BILL ANALYSIS �
AB 2302
Page 1
Date of Hearing: April 30, 2014
ASSEMBLY COMMITTEE ON EDUCATION
Joan Buchanan, Chair
AB 2302 (Mullin) - As Introduced: April 22, 2014
SUBJECT : Child care and developmental services: facilities
SUMMARY : Extends the term of a loan through the Child Care
Facilities Revolving Fund (CCFRF) from 10 years to 14 years,
increases the amount of funding per award, and requires the
California Department of Education (CDE) to adopt regulations
for the administration of the program. Specifically, this bill :
1)Extends the term of a loan for the purchase of new relocatable
child care facilities from 10 years to 14 years.
2)Requires the CDE to adopt regulations to establish priorities,
forms, policies, and procedures for implementing and managing
the CCFRF that set expansion of capacity, including expansion
of capacity of existing sites, as a priority. Requires the
CDE to promote the availability of the fund on its Internet
Web site.
3)Specifies that a funding award for the renovation, repair, or
improvement of existing building shall not exceed $900,000.
4)Specifies that an eligible applicant may apply for and receive
a funding award of up to $400,000 for a single, freestanding
relocatable or modular building consisting of three
12-by-40-foot modules, and up to $200,000 per additional
module added to an existing building.
5)Expresses the intent of the Legislature to annually
appropriate $7 million in the Budget Act to the fund purposes
specified in Provision 3 of Item 6110-194-0001 of Section 2.0
of the Budget Act of 2013.
EXISTING LAW establishes the CCFRF in the State Treasury to
provide funding for the renovation, repair, or improvement of an
existing building to make the building suitable for licensure
for child care and development services and for the purchase of
new relocatable child care facilities for lease to school
districts and contracting agencies that provide child care and
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development services. A leasing fee is charged, either at a
fair market value for the facilities or at an amount sufficient
to amortize the cost of purchase and relocation, whichever
amount is lower, over a 10-year period. Upon full repayment,
title transfers to the school district or contracting agency.
FISCAL EFFECT : Unknown
COMMENTS : Background on CCFRF . The CCFRF, established by AB
1578 (Migden), Chapter 299, Statutes of 1997, is administered by
the CDE to provide funding for the lease-purchase of new
relocatable buildings to eligible school districts and
contracting agencies that provide child care and development
services, and for the renovation, repair, or improvement of an
existing building to make the building suitable for licensure
for child care and development services. Local educational
agencies (LEAs) and child care agencies that contract with the
CDE to provide state-funded child care and development services
may apply for up to $210,000 for each single, freestanding
relocatable building and up to $70,000 maximum for each
additional module added to the basic building. The buildings
must be used to serve children participating in state-funded
child care and preschool programs. Non-subsidized children may
be served in the facility as long as 50% of the children served
are in the state-funded programs. Applicants must indicate
whether the funds are needed to reduce class sizes, for program
expansion to serve additional eligible children, or to replace
substandard facilities with health and safety problems. Funds
can be used for building expenses, architect and inspection
fees, site development, and site improvement costs. All funds
advanced from the program are repaid by the applicant agency
over a 10 year term, with no interest.
The CCFRF received an initial General Fund appropriation of $25
million in fiscal year (FY) 1997-98. The funding source in
subsequent years came from both the transfer of unencumbered and
the reappropriation of unused child care and development program
monies. In the beginning of FY 2007-08, the CCFRF had an
available fund balance of $80.8 million, but budget actions have
diverted almost all of the funds. Beginning FY 2006-07, $5
million was authorized to be used for funding facility
renovation and repairs (FRR) as a grant, not a loan. The CCFRF
is expected to have a fund balance of $4.78 million beginning FY
2014-15, with an additional $2.6 million expected from loan
payments. After subtracting $5 million for FRR and allocating a
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projected $2 million in awards, the fund is expected to have a
balance of $377,362 by the end of the fiscal year.
According to the CDE, since the inception of the program, 598
applications have been approved for funding. LEAs comprise the
majority of the participants in the CCFRF, while private child
care providers comprise 34.6% of the total. The largest group
to be served through CCFRF is preschool children. The most
frequently cited reason for request of funds was program
expansion, followed by class size reduction and replacement of
facilities for health and safety reasons. Requests for funding
new portables have slowed down over the last few years. One
application was funded in FY 2011-12 totaling $210,000 and one
application was funded in FY 2012-13 totaling $700,000. This
could be due to the decrease in state funding for child care and
development programs. According to the Legislative Analyst's
Office, overall funding for child care and development programs
has decreased by almost $1 billion since 2008-09, with the
elimination of 110,000 slots.
