BILL ANALYSIS �
AB 677
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Date of Hearing: May 4, 2011
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 677 (Skinner) - As Amended: April 26, 2011
Policy Committee: Education
Vote:10-0
Urgency: No State Mandated Local Program:
No Reimbursable: No
SUMMARY
This bill reestablishes Oakland Unified School District's (OUSD)
authority, from January 1, 2012 to June 30, 2016, to sell
surplus property and use the proceeds from the sale to reduce or
retire its emergency loan. Specifically, this bill:
Prohibits OUSD from being eligible for hardship assistance under
the state school facilities program.
FISCAL EFFECT
As of July 2010, OUSD's emergency loan balance is $73.6 million.
In 2003, the school district chose to utilize only $65 million
of the original $100 million appropriation. However, in June
2006, OUSD drew down the remaining $35 million. To date, the
district has paid $35.6 million on its loan, with an annual
payment of approximately $6 million.
OUSD received a "qualified" certification of its financial
status at the 2010-11 First Interim Report (January 15) issued
by the State Department of Education (SDE). This "qualified"
certification is given to a local education agency that may not
meet its financial obligations in the 2010-11, 2011-12, or
2012-13 fiscal years, as determined by the Fiscal Crisis
Management and Assistance Team (based on current revenue
projections). The second interim report is due to SDE by April
15 of each year; however, additional time is needed for SDE to
certify the report.
COMMENTS
AB 677
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1)Background . SB 39 (Perata), Chapter 14, Statutes of 2003,
appropriated $100 million for an emergency loan to OUSD and
required the Superintendent of Public Instruction (SPI) to
assume all the rights, duties, and powers of the governing
board of OUSD and appoint an administrator to serve during the
term of the loan.
Beginning in 2007, the SPI gradually returned powers and
duties to OUSD in areas of facilities, personnel, community
relations, and governance. In December 2008, the governing
board was given authority over the remaining two areas: pupil
achievement and financial management. OUSD has hired a
superintendent; however, a state trustee remains in the
district.
Chapter 14 also authorized the school district to sell its
surplus property and use the proceeds from the sale to reduce
or retire its emergency loan. This initial authorization was
provided until July 30, 2005. SB 512 (Committee on
Education), Chapter 677, Statutes of 2005, extended the
authorization until June 30, 2007.
According to the author, "Statewide schools districts face
tremendous difficulty meeting their financial obligations.
While OUSD has responsibly made payments throughout the
duration of the loan period, the state's severe fiscal crisis
and looming budget shortfalls for OUSD necessitates that OUSD
continue to have every tool available to manage its budget and
repay its emergency loan obligations. AB 677 will authorize
OUSD to continue examining the possibility of selling unused
property in the next few years."
2)AB 2 X4 (Evans), Chapter 2, Fourth Extraordinary Session,
Statutes of 2009 authorized school districts to sell surplus
property, until 2012, and utilize the proceeds for any general
fund purpose. SB 70 (Committee on Budget and Fiscal Review),
Chapter 7, Statutes of 2011 extended this authorization until
2015.
3)AB 1200, Chapter 1213, Statutes of 1991 established a process
that delineates the duties and responsibilities of both the
state and the school district when emergency loans need to be
granted to school districts due to insolvency. Chapter 1213
provides that if the state makes a loan to a school district
the SPI shall assume all legal rights, duties, and powers of
AB 677
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the governing board of the school district. The SPI may
appoint an administrator to act on his or her behalf in
exercising specified authority over the district and may, on a
short-term basis, assign any staff necessary to assist the
administrator.
As of July 2010, there are five school districts (excluding
OUSD) that have an outstanding emergency loan balance with the
state: Emery Unified School District ($903,000), Kings City
Joint Union High School District ($14.3 million), Vallejo City
Unified School District ($45.5 million), West Contra Cost
Unified School District ($10.6 million), and West Fresno
Unified School District ($550,000).
Analysis Prepared by : Kimberly Rodriguez / APPR. / (916)
319-2081