BILL ANALYSIS
AB 2846
Page A
Date of Hearing: May 3, 2006
ASSEMBLY COMMITTEE ON EDUCATION
Jackie Goldberg, Chair
AB 2846 (Daucher) - As Amended: May 2, 2006
SUBJECT : State-mandated local programs - local educational
agencies.
SUMMARY : Requires the Commission on State Mandates to annually
make a preliminary determination of whether a bill chaptered
during the preceding year mandates a new program or higher level
of service. Establishes an alternative option for reimbursement
of local educational agency (LEA) claims for the costs of state
mandates. Specifically, this bill :
1)Requires the Commission on State Mandates (commission) to do
all of the following:
a) On or before January 1 of each year, make a preliminary
determination of whether each bill that is chaptered during
the preceding calendar year mandates a new program or
higher level of service.
b) Within 90 days of the effective date of each bill that
is chaptered as an urgency statute, preliminarily determine
whether the statute mandates a new program or higher level
of service.
2)Specifies that the preliminary determination made by the
commission as required by this bill is not binding on the
commission in making its determination on a claim filed by an
LEA pursuant to provisions of existing law.
3)Establishes an alternative option for LEAs to receive funding
for claims filed for reimbursement of state-mandated costs if
the claim is filed with the Controller before January 1, 2007,
relating to educational services provided by a local
educational agency, and if no appropriation is made to pay the
claim on or before January 1, 2007:
a) Requires the Controller to provide the agency with the
option of receiving 80 percent of the total amount claimed
as full satisfaction of the claim.
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b) Requires an LEA that is offered the option of receiving
80 percent of the total amount claimed to make an election
to accept or reject the option on or before March 31, 2007.
c) Authorizes the Controller to, within 90 days of the
election by the local educational agency to settle a
reimbursement, object to the agency's election.
d) Specifies that an objection by the Controller must be
followed by an audit of the mandated cost reimbursements of
the agency, to be completed within 180 days.
4)Requires the Department of Finance, the Legislative Analyst's
Office, the State Department of Education, the California
Association of School Business Officials, and the California
County Superintendents Educational Services Association to
establish a working group to determine, to the extent
feasible, a unit rate for educational services mandated by the
state as of January 1, 2007.
a) Requires the working group to establish a process for
determining a unit rate, where that unit rate is
appropriate, for each mandate identified by the commission.
b) Specifies that, if the unit rate is not appropriate for
a particular mandate, the law relating to reimbursement
claims as it existed on January 1, 2006, shall apply.
5)Provides that, if a reimbursement claim is initially filed by
an LEA with the Controller on or after January 1, 2007 for
educational services, the agency may settle the reimbursement
claim by using the unit rate established by the working group,
instead of the commission's allocation formula or uniform
allowance.
6)Requires, on or before June 30 of each year, that each LEA
elect whether it will use the unit rate established by the
working group, or the commission's allocation formula or
uniform allowance to settle a reimbursement claim filed in the
following fiscal year.
a) Requires an LEA electing to use the unit rate
established by the working group to list all of the
mandates for which a unit rate was established that apply
to the LEA.
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b) Requires the LEA to guarantee that they will provide the
mandated service for which they seek reimbursement.
c) Authorizes the Controller to conduct compliance reviews
of up to 5% of the LEAs that elect to use the unit rates
established by the working group for the purpose of
settling a reimbursement claim.
7)Prohibits the Controller from auditing a reimbursement claim
settled by using the unit rate established by the working
group [presumably with the exception authorized in 6(c),
above].
8)Defines "local educational agency" to mean a school district,
a county office of education, or a charter school, and
specifies that the term does not include a community college
district.
EXISTING LAW :
1)Requires the State, in accordance with provisions of the
California Constitution, whenever it mandates a new program or
higher level of service, to reimburse local governments and
schools for the costs, unless the mandate was requested by the
local agency, defines a new crime, or existed before 1975.
2)Establishes the Commission on State Mandates, a quasi-judicial
entity which determines if mandated-cost claims are
reimbursable state mandates. Upon hearing a test case, the
Commission issues a Statement of Decision. Upon a positive
determination, the Commission holds more hearings to adopt
parameters and guidelines that spell out a general methodology
for providing reimbursement. It also adopts a cost estimate
of paying the claims and reports this amount to the
Legislature. For initial claims, the Legislature appropriates
funds in the annual claims bill. For continuing claims, the
Legislature appropriates funding through the annual state
Budget Act.
