BILL ANALYSIS �
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|SENATE RULES COMMITTEE | AB 2279|
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THIRD READING
Bill No: AB 2279
Author: Swanson (D)
Amended: 8/20/12 in Senate
Vote: 21
SENATE EDUCATION COMMITTEE : 8-1, 6/20/12
AYES: Lowenthal, Alquist, Blakeslee, Hancock, Liu, Price,
Simitian, Vargas
NOES: Huff
NO VOTE RECORDED: Runner, Vacancy
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
ASSEMBLY FLOOR : 77-0, 5/29/12 - See last page for vote
SUBJECT : School districts: emergency apportionments:
trustees
SOURCE : California School Boards Association
DIGEST : This bill removes the requirement, as specified,
that a trustee appointed by the Superintendent of Public
Instruction (SPI) who works in a school district that
received an emergency loan serve until the loan is repaid.
However, this bill includes a provision that the county
superintendent of schools (CSS) may stay or rescind an
action of the governing board that in their judgment may
affect the financial condition of the school district.
This bill requires the CSS to notify the SPI, as specified,
within five business days of staying or rescinding an
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action of the governing board of the school district. If
the SPI receives this notice from the CSS, this bill
requires the SPI to report to the Legislature, on or before
December 30 of every year, whether the school district is
complying with the fiscal plan approved for the school
district. This bill authorizes the SPI, within five years
after an appointed trustee is removed or the emergency
apportionment is repaid, whichever occurs later, to
reassume, either directly or through an administrator, all
of the legal rights, duties, and powers of the governing
board of the school district if the school district
violates any provision of specified recovery plans approved
by the SPI. This bill contains double-jointing language
with AB 2278 (Swanson), Chapter 159, Statutes of 2012.
Senate Floor Amendments of 8/20/12 (1) resolve conflicts
with AB 2662 (Assembly Education Committee) and AB 2278.
The conflicts exist solely because these bills amend the
same section of the Education Code (ED); (2) make various
technical changes.
ANALYSIS : Existing law establishes a process for state
oversight and financial assistance for schools in financial
trouble, and authorizes the governing board of a school
district that determines that its revenues are insufficient
to meet its current year obligations to request an
emergency apportionment (loan) from the state through the
SPI. An emergency apportionment (loan) from the state
results in the state taking control of the school district.
The degree of state control is determined by the size of
the loan relative to the district's budget.
Specifically, if the emergency loan is less than twice the
size of the district's required reserve level, a State
Trustee is assigned and assumes authority over the
financial aspects of the school district's activities. If
the size of the loan exceeds twice the size of the
district's required reserve level, the following takes
place: (1) the governing board loses its powers and
becomes advisory only; (2) the local superintendent is no
longer employed by the district; and (3) a State
Administrator is assigned and assumes the powers of the
local governing board and superintendent.
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In the case of a state appointed trustee, existing law
requires the trustee to serve until the loan is repaid, the
district has adequate fiscal systems and controls in place,
and the SPI determines that the district's future
compliance with its approved fiscal plan is probable. In
addition, existing law provides that-before the district
repays the loan-it shall select an auditor from a list
established by the SPI and State Controller to conduct an
audit of its fiscal systems. If the fiscal systems are
deemed to be inadequate, then the SPI may retain the
trustee until the deficiencies are corrected. (ED Section
41320, et. seq.)
This bill removes the requirement that a trustee appointed
by the SPI who works in a school district that received an
emergency loan serve until the loan is repaid.
Specifically, this bill:
1. Requires the trustee to serve for at least three years
and until the school district has adequate fiscal
systems/controls in place and the SPI determines the
district's future compliance with the fiscal plan is
probable, as specified.
2. Authorizes the CSS to stay or rescind an action of the
governing board of the school district that may affect
the financial condition of the district after the
trustee's period of service and until the emergency loan
is repaid.
3. Requires the CSS to notify the SPI, as specified, within
five business days of staying or rescinding an action of
the governing board of the school district. If the SPI
receives this notice from the CSS, this bill requires
the SPI to report to the Legislature, on or before
December 30 of every year, whether the school district
is complying with the fiscal plan approved for the
school district.
