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SB-1457 School district: postretirement employee benefits. (2005-2006)

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SB1457:v99#DOCUMENT


CALIFORNIA LEGISLATURE— 2005–2006 REGULAR SESSION

Senate Bill
No. 1457


Introduced  by  Senator Simitian

February 23, 2006


An act to amend Sections 33127 and 42127 of, and to add Sections 42135 and 42136 to, the Education Code, relating to school districts.


LEGISLATIVE COUNSEL'S DIGEST


SB 1457, as introduced, Simitian. School district: postretirement employee benefits.
Existing law requires the Superintendent of Public Instruction, the Controller, and the Director of Finance to develop standards and criteria to be reviewed and adopted by the State Board of Education, and to be used by local educational agencies in the development of annual budgets and the management of subsequent expenditures from that budget.
This bill would require the State Department of Education, with the assistance of the Controller and the Director of Finance, to develop standards and criteria for actuarial studies of school district liabilities for retired employee health and welfare benefits other than pensions, as specified.
Existing law requires the governing board of school districts to adopt an annual budget and to perform other specified tasks relating to the budget process, including, but not limited to, holding public hearings.
This bill would require the governing boards of school districts to determine whether the adopted budget includes the amount of funding for retired employee health and welfare benefits other than pensions identified in plans developed by the school district, as specified. This bill would require governing boards to identify, if necessary, the amount of funding that would be necessary to fully fund the plans developed by the school district, as specified.
Existing law requires the superintendent of each school district to submit reports, as specified, on the financial and budgetary status of the school district for each fiscal year to the governing board of the district.
This bill would require school districts that provide retired employees health and welfare benefits other than pensions to develop a long‑term plan, as specified, that identifies the manner in which the district will fund the benefits for current and future retired employees. This bill would require school districts that have actuarial studies conducted regarding retired employee health and welfare benefits other than pensions to provide a copy of the most recent study to the county office of education by January 30, 2007. This bill would require the State Department of Education to submit reports, as specified, to the appropriate policy and fiscal committees of the Legislature, the State Legislative Analyst, and the State Department of Finance concerning the outstanding liabilities of school districts for retired employee health and welfare benefits other than pensions.
By requiring school districts to perform additional duties, this bill would impose a state‑mandated local program.
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.
This bill would provide 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 these statutory provisions.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: YES  

The people of the State of California do enact as follows:


SECTION 1.

 Section 33127 of the Education Code is amended to read:

33127.
 (a) The Superintendent of Public Instruction, the Controller, and the Director of the Department of Finance shall develop, on or before March 1, 1989, standards and criteria to be reviewed and adopted by the State Board of Education state board, and to be used by local educational agencies in the development of annual budgets and the management of subsequent expenditures from that budget. During the development of the standards and criteria, the Superintendent of Public Instruction shall convene a committee composed of representatives from school districts, county offices of education, state agencies, the Legislature, and appropriate labor and professional organizations. The committee may review and comment on the proposal standards and criteria prior to their adoption. In addition, the standards and criteria shall be used to monitor the fiscal stability of local educational agencies as provided for in Sections 1240.1, 1240.2, 1621, 1623, 33131, 42127, and 42127.1.
(b) The Superintendent of Public Instruction, the Controller, and the Director of the Department of Finance shall update the standards and criteria developed pursuant to subdivision (a) on or before September 1, 2005. The updated standards and criteria shall be reviewed and adopted pursuant to the procedure established by subdivision (a) and are applicable to local educational agency budgets commencing with the 2006–07 fiscal year and each fiscal year thereafter.
(c) After September 1, 2005, to the extent necessary, any revisions or updates to the standards and criteria shall be developed by the Superintendent of Public Instruction, the Controller, and the Director of the Department of Finance pursuant the procedures established by subdivision (a). The revisions or updates shall specify the fiscal year in which the revisions or updates are applicable.
(d) The department, with the assistance of the Controller and the Director of Finance, shall develop standards and criteria for actuarial studies of the liabilities of school districts for retired employee health and welfare benefits other than pensions in accordance with Statement 45, issued by the Governmental Accounting Standards Board in June 2004, and in accordance with plans developed by school districts pursuant to Section 42135. The standards and criteria shall include guidance on developing reasonable assumptions concerning future increases in medical costs and appropriate methods for identifying long‑term discount rates.

