BILL ANALYSIS �
SENATE COMMITTEE ON EDUCATION
Carol Liu, Chair
2013-2014 Regular Session
BILL NO: AB 2235
AUTHOR: Buchanan
AMENDED: May 23, 2014
FISCAL COMM: Yes HEARING DATE: June 18, 2014
URGENCY: Yes CONSULTANT:Kathleen Chavira
NOTE : This bill has been referred to the Committees on
Education and Governance and Finance. A "do pass" motion
should include referral to the
Committee on Governance and Finance.
SUBJECT : Kindergarten-University Public Education Facilities
Bond
Act of 2014.
SUMMARY
This bill, an urgency measure, makes changes to the existing
School Facility Program and authorizes the
Kindergarten-University Public Education Facilities Bond Act
of 2014 to provide for the issuance of $9 billion in general
obligation bonds for construction and modernization of
education facilities (to become effective only if approved by
voters), and requires its submission to voters at the
November 4, 2014, statewide general election.
BACKGROUND
The last statewide general obligation bond, Proposition 1D
was approved by voters in November 2006. AB 127 (Nunez and
Perata), the Kindergarten-University Public Education
Facilities Bond Act of 2006, authorized the $10.4 billion
bond proposal, which provided $7.3 billion of this amount for
K-12 education facilities and $3.087 billion for higher
education facilities.
Of the $7.3 billion provided for K-12 education facilities
specified amounts from the sale of these bonds were allocated
for modernization, new construction, charter schools, career
technical education facilities, joint use, projects for new
construction on severely overcrowded schoolsites, and high
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performance incentive grants to promote energy efficient
designs and materials. In addition, portions of the amounts
allocated for new construction and modernization were
authorized for purposes of funding smaller learning
communities and high schools and for seismic retrofit
projects.
Of the amount provided for higher education facilities, $1.5
billion was provided for Community College facilities, $890
million was provided for the University of California (of
which $200 million was provided for capital improvements for
medical education programs, with an emphasis on telemedicine)
and $690 million was provided for the California State
University.
ANALYSIS
This bill , an urgency measure, establishes the
Kindergarten-University Public Education Facilities Bond Act
of 2014 to provide for the issuance of $9 billion in general
obligation (GO) bonds for construction and modernization of
education facilities, to take effect only if approved by
voters. More specifically it:
1) Requires submission of the Act to voters at the November
4, 2014, statewide general election.
2) Provides for allocation of the proceeds from the bond
sales. Specifically it:
a) Provides $6 billion for purposes of
K-12 education facilities and of this amount:
i) Provides $2.25 billion for new
construction projects.
ii) Provides $500 million for charter
school facility projects.
iii) Provides $3.25 billion for
modernization projects.
b) Provides $3 billion for purposes of
education facilities for California's public
segments of higher education and of this amount:
i) Provides $2 billion for California
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Community Colleges.
ii) Provides $500 million for the
California State University.
iii) Provides $500 million for the
University of California and the Hastings
College of Law.
3) Authorizes the State Allocation Board (SAB) to require a
school district that elects to participate in the new
construction or modernization program funded by the
proceeds of the bond established by the provisions of
this bill to reestablish eligibility pursuant to SAB
adopted regulations.
4) Requires the Office of Public School Construction
(OPSC), in consultation with the California Department
of Education (CDE), to recommend regulations to the SAB
that provide school districts with flexibility in
designing instructional facilities.
5) Makes the following technical changes:
a) Repeals provisions requiring an
evaluation of the construction and modernization
costs of small high schools.
b) Repeals provisions establishing
eligibility calculation adjustments on the basis of
multitrack year-round operation.
c) Repeals other obsolete eligibility
calculation adjustments.
d) Corrects an erroneous
cross-reference.
