BILL ANALYSIS
SB 1396
Page 1
Date of Hearing: June 30, 2010
ASSEMBLY COMMITTEE ON EDUCATION
Julia Brownley, Chair
SB 1396 (Lowenthal and Romero) - As Amended: June 1, 2010
SENATE VOTE : 35-0
SUBJECT : Education finance: revenue limit apportionments
SUMMARY : Establishes the Maximum Categorical Education
Flexibility Pilot Program (Pilot) and authorizes the
Superintendent of Public Instruction (SPI) to select three
school districts to participate and utilize categorical funding,
from programs not previously granted flexibility, for any
purpose related to improving pupil academic achievement and
academic instruction from the 2011-12 through the 2013-14 fiscal
years. Specifically, this bill :
1)Makes legislative findings and declarations as to the fiscal
challenges facing California school district, the benefits of
categorical flexibility, and the impact of the proposed pilot.
2)Establishes the Pilot and requires it to be implemented during
the 2011-12, 2012-13, and 2013-14 fiscal years.
3)Authorizes the SPI to select three school districts to
participate in the Pilot; also requires the SPI to consider
the quality and rigor of the preconditions in 4) below and to
select, to the extent there are qualified applicants, a
geographically diverse group of school districts of varying
size to participate.
4)Requires as preconditions, in order to be eligible to apply to
participate in the Pilot, a school district to have:
a) A plan or initiative, as specified and developed in
conjunction with parents and teachers, to accelerate
pupils' progress to proficiency.
b) Approved the district's plan and developed corresponding
policies in support of the plan at a regularly scheduled
public meeting of the district governing board.
c) An annual evaluation of the district superintendent that
is linked to the pupil performance goals specified in the
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district's plan.
d) The ability to demonstrate a pattern of stability
between management and the bargaining units in the
district.
e) Community support for the district's plan, such that a
district survey of all parents and legal guardians in the
district shows in writing that at least one-half of the
permanent teachers and one-half of the surveyed parents
support participation in the Pilot.
f) A standards-based curriculum for English learners is
cognitively complex, coherent, well articulated,
meaningful, will enable English learners to learn English
quickly and fluently, and that provides:
i) Support for English learners who are new to the
district.
ii) An English language development program that is
comprehensive and standards aligned, as specified.
iii) Full access to a challenging curriculum.
iv) High-quality instruction and materials, and valid,
comprehensive and useful assessments.
v) An inclusive and affirming school climate, and
strong family partnerships.
vi) A qualified educator workforce.
5)Requires a school district selected to participate in the
Pilot to agree to demonstrate significant progress toward
accelerating pupils' academic progress, a narrowing of the
achievement gap, fiscal solvency, positive API growth, an
increase in the district's graduation rate, improvement in the
district's college entrance rate, and the number of pupils who
enter technical school after graduation or who graduate
prepared to enter high-wage, high-skill occupations.
6)Requires the SPI to apportion, to the Pilot school districts,
a categorical block grant that is based on the funding those
school districts received in the 2009-10 fiscal year for
budget items provided budget flexibility (i.e., Tier 3)
pursuant to SB 4 X3 (Ducheny), Chapter 12, Statutes of 2009,
Third Extraordinary Session, and for eight additional state
categorical programs, including Pupil Transportation
(Home-to-school and special education), Foster Youth Services,
Economic Impact Aid (EIA), Advancement via Individual
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Determination (AVID), Adults in Correctional Facilities
Program, Career Technical Education-Partnership Academies,
Child Care and Development Programs, and Class Size Reduction,
K-3.
7)Deems a participating school district to be in compliance with
program and funding requirements contained in statutory,
regulatory, and provisional language for the categorical
programs listed in 6) above, and permits a participating
school district to use the categorical block grant funds for
any purpose related to improving pupil achievement and
academic instruction, with the following restrictions. The
school district is required to:
a) Utilize funding for EIA to supplement the base program
provided to English learners and economically disadvantaged
pupils.
b) Continue to designate staff to coordinate services and
programs, including the home language survey, for English
learners and continue in existence parent advisory
committees and schoolsite councils, as specified.
c) Implement an open and transparent process that allows
public input at a regularly scheduled meeting of the
governing board when deciding on the expenditure of
categorical block grant funds.
