Bill Text: CA SB1491 | 2011-2012 | Regular Session | Amended
Bill Title: Education finance: deferrals.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Introduced - Dead) 2012-05-24 - Held in committee and under submission. [SB1491 Detail]
Download: California-2011-SB1491-Amended.html
BILL NUMBER: SB 1491 AMENDED
BILL TEXT
AMENDED IN SENATE APRIL 26, 2012
INTRODUCED BY Senator Negrete McLeod
FEBRUARY 24, 2012
An act to add Section 14041.8 to the Education Code, relating to
education finance.
LEGISLATIVE COUNSEL'S DIGEST
SB 1491, as amended, Negrete McLeod. Education finance:
Fairness in Educational Deferral Funding Act.
deferrals.
Existing law requires the Controller to draw warrants on the State
Treasury in each month of each year in specified amounts for
principal apportionments for purposes of funding school districts,
county superintendents of schools, and community college districts.
Existing law defers the drawing of those warrants, as specified.
This bill would express findings and declarations of the
Legislature relating to the impact of the deferral of the payment of
the warrants referenced above. The bill would enact the
Fairness in Educational Deferral Funding Act which, among other
things, would require the Superintendent of Public Instruction to
make calculations to determine the impact of the deferral of
apportionment payments on the costs of individual school districts.
The bill would require the state, if a measure enacted
after January 1, 2013, defers an amount of money greater than the
amount projected to be deferred at the time the Budget Act of 2012 is
enacted, to reimburse school districts, through a supplemental
apportionment, for a portion of their borrowing costs that does not
exceed the effective annual percentage yield earned in the prior
fiscal year by the Pooled Money Investment Account. The bill would
require the Superintendent of Public Instruction to
calculate a lending cost determine whether
the supplemental apportionment to be allocated to
is suffic ient to reimburse school
districts , as specified for their costs
. The bill would require the Superintendent to allocate
the supplemental apportionment amounts to the school districts.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. The Legislature finds and declares all of the
following:
(a) The economy and the residents of this state are slowly
recovering from the worst recession since the Great Depression.
(b) Our school districts and our community colleges have had to
endure great reductions.
(c) The K-14 Proposition 98 level of funding is 12 percent less
than it was in the 2007-08 fiscal year.
(d) We have had to cut $1,000 per pupil from our schools since the
2007-08 fiscal year.
(e) We have had over $10 billion in deferrals, including a $2.1
billion deferral in the 2011-12 fiscal year.
(f) The deferrals are also being used to help solve the state's
cash flow cashflow problems. The
majority of the $2.1 billion deferral in the 2011-12 fiscal year is
for five months in order to help the state's cash flow
cashflow problems. A consequence of the
deferrals is that school districts incur additional borrowing costs
without accompanying state support to offset even a portion of the
additional borrowing costs.
(g) Perhaps the deferrals do avoid more difficult reductions.
However, the deferrals are extremely inequitable in at least four
ways, as follows:
(1) (A) First, the $2.1 billion deferral in the 2011-12 fiscal
year is a revenue limit deferral. The deferral will vary depending on
the amount of state aid a school district receives. This can vary
greatly by county. For example, the San Bernardino City Unified
School District has to obtain a loan for $26.7 million, or $525 per
pupil, for five months. This school district has 87 percent of its
pupils eligible for the federal Free and Reduced Lunch Program.
(B) There is a similar school district with almost the same number
of pupils as San Bernardino City Unified School District (51,000).
That school district is located along the coast and only has 20
percent of its pupils eligible for the federal Free and Reduced Lunch
Program. Yet its loan amount is $2.2 million or $43 per unit of
average daily attendance. The San Bernardino City Unified School
District has four times the number of disadvantaged pupils, and has
to pay 12 times the amount of loan and interest payments. This is not
fair.
(C) Basic aid school districts that have more money to spend than
other school districts, and are often in affluent areas, do not have
to defer any of their funds because of the $2.1 billion deferral.
This is not fair.
(D) There are 312 school districts where the level of state aid
per pupil exceeds $4,000. Their effective loan liability is $494 per
pupil or $3.2 million per school district. There are 234 school
districts where the level of state aid per pupil is less than $1,500.
Their effective loan liability is $64 per pupil or $260,000 per
school district. This is not fair.
(2) (A) Second, school districts with more disadvantaged children,
as measured by the percentage of pupils who are eligible for the
federal Free and Reduced Lunch Program, will have larger deferrals.
If a school district is in quartile 1, with a population that is 81
percent disadvantaged children, the deferral cost will be 23 percent
larger than the cost borne by the average school district. If a
school district is in the lowest quartile, with a population that is
23 percent disadvantaged children, its deferral cost will be 33
percent less than the average. This is not fair.