4. Modifies existing law, by clarifying that if a school
district violates a provision of their recovery plans
within five years after the trustee is removed or after
the emergency apportionment is repaid, whichever occurs
later, the SPI may reassume either directly or through
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an administrator all of the legal rights, duties, and
powers of the governing board of the school district, as
specified.
5. Resolves conflicts with AB 2662 and AB 2278. The
conflicts exist solely because these bills amend the
same section of the ED.
Comments
Additional background on appointed trustees . As previously
stated, depending on the size of an emergency apportionment
(loan), the SPI may appoint either a trustee or
administrator to act on his/her behalf. A trustee must
have recognized expertise in management and finance. The
trustee serves until the emergency loan is repaid and the
school district has adequate fiscal systems and controls in
place. The trustee serves at the pleasure of, and reports
directly to, the SPI. The trustee is authorized to do all
of the following:
1. Monitor and review the operation of the school district.
2. During the period of his/her service, stay or rescind
any action of the local governing board that, in the
judgment of the trustee, may affect the financial
condition of the school district.
According to the Senate Education Committee analysis, the
necessity of accepting an emergency apportionment and
therefore, the appointment of either a state administrator
or trustee generally is the result of poor local district
leadership and decision making and ineffective governance,
typically over multiple years. If not corrected, past
management decisions can lead to cash insolvency and the
need for state fiscal intervention in order to ensure a
school district is able to maintain an appropriate fiscal
and financial viability.
The term of an emergency loan is typically 20 years. It
could be argued that having a trustee in place for this
length of time may undermine the community's engagement
with its schools, because the powers and authority of the
locally elected governing board is constrained. And over
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time, this can discourage qualified members of the
community from choosing to serve on the board, leading to
further disengagement, and making self-government more
difficult when full authority returns to the board.
A goal of this bill, therefore, is to transition from a
trustee to the local governing board sooner than 20 years,
but with adequate safeguards. For example, permitting the
local CSS to stay or rescind governing board actions that
may affect the financial condition of the school district.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Assembly Appropriations Committee, for a
school district with an emergency loan, this bill will
result in local school district general fund savings,
likely in excess of $150,000, per year by repealing the
requirement for a trustee to serve in the district until
its loan is repaid.
Of the eight emergency loans the state has issued, four
have been paid off. Of the four districts that paid off
their loan, it took three of them more than 10 years to pay
the loan in full. As a result, the trustee appointed by
the SPI served in the school district, alongside the
district's superintendent, for a number of years. During
this time, the district was paying the salary of both the
trustee and its superintendent.
SUPPORT : (Verified 8/20/12)
California School Boards Association (source)
ARGUMENTS IN SUPPORT : According to the author's office,
while the SPI has the authority to appoint a trustee, the
SPI does not have discretion to remove a trustee prior to
the full repayment of an emergency loan. This bill allows
the SPI to remove the trustee and restore the district
governing board's full power after a minimum of three years
if he/she determines that school district's future
compliance with their approved fiscal plan is probable. In
addition, this bill authorizes the CSS to stay or rescind
any action of the local school district after the trustee's
period of service and until the state loan is repaid.
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ASSEMBLY FLOOR : 77-0, 5/29/12
AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Beall,
Bill Berryhill, Block, Blumenfield, Bonilla, Bradford,
Brownley, Buchanan, Butler, Charles Calderon, Campos,
Carter, Chesbro, Conway, Cook, Davis, Dickinson,
Donnelly, Eng, Feuer, Fong, Fuentes, Furutani, Beth
Gaines, Galgiani, Garrick, Gatto, Gordon, Gorell, Grove,
Hagman, Halderman, Harkey, Hayashi, Roger Hern�ndez,
Hill, Huber, Hueso, Huffman, Jeffries, Jones, Knight,
Lara, Logue, Bonnie Lowenthal, Ma, Mansoor, Mendoza,
Miller, Mitchell, Monning, Morrell, Nestande, Nielsen,
Norby, Olsen, Pan, Perea, V. Manuel P�rez, Portantino,
Silva, Skinner, Smyth, Solorio, Swanson, Torres, Valadao,
Wagner, Wieckowski, Williams, Yamada, John A. P�rez
NO VOTE RECORDED: Cedillo, Fletcher, Hall
PQ:k 8/21/12 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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