BILL ANALYSIS
AB 2366
Page 1
Date of Hearing: April 21, 2010
ASSEMBLY COMMITTEE ON EDUCATION
Julia Brownley, Chair
AB 2366 (Brownley) - As Amended: April 6, 2010
SUBJECT : Education finance: revenue limits
SUMMARY : Mitigates unintended consequences created by the
interaction between the current economic recession and changes
to revenue limit calculations that are required to be
implemented commencing in the 2010-11 fiscal year.
Specifically, this bill :
1)Defers implementation of a school district revenue limit
adjustment related to the Meals for Needy Pupils program from
the 2010-11 fiscal year to the 2013-14 fiscal year.
2)Extends the authorization of the Meals for Needy Pupils
program until July 1, 2013.
3)Makes a technical correction in the calculation that applies a
cost of living adjustment to the revenue limit add-on
adjustments for beginning teacher's salaries and the Meals for
Needy Pupils program to be implemented in the 2011-12 and the
2013-14 fiscal years, respectively.
EXISTING LAW :
1)Provides for revenue limit funding for school districts that
is based on a per pupil base revenue limit multiplied by
average daily attendance (ADA).
2)Defines base revenue limit for any school district to be equal
to the prior year amount adjusted to account for
cost-of-living increases and any other adjustment specified by
statute (e.g., an adjustment implementing revenue limit
equalization).
3)Defines ADA to be calculated by dividing the number of days of
attendance for all pupils enrolled in the district by the
number of instructional days in the district's FY, and a day
of attendance as a minimum number of instructional minutes
(specific to grade level) in a classroom setting under the
immediate supervision of a certificated employee of the school
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district.
4)Adjusts revenue limit funding further by making adjustments,
as specified in statute, for individual programs or district
characteristics; these adjustments are collectively referred
to as revenue limit add-ons.
5)Requires the Superintendent of Public Instruction (SPI) to
compute an amount for each school district equal to the sum of
funding received in fiscal year (FY) 2007-08 for the Meals for
Needy Pupils program [Education Code (EC) Section 42241.2],
and incentives to increase beginning teachers salaries (EC
Section 45023.4), all divided by the district's ADA; also
applies an annual cost-of-living adjustment (COLA) to this
amount.
6)Requires the SPI to compute an amount for each school district
equal to the sum of funding received in FY 2007-08 for Orange
County bankruptcy proceedings (EC Section 42238.21), and
inter-district transfers (EC Section 42238.22), all divided by
the district's ADA.
7)Computes total revenue limit funding for each school district,
commencing in the 2010-11 fiscal year, by multiplying the sum
of the base revenue limit and the amounts calculated in 5) and
6) above by ADA.
FISCAL EFFECT : Unknown
COMMENTS : According to the author, this bill is intended to
relieve the effects of an unintended consequence of AB 851
(Brownley), Chapter 374, Statutes of 2009, that was created by
the current economic recession; the bill accomplishes this by
deferring the implementation of one of the provisions of AB 851
until the 2013-14 fiscal year.
In order to conform to the court's decision in Serrano v.
Priest, the state created the current school district revenue
limit system that combines local property tax revenues with
state General Fund aid and allows the state to control the two
revenue sources on a per pupil basis. Each district's base
revenue limit has been determined by a series of historical
actions based on statute. Each year a district's base revenue
limit is calculated to be its prior year base revenue limit
adjusted in that year to account for cost-of-living increases
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and other adjustments such as equalization. This base revenue
limit is then multiplied by ADA to convert the per pupil base to
a total level of funding. Further adjustments are made to total
revenue limit funding in the form of revenue limit "add-ons."
These adjustments initially were categorical funding programs,
but have become simply additions to discretionary funding
without any spending restrictions. Many of these add-ons
provide a proportionally equal amount of funding to all or
nearly all districts each year, and/or provide an amount that
does not vary over time to some subset of districts.
