BILL ANALYSIS Ó AB 882 Page 1 ASSEMBLY THIRD READING AB 882 (Wilk) As Amended May 20, 2015 Majority vote ------------------------------------------------------------------- |Committee |Votes |Ayes |Noes | | | | | | | | | | | |----------------+------+--------------------+----------------------| |Education |7-0 |O'Donnell, Chávez, | | | | |Kim, McCarty, | | | | |Santiago, Thurmond, | | | | |Weber | | | | | | | | | | | | ------------------------------------------------------------------- SUMMARY: Specifies that the term of a bond used for the purposes of furnishing and equipping of classroom, including, but not limited to, electronic equipment, shall not exceed 120% of the average reasonably expected economic life of the furnishings and equipment. EXISTING LAW: 1)Authorizes, under California Constitution Article XVI, Section 18, a school district, community college district or county office of education to incur indebtedness in the form of General Obligation (GO) bonds for the construction, reconstruction, AB 882 Page 2 rehabilitation, or replacement of school facilities, including the furnishing and equipping of school facilities, or the acquisition or lease of real property for school facilities upon approval of 55% of the voters. 2)Specifies, under the Education Code, that the number of years the whole or any part of the bonds are to run shall not exceed 25 years, from the date of the bonds or the date of any series thereof. 3)Specifies, under the Government Code, that a school district or community college district may issue bonds that do not allow for the compounding of interest and that have a maturity greater than 30 years, but not greater than 40 years, if the school district or community college district does both of the following: a) Complies with the requirements of Education Code Section 15146 (b) and (c). b) Makes a finding that the useful life of the facility financed with the bonds that do not allow for the compounding of interest and that have a maturity greater than 30 years, but not greater than 40 years, equals or exceeds the maturity date of those bonds. FISCAL EFFECT: None COMMENTS: Proposition 39. In November, 2000, voters passed Proposition 39, a Constitutional Amendment which, among others, give school districts and community college districts the opportunity to seek approval of a local GO bond based on a 55% vote rather than a two-thirds vote, provided that the local bond initiative meets specified accountability measures, including identifying the list of specific school facilities projects that will be funded by bond proceeds and the requirement to conduct an annual independent performance audit and an independent financial AB 882 Page 3 audit. Term of bonds. Under the Education Code, the term of local bonds cannot exceed 25 years, while bonds issued under the Government Code is no more than 40 years. Proposition 39 authorizes the proceeds from the sale of GO bonds to be used for the construction, reconstruction, rehabilitation, or replacement of school facilities, including the furnishing and equipping of school facilities. Existing law, however, does not differentiate between bonds for buildings versus bonds for furnishing and equipping of facilities, which may include electronic equipment. This bill specifies that the issuance of local bonds used to furnish and equip classrooms cannot exceed 120% of the life expectancy of the items being purchased, whether the bond is issued under the Education Code or the Government Code. This bill is consistent with federal tax rules to ensure that taxpayers are not paying long term bonds for items that have shorter lifespan, and will reduce costs for these purchases. The author states, "This bill is consistent with the provisions in Proposition 39 and does not prohibit the use of Prop 39 bond proceeds to purchase technology. I am a huge proponent of equipping students with technology in the classroom, especially given our new common core standards. If we don't empower our students with modern technology, we are putting our students at a disadvantage to provide them the opportunity to develop 21st century skills. AB 882 will protect taxpayer dollars by ensuring Prop 39 bond funds are paid off based on the life expectancy of the items being purchased." Analysis Prepared by: Sophia Kwong Kim / ED. / (916) 319-2087 FN: 0000484 AB 882 Page 4