BILL ANALYSIS Ó
------------------------------------------------------------
|SENATE RULES COMMITTEE | AB 2435|
|Office of Senate Floor Analyses | |
|1020 N Street, Suite 524 | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
------------------------------------------------------------
THIRD READING
Bill No: AB 2435
Author: Roger Hernández (D)
Amended: 8/13/12 in Senate
Vote: 21
SENATE EDUCATION COMMITTEE : 7-1, 6/20/12
AYES: Lowenthal, Alquist, Hancock, Liu, Price, Simitian,
Vargas
NOES: Blakeslee
NO VOTE RECORDED: Runner, Huff, Vacancy
SENATE APPROPRIATIONS COMMITTEE : 5-2, 8/6/12
AYES: Kehoe, Alquist, Lieu, Price, Steinberg
NOES: Walters, Dutton
ASSEMBLY FLOOR : 56-15, 5/29/12 - See last page for vote
SUBJECT : Education finance: indirect cost rates
SOURCE : Los Angeles County Office of Education
DIGEST : This bill, until January 1, 2016, requires the
State Department of Education (SDE), or any other state
agency, that administers a grant or allocation of federal
or state funds to a school district, to allow an indirect
cost rate that is not less than the indirect cost rate
established by SDE for each district, unless federal or
state law requires a lower cost rate.
ANALYSIS : The United States Department of Education has
CONTINUED
AB 2435
Page
2
approved a delegation agreement with the department that
authorizes the SDE, as the recognized agency to establish
indirect cost rates for the state's local educational
agencies (LEAs). Indirect costs are agency-wide general
management costs (i.e., activities for the direction and
control of the agency as a whole). General management
costs consist of administrative activities necessary for
the general operation of the agency, such as accounting,
budgeting, payroll preparation, personnel services,
purchasing, and centralized data processing.
This bill requires the SDE, or any other state agency, that
administers a grant or allocation of federal or state funds
to a school district, to allow an indirect cost rate that
is not less than the indirect cost rate established by SDE
for each district, unless federal or state law requires a
lower cost rate.
This bill:
1. Defines "direct cost" as a cost that provides
measurable, direct benefits to a particular program of
an agency, including, but not limited to, salaries and
benefits of teachers and aides, costs of purchasing
textbooks and instructional supplies, and costs for
providing pupils with counseling, health services, and
transportation.
2. Defines "indirect cost" as the agency-wide, general
management cost of the activities for the direction and
control of the agency as a whole, including, but not
limited to, administrative activities necessary for the
general operation of the agency, as specified.
3. Defines "indirect cost rate" as the indirect cost rate
established by SDE for each school district.
4. Sunsets January 1, 2016.
Comments
Need for this bill . The SDE determines the indirect cost
rate for each LEA. This indirect cost rate is typically
less than 10%, and this rate covers such general operating
CONTINUED
AB 2435
Page
3
costs as accounting, budgeting, personnel services,
purchasing, payroll and data processing. However, LEAs
cannot cover their operating costs when the indirect rate
allowed for certain grants and allocations are less than
the SDE determined rate. If LEAs cannot cover these
operating costs, they cannot operate programs that provide
important services for students and families without
putting the LEA at financial risk.
According to the SDE, "General management costs are
necessary for any program to exist. For instance, all
programs will use the business office at one time or
another for services such as contracts, purchasing, payroll
checks, and personnel management. Without the benefit of
an indirect cost rate, there would be no standard way for
each program to contribute its share of the general
management costs without spending a lot of staff time
having to 'time account' to each activity. By using an
indirect cost rate, LEAs have a standardized, efficient way
to recover a share of general management costs from
individual programs."
Federal and state law often delineate the amount of
indirect costs or administration either the state or LEAs
can utilize from a grant allocation. For example, under
the state After School Education and Safety program, school
districts are limited to expending no more than 5% of their
grant amount for administration.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee, this bill
has no direct fiscal impact on the state, since any
potential funding distribution would occur within a program
and a set amount of grant funding already dedicated to that
program.
SUPPORT : (Verified 8/14/12)
Los Angeles County Office of Education (source)
California County Superintendents Educational Services
Association
San Francisco Unified School District
CONTINUED
AB 2435
Page
4
School Innovations and Advocacy
West Covina Unified School District
ARGUMENTS IN SUPPORT : Proponents of this bill argue that
the SDE, as well as other state agencies sometimes
arbitrarily specify an indirect cost rate for grant
programs that is neither specified in law or is lower than
the established indirect cost rate established by the SDE.
ASSEMBLY FLOOR : 56-15, 5/29/12
AYES: Alejo, Allen, Ammiano, Atkins, Beall, Bill
Berryhill, Block, Blumenfield, Bonilla, Bradford,
Brownley, Butler, Charles Calderon, Campos, Carter,
Chesbro, Davis, Dickinson, Eng, Feuer, Fong, Fuentes,
Furutani, Galgiani, Gatto, Gordon, Hagman, Hayashi, Roger
Hernández, Hill, Huber, Hueso, Huffman, Jeffries, Jones,
Lara, Ma, Mendoza, Mitchell, Monning, Nestande, Norby,
Olsen, Pan, Perea, V. Manuel Pérez, Portantino, Skinner,
Smyth, Solorio, Swanson, Torres, Wieckowski, Williams,
Yamada, John A. Pérez
NOES: Achadjian, Conway, Donnelly, Beth Gaines, Garrick,
Grove, Harkey, Knight, Logue, Mansoor, Miller, Morrell,
Nielsen, Silva, Wagner
NO VOTE RECORDED: Buchanan, Cedillo, Cook, Fletcher,
Gorell, Halderman, Hall, Bonnie Lowenthal, Valadao
PQ:k 8/14/12 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
**** END ****
CONTINUED