SEC. 2.

 Section 42127 of the Education Code is amended to read:

42127.
 (a) On or before July 1 of each year, the governing board of each school district shall accomplish the following:
(1) Hold a public hearing on the budget to be adopted for the subsequent fiscal year. The budget to be adopted shall be prepared in accordance with Section 42126. The agenda for that hearing shall be posted at least 72 hours prior to the public hearing and shall include the location where the budget will be available for public inspection.
(2) Adopt a budget. Not later than five days after that adoption or by July 1, whichever occurs first, the governing board shall file that budget with the county superintendent of schools. That budget and supporting data shall be maintained and made available for public review. If the governing board of the district does not want all or a portion of the property tax requirement levied for the purpose of making payments for the interest and redemption charges on indebtedness as described in paragraph (1) or (2) of subdivision (b) of Section 1 of Article XIII A of the California Constitution, the budget shall include a statement of the amount or portion for which a levy shall not be made.
(b) The county superintendent of schools may accept changes in any statement included in the budget, pursuant to subdivision (a), of the amount or portion for which a property tax levy shall not be made. The county superintendent or the county auditor shall compute the actual amounts to be levied on the property tax rolls of the district for purposes that exceed apportionments to the district pursuant to Chapter 6 (commencing with Section 95) of Part 0.5 of Division 1 of the Revenue and Taxation Code. Each school district shall provide all data needed by the county superintendent or the county auditor to compute the amounts. On or before August 15, the county superintendent shall transmit the amounts computed to the county auditor who shall compute the tax rates necessary to produce the amounts. On or before September 1, the county auditor shall submit the rate computed to the board of supervisors for adoption.
(c) The county superintendent of schools shall do all of the following:
(1) Examine the adopted budget to determine whether it complies with the standards and criteria adopted by the State Board of Education state board pursuant to Section 33127 for application to final local educational agency budgets. The county superintendent shall identify, if necessary, any technical corrections that are required to be made to bring the budget into compliance with those standards and criteria.
(2) Determine whether the adopted budget will allow the district to meet its financial obligations during the fiscal year and is consistent with a financial plan that will enable the district to satisfy its multiyear financial commitments. In addition to his or her own analysis of the budget of each school district, the county superintendent of schools shall review and consider studies, reports, evaluations, or audits of the school district that were commissioned by the district, the county superintendent, the Superintendent, and state control agencies and that contain evidence that the school district is showing fiscal distress under the standards and criteria adopted in Section 33127 or that contain a finding by an external reviewer that more than three of the 15 most common predictors of a school district needing intervention, as determined by the County Office Fiscal Crisis and Management Assistance Team, are present. The county superintendent of schools shall either conditionally approve or disapprove a budget that does not provide adequate assurance that the district will meet its current and future obligations and resolve any problems identified in studies, reports, evaluations, or audits described in this paragraph.
(3) Determine whether the adopted budget includes the amount of funding necessary to satisfy liabilities for retired employee health and welfare benefits other than pensions identified in plans developed by the school district pursuant to Section 42135, and identify, if necessary, the amount of additional funding necessary to fully fund those plans.
(d) On or before August 15, the county superintendent of schools shall approve, conditionally approve, or disapprove the adopted budget for each school district. If a school district does not submit a budget to the county superintendent of schools, the county superintendent of schools shall, at district expense, develop a budget for that school district by September 15 and transmit that budget to the governing board of the school district. The budget prepared by the county superintendent of schools shall be deemed adopted, unless the county superintendent of schools approves any modifications made by the governing board of the school district. The approved budget shall be used as a guide for the district’s priorities. The Superintendent shall review and certify the budget approved by the county. If, pursuant to the review conducted pursuant to subdivision (c), the county superintendent of schools determines that the adopted budget for a school district does not satisfy paragraph (1) or (2) of that subdivision, he or she shall conditionally approve or disapprove the budget and, not later than August 15, transmit to the governing board of the school district, in writing, his or her recommendations regarding revision of the budget and the reasons for those recommendations, including, but not limited to, the amounts of any budget adjustments needed before he or she can conditionally approve that budget. The county superintendent of schools may assign a fiscal adviser to assist the district to develop a budget in compliance with those revisions. In addition, the county superintendent of schools may appoint a committee to examine and comment on the superintendent’s review and recommendations, subject to the requirement that the committee report its findings to the superintendent no later than August 20.
