BILL ANALYSIS �
AB 751
Page 1
Date of Hearing: May 11, 2011
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 751 (Furutani) - As Amended: April 26, 2011
Policy Committee: Education
Vote:7-3
Urgency: No State Mandated Local Program:
No Reimbursable: No
SUMMARY
This bill makes the following changes to the local education
agency fiscal oversight process conducted by county offices of
education (COE) and the Superintendent of Public Instruction
(SPI):
1)Requires the SPI, a county superintendent (CS), and the
governing board of a school district to clearly distinguish
between a district that is assigned a qualified certification
because it may not meet its financial obligations only for the
second subsequent fiscal year (FY) following the current FY
and a district that is otherwise assigned a qualified
certification. Provides these same requirements for COEs.
2)Requires the governing board of a school district that chooses
to propose reductions to expenditures in the current year,
after being assigned a qualified certification because it may
not meet its financial obligations only for the second
subsequent FY, to present that proposal and provide for public
comment at an open meeting held prior to the meeting in which
the board takes action to reduce expenditures.
3)Authorizes the SPI to waive any reporting, certification, and
intervention requirements based on the second subsequent FY
following the current FY for a COE and a school district if
all of the following conditions are met:
a) The CS acting for the COE or the governing board of the
school district requests that the waiver be approved, as
specified.
b) In the instance where the school district requests a
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waiver, the CS of the county where the district is located
provides a letter supporting the waiver.
c) The SPI determines the COE or the school district will
meet its financial obligations for the second subsequent FY
following the current FY, as specified.
FISCAL EFFECT
1)Minor, absorbable GF/98 costs to COEs and minor, absorbable GF
costs to the SPI to comply with the requirements of this
measure. COEs are currently required to review and approve
school district budgets for fiscal certification purposes.
The SPI is required to do the same for COEs. This bill
requires districts, COEs, and SPI to provide more information
to the general public regarding the reasons for a qualified
fiscal certification, particularly if the certification is due
to projections regarding the third budget year, as specified.
2)The state is required to pay approximately $359,000 GF/98 in
annual state reimbursable mandated costs for the financial
compliance and oversight process conducted by local education
agencies. This bill modifies this process, as specified.
COMMENTS
1)Background . AB 1200 (Eastin), Chapter 1213, Statutes of 1991,
provides that the CS has fiscal oversight responsibility over
school districts in the county and SPI has fiscal oversight
responsibility over COEs. The CS has authority to disapprove a
school district's budget, or at any time, to declare a
district in jeopardy of meeting its financial obligations
through the financial reporting process.
Current law requires school districts and COEs to file two
interim reports annually on their financial status with the
SDE. The first interim report is due to the state by January
15 of each FY and the second interim report is due by April 15
each year. As a part of these reports, school districts and
COEs must certify whether they are able to meet their
financial obligations, as determined by standards and criteria
for fiscal stability adopted by the State Board of Education,
their budget (as revised to reflect current adopted state
budget information), property tax revenues, and ending
balances for the preceding FY. The certifications are
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classified as positive, qualified, or negative.
a) A positive certification is assigned when a school
district or COE will meet its financial obligations for the
current and two subsequent FY.
b) A qualified certification is assigned when a district or
COE may not meet its financial obligations for the current
and two subsequent FY.
c) A negative certification is assigned when a school
district or COE will not meet their financial obligations
in the current year or in the subsequent FY.
If a COE disapproves a school district's budget or determines
the district has a negative or qualified certification,
statute provides the COE with authority to conduct various
forms of intervention, including assigning external
consultants, requiring a district fiscal recovery plan, or
even disallowing certain district expenditures. The SPI has
similar authority to intervene in fiscal matters of the county
office of education.
2)Purpose . According to the Legislative Analyst Office (LAO),
K-12 education has experienced a 6.6% , $5.8 billion, decline
in programmatic funding from the 2007-08 FY, including the
loss of federal American Recovery and Reinvestment Act funds.
K-12 programmatic spending has been reduced by $542 per pupil
during this same time period.
Likewise, the LAO reports the state has a $9.5 billion
Proposition 98 (K-14 schools) maintenance factor obligation
entering into the 2011-12 FY. This obligation is due to the
reductions the state has recently implemented, including
providing no cost-of-living adjustment for three years and
suspending Proposition 98 in 2009. Also, the state is
currently deferring $9.2 billion (20%) of GF/98 funding.
School districts contend the current fiscal oversight process
does not account for the amount of reductions they have taken
in a short period of time or the constant uncertainty of the
state budget process. Specifically, they argue making
budgetary decisions in this fiscal environment based on a
three year projection is neither practical nor fair.
According to the author, "Revenues consistently have come in
lower than estimates, causing the state to impose additional
cuts to school districts mid-year. Mid-year cuts to school
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districts create chaos because fiscal planning assumptions are
invalidated by the drop in revenues, much of which is ongoing
into subsequent budget years."
This bill, sponsored by the Los Angeles Unified School
District, changes the fiscal oversight process for school
districts and COEs to provide more information to the general
public, as specified.
3)Current fiscal reporting information . According to SDE, at
the 2011 first interim report, 97 districts received a
qualified rating and 13 districts received a negative rating.
There are approximately 1,021 school districts and COEs in the
state. Between the 2007-08 FY and the 2008-09 FY, the number
of districts receiving a qualified rating increased by more
than 50%. Each year thereafter, these numbers have continued
to grow due to the state's fiscal situation.
According to the Fiscal Crisis Management Assistance Team, an
agency established by the state to provide technical
assistance to school districts and COEs regarding financial
issues, preliminary estimates indicate there will continue to
be 13 districts with a negative certification and 124 school
districts with a qualified certification at the Second Interim
Report.
Analysis Prepared by : Kimberly Rodriguez / APPR. / (916)
319-2081