California Assembly Bill AB609 Amended / Bill

 BILL NUMBER: AB 609AMENDED BILL TEXT AMENDED IN ASSEMBLY APRIL 25, 2011 AMENDED IN ASSEMBLY MARCH 30, 2011 INTRODUCED BY Assembly Member Swanson FEBRUARY 16, 2011 An act to  amend Section 41320.1 of, and to  add Section 41344.45 to  , the Education Code,  and to amend Section 9 of Chapter 14 of the Statutes of 2003,  relating to  the Oakland Unified School District   education finance  . LEGISLATIVE COUNSEL'S DIGEST AB 609, as amended, Swanson.  Education Finance:  Oakland Unified School District: audits: emergency loan deductions. (1) Existing law  provides for emergency apportionments to school districts subject to specified conditions, including, in certain circumstances, the repayment of an emergency loan and the appointment by the Superintendent of Public Instruction of an administrator who would exercise the powers and responsibilities of the governing board of the school district. As a condition of receiving an emergency apportionment, existing law requires the Controller, or his or her designee   , to cause an audit to be conducted on the books and accounts of the school district. Pursuant to these provisions, existing law  appropriates $100,000,000 from the General Fund to the Superintendent of Public Instruction for  apportionment to   purposes of providing  the Oakland Unified School District  as   with  an emergency loan , and requires the Controller to conduct an audit for the fiscal year in which the loan moneys are disbursed and each fiscal year thereafter  .  Existing law requires the Controller, or his or her designee, to cause an audit to be conducted of the books and accounts of the Oakland Unified School District for the fiscal years in which emergency loan moneys are disbursed to the school district. Existing law provides that, at the discretion of the Controller, the audit may be conducted by the Controller, his or her designee, or an auditor selected by the county superintendent of schools and approved by the Controller. Existing law also requires that the cost of the audit be paid by the school district.   This bill would delete the requirement that the Oakland Unified School District be subject to, and be responsible for paying for, these audits, and would instead require the school district to comply with certain other provisions of existing law relating to annual audits. The bill would require the Controller to deduct specified amounts related to the cost to the school district of these audits from the amount owed by the school district for the emergency loan. The bill would additionally require the Controller to deduct $16,630,000 from the amount owed for that emergency loan.   This bill would require an audit conducted as a condition of receiving an emergency apportionment to only be conducted to assist the administrator in ensuring that the school district returns to financial solvency, and would prohibit the audit from being conducted in a manner that would impose an additional financial burden on the school district. The bill would require the Oakland Unified School District to be released from any requirement to be subject to, or to pay for, fines or penalties imposed as a result of emergency loan audits for a specified period. The bill would also require the Controller to calculate the total amount of emergency loan audit fines or penalties accrued or paid by the Oakland Unified School District during a specified period and deduct that amount from the amount owed by the school district for the emergency loan. The bill would also require the Controller to deduct $18,500,000 dollars from the amount owed by the Oakland Unified School District on the outstanding principal balance of the emergency loan.  (2) This bill would make legislative findings and declarations as to the necessity of a special statute for the Oakland Unified School District. 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.   Section 41320.1 of the   Education Code   is amended to read:  41320.1. Acceptance by the district of the apportionments made pursuant to Section 41320 constitutes the agreement by the district to all of the following conditions: (a) The Superintendent of Public Instruction shall appoint a trustee who has recognized expertise in management and finance and may employ, on a short-term basis, any staff necessary to assist the trustee, including, but not limited to, certified public accountants, as follows: (1) The expenses incurred by the trustee and any necessary staff shall be borne by the district. (2) The Superintendent shall establish the terms and conditions of the employment, including the remuneration of the trustee. The trustee shall serve at the pleasure of, and report directly to, the Superintendent. (3) The trustee, and any necessary staff, shall serve until the loan authorized by this section is repaid, the district has adequate fiscal systems and controls in place, and the Superintendent has determined that the district's future compliance with the fiscal plan approved for the district under Section 41320 is probable. The Superintendent shall notify the county superintendent of schools, the Legislature, the Department of Finance, and the Controller no less