According to the author, despite a shortage of child care
facilities, few applications have been submitted for funding,
due to insufficient funding to complete projects. The author
also states that the CDE has not awarded funds for the repair of
existing facilities in order to expand capacity.
This bill does the following:
Expands the term of the loan from 10 years to 14 years . The
loans are interest free, amortized over 10 years. Extending
loan payments to 14 years will result in lower payments annually
for LEAs and child care providers. However, this will also mean
less payments returning to the fund every year and less amount
available for new loans. The CDE expresses concerns that
extending the term increases the risk of a borrower defaulting
on a loan.
Establishes an amount for new relocatables . The amount for new
relocatables is not specified in statute. The CDE allows a
maximum of $210,000 for new relocatables and $70,000 for each
additional building. The funds can be used for building
expenses, architect and inspection fees, site development and
site improvement costs. This bill increases the amount from
$210,000 to $400,000 specified as consisting of three 12-by-40
foot modules, and increases any additional buildings from
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$70,000 to $200,000. According to the author, the amounts
currently authorized by CDE are insufficient for a project;
contractors frequently need to secure additional loans to
complete a project. The author's office reports that, as an
example, the cost to add a one-building portable at a schoolsite
in the San Carlos Unified School District totaled more than
$500,000.
Establishes an amount for the renovation, repair, or improvement
of existing buildings . According to the author, the CDE has not
funded renovations and repair projects of existing sites in
order to expand capacity. According to the CDE, applications
have not been submitted for renovations and repair. This bill
sets a maximum of $900,000 per award for this purpose.
Requires the CDE to adopt regulations to establish priorities,
forms, policies, and procedures to administer the CCFRF and
requires the priority for funding to be for expanding capacity .
Regulations have not been adopted for this program. Funding
amounts have been set by CDE. It is always helpful to have
clear guidelines and procedures established through regulations.
However, given that the funds are depleting, is there value in
adopting regulations now?
Expresses legislative intent to appropriate $7 million for the
FRR . Part of the reason for the dwindling of funds in the CCFRF
is due to the allocation of $5 million annually for the FRR
since FY 2006-07. This totals $40 million that has been
deducted from the CCFRF that is not replenished. The CDE
reports that there is high demand for the FRR funds. The FRR is
allocated to providers who contract with CDE to provide
subsidized child care and preschool to bring a facility into
compliance with the American with Disability Act or for health
and safety compliance. Requests have totaled at least $7
million annually over the last several years. The CDE conducts
a lottery for allocation of the $5 million when demand exceeds
the amount available. In FY 2012-13, 154 applications were
submitted with 94 applications funded and in FY 2013-14, 133
applications were submitted with 93 applications funded.
Committee amendments .
1)With funds slowly depleting, it may not be the right time to
increase project funding. Establishing amounts in statutes
and specifying the exact type of buildings allowed removes
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flexibility to make future changes without going through the
legislative process. Staff recommends striking the funding
amounts specified in the bill, and directing the CDE to adopt
regulations that shall address, but is not limited to,
eligible project funding, which includes purchase of new
buildings as well as funds for the renovation of existing
buildings that will expand capacity; maximum awards; and term
of the loans. This would provide stakeholders the opportunity
to provide input through the regulatory process that takes
into consideration the future of the program. Staff also
recommends specifying that the term of the loan shall be 10
years, or based on a term specified through regulations.
2)Current law authorizes funding for the purchase of relocatable
buildings. Relocatables are portable buildings with short
life spans. Staff recommends authorizing the purchase of
modular buildings. Modular buildings are not as expensive as
permanent buildings, but will last longer than relocatable
buildings. The building is comprised of many sections
constructed off-site and installed onto the foundation at the
schoolsite.
Arguments in support . The San Mateo County Child Care
Partnership Council supports the bill and states, "As you know,
the fund has not been effectively used in recent years by
agencies and school districts providing state-subsidized early
learning services because the cap on the dollars available per
project was too low, the repayment period specified was too
short, and the use was restricted to the purchase or repair of
relocatable buildings. The smart changes you propose in AB 2302
will permit the fund to fulfill its original intent to increase
the capacity, quality and safety of early learning facilities
serving low income children."
Prior related legislation . AB 932 (Torlakson), held in the
Assembly Appropriations Committee suspense file in 2009,
broadens the types of projects eligible for funds from the CCFRF
and requires the CDE to utilize the expertise of the child care
financial intermediary program to administer the CCFRF.
REGISTERED SUPPORT / OPPOSITION :
Support
AB 2302
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California Alternative Payment Program
Child Care Coordinating Council of San Mateo County, Inc.
San Mateo County Board of Supervisors
San Mateo County Child Care Partnership Council
Opposition
None on file
Analysis Prepared by : Sophia Kwong Kim / ED. / (916) 319-2087