AB 851 incorporates, commencing in the 2010-11 fiscal year, two
of these revenue limit add-ons (Meals for Needy Pupils program
and incentives to increase beginning teachers' salaries), into a
single, fixed adjustment based on 2007-08 funding levels, and
consolidates two additional revenue limit add-ons (adjustments
for Orange County bankruptcy proceedings, and specified
inter-district transfers) into a separate, fixed adjustment;
both adjustments are included in the calculation of each
district's total revenue limit funding, but not in the base
revenue limit. The slightly different treatment given to the
two sets of add-ons resulted from the fact that the first group
of add-ons has historically had the annual revenue limit COLA
applied, while the second group has not; thus the two
adjustments are treated separately, and the revenue limit COLA
is applied to the first adjustment in a manner consistent with
historical practice. AB 851 simplifies and provides additional
transparency for the state's education finance system, in a
manner consistent with the Getting Down to Facts studies
released in 2007. The intent of AB 851 was to accomplish this
in a cost neutral manner; the bill was analyzed at the time in
both houses and by the Department of Finance to be cost neutral.
The bill also had no opposition during its progress through the
Legislature.
Incorporation and consolidation of revenue limit add-ons makes
sense in that often the funding has lost all historical
connection to the program as it initially existed, the add-ons
merely add revenue limit funding in a complicated fashion even
though that revenue may be used for any discretionary purpose,
the amounts received vary little from year to year, or the
annual process for calculating funding levels is complicated and
cumbersome. The Legislative Analyst's Office (LAO) has often
recommended to the Legislature that a number of revenue limit
add-ons, including those specified in this bill, be rolled into
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revenue limit funding.
The Meals for Needy Pupils was one of those add-ons addressed by
AB 851. This program provides funding to districts that enacted
property tax levies to support free or reduced-price meals prior
to Proposition 13 and subsequently lost that funding with the
passage of Proposition 13. Despite the name of the program, the
districts receiving these funds have complete freedom over the
use of the funds and are not obligated to use the revenues to
pay for subsidized meals. Districts currently receive other
state and federal categorical funding that must be used only for
subsidized meals. Historically funding levels, based on meals
provided to eligible pupils, were relatively stable over time.
However, the current recession has dramatically increased the
number of families in poverty, and thus the number of pupils
eligible for subsidized meals. The larger number of meals would
qualify school districts for greater levels of reimbursement
funding during this recession, however, the implementation of
the AB 851 changes, commencing in 2010-11, will prevent this and
hold funding fixed at 2007-08 levels. According to a draft
analysis compiled by School Services of California this effect
will potentially impact funding for more than 300 districts by a
total of more than $16 million, in terms of funding that would
be received below what the districts would have received without
the provisions of AB 851.
This bill reduces the impact of the interaction between the
implementation of the provisions of AB 851 that deal with the
Meals for Needy Pupils program and the current economic downturn
by deferring the implementation of those provisions until the
2013-14 fiscal year. It is hoped that a three year delay will
allow economic circumstances, the number of pupils eligible for
subsidized meals, and the number of meals to return to the
pre-recession stable levels. This bill also changes the repeal
date for the Meals for Needy Pupils program to July 1, 2013 so
as to conform to the delay in implementing the funding
adjustment. In addition, the bill makes a technical correction
to the calculation of the cost of living adjustment applied to
the revenue limit add-on for the Meals for Needy Pupils program
and beginning teacher's salary incentives.
Committee amendments: Committee staff recommends that a
drafting error in the bill be corrected so that page 3, line 6
makes reference to the 2012-13 fiscal year, rather than the 2012
fiscal year.
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Previous legislation: AB 851 (Brownley), Chapter 374, Statutes
of 2009, consolidates four revenue limit add-ons into two fixed
adjustments to be included in each district's total revenue
limit funding, commencing with the 2010-11 fiscal year. AB 599
(Mullin), vetoed in 2008, was substantially similar to AB 851,
except that it also included longer day-longer year incentive
funding in the fixed adjustment that receives the annual COLA.
A number of bills have proposed rolling revenue limit add-ons
into revenue limit funding as part of a larger proposal to
reform or equalize revenue limits, or to consolidate categorical
funding; in general these bills have had opposition related more
to the larger proposal than to the treatment of add-ons: AB
2531 (Mullin), vetoed in 2006; AB 60 (Nunez), held in the
Assembly Appropriations Committee in 2005; SB 1510 (Alpert),
held on the Assembly Floor in 2004; AB 2153 (Daucher), held in
the Assembly Appropriations Committee in 2004.
REGISTERED SUPPORT / OPPOSITION :
Support
None on file
Opposition
None on file
Analysis Prepared by : Gerald Shelton / ED. / (916) 319-2087