BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Kevin de Le�n, Chair
SB 223 (Liu) - Maximum Categorical Funding Flexibility and
Accountability
Amended: April 15, 2013 Policy Vote: Education
Urgency: No Mandate: No
Hearing Date: May 13, 2013 Consultant: Jacqueline
Wong-Hernandez
This bill meets the criteria for referral to the Suspense File.
Bill Summary: SB 223 creates a fiscal flexibility option for
school districts over their categorical program funding, linked
to a new accountability system. This bill would allow school
districts, beginning in 2015-16, to apply for the Maximum
Categorical Funding Flexibility and Accountability Program, as
specified. The Superintendent of Public Instruction (SPI) would
be responsible for ensuring that the required local plans meet
specified pre-conditions in order for the district to
participate in obtaining maximum flexibility, and that a school
district that obtains this "flexibility" agrees to demonstrate
various goals, including but not limited to, significant
progress toward pupil proficiency in the state standards,
narrowing of achievement gaps, fiscal solvency, and improvement
in career technical preparedness. This flexibility program would
sunset on July 1, 2020.
Fiscal Impact: Potentially substantial staffing costs for the
California Department of Education (CDE) to establish and
implement the Maximum Categorical Funding Flexibility and
Accountability Program outlined in this bill, likely in excess
of $1 million. The CDE is likely to incur significant additional
costs to contract for the independent evaluation required by
this measure.
Background: Existing law establishes and funds categorical
programs that focus resources and /or compliance requirements on
specific classes of students or schools, or specific uses of
funds, identified by the Legislature as priorities. Categorical
funds have been created over time to provide school districts
with funding for specific purposes, such as improving school
safety or improving the academic achievement of struggling
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students. Unlike discretionary funds, categorical funds (also
known as "categorical programs") are all funded through the
annual Budget Act. They are generally accompanied by
requirements that they be spent for specific purposes.
Categorical flexibility: SB 4 (Chapter 12, 2009) as extended by
SB 70 (Chapter 7, 2011), authorized local educational agencies
(LEAs) through the 2014-15 fiscal year, to use (approximately
$4.5 billion in) funding for approximately 40 categorical
programs for virtually any educational purpose, to the extent
permitted by federal law. Categorical flexibility was
implemented in order to assist schools in absorbing extensive
budget reductions imposed on them in recent years. Almost 20
state-funded categorical programs totaling roughly $6.8 billion
were excluded from this flexibility.
Proposed Law: SB 223 creates a fiscal flexibility option for
school districts over their categorical program funding, linked
to a new accountability system. Specifically, this bill:
1) Repeals current operation of categorical flexibility "Tier
III" on June 30, 2015.
2) Reconstitutes a new voluntary funding flexibility program
that includes, as a condition of participation,
preconditions and measurable goals. The categorical
programs eligible for funding flexibility would mirror
those under the current Tier III approach.
3) Institutes the new program beginning in 2015-16 through
2019-20; in order to participate, a school district must
meet all preconditions, including, but not limited to: a) A
school district has a plan, developed in conjunction with
parents and teachers, to accelerate pupils' progress toward
academic proficiency, as specified; b) the local governing
board has approved the plan, as specified; c) the plan
links the local superintendent's annual performance
evaluation to the pupil performance goals; d) the district
demonstrates a pattern of stability between management and
bargaining units; e) there is community support for the
plan; f) the standards-based curriculum for English
language learners at a minimum meets rigorous specified
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criteria.
4) Requires SPI approval of a school district's participation
in the Maximum Categorical Funding Flexibility and
Accountability Program only if the school district meets
certain preconditions and agrees to demonstrable goals, as
specified.
5) Requires the SPI to consider the quality and rigor of the
manner in which school districts meet the preconditions
outlined above.
6) Requires the SPI, in addition to reviewing planning
preconditions, to perform various calculations, as
specified.
7) Permits a participating school district to use funds it
receives for any purpose related to improving pupil
achievement and academic instruction.
8) Requires a participating school district to implement an
open and transparent process that allows for no fewer than
two regularly scheduled meetings of the local school board
and prohibits any action on this matter at the first
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meeting at which the item appears on an agenda.
9) Requires a participating school district to submit an
evaluative annual report to the CDE detailing the progress
made during the immediately prior school year toward the
required demonstrable goals, including details of the
academic progress made by pupil subgroups.
10) Requires the SPI to provide guidance to participating
school districts to ensure the reports conform to
requirements.
11) Requires the SPI to contract for an independent statewide
evaluation by June 1, 2017, as specified.
Staff Comments: This bill establishes the Maximum Categorical
Funding Flexibility and Accountability Program, to be
implemented after the current categorical flexibility ends, from
the 2015-16 fiscal year through the 2019-20 fiscal year. Its
provisions specify how the existing categorical program funds
should be allocated among LEAs, and which funding streams
currently subject to categorical flexibility will not be
included in the new flexibility program.
The bill would extend the operation of the provisions that
authorize the expenditure of funds provided for specified
categorical education programs for any educational purpose,
except for funds appropriated for adult education programs,
specialized secondary education grant programs, and regional
occupational centers and programs from the scope of this
provision as of July 1, 2015, and would base the amount
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apportioned under the provision on the same relative proportion
that the local educational agency received in the 2013-14 fiscal
year. In addition to removing certain existing programs from
flexibility, the primary differences between the current
categorical flexibility that has been in place since 2009 and
the proposed Maximum Categorical Funding Flexibility and
Accountability Program are choice and accountability. This bill
does not provide new or additional funding to schools.
This bill would essentially allow LEAs to opt-in to a modified
categorical flexibility system, if they agree to accountability
mechanisms including the production of a specified district plan
for achieving maximum results from funding flexibility. To the
extent that LEAs opt-in, they would enjoy continued flexibility
over most categorical funds and absorb the related
accountability workload. LEAs that choose not to opt-in would
revert back to the previous categorical funding system, and be
required to follow the regulations of each categorical program
for which they receive funding.
This bill requires the SPI to verify and enforce various
components of the program.
For example, in order to award funding, the SPI must verify that
the LEA meets all preconditions including, but not limited to:
a) having a school district plan, developed in conjunction with
parents and teachers, to accelerate pupils' progress toward
academic proficiency, as specified; b) having the local
governing board approve the plan, as specified; c) demonstrating
a pattern of stability between management and bargaining units;
e) demonstrating community support for the plan; and, f)
ensuring the standards-based curriculum for English language
learners at a minimum meets rigorous specified criteria.
This bill further requires the SPI to administer and enforce
various aspects of of an extensive new program, including
contracting for an independent evaluation. Developing and
implementing the initial program requirements and accountability
mechanisms will require substantial staff time and new resources
for the CDE, likely in excess of $1 million. Ongoing
administration, compliance-tracking, and guidance (as required)
will continue to necessitate dedicated staff for this purpose.
To the extent that some LEAs do not opt-in to the program, this
bill would functionally require the CDE to administer this
program for some LEAs and the state's pre-2009 categorical
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programs for other LEAs.
Staff notes that as part of the 2013-14 Governor's Budget, the
Administration proposes to restructure the existing K-12 finance
system and eliminate over 40 existing programs. The
Administration proposes to primarily fund LEAs using a new
formula known as the Local Control Funding Formula (LCFF). The
LCFF would consolidate the vast majority of state categorical
program funds and revenue limit apportionments into a single
funding stream and would eliminate the statutory and
programmatic requirements for almost all existing categorical
programs. The LCFF would specifically include the same funding
that this bill would propose for the Maximum Categorical Funding
Flexibility and Accountability Program.