BILL ANALYSIS �
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: SB 761 HEARING: 1/15/14
AUTHOR: DeSaulnier FISCAL: Yes
VERSION: 1/6/14 TAX LEVY: No
CONSULTANT: Grinnell
VOLUNTARY CONTRIBUTIONS: SCHOOL SUPPLIES FOR HOMELESS
CHILDREN FUND
Changes the method for allocating funds in the School
Supplies for Homeless Children Fund.
Background and Existing Law
Existing state law allows taxpayers to contribute money to
one or more of 20 voluntary contribution funds (VCFs) by
checking a box on their state income tax return.
California law requires contributions made through
so-called "check-offs" to be made from taxpayers' own
resources and not from their tax liability, as is possible
on federal tax returns.
Generally, when a taxpayer contributes to VCFs, FTB
deposits the total of all contributions into the fund
created as part of the VCF's legislative authorization
after deducting its administrative costs. Next, an
administrative agency opens a competitive grant process for
organizations to implement the purposes of the VCF, such as
University of California's Breast Cancer Research Fund's
awards to scientists researching breast cancer. However,
some VCFs direct administrative agencies to simply
pass-through funds to a private organization which then
directs funds. For example, the California Department of
Public Health passes through VCF funds to the Amyotrophic
Lateral Sclerosis (ALS) Association, which then administers
grants for ALS research. Other funds require the
Controller to send the funds directly to private
organizations without passing through an administrative
agency, such as the California Senior Legislature. The
Controller deducts his or her costs for disbursing grant
funds from the amount of donations each VCF receives.
In 2012, the Legislature created the School Supplies for
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Homeless Children Fund, administered by the California
Department of Education (CDE) and the State Superintendent
of Education to award grants through a competitive process
to provide school supplies and health-related products to
homeless children using funds from a VCF on the income tax
form (SB 1571, DeSaulnier, 2012). In the first eight
months of last year, this VCF's first year, taxpayers
dedicated $360,000 to the fund, more than many other VCFs.
However, CDE must obtain budgetary authorization to hire
personnel necessary to administer a competitive grant
program and monitor use of funds prior to awarding grants,
so it has not yet awarded funds. CDE has requested a
budget change proposal for the 2014-15 year to do so, but
it has not yet been authorized. K to College, the
organization that sponsored SB 2012, instead wants CDE to
allocate funds more quickly to accelerate the delivery of
school supplies.
Proposed Law
Senate Bill 761 changes the manner in which CDE allocates
funds from the School Supplies for Homeless Children Fund
by repealing the competitive grant program. Instead, the
measure requires CDE to designate a tax-exempt, nonprofit
organization to use funds for the sole purpose of providing
school supplies and health-related products to partnering
learning education agencies for distribution to homeless
children, as defined, and provide a 100% match for all
funds received.
CDE's initial designation of an organization is valid until
January 1, 2017, on which date CDE can designate the same
or another organization for another three year period. CDE
can revoke the designation should the organization fail to
comply with requirements in law, but can designate another
organization within three calendar months.
CDE can only send funds to the organization after evidence
is presented that the local education agency or domestic
violence shelter received the materials. Additionally, CDE
can only be reimbursed for costs verifying that the
organization procures the materials and provides matching
funds.
SB 761 - 1/6/14 -- Page 3
The organization receiving VCF funds must only use them to
procure, assemble, and ship school supplies and
health-related products, and not for administrative
purposes, costs associated with administering grants, or
any other operational purpose. The organization may also
provide supplies to children living in domestic violence
shelters.
State Revenue Impact
No estimate.
