BILL ANALYSIS
SENATE COMMITTEE ON EDUCATION
Gloria Romero, Chair
2009-2010 Regular Session
BILL NO: SB 130
AUTHOR: Denham
AMENDED: April 13, 2009
FISCAL COMM: Yes HEARING DATE: April 22, 2009
URGENCY: Yes CONSULTANT: James Wilson
SUBJECT : Emergency Loan: King City High School District
SUMMARY
This bill, an urgency measure, appropriates thirteen
million dollars ($13,000,000) from the State General Fund
to the Superintendent of Public Instruction (SPI) for
apportionment as an emergency loan to the King City Joint
Union High School District, and transfers authority over
the district from its board of trustees to the SPI who is
required to appoint an administrator for the district..
BACKGROUND
Current law requires that emergency loans be provided by
legislative appropriation and that acceptance of a loan
that exceeds 200% of a district's recommended reserve
requires that the State Superintendent of Public
Instruction (SPI) to assume all the legal rights, duties
and powers of the district governing board. The SPI may
appoint an administrator to act on behalf of the SPI and
the district governing board becomes advisory to the
administrator.
.
The King City Union High School District has about 2,000
pupils attending three high schools and one continuation
school. The district had 2007-08 revenues of $19 million
and expenditures of $20.7 million. A beginning balance of
$1.7 million allowed the district to end the year with a
$10 thousand balance. The district's reserve requirement
(3%) should be close to $500 thousand dollars. The Monterey
County Office of Education declared the King City Joint
Union High School District to not be a "going concern" in
December of 2007, and the district was projected to run out
of cash in March 2009.
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In order to provide an emergency loan that exceeds 200 % of
the district's reserve, current law requires the SPI to
assume all the legal rights, duties, and powers of the
governing board. The SPI then appoints a state
administrator to act for SPI and the local board becomes
advisory to the state administrator. The authority of the
SPI and state administrator continues until specified
benchmarks are achieved, allowing the SPI to appoint a
trustee to replace the administrator. Under a trustee the
district board regains its authority, but the trustee has
the authority to stay and rescind any action of the board.
The authority of the SPI and the state-appointed trustee
continues until the loan has been repaid, the district has
adequate fiscal controls in place and the SPI determines
that the district's future compliance with the fiscal plan
approved for the district is probable.
ANALYSIS
This bill, an urgency measure, appropriates thirteen
million dollars ($13,000,000) from the State General Fund
to the Superintendent of Public Instruction (SPI) for
apportionment to the King City Joint Union High School
District for the purpose of an emergency loan. And further:
1) Provides that In order to qualify for the loan, the
district shall comply with current law except as
otherwise specified in the bill.
2) Requires that the SPI assume all rights, duties, and
powers of the King City governing board and appoint a
state administrator, in consultation with the county
superintendent, and provides for the authority of the
SPI and the state administrator to continue until all
of the following occur:
a) After one year, the state administrator and
the SPI determine that future compliance by the
district with recovery plans is probable.
b) The SPI has approved all of the recovery
plans legally required.
c) The County Office Fiscal Crisis and
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Management Assistance Team (FCMAT) completes the
improvement plans required under current law, and
has completed at least two reports on district
progress in implementing the improvement plans.
d) The state administrator certifies that
collective bargaining agreements have been
ratified, consistent with the recovery plans.
e) The King City district has completed all
reports required by the SPI and the state
administrator.
f) The state administrator certifies that the
members of the school board and specified
district personnel have successfully completed
the training specified by this bill (see #6
below).
3) The SPI may return power to the governing board for
any of the following five areas if performance under
the recovery plan for that area has been demonstrated
to the satisfaction of the SPI.
a) Financial management.
b) Pupil achievement.
c) Personnel management.
d) Facilities management.
e) Community relations.
4) Declares intent that the SPI and state administrator
work with the district to do all of the following:
a) Improve achievement, attendance, dropout
rates, and parent involvement.
b) Attract and retain quality teachers, and
manage fiscal resources,
c) Maintain core educational reforms that will
lead to improvement of academic achievement.
d) Consider the unification of the King City
Joint Union High School District with the King
City Elementary School District, or any other
school district within the general attendance
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area.
5) Specifies the duties of the County Office Fiscal
Crisis and Management Assistance Team (FCMAT) and
provides that the district shall bear 100 percent of
the costs associated with the activities of the FCMAT.
6) Provides that the improvement plan for personnel
management should include training for:
a) Members of the governing board including
training in their fiduciary responsibilities as
board member and in financial management
practices provided by the California School
Boards Association.
b) All personnel with management, policymaking,
and advisory responsibilities who report directly
to the state administrator, to ensure they have
the knowledge and skills to effectively
administer their areas of responsibility.
7) Provides that the emergency loan may be disbursed only
if the state administrator and FCMAT jointly determine
that it is necessary to support the immediate cash
flow needs of the district.
8) Requires that an annual audit of the books and
accounts of the district be conducted consistent with
current law but provides that the county
superintendent may allow the Controller to conduct the
audit, or select a local auditor from the directory of
certified public accountants deemed qualified by the
Controller to conduct audits of local educational
agencies.
9) Requires the King City Joint Union High School
District to repay the emergency loan amortized over a
20-year term, including the usual interest calculated
at a rate equal to the rate earned by the Pooled Money
Investment Account in the state treasury.
10) Requires the district to enter into lease financing
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with the California Infrastructure and Economic
Development Bank for the purpose of financing the
emergency loan.
11) Provides that the Director of Finance may amend the
payment schedule if the director concludes that the
amendment is warranted and is in the best interests of
both the state and the district, provided that the
Director gives a 90-day notice to the Joint
Legislative Budget Committee.
12) From June 1, 2009, to June 30, 2012, authorizes the
district to sell property owned by the district and
use the proceeds from the sale to reduce or retire the
emergency loan.
STAFF COMMENTS
1) Mandated Costs . The Legislative counsel has found
that this bill imposes new duties, and thus state
mandated costs, on the County Office Fiscal Crisis and
Management Assistance Team (FCMAT). This mandate is
identified even though no reimbursement is required
for the King City High School District because the
district requested the bill.
2) Controller audit. One provision of the bill
[subdivision (d) of Section 8], supersedes current law
by authorizing the county superintendent to choose to
have the annual audit of the district be conducted by
either the State Controller, or any CPA chosen from
the list of local auditors certified to perform school
district audits. The Controller's office is
sufficiently concerned about the potential loss of
state oversight over the emergency loan that the
Controller took the rare step of issuing a letter
declaring their intent to oppose the bill unless it is
amended to restore the current law practice of having
the Controller conduct the audits, or choose an
auditor. Staff recommends that subdivision (d) of
Section 8 of the bill be amended to cross reference
current law (subdivision (d) of EC Sec 41320.1) so
that the Controller may either conduct the audit or
choose the auditor.
SUPPORT
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California Teachers Association
OPPOSITION
None received.