BILL ANALYSIS
AB 2082
Page 1
Date of Hearing: April 21, 2010
ASSEMBLY COMMITTEE ON EDUCATION
Julia Brownley, Chair
AB 2082 (Committee on Education) - As Amended: April 14, 2010
SUBJECT : Local educational agencies: reimbursable state
mandates
SUMMARY : Implements three changes related to the state's
reimbursement process for educational mandates by streamlining
the process for hearing incorrect reduction claims, providing
for future Legislative review of new mandates, and clarifying
the information on educational mandates that the Legislative
Analyst is required to provide the Legislature. Specifically,
this bill :
1)Requires the Commission on State Mandates (COSM) to transfer
all pending incorrect reduction claims filed by local
educational agencies, excluding community college districts,
to the Education Audits Appeal Panel (EAAP) by July 1, 2011.
2)Deems those transferred incorrect reduction claims to have
been appealed to the EAAP, and requires the EAAP to hold a
hearing on or before:
a) June 30, 2011 for incorrect reduction claims filed prior
to January 1, 2005.
b) June 30, 2012 for incorrect reduction claims filed on or
after January 1, 2005 and prior to January 1, 2007.
c) June 30, 2013 for incorrect reduction claims filed on or
after January 1, 2007 and prior to January 1, 2008.
d) June 30, 2014 for incorrect reduction claims filed on or
after January 1, 2008 and prior to July 1, 2011.
3)Requires any incorrect reduction claim filed by a local
educational agency, excluding community college districts,
commencing with the 2011-12 fiscal year, to be filed as an
appeal with the EAAP within 60 days of notification by the
State Controller (SCO) that the claim has been reduced.
4)Requires the EAAP to hold a hearing within 60 days of the
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receipt of the incorrect reduction claim filed as an appeal,
and to adjudicate that appeal in a manner consistent with the
panel's treatment of other education audit appeals.
5)Authorizes both local educational agencies filing incorrect
reduction claims as appeals and the EAAP to consolidate
similar claims made by multiple local educational agencies
into a single consolidated claim, as specified.
6)Prohibits the COSM from ordering a reconsideration of all or
part of any incorrect reduction claim that is eligible to be
filed as an appeal with the Education Audits Appeal Panel.
7)States legislative intent that statutes creating a
reimbursable state mandate on local educational agencies be
periodically reviewed, and that the Legislature consider
recommendations on whether those statutes should be amended,
repealed, or remain unchanged.
8)Requires that, in addition to a report submitted pursuant to
existing law, the Legislative Analyst (LAO) review and report
to the appropriate policy and fiscal committees in both houses
of the Legislature on each reimbursable state mandate, as
specified, relating to local educational agencies; also
specifies the information to be provided in the review and
report, including a summary of the mandate, its statutory
source, related fiscal information, and recommendations as to
whether the mandate should be amended, repealed, or remain
unchanged.
9)Requires the Legislative Counsel, in drafting a bill for
introduction or amendment where that bill would impose a state
mandated local program on a local educational agency, to
include a provision that repeals the state mandated local
program on a local educational agency, or makes the
requirement inoperative, five years after the date on which
the requirement becomes operative, unless the person
requesting the bill or amendment directs the Legislative
Counsel to do otherwise.
EXISTING LAW :
1)Requires the state, under the California Constitution, to
provide a subvention of funds to reimburse local governments,
including school districts, whenever the Legislature or a
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state agency mandates a new program or higher level of
service, with specified exceptions.
2)Establishes a procedure for local government agencies to file
test claims and claims for reimbursement of these costs with
the COSM and the SCO.
3)Requires the COSM to hear and decide upon each claim for
reimbursement, to determine the amount to be subvened for
reimbursement, to adopt parameters and guidelines to guide the
payment of claims, to adopt a reasonable reimbursement
methodology, and to hear incorrect reduction claims from local
agencies if the SCO reduces reimbursement claims upon audit.
4)Requires the COSM to consult with the Department of Finance
(DOF), among other state officials, when adopting parameters
and guidelines for reimbursement.
