BILL ANALYSIS �
AB 2434
Page 1
Date of Hearing: April 18, 2012
ASSEMBLY COMMITTEE ON EDUCATION
Julia Brownley, Chair
AB 2434 (Block) - As Introduced: February 24, 2012
SUBJECT : School districts: surplus school property
SUMMARY : Extends the sunset of the provisions authorizing a
school district to deposit the proceeds from the sale of surplus
real property, together with any personal property located on
the property, purchased entirely with local funds, into the
general fund of the school district, and use the proceeds for
any one-time general fund purpose, from January 1, 2014 to
January 1, 2019.
EXISTING LAW :
1)Requires funds from the sale of surplus property to be used
for capital outlay or for costs of maintenance of school
district property that the local governing board determines
will not recur within a five-year period.
2)Authorizes proceeds from the lease of a school district
property with an option to purchase to be deposited into a
restricted fund for the routine repair of district facilities
for up to five-years.
3)Provides that proceeds from the sale or lease with the option
to purchase may be deposited in the general fund if the school
district governing board and the State Allocation Board (SAB)
have determined that the district has no anticipated need for
additional sites or building construction for the ten-year
period following the sale or lease with option to purchase,
and the district has no major deferred maintenance
requirements. Authorizes proceeds from the sale or lease with
option to purchase of school district property to be used for
one-time expenditures, and may not be used for ongoing
expenditures including, but not limited to, salaries and other
general operating expenses.
4)Requires the SAB to reduce an apportionment of hardship
assistance awarded to a school district by an amount equal to
the amount of any proceeds from the sale of surplus property
used for a one-time expenditure of the school district for
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five years following the expenditure.
FISCAL EFFECT : Unknown
COMMENTS : Background . Existing law requires districts to
establish routine facilities accounts and deferred maintenance
accounts, and requires proceeds from the sale of surplus
property to stay in capital facilities or maintenance funds to
ensure that districts protect and maintain their facilities. SB
1415 (Scott), Chapter 810, Statutes of 2006, authorizes the
proceeds from the sale of surplus property to be deposited into
the general fund for one-time expenditures and prohibits the use
for ongoing expenditures. As a condition for using funds for
one-time general fund purposes, a district must show that it has
no need for additional sites or building construction for a
ten-year period following the sale of the property and may not
apply for state bond funds during the ten-year period. The
district may apply for funds after five years if the SAB
determines that the district demonstrates enrollment growth or a
need for additional sites it could not have anticipated.
Existing law also authorizes, on a district by district basis,
the authority to sell surplus property purchased with local
funds to be used for one-time purposes that does not result in a
ban from applying for state bond funds. Such authorities are
limited to specified time periods and conditions. Two
districts, Oakland Unified School District and Vallejo City
Unified School District, are given the authority to sell surplus
property so that they can repay emergency loans from the state.
All of the authorizations were given prior to the enactment of
SB 1415.
Budget flexibility provisions . The 2009-10 budget established a
number of flexibility provisions to provide school districts
with tools to balance their budgets, including the authority to
use the funds for 39 categorical program funds for any
educational purpose, relaxing the penalties for violating class
size reduction student to teacher ratios and the authority to
use proceeds from the sale of surplus property for any one-time
general fund purposes (AB 2 (Evans), Chapter 2, Statutes of
2009-10 Fourth Extraordinary Session). The authority was
initially provided until January 1, 2012. SB 70, Chapter 7,
Statutes of 2011, extended this authority along with other
flexibility provisions until January 1, 2014. This authority
does not prohibit school districts from applying for state bond
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funds. Regulations for the implementation of SB 1415 (Title 2,
Section 1700) adopted by the SAB, the body that administers
state education bond funds and the School Facility Program,
established the following definitions:
1)"One-time Expenditures" means costs paid by the general funds
of a school district that are nonrecurring in nature and do
not commit the school district to incur costs in the future,
and are exclusive of Ongoing Expenditures.