Comments
1. Purpose of the bill . According to the author, "In
2012, I authored SB 1571, which was signed into law, to
establish the School Supplies for Homeless Children Fund
and allow taxpayers to designate contributions to the Fund
on their personal income tax returns. The Fund has
currently generated over $360,000. Unfortunately, SB 1571
requires the California Department of Education (CDE) to
follow a two-year budget process that will cost $150,000
for first year administrative costs and several tens of
thousands more each subsequent year. SB 761 is a clean-up
bill that simplifies the School Supplies for Homeless
Children Fund allocation process to avoid the California
Department of Education's (CDE) budget process, and allow a
timely and efficient distribution process that will ensure
all awarded funds go directly to the benefit of homeless
children."
2. Trust, but verify . Legislators have different models
to choose from when designing the administration of VCF
funds, and the model generally depends on the VCF's
intended goals and the organizations who deliver the
services which underlie the fund's purpose. In some cases,
bills send funds directly to private organizations with a
history of advancing the VCF's purposes and that are
well-suited to determine the best use of funds, such as the
Senior Legislature, or through a pass-through, such as the
ALS association. In other cases, where funds could be
directed to many different uses, such as breast cancer
research, state agencies create competitive grant programs
similar to other programs funded through the Budget Act.
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K to College is a non-profit founded in 2008 by a group of
UC Berkeley students and alumni. According to its website,
it operates the largest free school and dental supply
program for impoverished students in California. Kits
distributed by K to College are assembled at Folsom Prison
and include items such as paper, pencils, erasers, folders,
glue sticks, index cards, art supplies, a white board, a
dental hygiene kit and a tote bag. Through a partnership
with Give Something Back Office Supplies, K to College is
able to leverage a network of manufacturers willing to
produce up to a 200% in-kind match on every dollar. K to
College sponsored SB 1571 in the hopes of financially
bolstering its efforts to help homeless youth by allowing
California taxpayers to donate using the income tax form.
The Committee is not aware of an organization, other than K
to College, that could fulfill SB 1571's goals.
The gears and wheels of government can be slow, and CDE has
not yet been able to obtain budget authorization to
administer SB 1571 as the Legislature enacted it, so K to
College hasn't received the funds it needs. SB 761 would
speed up the process by replacing the competitive grant
program with a different process. CDE would designate an
organization, and verify that it purchased and delivered
the promised supplies, along with a 100% match. SB 761
directs CDE to verify costs, deliveries, and if necessary,
CDE can revoke the designation. While SB 761 entails less
CDE involvement than SB 1571 initially put in place, its
model provides more than the pass-through process currently
in place for the ALS VCF, or the direct funding of the
California Senior Legislature. The Committee may wish to
consider whether SB 761 provides the appropriate level of
CDE oversight for K to College.
3. History . When SB 1571 was introduced in 2012, the
measure required VCF funds to be sent directly to K to
College. However, the measure was amended when the
Committee approved it to insert the competitive grant
program, in response to concerns regarding the precedent of
directing VCF funding to a single charity without providing
an opportunity for others to come forth and compete. SB
761 repeals the competitive grant program, instead
installing a new and different model of designation and
verification. While not going as far as the direct funding
or pass through model, the measure does significantly alter
the Committee's decision two years ago. The Committee may
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wish to consider the reasons for changing a determination
made in the recent past.
4. Of least best options . SB 761 is before the Committee
largely due to the inherent inferiority and uncertainty of
VCF funding. Any entity seeking to use VCF funding has no
idea how much it will actually be able to use, because no
one can accurately predict the amount of funds that
taxpayers will designate on tax returns over the course of
the year. Additionally, when a VCF falls short of the
minimum amount required, the fund disappears from the
income tax form after two years, making multi-year spending
commitments difficult. Bills authorizing VCFs direct
administrative agencies to oversee the use of funds, which
can often lead to costs that use a large share of the funds
raised by the VCF, blunting its purpose. Administrative
agencies may often need to wait for budgetary authorization
to use the funds, causing delays.
5. Technicals . The Committee may wish to consider the
following amendments:
On page 3, line 10, strike out "single"
Require CDE to enter into a MOU with the designated
organization.
Support and Opposition (1/9/14)
Support : K to College, Give Something Back Office
Supplies.
Opposition : None received.