(B) Because school districts with more disadvantaged children have
had to pay a greater share of the $10 billion of past deferrals, and
because there are higher costs in those school districts because of
the special needs of those children, a special poverty factor should
be created to slightly reduce the cost of future deferrals for those
school districts by up to a maximum of 10 percent.
(3) (A) Third, starting in the 2006-07 fiscal year, there were
nine categorical deferrals where $335.7 million was deferred each
fiscal year. Starting with the 2008-09 fiscal year and continuing
each fiscal year, the school districts receiving these deferrals were
cut or charged an extra loan fee of 20 percent, or $66.6 million
each fiscal year. As of the 2011-12 fiscal year, that additional fee
has totaled over $250 million.
(B) The nine categorical programs referenced in subparagraph (A)
are:
(i) Apprentice program ($6.2 million).
(ii) Remedial summer school ($90.1 million).
(iii) Regional occupational centers and programs ($39.6 million).
(iv) Gifted and talented pupils ($4.3 million).
(v) Adult education ($45.9 million).
(vi) Community day schools ($4.8 million).
(vii) Charter school block grant ($5.9 million).
(viii) Grades 8-12, inclusive, safety block grant ($38.7 million).
(ix) Targeted block grant ($100.1 million).
(C) The disparities in the deferrals noted in this paragraph are
not fair.
(4) (A) Fourth, deferrals can also indirectly occur whenever the
property tax revenues are increased by the state, usually for a
purpose not related directly to education. For example, in the
2011-12 fiscal year, property tax revenues after January 1 are
projected to increase by $1.7 billion. Therefore, the State
Department of Education and the Department of Finance have
administratively decreased apportionments in the early fall in
anticipation that property tax revenues would increase after January
1. When this practice was brought to their attention, their reaction
was that this could not be fixed because of the state's cash flow
problems. This was, in effect, a deferral of an estimated $800
million. Therefore, the total deferral was $2.9 billion rather than
$2.1 billion.
(B)
(g) It is because of these inequities and
the fact that the deferrals are often used to solve the
state's cash flow cashflow problems
that the Fairness in Educational Deferral Funding Act
this act is being enacted.
SEC. 2. Section 14041.8 is added to the Education Code, to read:
14041.8. (a) This section shall be known, and may be cited, as
the Fairness in Educational Deferral Funding Act.
(b) As used in this section, a "deferral" is a deviation from the
schedule of the drawing of warrants for payment of apportionments in
Section 14041 so that the scheduled payment occurs in a later fiscal
year than would have occurred under the schedule set forth in Section
14041.
(c) Notwithstanding any other law, for any deferral, the
Superintendent shall determine the deferral amount for each school
district in the following manner:
(1) Calculate a poverty factor equal to 100 percent minus the
percentage of pupils in the school district who are eligible for the
federal Free and Reduced Lunch Program divided by 10.
(2) Calculate an equal per average daily attendance amount, known
as the base deferral amount, for all the school districts so that the
sum for all school districts of this base deferral amount,
multiplied by the school district's poverty factor, multiplied by the
school district's average daily attendance, will equal the new
deferral amount.
(3) If the school district does not receive the necessary state
funds for the deferral as specified in the measure that required the
deferral, the Superintendent may defer the necessary amount from any
budget allocation or allocations for that school district to make
sure the total amount for that school district is deferred.
(d) For any new deferral,
14041.8. If a measure enacted after
January 1, 2013, defers an amount of money greater than the amount
projected to be deferred at the time the Budget Act of 2012 is
enacted, the state shall include a lending cost
, through a supplemental apportionment
to , reimburse school districts for the
lending cost of the deferral a portion of their
borrowing costs that does not exceed the effective annual
percentage yield earned in the prior fiscal year by the Pooled Money
Investment Account . The lending cost
calculation of these borrowing costs shall include all
of the appropriate costs, including the interest cost. The
Superintendent shall determine whether the lending cost
supplemental apportionment is sufficient to
reimburse school districts for their costs as prescribed in this
section . Notwithstanding any other law,
if the Superintendent determines that the lending cost is
insufficient, the Superintendent may reduce the time period of the
deferral accordingly in order that the lending cost apportionment is
equal to the school district's cost of the deferral. The
Superintendent shall allocate the lending cost
supplemental apportionment amounts to the school
districts.
(e) If categorical programs are deferred into the next fiscal
year, and if those categorical programs and the amount that is
deferred into the next fiscal year are cut, or cut pursuant to a
provision of the Budget Act, the amount that the categorical program
receives from the prior fiscal year shall not be cut or reduced.
(f) If local property tax revenues are increased after January of
a fiscal year because of actions by state agencies or officials, any
resulting reduction in apportionments to school districts before
January because of this increase shall be treated as a deferral under
this section.