8)States that it is not the intent of the Legislature to waive
any requirements enacted by initiative.
9)Requires a participating school district to submit an annual
evaluative report to the California Department of Education
(CDE), the State Board of Education, the governor, and the
Legislature that details the progress made during the
immediate prior school year, as specified; also requires
participating districts to provide for independent evaluation
reports, including an interim report within 18 months of the
apportionment of funds and a final report that identifies
successes, failures, recommendations for improvement, and
whether the Pilot should be continued.
10)Requires a participating school district to submit an annual
expenditure report to the CDE, detailing the expenditure of
specific categorical program funds and the purposes for which
those funds were expended; also requires, to the extent
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feasible, the expenditure report to identify the weighting of
per pupil expenditures on low socioeconomic, limited-English
proficient, and special education pupils.
11)Makes these provisions inoperative on July 1, 2014, and
repeals them as of January 1, 2015.
EXISTING LAW :
1)Provides for Revenue Limit funding for school districts that
is, in part, based on average daily attendance (ADA);
expenditure and use of Revenue Limit funding is at the
discretion of the local educational agency (LEA).
2)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.
3)Consolidates, under AB 825, a number of historical categorical
programs into a smaller set of clustered block grants, where a
block grant gives funding recipients the flexibility to spend
the funds across any of the previously individual programs
consolidated into that block grant.
4)Authorizes LEAs, through the 2012-13 fiscal year, to use
funding for approximately 40 categorical programs (totaling
approximately $4.5 billion statewide in 2009-10) for any
educational purpose to the extent permitted by federal law.
Also deems LEAs to be in compliance with program and funding
requirements related to the 40 categorical programs, and
requires LEA governing boards to make flexible expenditure
decisions in a regularly scheduled public meeting.
FISCAL EFFECT : According to the Senate Appropriations
Committee, "The combined total of the programs included in the
block grant (aside from those already in Tier 3) is over $3.5
billion, as of the Governor's January budget proposal. It's
unknown at this time how much categorical funding will be
shifted from the intended purposes of the programs, but the
figure is likely to be in the millions depending on which
districts participate. New costs from the bill would arise from
the evaluation, perhaps $50,000 to $100,000, though the
evaluation is vaguely described. Staff notes that the LAO has
indicated an unwillingness to prepare the final report, as the
LAO does not believe meaningful conclusions could be drawn from
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a pilot of only three districts. There may also be some minor
administrative costs for the Department for reviewing
applications, though this would not likely be a significant cost
unless there are a large number of applicants."
COMMENTS : For almost twenty years, the Legislative Analyst has
recommended that the Legislature consolidate categorical funding
in the school finance system, including consolidating
categorical funds into block grants that would provide districts
greater flexibility over the use of funds. Reforming the system
of categorical programs would have several very important
benefits for schools and districts, including increasing
flexibility to allow local funds to be used to meet local
priorities, empowering the ability of local decision-makers to
find local solutions to problems, increasing the focus on
outcomes rather than on compliance with input requirements, and
increasing the transparency of LEA budgeting and expenditure
processes for both decision-makers and the public. At the state
level, reform through consolidation of fund accounts and the
relaxation of expenditure restrictions would also simplify
administrative processes, reduce state operations costs, and
provide transparency for state level policy-makers.
According to the author, "current law does not allow districts
to use categorical funds in a more flexible manner to address
local needs. With California school districts facing
unprecedented cuts to staff and programs as a result of the
state's continuing bleak economy and the Governor's proposed
2010-11 budget cuts to schools, school districts need greater
flexibility to use categorical funds for any purpose related to
improving student achievement and academic instruction and at
the same time hold those school districts accountable for
results."
Three different approaches to flexibility in the use of
categorical funds have been proposed or enacted by the
Legislature in the past.
