BILL ANALYSIS
SB 592
Page 1
Date of Hearing: August 27, 2009
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Kevin De Leon, Chair
SB 592 (Romero) - As Amended: August 24, 2009
Policy Committee: Education
Vote:10-0
Urgency: Yes State Mandated Local Program:
No Reimbursable: No
SUMMARY
This bill allows local governments (i.e., city, county, county
board of education) and charter schools to hold title to a
school facility constructed utilizing state education bond funds
allocated under the Charter Schools Facilities (CSF) program, as
specified. Specifically, this bill:
1)Requires applicants, prior to the release of funds under the
CSF program, to provide the State Allocation Board (SAB)
evidence that the school district (where the facility is
located) holds title or a local government entity or charter
school holds title of the school facility.
2)Requires both of the following conditions to be met, if a
local government entity or charter school holds title: (a) the
local government entity is prohibited from exercising any
control over the operation of the charter school, and (b) the
chain of the title is required to include a restrictive
covenant specifying that the facility be used for purposes
authorized in education statute and a remainder interest to
the district in which the facility is located or the SAB, if
the district disclaims interest to the facility.
3)Requires a lien to be recorded if a charter school requests to
hold title of the school facility authorized under the CSF
program. This measure requires the lien to be in the total
amount of funds allocated under the CSF program and any loan
received from the Charter School Facilities Financing
Authority (CSFFA), as specified.
4)Authorizes a charter school to request that a school district
transfer title of a facility to a local government entity or
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itself, if the district entered into an agreement to hold
title with the charter school prior to January 1, 2010.
5)Requires the SAB to dispose of the facility in the same manner
as surplus property held by a school district if a local
government entity (other than the district) declines to
dispose of the facility. This bill also requires the proceeds
of the sale to be deposited into the CSF program.
6)Authorizes the SAB to adopt regulations to implement this
measure.
FISCAL EFFECT
Minor absorbable GF costs to the SAB to adopt regulations, as
specified. Since 2002, the voters have authorized $900 million
in state education bonds for the CSF program (under Propositions
47, 55 and 1D). According to the SAB, there is approximately
$50.1 million available for new projects under this program.
COMMENTS
Current law prohibits an entity other than a school district
from holding title to a school facility constructed under the
CSF program. According to the author, "due to liability and
other concerns, many school districts have been unwilling to
assume title holder responsibility. In some instances, school
districts have agreed to assume title but only with extremely
onerous conditions placed on charter schools. These issues
have contributed to delay in charter school facility
construction. To date, only three charter schools funded
through the CSFP have been completed."
This bill allows other government entities (i.e., city,
county, county board of education) and charter schools to hold
title of a school facility constructed under the CSF program,
as specified.
1)Purpose . The CSF program provides funding to charter schools
to construct new facilities. In order to receive funding
under this program, the charter must be deemed financially
sound by the CSFA, located within the state treasurer's
office, including that it be in operation for at least 24
months prior to submission of an application. However, a
charter school that has not been in operation for at least 24
months may receive funding if the charter is managed by staff
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that has at least 24 months of documented experience, as
determined by the CSFA. Likewise, regulations stipulate
several additional indicators in determining the financial
soundness of a charter school, including whether the applicant
is able to maintain stable financial operations, make
estimated lease payments, and that the charter is not in
danger of being revoked.
2)AB 14 (Goldberg), Chapter 935, Statutes of 2002 , established
the CSF program. This program requires the state to provide
50% of the allocation for the facility (via state education
bond funds) and the other half to be provided by the charter
school via a local match. In developing this program, the
Legislature recognized that because charter schools do not
have the ability to issue local bonds they may have difficulty
in meeting the local match requirement. Therefore, Chapter
935 authorized charter schools to receive their local match
via the CSFA. The CSFA finances educational facilities and
provide school districts, community college districts, and
charter schools access to working capital.
The CSF program authorizes a charter school or a school
district on behalf of a charter school to apply for state
school construction bond funds to construct a school facility.
Chapter 935 also stipulated that regardless of the applicant
(i.e., the charter school or district) title of the property
remains with the school district.
The requirement for school districts to hold title has
required districts and charter schools to develop user
agreements with regard to the facility being constructed.
Both charter schools and districts have expressed frustration
and issues with developing these agreements and the
requirement to hold title in general. Many school districts
have expressed concerns that holding title of a charter school
facility subjects them to liability and legal challenges for
which they have no control over. For example, one district
that holds title to a charter facility was sued by a
construction contractor because the charter had defaulted on
payments.
This bill authorizes a local government entity and charter
schools to hold title, with certain protections. One of the
protections is to require a lien on the facility in the amount
of the CSF program grant amount and any amount the charter
school received from the CSFA.
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Analysis Prepared by : Kimberly Rodriguez / APPR. / (916)
319-2081