5)Requires the SCO to develop claiming instructions for each
mandate and to pay claims, subject to the availability of
funds; also authorizes the SCO to audit claims submitted for
reimbursement.
6)Requires the Legislative Analyst to submit a report to the
Joint Legislative Budget Committee and legislative fiscal
committees on the mandates reported by the COSM, and requires
that report to make recommendations as to whether the mandate
should be repealed, funded, suspended, or modified.
7)Establishes the Education Audit Appeals Panel (EAAP) in order
to allow local education agencies to appeal apportionment
significant (i.e., those valued at more than one ADA worth of
revenue limit funding) audit findings to a quasi-judicial
panel; also establishes a process and deadlines that govern
EAAP's actions and provide due process to appellants, and
requires the membership of EAAP to consist of the SPI, the
Director of DOF, and the Executive Director of the Fiscal
Crisis Management Assistance Team (FCMAT).
FISCAL EFFECT : Unknown
COMMENTS : The concept of state reimbursement to local
agencies, including local education agencies (LEAs), for state
mandated activities originated with SB 90 (Dills), Chapter 1406,
Statutes of 1972, also known as the Property Tax Relief Act of
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1972. The primary purpose of that Act was to limit the ability
of local agencies and school districts to levy taxes. To offset
these limitations, the Legislature declared its intent to
reimburse local agencies and school districts for the costs of
new programs or increased levels of service mandated by state
government. The Legislature authorized the State Board of
Control (BOC) to hear and decide upon claims requesting
reimbursement for costs mandated by the state.
In 1979, Proposition 4 amended the California Constitution by
adding Article XIII B, section 6 requiring the state to
reimburse local governments for the cost of new programs or
higher levels of service mandated by the Legislature or any
state agency; the BOC continued to hear claims under these
requirements. In 1984, the Legislature created the COSM, a
quasi-judicial body succeeding the BOC as the entity that
decides test claims alleging that the Legislature or a state
agency imposed a reimbursable state-mandated local program. If
the COSM identifies a state-mandated program as eligible for
reimbursement, it adopts parameters and guidelines defining what
activities will be reimbursed and adopts statewide cost
estimates. The COSM is also authorized to hear claims of
incorrect reductions from local agencies if the SCO reduces
reimbursement claims upon audit and the claimant chooses to
dispute that reduction. The COSM consists of the State
Treasurer, the SCO, the Director of DOF, the Director of the
Office of Planning and Research, two local elected officials
(with the restriction that they come from different categories
of local government, including school district governing boards,
city councils, or county boards of supervisors), and a public
member with experience in public finance.
The SCO is authorized to make payments for costs of mandated
programs from amounts appropriated by the annual Budget Act, by
the State Mandates Claims Fund, or by specific legislation. In
the event the appropriation is insufficient to pay claims in
full, claimants receive prorated payments in proportion to the
dollar amount of approved claims for the program. Balances of
prorated payments are made when supplementary funds become
available. The SCO reports the amounts of insufficient
appropriations to DOF, the Chairperson of the Joint Legislative
Budget Committee, and the Chairperson of the respective
committee in each house of the Legislature which considers
appropriations, in order to assure appropriation of these funds
in the Budget Act. If these funds cannot be appropriated on a
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timely basis in the Budget Act, this information is transmitted
to the COSM which will include these amounts in its report to
assure that an appropriation sufficient to pay the claims is
included in the next local government claims bill or other
appropriation bills. When the supplementary funds are made
available, the balances of each claim are paid. A claimant is
entitled to receive accrued interest at the pooled money
investment account rate if the payment is made more than a
specified period of time after the claim filing deadline or the
actual date of claim receipt, whichever is later.
The existing 51 reimbursable mandates for local education
agencies cover a wide variety of activities. According to the
Legislative Analyst's Office (LAO), the 2009-10 Budget Act
provides an appropriation of $1,000 for 41 mandated local
programs that bear on Kindergarten through community college
local educational agencies funded under Proposition 98. In
addition, five mandates are unfunded but suspended, and five
other mandates are unfunded in the budget. Of those 51
education mandates, 44 involve K-12 local educational agencies.