1)Clustered Block Grants: AB 825 (Firebaugh), Chapter 871,
Statutes of 2004, enacted categorical reform in the form of a
clustered block grant approach. Under this approach the funds
allocated for categorical programs focusing on a similar
sub-population or on similar activities are clustered together
to create one larger grant, however, the individual programs
are still retained within the single grant. In other words
the revenue is consolidated and some flexibility is given on
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the expenditure side, but that flexibility is limited to
expending the consolidated funds only on the programs that
exist within the cluster. This approach improves
administrative ease, increases transparency, and maintains the
spending priorities of the Legislature, but it does not
provide the level of flexibility that would likely be
necessary to allow LEAs to create educational programs that
match the needs of their student populations.
2)Block Grants: True block grants go an additional step beyond
the clustered approach, and provide an effective way to
distribute state funds for activities where the state seeks
some restrictions on the use of funds, but where increased
flexibility, transparency, and fairness are desired.
Categorical reform through true block granting could begin
much like the clustered approach, where the funding for
broadly similar programs is bound together as a single funding
source. The difference between a true categorical block grant
and clustered block grant or a single categorical program is
in the scope of activities allowed and the flexibility
provided in the use of the funds. An LEA would be allowed to
expend funds in a true block grant on a very broadly defined
set of activities.
3)Full Funding Flexibility: a simple proposal would be to
convert restricted categorical funds into discretionary or
unrestricted funding. This would allow complete freedom in
making expenditures, but leaves the allocation or
determination of funding (i.e., revenues) undetermined. In
addition, this approach leads to expenditures that may not
even approximate the broad expenditure goals of the
Legislature. As a long-term proposal, full funding
flexibility suffers from its lack of connection to the state's
funding priorities, and may place protected pupil
subpopulations at risk.
A short-term version of this full funding flexibility approach
was enacted by SB 4 X3 (Ducheny), Third Extraordinary Session,
which reduced funding for the 2008-09 through the 2012-13
fiscal year for approximately 40 categorical programs in what
is described as "Tier 3"; Tier 3 programs were funded in
2009-10 approximately 20 percent lower than in 2008-09 with
funding across the programs totaling approximately $4.5
billion. Table 1, at the end of this analysis, provides a
list of Tier 3 programs. To help mitigate these reductions,
SB 4 X3 also authorized LEAs to use funding for those programs
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through the 2012-13 fiscal year for any educational purpose to
the extent permitted by federal law. The bill specified that
LEAs that use the flexibility provisions are deemed to be in
compliance with program and funding requirements contained in
statutory, regulatory, and provisional language for the
categorical programs, but also required, as a condition of
receipt of funds, that governing boards of a school district
or county office of education must, at a regularly scheduled
open public hearing, take testimony from the public and take
action on the proposed use of funding and make explicit the
purposes for which the funds will be used.
Increased flexibility in the use of categorical funds, as
proposed by this bill, allows local control and focus on local
priorities, empowers local decision-makers, and increases the
focus on pupil outcomes rather than on compliance; this latter
benefit is important in a system that provides extensive
resources for accountability systems that measure pupil
outcomes. Many school district officials and others have
historically argued that the existence of our state and federal
accountability systems, in fact, put the state in the position
of being able to implement increased funding flexibility without
concern over hidden negative effects on pupil achievement.
On the other hand, the state's categorical programs were created
for a purpose. The primary strategy the state has used to
ensure that LEAs spend funds in a manner that is consistent with
the Legislature's priorities, has been through the use of
categorical programs that earmark funds for specific purposes or
students. There is always the concern that those legislative
priorities - whether it is related to protecting disadvantaged
or special needs populations, creating incentives for specific
instructional or administrative practices, or ensuring that LEAs
undertake high cost activities by providing compensation - will
not be met. Specific to this bill, opposition has also made the
point that the Legislature entered into a thoughtful process in
the development of the 2009-10 budget, which included the
flexibility provisions enacted by SB 4 X3. In those provisions
the Legislature stopped short of including all categorical
programs in the "Tier 3" flexibility, and decided that certain
programs, including the eight proposed for full flexibility by
this bill, were of such a high priority that no flexibility or
limited flexibility would be provided.