FISCAL EFFECT : Unknown.
COMMENTS :
Background . According to the Legislative Analyst's Analysis of
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the 2006-07 Budget, the existing mandate claims process has
several problems:
It is cumbersome, operating in a quasi-judicial fashion that
bases decisions on case law and written briefs;
It is lengthy (it currently takes an average of more than five
years to approve a new mandate for state funding); and
It does little to encourage the state and school districts to
craft a settlement that balances the interests of both parties
outside of the formal claiming process.
Currently, 39 mandates apply to K-12 school districts and county
offices of education requiring a wide range of instructional,
fiscal, and safety activities, at an annual cost of $162
million.<1> The 2006-07 Governor's budget proposes $134 million
for the ongoing costs of education mandates. In addition, the
budget proposes to allocate $151 million to reimburse LEAs for
mandate claims from past years. These funds would retire a
portion of the outstanding claims incurred since the late 1990s
when mandate claims outstripped the amount appropriated in the
annual Budget Act. The amount owed for past claims through
2005-06 is estimated at approximately $1.2 billion. If all of
those claims qualified for 80% reimbursement and all LEAs
elected this option, then the state would save $240 million in
costs for past claims.
Are the incentives created by this bill for past claims
appropriate ? Among other things, this bill would establish an
alternative process for resolution of existing, but unfunded,
mandated-cost claims owed LEAs for educational services provided
prior to January 1, 2007. LEAs could elect, by March 31, 2007,
to receive 80 cents on the dollar in full satisfaction of their
outstanding claims. Presumably, the total amount owed for those
LEA settlement claims would be included as a state budget
appropriation for FY 2007-08.
Will this option create a "perverse incentive" for the state to
continue withholding funding for education mandates already owed
to LEAs with the hope that they will settle their claims for a
lower dollar amount? Can the state legally withhold
reimbursements owed to school districts for mandated costs that
have already been incurred? The committee may wish to ask the
author to address these questions at the time the bill is
---------------------------
<1> Excludes costs for mandates that have been recently
eliminated or suspended by the Legislature.
AB 2846
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presented.
Arguments in support . According to the author, "Despite
widespread agreement that the current mandate process is complex
and costly and in much need of reform, there has been very
little success with recent attempts to do so.
"The current mandates process suffers from many deficiencies,
namely long delays in reimbursing school districts, inadequate
resources to carry out laws, uncertainty in determining the
costs of complying with laws, and mistrust among local agencies
and school districts due to variation in delivery methods and
levels of reimbursement.?
"Because of the long delays in receiving state reimbursement,
school districts are required to redirect their resources from
existing programs. Districts are therefore unable to control
their budget, and are sometimes left vulnerable to lawsuits if
they fail to provide the services.
"Complicating the reimbursement process further is the lack of
audit standards applied to a district's claim. School districts
are too often required to provide a level of documentation for
their claims that far exceeds normal cost accounting standards.
These standards are sometimes not developed until years have
passed after the costs were incurred.
"AB 2846 will streamline the reimbursement process by giving
districts an alternative to the current, complex and lengthy
system."
Arguments in opposition . The California Federation of Teachers
summarizes the opposition to this measure, based on the April 3
amended version of the bill:
"This bill does not change much that the Federation and other
education organizations find objectionable about the current
mandate reimbursement process. First, it sets an arbitrary
settlement figure for past mandate claims and then allows audits
to continue if the Controller objects. Education groups have
not been consulted about the settlement figure and we have a
number of objections concerning the current audit process.
"Second, education organizations are excluded from the
determination of unit rates [Note: recent amendments have added
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school business official' and county superintendents'
associations to the organizations included on the rate setting
work group]. We believe that some unit rates are appropriate.
We also believe we should be included in the discussions about
appropriate unit rates.
"Third, the 'carrot' of prohibiting audits if unit rates are
chosen by the local agency is a red herring. The unit rates
established may be inadequate to fully reimburse costs. If full
reimbursement is allowed the agency is still subject to an
objectionable audit procedure.
"We do not see much to like in this bill and do not see how it
can be amended to our liking. Therefore, we ask for a no vote
on AB 2846."
REGISTERED SUPPORT / OPPOSITION :
Support
None on file.
Opposition
California Federation of Teachers
Analysis Prepared by : Michael Ricketts / ED. / (916) 319-2087