BILL ANALYSIS
AB 2335
Page 1
Date of Hearing: April 21, 2010
ASSEMBLY COMMITTEE ON EDUCATION
Julia Brownley, Chair
AB 2335 (Brownley) - As Introduced: February 19, 2010
SUBJECT : Education finance: school-based financial reporting
system
SUMMARY : Requires the Superintendent of Public Instruction
(SPI) to make recommendations on modifying the format and
requirements on school district accounting in order to support
school-level financial reporting. Specifically, this bill :
1)Makes legislative findings and declarations related to
California's current education finance system, its complexity
and lack of transparency, the lack of tools that would allow
schools and districts to use resources effectively and
efficiently, and the need for a complete understanding of how
resources are allocated by districts and within schools.
2)States Legislative intent to:
a) Support accountability by increasing the transparency of
state funding mechanisms and of expenditure decisions at
the local level.
b) Improve the reporting of financial data so that
programmatic investments can be linked to programs at
school sites that increase pupil achievement.
3)Requires the SPI to study and report on:
a) Modifications to the standardized account code structure
(SACS) to provide school-level reports on revenue and
expenditures so as to facilitate easy comparisons across
schools and districts, including comparisons of school,
district, and statewide demographics and academic
performance, and data on program-level expenditures.
b) An evaluation mechanism to facilitate continuous
improvement, maximum transparency, and accountability of
the primary funding structures, as well as a consistent
process to evaluate the effectiveness of any specific
programs that are funded separately.
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4)Requires the Superintendent to present the findings and
recommendations from the study to the Legislature and the
Governor on or before December 1, 2011.
EXISTING LAW :
1)Provides for Revenue Limit (base discretionary) funding for
school districts that is, in part, based on attendance, and
establishes and funds categorical programs that focus
resources and/or compliance requirements on specific classes
of students or schools, or on specific uses of funds,
identified by the Legislature as priorities.
2)Requires that each school district produce an annual school
accountability report card (SARC) for each school in the
district, including various specific data elements describing
the school and its condition.
3)Authorizes the California Department of Education (CDE) to
develop SACS to be used to account for revenues and
expenditures in local educational agencies.
4)Requires, on or before September 15, the governing board of
each school district to approve, in a format prescribed by the
SPI, an annual statement of all receipts and expenditures of
the district for the preceding fiscal year and to file the
statement with the county superintendent of schools.
5)Requires each county superintendent of schools to prepare and
file with the SPI a statement of all receipts and expenditures
of the county office of education for the preceding fiscal
year in a format or on forms prescribed by the SPI; also
requires each county superintendent of schools to prepare and
file with the SPI the financial statements of each school
district in that county.
6)Requires the financial statement format or forms prescribed by
the SPI to be adopted as regulations by the State Board of
Education, and authorizes periodic amendments to accommodate
changes in statute or government reporting standards.
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7)Requires the accounting system used to record the financial
affairs of any school district to be consistent with the
California School Accounting Manual (CSAM) developed by the
CDE.
FISCAL EFFECT : Unknown
COMMENTS : According to the author, "California's current
system of school finance is the result of three decades of
court-mandated and voter-influenced reforms. It is highly
state-centralized, extremely complex and in need of fundamental
reform. The Getting Down to Facts project and the Governor's
Committee on Education Excellence made clear that if California
is to make any significant progress in improving its K-12 public
schools, the entire system needs to be overhauled. A simpler and
more transparent system is needed in order to support
accountability for increased student success." One step toward
improving the transparency of the current system is to
implement, "school-level reports on revenue and expenditures to
facilitate easy comparisons across schools and districts,
including comparisons of school, district, and statewide
demographics and academic performance, and data on program-level
expenditures."
This bill requires the SPI to make recommendations for the
modification of the existing SACS system to support more
comprehensive school-level financial reporting. There are clear
benefits to school-level fiscal reporting - many related to
increased transparency and sensitivity to possible
intra-district funding and service inequities. In addition,
school-level financial data reveals the effectiveness of
expenditures at the intended point of impact - the school and
classroom. There are also numerous technical, administrative,
accounting, and information technology issues that would have to
be addressed by the SPI's recommendations before the Legislature
could act on those recommendations. Since the school district
is the locus of accounting and administration for the schools
within the district, it will require a complex system of rules
and judgments to put all schools in a uniform position for
accounting and reporting purposes; that is the charge proposed
by this bill to be placed on the SPI.
Each year local educational agencies submit a series of
financial statements, budget documents and audit reports to the
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county superintendent of schools; county superintendents have
fiscal oversight responsibilities for school districts in the
same manner that the SPI has oversight responsibilities for
county offices of education. This school district financial
reporting includes the district's preliminary budget passed by
the start of the fiscal year, interim budget reports provided in
December and March, unaudited financials reported at the end of
the fiscal year, and the district's annual financial audit that
is completed and submitted in the months following the close of
the fiscal year. All of these financial reports are reviewed by
the county superintendent and then submitted to the SPI.
The state's SACS provides all California school districts with a
uniform and comprehensive system of accounts that districts are
required to use to categorize each revenue and expenditure.
