June 3, 2016
By Rebekah Cearley
On Thursday, June 9, 2016, the Legislature and Governor announced the framework for a deal on the FY 2016-17 budget. Some details are still being refined, and the deal still must be approved by both houses of the Legislature. We expect the Legislature to take up the budget bill and related trailer bills in time to meet the June 15 constitutional deadline. The deal reflects one of the Governor’s top priorities, placing an extra $2 billion into the state’s Rainy Day Fund. The deal also addresses one of the Legislature’s top priorities by including $400 million for affordable housing, tied to future regulatory reform.
The deal does not appear to include any significant new school facilities proposals. Our understanding of the major school facility proposals in the budget deal is as follows:
- Proposition 39 – Reflects the May Revision proposal to provide $398.8 million in Proposition 39 energy efficiency funding for K-12 schools. This is an increase of $85.4 million over FY 2015-16.
- Emergency Repair Revolving Loan Program – The Legislature rejected the Governor’s proposal to establish an Emergency Repair Revolving Loan Program to provide temporary funding to schools with insufficient resources to quickly address imminent health and safety issues that would cause students to be displaced. The May Revision proposed $100 million in one-time Proposition 98 General Fund dollars to establish this bridge loan program. Legislative members were concerned about the use of Proposition 98 dollars for this purpose and suggested that an action to approve this program would be premature given the school bond measure on the November ballot. C.A.S.H. supported this proposal.
- Safe Drinking Water – Includes $10 million in one-time Proposition 98 funds for the State Water Resources Control Board, in consultation with the Department of Education, to administer a grant program for water bottle filling station installations to deliver safe drinking water to students who currently lack access. Also includes 4 positions at the Water Board for data collection and management to track access to safe drinking water. C.A.S.H. supported the water station proposal.
- Discretionary Funds – Provides $1.28 billion in one-time discretionary funds, which also pays down the K-12 education mandates backlog. This is below the May Revision proposal of $1.4 billion.
DSA Review Threshold
Additionally, the Administration is proposing changes to the Division of the State Architect (DSA) project review threshold. The proposal would increase the minimum project cost threshold for DSA review as follows:
- Structural projects – from $42,218 to $100,00
- Non-structural projects – from $168,187 to $225,000
We do not yet know if this proposal will be reflected in the trailer bill language accompanying the budget, though it has not appeared to be contentious.
AB 2429 (Thurmond) – Bonding Capacity
Assembly Member Thurmond introduced AB 2429, which was sponsored by the Albany Unified School District. This bill would increase the limits on bonding capacity for bonds issued under Proposition 39 (2000) as follows:
- From 1.25% of taxable property to 2% for elementary and high school districts
- From 2.5% of taxable property to 4% for unified school districts and community college districts
CASH has been closely monitoring this bill, and we became aware that it could have significant implications for the calculation of Level 2 developer fees. The current code requires a school district to have issued debt for capital outlay equivalent to at least 15% of its statutory bonding capacity (or 30% if using CFD debt from after 1998) in order to levy Level 2 fees. Increasing the bonding capacity limits in statute would make it more difficult for some schools to meet the requirements to levy Level 2 fees.
CASH brought these concerns to the attention of the author and key policymakers, and the author decided not to proceed with the bill’s scheduled hearing in Senate Education Committee this past Wednesday. The author’s office has indicated that the bill will not be moving forward this year.
CASH wants to thank Larry Ferchaw, Executive Director of Dolinka Group, for bringing this issue to our attention.