing that the District
cannot access its proceeds from the sale of surplus
property when they are able to access funding
previously limited for specified programs.
2) What does current law allow ? Under current law, and
with State Allocation Board (SAB) approval, the
District could deposit funds from the sale of surplus
property into the general fund for one-time
expenditures, but is prohibited from using these funds
for ongoing or general operating expenses. The
District would also be prohibited from requesting
state funds for school facility modernization or new
construction for at least five and at most ten years.
The District could be eligible for state facilities
funding after five years if the SAB determines that
there is enrollment growth or a need for additional
sites or building construction that the district could
not have easily anticipated when it sold the surplus
property.
This bill would authorize the deposit of proceeds from
the sale of surplus property that occurred prior to
2005 into the general fund for one-time expenditures
until October 31, 2013. The District would maintain
the ability to request state funds for school facility
modernization or new construction during that time.
3) Consistency . This bill authorizes the use of proceeds
for the sale of surplus real property for any one-time
general fund purpose. Current law defines "one-time
expenditures" for purposes of the School Facility
program. In order to ensure consistency with the
definition of one-time expenditures, staff recommends
the bill be amended on page 2 line 9 to insert
"consistent with Section 17462 and the regulations
adopted by the State Allocation Board pursuant to
subdivision (c) of that section relating to the
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appropriate use of one-time expenditures" after
"purpose" and before the period.
4) Is this a unique circumstance ? Staff notes that the
Governor recently proposed several flexibility options
in order to help local districts meet their budget
shortfalls. Among these was the flexibility to
deposit proceeds from the sale of surplus property
into the general fund for any one-time general fund
purpose and trailer bill language which parallels this
bill's provisions. This bill would grant this
authority for a single district, the Ventura Unified
School District and declare a "unique circumstance
that makes a general statute inapplicable." Districts
throughout the state are experiencing budget
shortfalls as a result of the current fiscal climate.
Should the flexibility granted by this bill be limited
to one district only? If the Governor's flexibility
proposal is adopted by the Budget Conference
Committee, is this bill necessary?
5) Prior legislation . The Legislature and Governor have
enacted several legislative proposals to authorize the
use of proceeds from the sale of surplus property for
general fund purposes. Staff notes that in each case,
the use of these funds was restricted to one-time
general fund purposes.
AB 1908 (Wolk, Chapter 634, Statutes of 2008)
Authorizes the Dixon Unified School District to sell
specified surplus property and to deposit the proceeds
into the general fund of the school district in order
to reestablish a 3% reserve to stay out of
receivership.
AB 1895 (Coto, Chapter 269, Statutes of 2006)
authorized the Oak Grove Elementary School District,
until January 1, 2010, to sell certain surplus real
and personal property and to use the proceeds from
that transaction for any one-time general fund
purpose.
SB 177 (Hollingsworth, Chapter 839, Statutes of 2004)
authorized the Santee Elementary School District and
the Capistrano Unified School District to sell
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surplus real property and related personal property,
and deposit the net proceeds into the general fund for
any one-time general fund purpose. Specified
conditions for such authority included potential
reductions in apportionments for hardship assistance,
and ineligibility for hardship funding from the State
School Deferred Maintenance Fund.
SB 1906 (Sher, Chapter 838, Statutes of 2004)
authorized the Santa Clara Unified School District,
with specified conditions, to sell surplus real
property and related personal property, and deposit
the net proceeds into the general fund to use for any
one-time general fund purpose.
AB 264 (Mullin Chapter 891, Statutes of 2003)
authorized school districts with fewer than 11,000
pupils to deposit up to 25% of the proceeds of the
sale or lease of surplus school real property into the
school district general fund for use for any one-time
expenditure of the school district, except for
salaries and benefits, if prescribed conditions were
met. The authority granted by this bill was repealed
on January 1, 2005.
SUPPORT
California Association of School Business Officials (CASBO)
California School Boards Association (CSBA)
OPPOSITION
None received.