STAFF COMMENTS
1) Need for the bill . According to the author, this bill
is necessary because, despite declining enrollment in
some districts, there is projected future pupil
enrollment growth in many districts and we will need new
schools to house those students. In addition, school
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districts are working to rehabilitate aging facilities
to ensure they are safe and updated. Bond funds are not
only critical and beneficial to schools, they are
beneficial to the economy, as these infrastructure
dollars will generate thousands of construction-related
jobs. According to the author, while prior bond
authorizations have proposed funding for a number of
special grant programs, this bill, in an effort to keep
the bonds at a low to moderate level, proposes to fund
only the basic programs of new construction,
modernization, and charter schools.
2) Current status of the School Facilities Program (SFP) .
According to the Office of Public School Construction
(OPSC), as of March 26, 2014, approximately $351.1
million remained in bond authority in the SFP. At its
March, 2014 meeting, the State Allocation Board (SAB)
took action to reserve $52.7 million of existing bond
authority for the ongoing administration of the program
over the next five years, reducing the remaining bond
authority to $298.4 million. The majority of this bond
authority exists for the Seismic Mitigation and Charter
School programs (about $259 million). Bond authority
for new construction and modernizations programs has
essentially been depleted, respectively, since July 2012
and May 2012.
In addition, since November 1, 2012, the SAB has
maintained an "Applications Received Beyond Bond
Authority" list. This list is presented to SAB for
acknowledgement, but not approval. Because the
applications are not fully processed for final grant
determination, the project funding amounts on the list
are only estimates. As of March 31, 2014, the list
indicated new construction applications totaling $237
million and modernizations applications of $198 million.
These applications are currently unable to be funded
unless projects are rescinded or monies revert back to
the fund.
3) Related budget actions . The Governor's 2014-15 budget
proposed the transfer of bond authority from four
specialized school facility programs to the new
construction and modernization programs. These include
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the Overcrowded Relief Grant, Seismic Mitigation, Career
Technical Education, and High Performance Schools
programs. Under the proposal, half of any remaining
bond authority on June 30, 2014 would be equally
redirected to new construction and modernization. The
Legislature recently took action to reject the proposal
to transfer bond authority from the Overcrowded Relief
Grant and Seismic Mitigation programs, but did agree to
transfer of 50 percent of the remaining bond authority
in the Career Technical Education, and High Performance
Schools programs.
4) Higher education provisions . This bill provides $3
billion in bond authority to the CCC, CSU, and UC and
Hasting College of Law. Since 2008, capital funding for
higher education has been provided in the annual Budget
Act through lease revenue bonds, as the bond authority
authorized for higher education in the 2006 bond has
long been exhausted. In April 2014, the UC identified
four-year needs of $550 million per year, the CSU has
identified a need of $400-$500 million per year, and the
CCC has identified a need of about $35 billion over the
next 10 years. In light of local bond resources
available to the CCC, this translates to a need of about
$3.2 billion every two years at the CCC. This bill
reflects these identified needs.
5) Related Governor's budget message . In the Governor's
2014-15 Budget Summary, the Governor noted that funding
for K-12 school facilities can include general
obligation bonds, developer fees, and local bonds,
certificates of participation and Mello-Roos bonds. The
Administration proposed to continue a dialogue on the
future of school facilities funding, including
consideration of what role, if any, the state should
play. The Governor noted that this infrastructure
discussion should include the growing debt service costs
associated with the state's increased reliance on debt
financing. The Governor also noted several concerns
with the existing program, including, the complex,
cumbersome and costly nature of the current program, the
first-come, first serve allocation process which
provides a competitive advantage to larger districts
with dedicated facilities personnel, and the lack of
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adequate local control over school facility design and
its impact on modern educational delivery methods.
The Governor also noted that any future program should
be designed to provide districts with the tools and
resources to address their core facility gaps, but
should also avoid the unsustainable reliance on debt
issuance that characterizes the current school
facilities program.