(e) On or before September 8, the governing board of the school district shall revise the adopted budget to reflect changes in projected income or expenditures subsequent to July 1, and to include any response to the recommendations of the county superintendent of schools, shall adopt the revised budget, and shall file the revised budget with the county superintendent of schools. Prior to revising the budget, the governing board shall hold a public hearing regarding the proposed revisions, to be conducted in accordance with Section 42103. In addition, if the adopted budget is disapproved pursuant to subdivision (d), the governing board and the county superintendent of schools shall review the disapproval and the recommendations of the county superintendent of schools regarding revision of the budget at the public hearing. The revised budget and supporting data shall be maintained and made available for public review.
(f) On or before September 22, the county superintendent of schools shall provide a list to the Superintendent identifying all school districts for which budgets may be disapproved.
(g) The county superintendent of schools shall examine the revised budget to determine whether it (1) complies with the standards and criteria adopted by the State Board of Education state board pursuant to Section 33127 for application to final local educational agency budgets, (2) allows the district to meet its financial obligations during the fiscal year, (3) satisfies all conditions established by the county superintendent of schools in the case of a conditionally approved budget, and (4) is consistent with a financial plan that will enable the district to satisfy its multiyear financial commitments, and, not later than October 8, shall approve or disapprove the revised budget. If the county superintendent of schools disapproves the budget, he or she shall call for the formation of a budget review committee pursuant to Section 42127.1, unless the governing board of the school district and the county superintendent of schools agree to waive the requirement that a budget review committee be formed and the department approves the waiver after determining that a budget review committee is not necessary. Upon the grant of a waiver, the county superintendent has the authority and responsibility provided to a budget review committee in Section 42127.3. Upon approving a waiver of the budget review committee, the department shall ensure that a balanced budget is adopted for the school district by November 30. If no budget is adopted by November 30, the Superintendent may adopt a budget for the school district. The Superintendent shall report to the Legislature and the Director of Finance by December 10 if any district, including a district that has received a waiver of the budget review committee process, does not have an adopted budget by November 30. This report shall include the reasons why a budget has not been adopted by the deadline, the steps being taken to finalize budget adoption, the date the adopted budget is anticipated, and whether the Superintendent has or will exercise his or her authority to adopt a budget for the school district.
(h) Not later than October 8, the county superintendent of schools shall submit a report to the Superintendent identifying all school districts for which budgets have been disapproved or budget review committees waived. The report shall include a copy of the written response transmitted to each of those districts pursuant to subdivision (d).
(i) Notwithstanding any other provision of this section, the budget review for a school district shall be governed by paragraphs (1), (2), and (3) of this subdivision, rather than by subdivisions (e) and (g), if the governing board of the school district so elects and notifies the county superintendent in writing of that decision, not later than October 31 of the immediately preceding calendar year. On or before July 1, the governing board of a school district for which the budget review is governed by this subdivision, rather than by subdivisions (e) and (g), shall conduct a public hearing regarding its proposed budget in accordance with Section 42103.
(1) If the adopted budget of a school district is disapproved pursuant to subdivision (d), on or before September 8, the governing board of the school district, in conjunction with the county superintendent of schools, shall review the superintendent’s recommendations at a regular meeting of the governing board and respond to those recommendations. The response shall include any revisions to the adopted budget and other proposed actions to be taken, if any, as a result of those recommendations.
(2) On or before September 22, the county superintendent of schools will provide a list to the Superintendent identifying all school districts for which a budget may be tentatively disapproved.
(3) Not later than October 8, after receiving the response required under paragraph (1), the county superintendent of schools shall review that response and either approve or disapprove the budget. If the county superintendent of schools disapproves the budget, he or she shall call for the formation of a budget review committee pursuant to Section 42127.1, unless the governing board of the school district and the county superintendent of schools agree to waive the requirement that a budget review committee be formed and the department approves the waiver after determining that a budget review committee is not necessary. Upon the grant of a waiver, the county superintendent has the authority and responsibility provided to a budget review committee in Section 42127.3. Upon approving a waiver of the budget review committee, the department shall ensure that a balanced budget is adopted for the school district by November 30. The Superintendent shall report to the Legislature and the Director of Finance by December 10 if any district, including a district that has received a waiver of the budget review committee process, does not have an adopted budget by November 30. This report shall include the reasons why a budget has not been adopted by the deadline, the steps being taken to finalize budget adoption, and the date the adopted budget is anticipated.
(4) Not later than 45 days after the Governor signs the annual Budget Act, the school district shall make available for public review any revisions in revenues and expenditures that it has made to its budget to reflect the funding made available by that Budget Act.
(j) Any school district for which the county board of education serves as the governing board is not subject to subdivisions (c) to (h), inclusive, but is governed instead by the budget procedures set forth in Section 1622.

