BILL ANALYSIS �
SB 533
Page 1
SENATE THIRD READING
SB 533 (Wright)
As Amended August 24, 2012
2/3 vote. Urgency
SENATE VOTE : Vote not relevant
NATURAL RESOURCES APPROPRIATIONS 11-0
(vote not relevant)
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| | |Ayes:|Gatto, Blumenfield, |
| | | |Bradford, Charles |
| | | |Calderon, Davis, Fuentes, |
| | | |Hall, Hill, Cedillo, |
| | | |Mitchell, Solorio |
|-----+--------------------------+-----+--------------------------|
| | | | |
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SUMMARY: Appropriates $29 million for an emergency loan to the
Inglewood Unified School District (IUSD) and authorizes an
additional $26 million of lease financing through the California
Infrastructure and Economic Development Bank (I-Bank). It also
requires the Superintendent of Public Instruction (SPI) to
assume all the rights, duties, and powers of the governing board
of IUSD and, in consultation with the Los Angeles County
Superintendent of Schools, appoint an administrator to serve in
the district, as specified. Specifically, this bill :
1)Requires the IUSD to enter into bank financing with the I-Bank
upon terms the bank deems necessary or appropriate for the
purpose of financing or refinancing the emergency
apportionment.
2)Provides that the financing or refinancing of the emergency
apportionment shall include funds necessary for reserves,
capitalized interest, credit enhancements and costs of
issuance.
3)Requires the Superintendent of Public Instruction (SPI) and
the state administrator to maintain control of the district
until specified provisions are met, including: one fiscal
year has elapsed and the administrator determines that future
compliance by IUSD with the improvement plan is probable; the
SPI has approved all recovery plans and the Fiscal Crisis
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Management and Assistance Team (FCMAT) completes the
improvement plan; the state administrator certifies that all
necessary collective bargaining agreements are consistent with
the terms of the recovery plans; and, the SPI determines that
future compliance by the district with the recovery plan is
probable.
4)Requires FCMAT to provide assistance to the state
administrator in the development of the first annual multiyear
financial recovery plan and adopted budget, as specified.
This bill also requires FCMAT to recommend to the SPI any
studies or activities that should be undertaken by the state
administrator to enhance revenue or achieve cost savings.
5)Requires IUSD to bear 100% of all costs associated with
implementing this measure, including the activities of FCMAT.
This bill also requires FCMAT to continue assisting the
district until it is certified as positive (as determined
through the annual local budget process) or until all legal
rights, duties, and powers are returned to IUSD's governing
board (whichever is first).
6)Requires the improvement plan for personnel management to
include training for members of IUSD's governing board in
fiscal management from the California School Boards
Association, as specified. This measure requires FCMAT, after
it completes its first written report, to file subsequent
reports annually, as determined by the SPI.
7)Requires the State Controller, for each year that loan
apportionments are disbursed to the district, to conduct an
audit of the district's books and accounts, as specified.
This bill also requires the costs of these audits to be borne
by IUSD.
8)Requires IUSD to repay the emergency loan as a straight line
loan amortized over a 20-year term. This measure also
requires the loan amount to be repaid by the district, plus
interest calculated at a rate equal to the rate earned by the
Pooled Money Investment Account (PMI) on the date this bill
becomes effective, for a period not to exceed 20 years.
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9)Requires IUSD to enter into a lease financing agreement with
I-Bank for the purpose of financing the emergency
apportionment, including a repayment to the GF of the $29
million appropriated in this bill.
10)Authorizes the school district to sell property owned by the
district and use the proceeds from the sale to reduce or
retire the emergency loan, provided that the district will be
ineligible for financial hardship assistance under the state
school facilities program from June 1, 2012 to June 30, 2015.
EXISTING LAW: Provides for emergency loans to school districts
that are unable to meet their current operating expenses. Such
loans are provided by legislation enacted at the request of the
district. Existing law requires districts that request and
agree to receive an emergency loan to agree to statutory terms
and conditions regarding repayment of the loan and the steps to
be taken to return the district to financial solvency.
If a district receives an emergency loan of up to 200% of its
recommended budget reserve, then the Superintendent of Public
Instruction (SPI) is required to appoint a trustee who has the
authority to stay and rescind any action of the district
governing board and who serves until the loan is repaid and the
district has adequate fiscal systems and controls in place. If
a district receives an emergency loan of more than 200% of its
recommended budget reserve, then the API is required to assume
all legal rights, duties, and powers of the governing board and
to appoint an administrator to act on his or her behalf in
exercising this authority. The SPI may return power to the
governing board after specified conditions are met. The costs
of the trustee and administrator and other related oversight and
monitoring activities are borne by the district. Currently four
districts-Oakland Unified, Vallejo City Unified, and King City
Joint Union High School District (formerly South Monterey County
Joint Union High School District)-have emergency loans
outstanding.
FISCAL EFFECT: According to the Assembly Appropriations
Committee, appropriates $29 million from the GF to the SPI for
apportionment to IUSD, as specified. This allocation is
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expected to be reimbursed to the GF within one year via the sale
of bonds by the I-Bank. This bill authorizes IUSD to augment
the $29 million emergency loan with an additional $26 million of
lease financing through the I-Bank in order to increase the
emergency loan to a total of no more than $55 million. Also,
this measure authorizes funds to be disbursed from the proceeds
of the loan only if the state administrator and Fiscal Crisis
Management Assistance Team (FCMAT) jointly determine the
disbursement is necessary to support the immediate cash flow
needs of the district.
COMMENTS: Inglewood Unified School District (IUSD) is located
in Los Angeles County and enrolled approximately 15,000 pupils
in 26 schools in the 2010-11 school year. In April 2012, the
Los Angeles County Office of Education (LACOE) certified IUSD's
fiscal status as negative, which means (based upon current
projections); the school district will not meet its financial
obligations for the 2011-12 or 2012-13 FYs. According to LACOE,
the district's financial information reflected "a negative GF
ending balance of $1.51 million for the 2011-12 FY resulting in
a negative 1.21% reserve for economic uncertainties."
LACOE further stated the positive financial projections the
district made for the 2012-13 and 2013-14 FY were overstated due
to assuming more average daily attendance (ADA) funding than it
will receive (i.e., the number of pupils attending school in the
district) and the reduction of furlough days for certificated
staff from ten to five. Likewise, the county office of
education also noted a projected operating deficit of $4.86
million, representing 3.89% of IUSD's projected expenditures for
the 2011-12 FY.
According to FCMAT's latest analysis, IUSD is projected to have
a negative cash flow balance of $8 million by March 2013, ending
the 2012-13 FY with a negative cash balance of approximately
$28.9 million. FCMAT projects that, based on current trends,
the district's deficit spending will be $24 million in 2013-14
and $ 36.29 million in 2014-15. This bill makes the statutory
changes necessary to provide a $55 million emergency loan to
IUSD.
Analysis Prepared by : Rick Pratt / ED. / (916) 319-2087
SB 533
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