6) Debt service . According to a recent report by the
Legislative Analyst Office (LAO), Addressing
California's Key Liabilities, as of April 1, 2014, the
state has $75.1 billion in general obligation bonds, and
about $10.2 billion in lease revenue bonds (10 percent
of which is for the CSU) outstanding. This does not
include $31 billion in general obligation and lease
revenue bonds authorized but not yet sold. According to
the LAO, debt service is expected to make up about 6
percent of the General Fund for the next few years, if
no new bonds are issued, as GF revenues and debt service
are expected to grow at similar rates. The LAO noted
that bond payments are the first funding priority of the
GF. The debt service must be paid annually, even if it
means that other spending priorities (including
education, health, social services, and prisons) have to
be cut or taxes have to be raised in order to balance
the budget.
This bill has also been referred to the Committee on
Governance and Finance which has jurisdiction over
legislation pertaining to state and local government
revenue mechanisms. The Governance and Finance
Committee can more appropriately consider this bill in
the context of the state's overall debt service and
infrastructure needs.
7) Does/can this bill go far enough ? The current School
Facilities Program (SFP) has been in place since 1998
and was designed to provide state funding for school
construction at a time when enrollment was projected to
grow significantly. This bill proposes a $9 billion
bond and relatively minor changes to the existing
program. The committee may wish to consider:
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a) Should eligibility for state bond funds
continue to be based upon enrollment growth and
distributed on a first-come first serve basis, or
are there other policy objectives upon which the
state should prioritize distribution of these
monies?
b) In light of the state's overall infrastructure
needs and debt service concerns, should the program
continue to operate as a 50/50 bond funded match
program available to all school districts, or
should other funding models be developed and
considered?
c) The State Allocation Board (SAB) is currently
staffed by an office that reports to the Department
of General Services. Should legislation to
authorize bond funds include changes to this
administrative structure?
d) Should ongoing deferred maintenance of the
state's substantial investment in school facilities
be a condition for participation in the program,
and if so, how should that be funded?
e) Should a $6 billion bond for K-12 be
authorized, or should a smaller "bridge" bond to
replenish the new construction and modernization
programs for the next two years be authorized to
allow consideration of more extensive programmatic
changes in a 2016 facilities bond?
Both K-12 and higher education have essentially
exhausted the funds provided for capital facility needs
from prior bond authorizations and additional funding
for this purpose is critical. However, in light of the
complex programmatic and funding conversations which
should accompany a new bond authorization, and
consistent with the issues and concerns raised by the
Governor about the existing program and the current
administrative structure, the Committee may want to more
thoughtfully consider the state's role in, and policy
objectives for, school facilities funding prior to
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authorizing $9 billion in new bonds.
Staff recommends the bill be amended to reduce the
amount of bonds being authorized to $1 billion for K-12
facilities, and $1 billion for higher education, to be
distributed equally across the UC, CSU, and CCC, in
anticipation of a more substantive proposal being placed
before the voters in 2016.
8) Source of bill contents . In 2012, the State Allocation
Board (SAB) formed a Program Review Subcommittee to
review various aspects of the SFP. In January, 2014,
the subcommittee, made a number of recommendations
relating to new construction, modernization, financial
hardship, special programs, portable buildings, facility
maintenance, statewide school facilities inventory, and
county offices of education. This bill incorporates
provisions to implement some of the recommendations of
the subcommittee, including requiring school districts
to reestablish eligibility, flexibility in the design of
instructional facilities, and the repeal of multi-track
year-round education related provisions as districts
have reduced their reliance on this strategy to relieve
overcrowding.
9) Timelines . Election Code provisions require that bond
measures submitted to voters by the Legislature meet
specified timelines for passage, notice and printing.
Among other things, current law requires that a bond
measure submitted to the people by the Legislature
appear on the ballot at the first statewide election
occurring at least 131 days after adoption of the
proposal by the Legislature (Election Code Section
9040).