SEC. 3.

 Section 42135 is added to the Education Code, to read:

42135.
 (a) (1) The Legislature finds and declares all of the following:
(A) School districts have made significant long‑term financial commitments by agreeing to provide benefits such as health insurance to employees upon retirement.
(B) School districts may be unaware of the long‑term costs of retired employee health and welfare benefits other than pensions or the impact of these costs on local education programs.
(2) It is the intent of the Legislature that the plans developed pursuant to this section assist school districts in meeting long‑term obligations for retired employee health and welfare benefits other than pensions.
(b) A school district that provides retired employee health and welfare benefits other than pensions shall develop a long‑term plan that identifies the manner in which the school district will fund those benefits for current and future retirees. The plan shall be based on an actuarial assessment conducted by the school district in accordance with Statement 45, issued by the Governmental Accounting Standards Board in June, 2004. The plan shall describe the amount of funding necessary for the school district to fund retired employee health and welfare benefits other than pensions over a 30‑year period. A school district that is required to develop a plan pursuant to this subdivision shall complete the plan, or complete updates to an existing plan, no later than one year after the date by which the school district is advised to complete an actuarial study, as specified in Statement 45.
(c) The plans shall be consistent with the standards and criteria developed by the department pursuant to Section 33127.
(d) It is the intent of the Legislature that school districts develop sound plans that recognize all of the following:
(1) The annual liability for retired employee health and welfare benefits other than pensions incurred for each employee each year.
(2) Existing unfunded liability created for current and past employees.
(e) The Legislature encourages school districts, to the extent possible, to establish financing plans that fund benefits before any liability exists, and that address existing liability by establishing an amortization schedule that spreads payment of benefit liabilities over a 30‑year period.
(f) A school district that has an actuarial study conducted regarding the costs of retired employee health and welfare benefits other than pensions after June 30, 2005, shall, by June 30, 2007, develop an initial plan using the results of the most recent actuarial study available.

SEC. 4.

 Section 42136 is added to the Education Code, to read:

42136.
 (a) A school district that has an actuarial study conducted regarding the costs of retired employee health and welfare benefits other than pensions shall provide a copy of the most recent report to the county office of education by January 30, 2007.
(b) The department shall submit all of the following reports to the appropriate policy and fiscal committees of the Legislature, the Legislative Analyst, and the Department of Finance:
(1) A report on the outstanding liability of school districts for retired employee health and welfare benefits other than pensions.
(2) To the extent that data is available, a report on the annual “normal” cost of health and welfare benefits for current employees, the actuarial cost of health and welfare benefits for current and retired employees, and the amount of health and welfare benefits that have been prefunded.
(3) A report on the manner in which school districts have prefunded health and welfare benefits.
(4) By January 1, 2008, a report on the liabilities of school districts that provide health and welfare benefits, other than pensions, to retired employees over 65 years of age.
(5) By July 1, 2009, a report on the liabilities of school districts that provide retired employee health and welfare benefits other than pensions.

SEC. 5.

 If the Commission on State Mandates determines that this act contains costs mandated by the state, reimbursement to local agencies and school districts for those costs shall be made pursuant to Part 7 (commencing with Section 17500) of Division 4 of Title 2 of the Government Code.