Draft legislation

Senate Bill No._____ CHAPTER _____ An act to amend Section 42127.01 of the Education Code, relating to school finance. [ Last approved by Governor October 11, 2017. Filed with Secretary of State October 11, 2017.] legislative counsel’ s digest SB 751, Hill.

School finance: school districts: annual budgets: reserve balance.

Existing law, unless the school district is granted an exemption, limits the amount of the combined assigned or unassigned ending fund balance contained in a school district’s annual budget in any fiscal year immediately after a fiscal year in which a transfer is made into the Public School System Stabilization Account.

This bill would instead, unless the school district is granted an exemption, require each school district to include the combined ending fund balance for all funds in their budget and would limit the combined ending fund balance for all funds in its annual budget.

Existing law allows an exemption from the requirements of subdivision for up to two consecutive fiscal years within a three-year period.

This bill allows an exemption from the requirements of subdivision for up to two consecutive fiscal years within a five-year period.

Existing law establishes formulas for calculating the maximum amount allowable for school districts with less than 400,000 units of average daily attendance and for school districts with more than 400,000 units of average daily attendance, as specified.

This bill would eliminate those formulas.

Existing law makes that limitation applicable only in a fiscal year immediately after a fiscal year in which the amount of moneys in the Public School System Stabilization Account is equal to or exceeds 3% of the combined total of General Fund revenues appropriated for school districts and allocated local proceeds of taxes, as specified, for that fiscal year.

This bill would make that limitation applicable every year.

Existing law provides that the school district’s budget shall not contain a combined assigned or unassigned ending general fund balance, as defined, in excess of 10% of those funds.

This bill would provide that the school district’s budget shall not contain a combined ending fund balance for all funds, as defined, in excess of 10% of those funds.

Existing law excludes from the requirements of those provisions basic aid school districts and small school districts, both most often in affluent areas.

This bill would have no exclusions.

Existing law addresses its imposition of “additional duties on school districts.” Being transparent with the public is not an imposition.

This bill clarifies expectations of district responsibilities.

This bill would mandate a reduction in second installment funding the following school year commensurate to the excess total fund balance.

Existing law requires the Superintendent of Public Instruction to notify school districts and county offices of education whenever the conditions specified above are met. Existing law also requires the Superintendent to notify school districts and county offices of education when those conditions no longer exist.

This bill would make that requirement moot.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement. Existing law provides that, if the Commission on State Mandates determines that the bill contains costs mandated by the state, reimbursement for those costs shall be made pursuant to the statutory provisions noted above.

This bill would make the 10 percent cap requirement a standard operating procedure requiring no additional funding.

95 The people of the State of California do enact as follows: SECTION 1. Section 42127.01 of the Education Code is amended to read: 42127.01.

(a) A school district budget that is adopted or revised pursuant to Section 42127 shall not contain a combined ending fund balance for all funds that is in excess of 10 percent of those funds.

(b) A county superintendent of schools may grant a school district under its jurisdiction an exemption from the requirements of subdivision

a) for up to two consecutive fiscal years within a three-year period if the school district provides documentation indicating that extraordinary fiscal circumstances, including, but not limited to, multiyear infrastructure or technology projects, substantiate the need for a total fund balance that is in excess of the amount described in subdivision (a).

As a condition of receiving an exemption, a school district shall do all of the following:

(1) Provide a statement that substantiates the need for a balance that is in excess of the amount described in subdivision (a).

(2) Identify the funding amounts in the budget adopted by the school district that are associated with the extraordinary fiscal circumstances.

(3) Provide documentation that no other fiscal resources are available to fund the extraordinary fiscal circumstances.

c) As a condition of exceeding the 10% limit, a county superintendent will mandate a reduction in second installment funding the following school year commensurate to the excess total fund balance.

(d) (d) For purposes of this section, the following definition shall apply:

(1) “Combined assigned or unassigned ending fund balance contained in a school district’s annual budget” refers to the balance of funds 1-9 and 17 only.

(2) “Combined ending fund balance for all funds” refers to funds 1-99 and any new future additional funds. d any new future additional funds.