2)"Ongoing Expenditures" means costs paid by the general or
special funds of a school district in support of employee
salaries, benefits and other costs that are associated with
ongoing and sustained operations and services except, if
approved by the State Allocation Board, a single and one-time
payment reducing a district's existing unfunded liability for
postemployment benefits other than pensions will be considered
a one-time expenditure and not an ongoing expenditure if the
following conditions are also met: (1) the unfunded liability
was incurred prior to January 1, 2007, (2) the unfunded
liability has been determined using actuarial measurement
methods as defined in Governmental Accounting Standards Board
Statement 45, and (3) the payment is consistent with any plan
made by the district according to Assembly Bill 1802, Chapter
79, Section 43(a)(6)(A), Statutes of 2006 (Committee on
Budget), as amended by Senate Bill 1131, Chapter 371, Statutes
of 2006 (Committee on Budget and Fiscal Review), or a similar
plan adopted by the district's governing board.
According to the Office of Public School Construction, eight
districts have exercised this authority between August 2010 and
March 2012. Proceeds have been used to purchase textbooks, IT
equipment and upgrades, supplies, staff development, with large
portions going towards postemployment benefits other than
pensions.
According to the author, "The problem with the current, imminent
sunset is that school districts are feeling pressured to sell
property in this weak real estate market environment. The
stakes are high because if they do not sell surplus property
soon, they will lose the opportunity to stabilize funding for
valuable programs such as arts and music.
Education has suffered from extensive budget cuts that will take
years to recover from, and even if revenues start increasing, it
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will take years for the state to eliminate the deficit factor
and provide sufficient and stable funding. In the meantime,
school districts will continue to need tools and flexibility
options. And it is important for school districts to know in
advance that they can count on this flexibility because state
law requires school districts to demonstrate a balanced budget
for the current year and the two subsequent fiscal years.
AB 2434 addresses this foreseeable need by extending the surplus
property flexibility provisions for another five years. In
effect, AB 2434 will remove the perverse incentive for "fire
sales," while also maintaining a valuable tool for school
districts to balance their budgets, save essential services for
students, and help keep cuts away from the classroom."
Current law already gives districts flexibility to use the
proceeds from the sale of surplus property for any one-time
general fund purposes, but prohibits a district from seeking
state bond funds for other projects for a period of ten years.
The authority provided through the budget process allows a
district to continue applying for state bond funds. With state
bond funds expected to be exhausted by the end of this year,
this flexibility authority may not be as beneficial anymore.
The initial flexibility was authorized for 2.5 years and
extended by two more years and was one of many other flexibility
provisions. The extension of this flexibility should be granted
only if extensions are granted to all the other budget
flexibility provisions. However, if the Committee chooses to
pass this bill, staff recommends extending the authority by two
years rather than five years, consistent with the previous
extension.
Related legislation . AB 1622 (Eng), pending in this Committee,
authorizes the San Marino Unified School District to sell the
site of the former Stoneman Elementary School to the City of San
Marino and use the proceeds from the sale for school district
education programs.
Previous legislation . AB 2 (Evans), Chapter 2, Statutes of the
Fourth Extraordinary Session, authorizes school districts to use
the proceeds from the sale of surplus school property for any
one-time general fund purposes, among many other provisions.
SB 70 (Committee on Budget and Fiscal Review), Chapter 7,
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Statutes of 2011, extended the authority to use proceeds from
the sale of surplus school property for one-time general fund
purposes by two years, among many other provisions.
SB 1415 (Scott), Chapter 810, Statutes of 2006, authorizes the
use of proceeds from the sale of surplus school property for any
one-time general fund purpose and prohibits the use for ongoing
expenditures.
REGISTERED SUPPORT / OPPOSITION :
Support
Riverside County School Superintendents' Association
Opposition
None on file
Analysis Prepared by : Sophia Kwong Kim / ED. / (916) 319-2087