Also according to the LAO, district costs of administering these
mandated programs are projected to be approximately $416 million
in 2009-10. Given the current funding crisis, however, funds to
cover those costs may not be appropriated in the near future.
Limiting the funding provided in the budget for mandate
reimbursements, with the knowledge that unpaid claimants would
be reimbursed for the untimely payment with accrued interest,
has been an important aspect of the state's approach to dealing
with the fiscal problems it has faced in this decade. In
contrast, under Proposition 1A, approved by the voters in 2004,
the Legislature must fully fund mandate reimbursements for
non-education local governments, unless it suspends or repeals
the mandate.
The California School Board Association's Education Legal
Alliance and five local education agencies filed suit in 2007 to
challenge California's authority to defer compensation to
schools for programs that the state requires them to perform,
but does not fund. The lawsuit, filed with the San Diego County
Superior Court, sought to compel the state to comply with its
constitutional obligation to fully reimburse the cost of all
state mandated local programs that create new programs or
increased levels of service. In December 2008, the court found
the that the California Constitution requires the state to
budget full reimbursement of local governments, including school
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districts, for the cost of state-imposed mandates, and ordered
the state to fully fund mandated programs in the future. The
state of California is seeking to overturn this decision; a
final decision by the 4th District Court of Appeal in San Diego
is not expected until mid-2010.
In a separate lawsuit the practice of referring mandates back to
COSM in an attempt to reduce associated costs through the
commission's "reconsideration" of the claim was found to be
unconstitutional, according to a 2009 Appellate Court ruling,
without a consistent process in statute for doing so.
Effectively this means that the state has no process in place
that would allow mandates and their reimbursements to evolve as
legal interpretations, technology or state statute changes over
time. This issue has been discussed in the Assembly Budget
Subcommittee #4, and a working group that includes COSM and
other interested parties have been working to develop a process
that would meet the requirements of the court and that could be
amended into statute.
In October 2009, after conducting a follow-up of its 2003 audit
on state mandates, the California State Auditor issued an audit
report concerning state mandate determination and payment
processes. According to this audit report, "while the
Commission on State Mandates has made progress in reducing its
backlog of test claims for state mandates, the continuing
backlog is large." The auditor finds that high workload and
insufficient resources exist at the COSM, and goes on to say
that, "This situation, combined with the long time that elapses
before the Commission makes determinations, means that
substantial costs will continue to build before the Legislature
has the information it needs to take any necessary action."
Three findings or recommendations of the State Auditor form the
basis for the proposals in this bill.
1)The SCO "appropriately uses desk reviews and field audits to
process and verify mandate reimbursement claims." However, a
backlog of pending incorrect reduction claims, effectively
appeals of those audited reductions, exists. COSM currently
reports 158 pending incorrect reduction claims, with 40 of
those claims filed by K-12 local educational agencies (LEAs);
these pending K-12 claims amount to over $15 million. It
should be noted that in addition to the commission's "high
workload and insufficient resources", the lack of statutory
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deadlines on COSM's hearing of incorrect reduction claims
contributes to this backlog. The State Auditor feels that
this backlog:
a) "has undermined the Controller's efforts to implement
clear and consistent policies related to cost
reimbursement;"
b) "also indicate[s] a possible understatement of the
State's mandate liability because of the fact that claim
reductions may be reversed;
c) "keeps the Legislature from being able to assess the
true cost of mandates;" and
d) deprives local entities "of the use of the money while
the matter is being decided", if the incorrect reduction
claims are later upheld and the claims are funded.
2)Even "before the Commission becomes involved in determining
whether a mandate exists, problems can arise when the
Legislature establishes new required activities for local
entities. This may be done without effective evaluation of the
potential breadth or cost of the activities." There is "a
possible void in the Legislature's understanding of what
activities and costs a new program or higher level of service
will entail and of differences in how local entities perform
mandated activities." Increasing information available to the
Legislature on the impacts of educational mandates appears to
be called for.