than 60 days prior to the time that the Superintendent expects these conditions to be met. (4) Before the district repays the loan, including interest, the recipient of the loan shall select an auditor from a list established by the Superintendent and the Controller to conduct an audit of its fiscal systems. If the fiscal systems are deemed to be inadequate, the Superintendent may retain the trustee until the deficiencies are corrected. The cost of this audit and any additional cost of the trustee shall be borne by the district. (5) Notwithstanding any other law, all reports submitted to the trustee are public records. (6) To facilitate the appointment of the trustee and the employment of any necessary staff, for the purposes of this section, the Superintendent is exempt from the requirements of Article 6 (commencing with Section 999) of Chapter 6 of Division 4 of the Military and Veterans Code and Part 2 (commencing with Section 10100) of  Division 2 of  the Public  Contracts   Contract  Code. (7) Notwithstanding any other law, the Superintendent may appoint an employee of the department to act as trustee for up to the duration of the trusteeship. The salary and benefits of that employee shall be established by the Superintendent and paid by the school district. During the time of appointment, the employee is an employee of the school district, but shall remain in the same retirement system under the same plan as if the employee had remained in the department. Upon the expiration or termination of the appointment, the employee shall have the right to return to his or her former position, or to a position at substantially the same level as that position, with the department. The time served in the appointment shall be counted for all purposes as if the employee had served that time in his or her former position with the department. (b) The trustee appointed by the Superintendent shall monitor and review the operation of the district. During the period of his or her service, the trustee may stay or rescind any action of the local district governing board that, in the judgment of the trustee, may affect the financial condition of the district. The Superintendent may establish timelines and prescribe formats for reports and other materials to be used by the trustee to monitor and review the operations of the district. The trustee shall approve or reject all reports and other materials required from the district as a condition of receiving the apportionment. The Superintendent, upon the recommendation of the trustee, may reduce any apportionment to the district in an amount up to two hundred dollars ($200) per day for each late or unacceptable report or other material required under Part 24 (commencing with Section 41000), and shall report to the Legislature any failure of the district to comply with the requirements of this section. If the Superintendent determines, at any time, that the fiscal plan approved for the district under Section 41320 is unsatisfactory, he or she may modify the plan as necessary, and the district shall comply with the plan as modified. (c) At the request of the Superintendent, the Controller shall transfer to the department, from any apportionment to which the district would otherwise have been entitled pursuant to Section 42238, the amount necessary to pay the expenses incurred by the trustee and any associated costs incurred by the county superintendent of schools. (d)  (1)    For the fiscal year in which the apportionments are disbursed and each year thereafter, the Controller, or his or her designee, shall cause an audit to be conducted of the books and accounts of the district, in lieu of the audit required by Section 41020. At the Controller's discretion, the audit may be conducted by the Controller, his or her designee, or an auditor selected by the district and approved by the Controller. The costs of these audits shall be borne by the district. These audits shall be required until the Controller determines, in consultation with the Superintendent, that the district is financially solvent, but in no event earlier than one year following the implementation of the plan or later than the time the apportionment made is repaid, including interest. In addition, the Controller shall conduct quality control reviews pursuant to subdivision (c) of Section 14504.2.  (2) The audit required pursuant to this subdivision shall only be conducted to assist the administrator in ensuring that the district returns to financial solvency. The audit shall not be conducted in a manner that would impose an additional financial burden on the district.  (e) For all purposes of errors and omissions liability insurance policies, the trustee appointed pursuant to this section is an employee of the local education agency to which he or she is assigned. For the purpose of workers' compensation benefits, the trustee is an employee of the local education agency to which he or she is assigned, except that a trustee appointed pursuant to paragraph (7) of subdivision (a) is an employee of the department for that purpose. (f) Except for an individual appointed by the Superintendent as trustee pursuant to paragraph (7) of subdivision (a), the state-appointed trustee is a member of the State Teachers' Retirement System, if qualified, for the period of service as trustee, unless the trustee elects in writing not to become a member. A person who is a member or retirant of the State Teachers' Retirement System at the time of appointment shall continue to be a member or retirant of the system for the duration of the appointment. If the trustee chooses to become a member or is already a member, the trustee shall be placed on the payroll of the school district for the purposes of providing appropriate contributions to the system. The Superintendent may also require that any individual appointed as trustee pursuant to paragraph (7) of subdivision (a) be placed on the payroll of the school district for purposes of remuneration, other benefits, and payroll deductions. For the purpose of workers' compensation benefits, the state-appointed trustee is deemed an employee of the local education agency to which he or she is assigned, except that a trustee who is appointed pursuant to paragraph (7) of subdivision (a) is an employee of the department for that purpose.  SECTION 1.   SEC. 2.  Section 41344.45 is added to the Education Code, immediately following Section 41344.4, to read: 41344.45. (a)  On and after January 1, 2012, the   The  Oakland Unified School District shall be released from any requirement to be subject to, or to pay for,  audits pursuant to former   fines or penalties imposed as a result of audits performed pursuant to  subdivision (d) of Section 9 of Chapter 14 of the Statutes of 2003,  and shall instead comply with Section 41020   for any fiscal year that falls between June 16, 2003, and June 28, 2009, inclusive  .  (b) No later than April 1, 2012, the Controller shall determine both of the following with respect to audits performed pursuant to former subdivision (d) of Section 9 of Chapter 14 of the Statutes of 2003:   (1) The cost to the Oakland Unified School District of each of the audits required by former subdivision (d) of Section 9 of Chapter 14 of the Statutes of 2003 for the 2003-04 fiscal year to the 2010-11 fiscal year, inclusive.   (2) The amounts paid by the Oakland Unified School District for audits required by former subdivision (d) of Section 9 of Chapter 14 of the Statutes of 2003 for audits that were issued by the Controller six or more months late.   (c)   (b)  Notwithstanding any other law,  no later than July 1, 2012,  the Controller shall do all of the following:  (1) Subtract one-half of the amount calculated under paragraph (2) of subdivision (b) from the amount owed by the Oakland Unified School District for the loan that it received pursuant to subdivision (a) of Section 9 of Chapter 14 of the Statutes of 2003.   (2)   (1)  Calculate the total amount of any audit fines or penalties  charged to   accrued or paid by  the Oakland Unified School District as a result of the audits performed pursuant to  former  subdivision (d) of Section 9 of Chapter 14 of the Statutes of 2003  between the 2003-04 fiscal year and the 2010-11 fiscal year   during the period of June 16, 2003, to June 28, 2009  , inclusive, and deduct that amount from the amount owed by the Oakland Unified School District for the loan that it received pursuant to subdivision (a) of Section 9 of Chapter 14 of the Statutes of 2003.  (3)   (2)  Deduct  sixteen million six hundred thirty thousand dollars ($16,630,000)   eighteen million five hundred thousand dollars ($18,500,000)  from the amount owed by the Oakland Unified School District  for   on the outstanding principal balance of  the loan that it received pursuant to subdivision (a) of Section 9 of Chapter 14 of the Statutes of 2003.  SEC. 2.   Section 9 of Chapter 14 of the Statutes of 2003 is amended to read: Sec. 9. (a) The sum of one hundred million dollars ($100,000,000) is hereby appropriated from the General Fund to the Superintendent of Public Instruction for apportionment to the Oakland Unified School District for the purpose of an emergency loan. In order to qualify for the loan, the district shall comply with Article 2 (commencing with Section 41320) of, and Article 2.5 (commencing with Section 41325) of, Chapter 3 of Part 24 of Division 3 of Title 2 of the Education Code to the extent those provisions are consistent with the conditions specified in this act. (b) Funds may be disbursed from the proceeds of the loan only if the administrator and the County Office Fiscal Crisis and Management Assistance Team jointly determine that the disbursement is necessary. (c) Based on the needs of the district to meet its obligations, the Superintendent of Public Instruction may direct the Controller to disburse, on a monthly basis, specific amounts of the emergency loan before the approval of all of the conditions established by this act.  SEC. 3. The Legislature finds and declares that, due to the unique circumstances relating to the fiscal emergency in the Oakland Unified School District, a general statute cannot be made applicable within the meaning of Section 16 of Article IV of the California Constitution, and the enactment of  this   Section 41344.45 of the Education Code by Section 2 of this act as a  special statute is therefore necessary.