BILL ANALYSIS �
AB 751
Page 1
ASSEMBLY THIRD READING
AB 751 (Furutani)
As Amended April 26, 2011
Majority vote
EDUCATION 7-3 APPROPRIATIONS 12-4
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|Ayes:|Brownley, Ammiano, |Ayes:|Fuentes, Blumenfield, |
| |Buchanan, Bonilla, | |Bradford, Charles |
| |Carter, Eng, Williams | |Calderon, Campos, Davis, |
| | | |Gatto, Hall, Hill, Lara, |
| | | |Mitchell, Solorio |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Norby, Hagman, Halderman |Nays:|Harkey, Nielsen, Norby, |
| | | |Wagner |
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SUMMARY : Provides for additional information on, and a
potential waiver related to, the fiscal status of school
districts and county offices of education (COE) in the second
fiscal year following the current fiscal year. Specifically,
this bill :
1)Requires the Superintendent of Public Introduction (SPI),
county superintendents and school districts to distinguish
between school districts and COE that receive qualified
certification only on the basis of the second subsequent year
following the current year from those that are qualified on
the basis of the current year or first subsequent year.
2)Requires any school district, choosing to make budget
reductions as a result of it being assigned a qualified
certification solely on the basis of the second subsequent
year following the current year, to hear those cuts as an
information item and allow public comment on that item at an
open meeting held prior to the meeting at which the board
takes action on the proposed cuts.
3)Authorizes the SPI to waive the requirements on any school
district or COE to provide and report budget projections and
interim projections for the second subsequent year following
the current year, as well as the requirement that the local
educational agency (LEA) self-certify interim status on the
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basis of that third year, if all of the following hold:
a) The school district or COE requests that such a waiver
be approved and provides any information requested that is
needed by the California Department of Education (CDE) to
analyze that request;
b) In the case of a school district, the county
superintendent of the county within which that district is
located recommends that the SPI approves the requested
waiver; and,
c) The SPI determines with reasonable certainty, from the
requestor's fiscal history, current financial status and
budget projections, and from the SPI's expectations
concerning future funding levels, that the requestor would
meet its financial obligations for the second subsequent
year following the current year.
EXISTING LAW :
1)Provides for external financial oversight of COEs by the SPI,
and of school districts by county superintendents.
2)Requires LEAs to adopt a budget prior to July 1 of each year,
and requires that budget to be approved by the county
superintendent (for districts) or the SPI (for COEs) by
October 8; also requires specified oversight and interventions
if the budget is not approved by that date.
3)Requires LEAs to provide two interim reports each fiscal year
by specified due dates, and requires each LEA to self-certify
as to whether the LEA will meet or may not meet its financial
obligations for the current and two subsequent fiscal years,
or will be unable to do so for the current and one subsequent
year; also requires specified oversight and interventions if a
LEA may not meet or will be unable to meet its financial
obligations.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, minor, absorbable General Fund/Proposition 98 (GF/98)
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costs to COEs and minor, absorbable GF costs to the SPI to
comply with the requirements of this measure; 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.
Assembly Appropriations also notes that 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 : As part of the state's financial oversight of LEAs,
the AB 1200 process, each school district and COE is required to
adopt a budget by July 1 of each year. County superintendents
are required to review and approve (or disapprove) each school
district's adopted budget (in the case of COE budgets, the SPI
is the approver) for compliance with fiscal criteria and
standards, and to determine whether the budget will allow the
LEA to meet current and subsequent year financial obligations.
If an LEA's budget remains disapproved by October 8, then the
county superintendent or SPI, as appropriate, is required to
make specified interventions with respect to financial actions
of the LEA, including developing a budget plan that will guide
the LEA through the fiscal year.
LEAs are also required to file two interim financial reports
during each fiscal year; these reports provide for a
self-assessment of the status of the LEA's financial health over
a three-year time horizon. This self-assessment results in a
certification of whether or not the LEA is able to meet its
financial obligations; each LEA's certification is classified as
positive, qualified, or negative. A positive certification is
assigned to a LEA that will meet its financial obligations for
the current and two subsequent fiscal years; a qualified
certification is assigned when the LEA may not meet its
financial obligations for the current or two subsequent fiscal
years; and a negative certification is assigned when a LEA will
be unable to meet its financial obligations for the remainder of
the current year or for the subsequent fiscal year. Qualified
or negative certification results in various forms of additional
oversight or interventions on the part of the county
superintendent or SPI, including assigning external consultants,
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requiring a district fiscal recovery plan, or even disallowing
certain expenditures through a stay and rescind of governing
board actions. For the period ending October 31, 2010, the CDE
reported that 97 LEAs in the state received a qualified
certification of its financial status at the 2010-11 First
Interim Report; a negative certification was assigned to 13
LEAs.
If a LEA is assigned a qualified certification as a result of
its fiscal status in the current or subsequent year, then that
district may be facing an immediate threat to its fiscal health
in that changes within this fiscal year or within the budget
that will have to be adopted by the end of this fiscal year may
be necessary. However, a LEA that is assigned a qualified
certification solely as a result of its fiscal situation in the
third year of the multi-year projections likely has the ability
to be slightly more deliberative in its approach to resolving
the problems that it faces. This does not mean that LEAs
qualified as a result of that third year have the luxury of
ignoring the early warning provided by those projections or that
the early warning provided is unimportant, but more that LEAs
qualified as a result of the situation that they face in the
current or subsequent year face a more urgent situation.
Under the current AB 1200 process, however, there is no
distinction made between a LEA qualified as a result of its
fiscal situation in the current or second year, and one assigned
a qualified certification solely as a result of its fiscal
situation in the third year. This may present some problems.
For example, a LEA certified as qualified or negative may face
external consequences, such as a loss of credit extended by
vendors, a decrease in its bond rating or even more difficulty
in accessing the capital market; a LEA in that situation may
also face a perception problem within its community. These
impacts might be less severe if it was clear, as is provided for
in this bill, that a LEA was assigned qualified status as a
result of the third year projections only, since that LEA may
have a longer period of time over which to improve its fiscal
health.
Some supporters of this bill have argued that the third-year
projections create a climate where a LEA assigned qualified
certification solely as a result of that third year, since there
is no distinction between these two situations, may rush to make
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reductions without taking advantage of the of the opportunity to
be slightly more deliberative in its approach to resolving its
problems. Clearly this is unwise practice, to the extent it
occurs; it would be possible, though, to address this problem
without abandoning the early warning benefits of the three-year
interim reports. This Assembly has historically shown a
commitment to transparency, openness, and public discourse
during the consideration of difficult decisions with which local
governing boards are faced. Examples of this commitment can be
found in legislation enacted in the Fifth Extraordinary Session
of 2009-10, and in legislation addressing issues that have
arisen as a result of the current expenditure flexibility
applied to categorical programs - in both cases, legislation has
provided for and ensured opportunities for parents, LEA staff,
and other community members to enter into a public discourse
over issues faced by the local governing board. This bill
provides the same type of assurance of transparency and public
discussion in the case of reductions that a LEA might consider
as a result of that LEA being assigned a qualified certification
solely as a result of its fiscal situation in the third year.
Analysis Prepared by : Gerald Shelton / ED. / (916) 319-2087
FN: 0000615