10) History of bond proposals . Since 1998, voters have
approved approximately $35 billion in statewide general
obligation bonds to construct or renovate K-12 school
facilities and almost $10 billion for higher education
facilities. There is currently no bond authority
remaining in the core school facilities new construction
and modernization programs.
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While this bill has been framed as keeping bonds at a
low to moderate level, in its current form it authorizes
$9 billion in K-16 bonds, a level similar to that which
has been authorized in each of the last four school
facility bond authorizations.
11) Prior legislation . Several bills have been introduced
since 2009 in an effort to authorize bond measures to
fund facility construction projects for K-12 schools and
public postsecondary educational institutions. These
include the following:
a) AB 41 (Buchanan, 2013) expresses the
Legislature's intent to place a
Kindergarten-University facilities bond on the 2014
ballot. AB 41 was held by the author in the
Assembly Education Committee.
b) SB 45 (Corbett), introduced in 2013, expresses
the Legislature's intent to place a
Kindergarten-University facilities bond on the next
statewide general election. The bill was held by
the author in the Senate Rules Committee.
c) SB 301 (Liu, 2013) expresses the Legislature's
intent to place a Kindergarten-University
facilities bond on the 2014 ballot. SB 301 was
held by the author in the Senate Rules Committee.
d) AB 331 (Brownley, 2011) expressed the
Legislature's intent to place a
Kindergarten-University facilities bond on the 2012
ballot. AB 331 was held in the Assembly
Appropriations Committee in 2012.
e) AB 822 (Block, 2011) would have placed a
higher education facilities bond on the November
2012 ballot. AB 822 was held in the Assembly
Appropriations Committee in 2012.
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f) AB 220 (Brownley, 2009) would have placed a
$6.1 billion Kindergarten-University facilities
bond on the November 2010 ballot. AB 220 was held
in the Senate Appropriations Committee.
g) SB 271 (Ducheny, 2009) would have placed a
$8.6 billion higher education facilities bond on
the November 2010 ballot. SB 271 was held in the
Senate Appropriations Committee.
SUPPORT
Advancement Project
All American Inspection, Inc.
Alliance for California Computing Education for Students and
Schools
AP Architects
Association of California Community College Administrators
Association of California Construction Managers (ACCM)
Association of California School Administrators
Bakersfield City School District
Barstow Community College District
BCA Architects
California Community Colleges, Chancellor's Office
California State PTA
California Teachers Association
CALMAC Manufacturing Corporation
Chaffey Community College District
Chico Unified School District
Citrus Community College District Board of Trustees
Coalition for Adequate School Housing
Community Action to Fight Asthma
Community College Facility Coalition
Community College League of California
Contra Costa County Office of Education
County School Facilities Consortium
Desert Sands Unified School district
Division of Governmental Relations
Dougherty Architects LLP
Foothill-De Anza Community College District
Grossmont-Cuyamaca Community College District
Kern Community College District
KNA Consulting Engineers
Los Angeles Community College District
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Los Angeles County Superintendent of Schools
Los Angeles Unified School District
Los Rios Community College District
MAAS Companies, Inc.
Monterey Peninsula Community College District
Mt. San Antonio College and the Board of Trustees
Mt. San Jacinto Community College District
Pasadena Community College District
Peralta Community College District
PlaceWorks
Public Advocates
Rancho Santiago Community College District
Regional Asthma Management and Prevention
RGM and Associates
Rio Hondo Community College District
Riverside Community College District
San Francisco Unified School District
San Leandro Unified School District
Santa Clarita Community College District
School Energy Coalition
Seals/Biehle, Inc.
Shasta College
Small School Districts' Association
South Orange County Community College District
State Building and Construction Trades Council
State Center Community College District
Temecula Valley Unified School District
Terraphase Engineering, Inc.
Trane
West Hills College Coalinga
West Kern Community College District
Wiseburn School District
Yosemite Community College District
Yuba Community College District
OPPOSITION
None received.