BILL ANALYSIS
SB 205
Page 1
Date of Hearing: January 21, 2010
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Kevin De Leon, Chair
SB 205 (Hancock) - As Amended: January 19, 2010
Policy Committee: Transportation
Vote: Not relevant
Urgency: No State Mandated Local Program:
No Reimbursable: No
SUMMARY
This bill provides statutory authority for the State Department
of Education (SDE) and the California School Finance Authority
(CSFA) to administer the federal Qualified School Construction
Bonds (QSCB) tax credit program authorized by the federal
American Recovery and Reinvestment Act of 2009 (ARRA).
Specifically, this bill:
1)Assigns $700 million of the state's 2009 federal tax credit
bond volume cap for the QSCB program to SDE for further
assignment and distribution to school districts and county
offices of education (COEs).
2)Assigns $73.5 million of the state's 2009 federal tax credit
bond volume cap for the QSCB program to CSFA to be issued for
the benefit of charter schools, as determined by CSFA.
3)Requires any of the state's 2009 federal tax credit volume cap
for QSCB assigned to SDE or CSFA that has not resulted in the
issuance of bonds by December 31, 2009 be added to the state's
volume cap for 2010.
4)Extends school districts and COEs ability to issue bonds by
120 days from the effective date of this measure, provided
these entities received an assignment of tax credits under the
QSCB program from SDE prior to December 31, 2009.
5)Requires any of the state's federal 2009 tax credit bond
volume cap for the QSCB program originally allocated to SDE
that does not result in the issuance of bonds within 120 days
from the effective date of this measure to revert to the state
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and be reallocated in accordance with the process established
by the state, as specified.
6)Requires any charter school that received an allocation from
CSFA prior to December 31, 2009 to retain its allocation
pursuant to a resolution of the CSFA board.
FISCAL EFFECT
California received a total of $1.36 billion for the QSCB
program. Of this amount, $582 million is allocated directly to
large school districts based on their federal Title I
allocations (poor, needy pupils) and $773.5 million is reserved
for school districts, COEs, and charter schools. SDE, in
collaboration with the governor's office and state treasurer,
designated $73.5 million of the state's $773.5 million
allocation for charter schools. This amount was determined
based on charter schools receiving approximately 10% of new
construction funding in the last two statewide education school
facility bonds.
There is not a minimum bond authorization amount in order for
LEAs to participate in this program. LEAs, however, are limited
to $25 million in tax credits per authorization cycle.
SUMMARY CONTINUED
7)Requires any of the state's federal 2009 tax credit bond
volume cap for QSCB originally allocated to CSFA that does not
result in the issuance of bonds by December 31, 2010 to be
retained by CSFA and reallocated in accordance with the QSCB
program parameters established by the CSFA.
8)Exempts the assignment and distribution of tax credit bond
volume cap by SDE and CSFA from the rulemaking provisions of
the Administrative Procedures Act (APA).
9)Ratifies and approves any actions taken and distributions of
tax credit volume cap made by SDE and CSFA with respect to the
state's volume cap.
COMMENTS
1)Background . In February 2009, the federal government passed
ARRA, which allocated approximately $100 billion nationwide
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for education programs with the purpose of stimulating the
economy, including tax credits under the QCSB program. The
QCSB program allows local education agencies (LEAs), including
charter schools, to issue tax-exempt bonds and use 100% of the
proceeds for specified school facility purposes. The bonds
provide federal tax credits for bondholders in lieu of
interest in order to significantly reduce an issuer's (i.e.,
LEAs) cost of borrowing. The final maturity of the loan may
vary slightly; it typically is limited to approximately 15
years.
ARRA provides for an allocation to each state based on the
state's Title I allocation, along with separate allocations
for large school districts. In the summer of 2009, SDE, in
collaboration with the governor's office and the state
treasurer, was designated as the administrating agency for the
QSCB program. SDE developed an administrative process for
implementing this program, including parameters for
participation and designating allocation amounts for school
districts and COEs ($700 million) and to CSFA for charter
schools ($73.5 million). Applications were due to SDE by
August 25, 2009.
CSFA was granted authority to administer the QSCB program for
charter schools due to its existing expertise in charter
school facility finance issues. Similar to SDE, CSFA's board
developed parameters and procedures for this program.
Applications were due to CSFA by September 14, 2009.
While both SDE and CSFA have established policies and
procedures to administer the QSCB program, each entities' bond
counsel, including the governor's office and the attorney
general, have expressed concerns regarding their legal
authority to issue tax credits to LEAs and charter schools, as
required under this program. Therefore, approved school
districts and charter schools have not issued bonds due to the
legal concerns regarding the state's ability to issue QSCB tax
credits.
This bill provides statutory authority for the SDE and CSFA to
administer the QSCB program and issue program tax credits to
approved school districts and charter schools.
2)Who received funding under the QSCB program ? SDE received a
total of 231 school districts applications for $3.6 billion.
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As a result, SDE conducted a lottery to determine the
recipients of the $700 million designated for LEAs. 43 school
districts were funded and initially required to issue bonds by
December 31, 2009. SDE granted extensions to 39 of the 43
districts on a case by case basis. Four LEAs returned their
program allocations. School districts have until March 31,
2010 to issue bonds. This bill extends this timeline by 120
days, as specified.
CSFA received 28 applications from charter schools for the
QSCB program. Under the board's parameters, CSFA staff
developed a list of six charter schools deemed "credit worthy"
and that demonstrated an ability to immediately begin
construction or modernization. These six charter schools were
approved for $29.2 million under the QSCB program. To date,
the approved charter schools have not issued bonds due to
legal concerns. The 22 remaining applicants are being further
evaluated by CSFA.
3)Committee amendments . As currently drafted, there is not an
urgency clause in the bill. Approved school districts and
charter schools, however, are waiting to issue bonds and
receive tax credits from the state under the QSCB program.
Committee staff recommends an urgency clause be amended into
this measure.
Also, SDE informed the committee that there is a technical error
in the amount of money specified for charter schools. The
committee recommends an amendment to change this number to
$75,525,000.
Analysis Prepared by : Kimberly Rodriguez / APPR. / (916)
319-2081