The purpose of this bill is to implement a three school district
pilot, where those selected school districts effectively receive
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extended authorization to use the flexibility provisions created
by SB 4 X3 with respect to funding for eight of the categorical
programs that were not included in Tier 3. Though the bill
refers to a "categorical education block grant" containing these
funds, the proposal actually takes the 'full funding
flexibility' approach of SB 4 X3 for these eight funding
streams. Table 2, at the end of the analysis, provides a
listing of non-Tier 3 programs and designates those programs for
which selected school districts would receive this extended
flexibility. The combined total funding for the programs
included in this extended flexibility (beyond those programs
already in Tier 3) is over $3.5 billion, as of the 2010-11
Governor's January budget proposal. It is unknown at this time
how much categorical funding would be shifted from the
legislatively intended purposes of the programs under this bill,
since that depends on which districts are selected, what
categorical funds were received by those districts in 2009-10,
and what changes those districts implement as a result of the
new flexibility. The Senate Appropriations Committee expressed
an expectation that the figure is likely to be in the millions.
The bill proposes flexibility for the eight existing categorical
programs listed below.
Pupil Transportation: Provides state funding for home-to-school
pupil transportation, small school district school bus
replacement, and special education pupil transportation
services. LEAs are entitled to receive the lesser of their
prior-year entitlement or prior-year approved program cost, and
must report transportation costs for each part of the program to
the CDE.
Foster Youth Services: This funding supports three subprograms,
including 1) six core district programs that were established in
1973 to provide educational and support services to foster
youths to improve educational outcomes of pupils in foster care
placement; 2) countywide foster youth services programs operated
through county offices of education to make education and
support services available for foster youths ages four through
twenty-one who reside in California group homes, foster family
agency homes, foster family homes, or court-specified foster
homes (approximately 25,000 children and youths), and 3)
education and support services to foster youths in
county-operated juvenile detention facilities. By far the
majority of the funds are allocated for the county office of
education and county-operated subprograms.
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EIA: This funding provides support in the form of additional
programs and services for English learners and compensatory
education services for educationally disadvantaged students.
Each district's funding is based on the number of EIA-eligible
pupils (economically disadvantaged counts plus English learner
counts plus the concentration count) in the district times the
district's prior year funding rate increased annually.
AVID: This funding provides a college preparatory program for
students in the middle ability level who are generally
economically disadvantaged and underachieving. The program is
designed to enable disadvantaged secondary school students to
succeed in rigorous curricula, enter mainstream activities in
school, and increase their opportunities to enroll in four-year
colleges. The funding is provided to 11 regional centers that
work with school districts located throughout the state and one
statewide center that coordinates AVID activities with the
regional centers; no funding is provided directly to school
districts under this program.
Adults in Correctional Facilities Program: This funding provides
for the education of incarcerated adults at county jails in
basic education, high school diploma, and English as a Second
Language (ESL). Jail education classes are designed to help
inmates improve competence in reading, language arts,
mathematics, vocational (job skills) education, and self-esteem.
The apportionment for each LEA is based on a reimbursement for
services provided in the previous year and paid in the current
year.
Career Technical Education - Partnership Academies: This funding
provides a program for grades 10 through 12 that is structured
as a school-within-a-school and incorporates 1) rigorous
integrated academics with a career focus, 2) business
partnerships that provide support through curriculum resources,
classroom speakers, field trips, mentors, and internships, and
3) teachers who work as a team in preparing students for careers
and postsecondary education. As of fall 2009, 280 funded
programs were in place, representing 230 high schools in 102
school districts in 33 counties. Academies are selected and
funding is allocated on the basis of a competitive application
process.
Child Care and Development Programs: This funding enables
agencies throughout the state to provide safe, healthy, and
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educationally enriched child development environments that are
staffed by competent adults. These programs provide for services
to low-income families, including welfare recipients, in
licensed center-based programs, licensed family child care
homes, and license-exempt settings, such as a family's own home
or the home of a relative or neighbor. The CDE currently
maintains approximately 1,468 service contracts with
approximately 797 public and private agencies that support and
provide services to 495,426 children (2007-08 data). Contractors
include school districts, county offices of education, cities,
local park and recreation districts, county welfare departments,
other public entities, community-based organizations, and
private agencies.