SACS, along with guidance in CSAM and from the Governmental
Accounting Standards Board, form the basis for school district
accounting and financial reporting in California. When this
system was first introduced in the 1990s it represented a major
transition from previous accounting requirements. Since the
early part of this decade, all school districts have been
required to report financial information electronically using
SACS as the accounting framework for that reporting. SACS
enables both school districts and the state to analyze district
revenues and expenditures in order to provide useful information
for policymakers, educators, and the public. Using SACS,
districts classify financial information in numerous ways,
including by fund (e.g., General Fund, Capital Fund), resource
(i.e., restricted or unrestricted resources), goal or program,
function or activity (e.g., instruction, pupil services, general
administration, debt service), or object (e.g., revenue source
or use of expenditure - salaries, benefits capital outlay); this
structure allows districts to connect revenues and expenditures
to specific goals, functions and activities, and thus could
provide a rich source of financial data that could be used by
policy makers and the public to examine resource usage within
school districts. Within SACS, school-level data can be added to
the district's financial analyses; however, districts currently
have flexibility in the extent to and manner in which they use
the system to reflect school-level information. Since school
districts have different levels of interest and expertise in
terms of going beyond what is required in SACS and district
financial reports, there may be a loss in uniformity in those
school-level reports if compared across districts.
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School-level financial information would serve a variety of
audiences and uses; for example:
1)The General Public - to help determine whether its objectives
for public education are being met.
2)Education researchers (in government, universities, or
schools) - to provide reasonable access to data in a format
that researchers can use to produce research that can be
translated into public policy.
3)School administrators - to evaluate past school and district
performance, to aid in day-to-day decision making, and to
inform the general public of the schools' effectiveness and
successes.
4)Other district and school employees (program coordinators,
classroom teachers or non-instructional employees) - to plan
budgets, to request additional funding or to ask for the
redirection of existing funds.
5)Local governing boards - to assess the areas of greatest need
in the district, or to plan how best to allocate education
resources in the future and to situations that may need
corrective action.
6)The State Legislature - to inform the development of statewide
policy.
7)Investors and Creditors (including bondholders and prospective
bondholders, commercial banks, other creditors, vendors) - to
track the fiscal and programmatic performance of the district
on a more localized level.
According to William J. Fowler of the National Center for
Educational Statistics, by 2001, 44 states had begun regulating
the financial reporting of school districts. Of these, 20
states had mandated some type of school-level financial or
budget reporting. In most of these cases, the state implemented
a requirement on school districts to extend the accounting
structure of the system used for district reporting down to the
school level. The approach may work for some types of
expenditures, but may become complicated (and thus be treated
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differently in different districts) for other types of
expenditures. For example, expenditures on the salary and
benefits of a specific certificated teacher at a school site
should clearly be assigned to that school site; however,
expenditures on the salary and benefits of a school
psychologist, who spends time in a number of school sites, works
on district-level programs and consults with the personnel
branch of the district central office may not be so easily
accounted for at the school level. In fact, the treatment and
allocation of central office expenditures in general is one of
the obstacles that must be overcome in order to implement
meaningful school-level financial reporting. Fowler suggests
that a richer set of accounting data will likely be necessary to
move from school district-level reporting to the kind of
school-level reporting that supports the public and policy-maker
uses that are envisioned by the author.
In fact, the author's vision that this bill proposes to support
extends beyond what could be supported through modifications in
SACS alone. As the author states, the intent of the bill is to
build toward school-level reports and data that will "facilitate
easy comparisons across schools and districts, including
comparisons of school, district, and statewide demographics and
academic performance, and data on program-level expenditures."
Committee amendments: In order to move the bill in the direction
of the author's stated intent, Committee staff recommends, and
the author accepts, amendments that would:
1)Broaden the potential end uses that would be supported by
school-level financial data to include not only the ability to
produce the transparent, school-level reports envisioned by
this bill, but to also include the ability to produce more
in-depth analyses of school-level financial data; to make
comparisons across schools (both intra- and inter-district)
and over time; to link school financial, demographic and
programmatic data for evaluative purposes; and to
comprehensively improve access to information about all
aspects of the performance of each school in the state.
2)Broaden the charge to the SPI and the scope of the
recommendations required from the SPI to include
recommendations related to statutory, regulatory or
ministerial changes that might be necessary to support a
future local educational agency requirement for school-level
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financial data reporting and to support the comprehensive uses
envisioned by the author. These recommendations would
address, but not be limited to, modifications to SACS;
modifications to CSAM; modifications to financial regulations
imposed upon or other instructions provided to school
districts; additional data collections; changes to the SARC
that may be necessary or could be implemented; changes to the
state's Education Information System, especially to facilitate
the linking of school financial, demographic and pupil program
data; and information technology needs to support publicly
available school-level data analysis and evaluative tools, as
well as publicly available school-level reports.
Previous legislation: AB 8 (Brownley), vetoed by the Governor
in 2009, would have convened a working group to make findings
and recommendations regarding the restructuring of California's
education finance system, including changes necessary to support
school-level financial reporting. AB 2159 (Brownley), held in
the Senate Rules Committee in 2008, would have established a
commission to develop a plan for reforming the school finance
system. SB 512 (Committee on Education), Chapter 677, Statutes
of 2005, changed the due date for annual financial reports from
September 15 to October 15. AB 1578 (Migden), Chapter 299,
Statutes of 1997, in Section 39, targeted funds to be used
exclusively to develop and implement SACS. AB 1578 (Migden),
Section 39 of Chapter 299, Statutes of 1997, targeted funds to
be used exclusively to develop and implement SACS.
REGISTERED SUPPORT / OPPOSITION :
Support
Alliance of Californians for Community Empowerment
Public Advocates
The Advancement Project
Opposition
None on file
Analysis Prepared by : Gerald Shelton / ED. / (916) 319-2087