3)In the period after the Commission has reported a new mandate
and its estimated cost, "problems can arise due to the lack of
state control of mandate activities undertaken by local
entities and the tendency for programs to diverge from
original intentions or lose their usefulness over time." In
order to reduce these problems, the State Auditor recommends
the sunsetting of each mandate, so as to "force the
reassessment of mandate activities and costs, hopefully
leading to the modifications needed to keep worthy activities
on track or to eliminate mandates that have outlived their
usefulness."
According to the authors, "the intent of this bill is to
implement changes in the mandate process in order to 1) reduce
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the impact of ineffective and unnecessary mandates placed on
local educational agencies, 2) reduce the long-term liability to
the state for mandate reimbursements, and 3) streamline the
process and reduce the workload of the COSM so as to shrink
processing time for all claims."
Specifically, this bill proposes to:
1)Redirect the workload associated with hearing incorrect
reduction claims filed by K-12 LEAs from the COSM to the EAAP.
The EAAP is an existing adjudicatory body in state government
that operates as a quasi-judicial panel and considers appeals
pertaining to audits of K-12 LEAs pursuant to the provisions
of the Administrative Procedure Act. The EAAP can approve
settlements, make findings of fact and interpretations of law,
find there was substantial compliance and thus waive or reduce
the payment required of the district, or deny the appeal.
It should be noted that the EAAP may have similar staffing
issues related to this workload as exists with the COSM;
however, EAAP is statutorily required to hear appeals before
it within 90 days of the filing of that appeal, has
historically stayed current with its caseload, and has the
ability to expand capacity by contracting with the Office of
Administrative Hearings for support in the form of hearings
and recommended decisions provided by Administrative Law
Judges who are experienced working with the EAAP on matters of
education law and finance.
2)Require the LAO to review and report to the appropriate policy
and fiscal committees in both houses of the Legislature on
each reimbursable state mandate relating to local educational
agencies, and includes specific information in the report,
including a summary of the mandate, its statutory source,
related fiscal information, and recommendations as to whether
the mandate should be amended, repealed, or remain unchanged.
This requirement augments an existing mandate report required
of the LAO.
3)Require the Legislative Counsel, when drafting a bill for
introduction or amendment, where that bill would impose a
state mandated local program on a local educational agency, to
include a provision that repeals the state mandated local
program on a local educational agency, or makes the
requirement inoperative, five years after the date on which
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the requirement becomes operative, unless the person
requesting the bill or amendment directs the Legislative
Counsel to do otherwise.
Previous legislation : AB 917 (Nestande), introduced in 2009 and
held in the Assembly Education Committee at the author's request
in 2010, would have required either full funding for or
suspension of education related state-mandated local programs in
each fiscal year; AB 844 (Villines), failed passage in the
Assembly Education Committee in 2009, and AB 3008 (Villines),
failed passage in the Assembly Education Committee in 2008, were
substantially similar to AB 917. AB 1222 (Laird and Silva),
Chapter 329, Statutes of 2007, revises the criteria required to
be met for the reasonable reimbursement methodology for state
mandates. AB 2856 (Laird), Chapter 890, Statutes of 2004,
authorizes the COSM to adopt reimbursement methodologies for
mandates that place greater emphasis on the use of unit costs
and other approximations of local costs, and stated the intent
to streamline the documentation and reporting process for
mandates. SCA 4 (Torlakson), Res. Chapter 133, Statutes of
2004, requires the Legislature to either appropriate full
funding for or suspend the operation of the mandate in that
fiscal year, with the exception of education or employment
mandates. AB 2834 (Migden), Chapter 1128, Statutes of 2002,
revises statutes governing the annual fiscal and compliance
audits of school districts, and establishes EAAP as a separate
state agency.
SB 90 (Dills), Chapter 1406, Statutes of 1972, expressed the
Legislature's intent to reimburse local agencies and school
districts for the costs of new programs or increased levels of
service mandated by state government. Proposition 4 amended the
California Constitution in 1979 to established this intent as a
requirement.
REGISTERED SUPPORT / OPPOSITION :
Support
Small School Districts Association
Opposition
None on file
Analysis Prepared by : Gerald Shelton / ED. / (916) 319-2087
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