Class Size Reduction, K-3: The goal of the K-3 Class Size
Reduction (CSR) Program is to increase student achievement,
particularly in reading and mathematics, by decreasing the size
of classes in grades K through 3 to 20 or fewer students per
certificated teacher. In 2007-08, only 14 districts did not
participate in this program. The state budget provided $1.8
billion for this purpose in FY 2008-09. Due to budget deferrals
and projected reductions of $340 million in 2009-10 and $550
million in 2010-11 as a result of districts withdrawing from the
program, the Governor proposes $693 million for FY 2010-11. SB
4 X3 reduced the penalties for not meeting required
pupil-to-teachers ratios and capped the penalties at a 30%
reduction for the 2008-09 through the 2011-12 school years in
order to provide districts with additional flexibilities during
a budget crisis. There are other bills pending in the
Legislature that propose to change the terms of flexibility and
any penalties associated with this program.
The author notes that the current flexibility provisions,
enacted as part of the budget, do "not include an evaluation
component to assess the benefits of flexibility and whether
giving school districts categorical program funding flexibility
leads to better local decision making and improved student
achievement." Committee staff shares the concern that an
evaluation is an important component of a proposal such as this.
In fact, the Committee Rules of the Assembly Committee on
Education state that "Any bill that proposes the creation of a
pilot project shall contain a statement of purpose of the
proposed pilot project which specifically states the goals or
objectives and the length of time of the project. Such bill
shall also contain a definitive mechanism by which the value and
success, if any, of the project may be quantified. This
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mechanism shall include specific numerical objectives that must
be met or exceeded, if a project is to be judged successful, and
a suggested time line. Precise cost projections and methods by
which costs or savings may be calculated shall be provided on
the Committee worksheet." The evaluation proposed for the Pilot
raises concerns with respect to the lack of independence, as
well as the usefulness of the sample created by the districts
selected for the Pilot; these concerns are addressed in
recommended Committee amendments.
Committee Amendments: Committee staff recommends the following
amendments:
1)Ensure the independence of the Pilot evaluation by having the
independent evaluator selected by the SPI in a competitive
contracting process administered by the CDE, and requiring the
final report to be submitted by December 31, 2013. The CDE
should also be authorized to bill the Pilot participants
(proportional to each district's enrollment) for the costs of
the evaluation, so as to limit costs to the state. In
addition the evaluation will only provide useful results if
the reporting requirements on selected districts yield
sufficiently detailed data on which to base that evaluation;
for example expenditure reports should allow a tracking of
funds from each budget appropriation to the district's
expenditures, rather than from a single undifferentiated block
grant to expenditures.
2)The districts selected for the Pilot may be so similar that it
would not be possible to generalize the results of the Pilot
to other districts in the state. The selected districts
should represent geographic diversity as proposed, but also
clear differences in other characteristics including district
size, the nature of the district's plan (proposed to be
required as a precondition for selection), and student
diversity.
3)Clarify the requirement that the district make decisions about
flexible use of funds in an open process to ensure that staff,
parents, and the community are involved and that sufficient
opportunity for comment is provided in a public meeting.
4)Require the district plan to show how the objectives of each
of the categorical programs provided flexibility will be met
under the provisions of this bill, and allow the SPI in
selecting participants to determine if any of those
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categorical programs should be excepted from these provisions
for a participant based on the district's plan. Also clarify
that the SPI is authorized to select up to three districts for
the Pilot, rather than exactly three( regardless of quality of
the applicant pool).
5)Extend the proposed requirement that the district's
expenditure report identify the weighting of per pupil
expenditures on low socioeconomic, limited-English proficient,
and special education pupils to include the 2009-10 base year,
and make these calculations a requirement.
6)Specify legislative intent that the needs of pupils served by
categorical programs proposed for flexibility in this bill
will be served by any selected school district.
7)Conform the duration of the Pilot to that of Tier 3
flexibility provided under SB 4 X3 by ending the Pilot with
the 2012-13 fiscal year.
8)Remove the following budget items from the provisions of this
bill:
a) That portion of Pupil Transportation funding provided
for special education pupil transportation, since this
could jeopardize federal funding for special education.
b) AVID, since no funding under this program is provided to
school districts.
c) Career Technical Education - Partnership Academies,
since these funds are provided on the basis of competitive
grants and redirection of these funds may jeopardize state
funding under the federal Carl D. Perkins Career and
Technical Education Improvement Act of 2006.
9)Consistent with a provision in the bill that ensures that a
selected school district uses the flexible funds to supplement
the base program provided to English learners and economically
disadvantaged pupils, extend this provision to include foster
youth and low income children served by subsidized child care
and development programs.
10)Technical amendments to clarify language.
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Table 1: K-12 Budget Items Granted Flexibility under SB 4 X3
Targeted Instructional Improvement Block Grant
Adult education
Regional Occupational Centers and Programs
School and Library Improvement Block Grant
Supplemental instruction
Instructional Materials Block Grant
Deferred Maintenance
Professional Development Block Grant
Grade 7-12 counseling
Charter schools categorical block grant
Teacher Credentialing Block Grant
Arts and Music Block Grant
School Safety Block Grant
Ninth-Grade Class Size Reduction
Pupil Retention Block Grant
California High School Exit Exam supplemental instruction
California School Age Families Education
Professional Development Institutes for Math and English
Gifted and Talented Education
Community Day Schools
Community Based English Tutoring
Physical Education Block Grant
Alternative Credentialing/Internship programs
Peer Assistance and Review
School Safety Competitive Grants
California Technology Assistance Projects
Certificated Staff Mentoring
County Offices of Education - Williams audits
Specialized Secondary Programs
Principal Training
American Indian Education Centers
Oral health assessments
Advanced Placement fee waivers
National Board certification incentive grants
Bilingual teacher training assistance program
American Indian Early Education Program
Reader services for blind teachers
Center for Civic Education
Teacher dismissal apportionments
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California Association of Student Councils
Table 2: K-12 Budget Items Not Granted Flexibility under SB 4 X3
Special education
K-3 Class Size Reduction*
Economic Impact Aid *
After School Safety and Education
Home-to-School Transportation*
Quality Education Investment Act
Child nutrition
Student assessments
English Language Acquisition Program
Year-Round school grants
Charter school facility grants
Partnership Academies*
Apprentice programs
Foster youth programs*
Adults in correctional facilities*
County office oversight
K-12 High-Speed Network
Agricultural vocational education
Advancement via Individual Determination (AVID)*
Child Care and Development Programs*
* denotes the eight programs that would be included in the
flexibility provisions granted to pilot districts as proposed
by this bill
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REGISTERED SUPPORT / OPPOSITION :
Support
California Association of School Business Officials
California State University, Long Beach
Centro CHA, Inc
Clovis Unified School District
Corona-Norco Unified School District
District Community Advisory Committee of Long Beach Unified
School District
Fresno Unified School District
Greater Lakewood Chamber of Commerce
Long Beach Area Chamber of Commerce
Long Beach City College
Long Beach Community College District
Long Beach Unified School District (Sponsor)
Long Community Improvement League
Los Angeles County Business Federation
Poway Unified School District
Regional Hispanic Chamber of Commerce
Riverside County Schools Advocacy Association
Torrance Parents Organization
Torrance Unified School District
Several individuals
Opposition
Alliance of Californians for Community Empowerment (unless
amended)
Asian/Pacific Islander Youth Promoting Advocacy and Leadership
(unless amended)
California Federation of Teachers (unless amended)
California Teachers Association
Californians for Justice (unless amended)
PICO California (unless amended)
Public Advocates (unless amended)
United Teachers Los Angeles
Analysis Prepared by : Gerald Shelton / ED. / (916) 319-2087
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