AB 2316

AB2316:v98#DOCUMENT

Bill Start

CALIFORNIA LEGISLATURE— 2025–2026 REGULAR SESSION

Assembly Bill

No. 2316

An act to amend Sections 17078.54 and 17078.57 of the Education Code, relating to school facilities.

LEGISLATIVE COUNSEL'S DIGEST

AB 2316, as amended, Hoover. School facilities: Charter School Facilities Program: undue financial burden.

The Leroy F. Greene School Facilities Act of 1998 provides for the adoption of rules, regulations, and procedures, under the administration of the Director of General Services, for the allocation of state funds by the State Allocation Board for the construction and modernization of public school facilities. Existing law establishes the Charter Schools Facilities Program within the Leroy F. Greene School Facilities Act of 1998 to provide funding to qualifying entities for the purpose of establishing school facilities for charter school pupils. Existing law requires that a 50% matching share be provided by charter schools applying for facilities funding under the program. Existing law requires California School Finance Authority, in consultation with the board, to adopt regulations for the program, including, among other regulations, the process for determining the manner in which the applicant will pay its local matching share, including the method for determining lease payments to be made in lieu of the local matching share.

This bill would, commencing January 1, 2027, 2028, if the 50% local share matching obligation or lease payments would result in the applicant charter school suffering an undue financial burden, as provided, require the authority to notify the board and authorize the board to reduce the 50% local share matching obligation or lease payments, and correspondingly increase the grant amount, as necessary for the school to reach a reasonable level of debt service. The bill would require the authority, in consultation with the board, to adopt regulations for that purpose. purpose and would require the authority and the board to adopt the method for determining whether the 50% local share matching obligation or lease payments would result in the charter school suffering an undue financial burden, in consultation with the department and the County Office Fiscal Crisis and Management Assistance Team.

Digest Key

Vote: MAJORITY Appropriation: NO Fiscal Committee: YES Local Program: NO

Bill Text

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

SECTION 1.

Section 17078.54 of the Education Code is amended to read:

17078.54.

(a) An eligible project under this article shall include funding, as permitted by this chapter, for new construction or rehabilitation of a school facility for charter school pupils, as set forth in this article. A project may include, but is not limited to, the cost of retrofitting an existing building for charter school purposes, purchasing a building, or retrofitting a building that has been purchased by the charter school, if those costs have not been previously funded under this chapter, but may not exceed the amounts set forth in subdivision (b). Existing school buildings made available by a school district that will be rehabilitated for the purposes of this article are not subject to Article 6 (commencing with Section 17073.10). An allocation of funds shall not be made for a school facility that is less than 15 years old.

(b) The maximum amount of the funding pursuant to this article shall be determined by calculating the charter school’s per-pupil grant amount plus other allowable costs as set forth in this chapter. Funding shall be provided by the authority for new facility construction or rehabilitation as set forth in Section 17078.58.

(c) To be funded under this article, a project shall comply with all of the following:

(1) It shall meet all the requirements regarding public school construction, plan approvals, toxic substance review, site selection, and site approval, as would any noncharter school project of a school district under this chapter, including, but not limited to, regulations adopted by the State Architect pursuant to Section 17280.5 relating to the retrofitting of existing buildings, as applicable.

(2) Notwithstanding any provision of law to the contrary, including, but not limited to paragraph (1), the board, after consulting with the relevant regulatory agencies, shall, to the extent feasible, adopt regulations establishing a process for projects to be subject to a streamlined method for obtaining regulatory approvals for all requirements described in paragraph (1), except for the requirements of the Field Act as defined in Section 17281 that shall be complied with in the same manner as any other project under this chapter.

(3) The board shall fund only new construction to be physically located within the geographical jurisdiction of a school district.

(d) (1) Facilities funded pursuant to this article shall have a 50 percent local share matching obligation that may be paid by the applicant through lease payments in lieu of the matching share, or as otherwise set forth in this article, including, but not limited to, Section 17078.58.

(2) (A) Commencing January 1, 2027, 2028, if the 50-percent local share matching obligation or lease payments would result in the applicant charter school suffering an undue financial burden, as determined by regulations developed pursuant to Section 17078.57, the authority shall notify the board and the board may reduce the 50-percent local share matching obligation or lease payments, and correspondingly increase the grant amount, as necessary for the school to reach a reasonable level of debt service.

(B) For purposes of subparagraph (A), an undue financial burden shall be determined by regulations adopted pursuant to Section 17078.57, and all of the following:(i) The total amount of state and federal grants received by the charter school described in clause (i) of subparagraph (C).(ii) The total amount of local general obligation bond funds provided by the chartering authority to the charter school for the eligible project.(iii) The amount of transfers described in clause (iv) of subparagraph (C).(iv) A threshold of the charter school’s borrowing capacity and indebtedness.(C) To be eligible for the reduction described in subparagraph (A), the applicant and charter school shall demonstrate all of the following in a manner prescribed by the authority and the board:(i) That the charter school has applied for all other state and federal grants for school facilities for which the charter school is eligible, as determined by the authority and the board, for the period of 12 months before the applicant submits the application for preliminary apportionment. The authority and the board shall publish on their respective internet websites a list of available state and federal grants for school facilities for charter schools at least 12 months before the application for an eligible project is made available.(ii) That the charter school has a made a written request to its chartering authority to include the eligible project in the chartering authority’s next local general obligation bond.(iii) The total amount of local general obligation bond funds provided by the chartering authority to the charter school in the previous five years, including a description of how the charter school used those funds.(iv) The amount of transfers of funds or assets to other individuals or organizations in the previous five years that exceeded five hundred thousand dollars ($500,000) or 5 percent of the charter school’s total revenue and other sources, whichever is less, together with a written explanation regarding the charter school’s purpose for each of these expenditures. This amount shall be reported at the time the eligible project application is submitted for preliminary apportionment, and again as a requirement to receive the final apportionment.(D) The local share matching obligation or lease payments described in subparagraph (A) shall be updated by the authority and the board based on the most current information provided.(E) For purposes of this section, “chartering authority” means the governing board of the school district or the county board of education that granted the charter to the charter school or the governing board of a school district or a county board of education that was designated as the chartering authority by the state board.

(e) The authority may charge its administrative costs against the respective 2002, 2004, or 2006 Charter School Facilities Account, or the amount described in paragraph (2) of subdivision (a) of Section 101122, which shall be subject to the approval of the Department of Finance and which may not exceed 2.5 percent of the account or amount.

SEC. 2.

Section 17078.57 of the Education Code is amended to read:

17078.57.

(a) The authority, in consultation with the board, shall adopt regulations establishing uniform terms and conditions that shall apply equally to all projects for funding in accordance with Section 17078.58, including, but not limited to, all of the following:

(1) The process for determining the manner in which the applicant will pay its local matching share, including the method for determining lease payments to be made in lieu of the local matching share. The regulations shall comply with all of the following criteria:

(A) The payment process set forth in Section 17199.4 may be used.

(B) The payment process shall permit lump-sum local matching payments and shall permit establishment of a schedule for lease payments to be made in lieu of the local matching share.

(C) The lease payment schedule shall be calculated by amortizing one-half of the total approved project costs, minus lump-sum payments, over the entire payment period as set forth in Section 17078.58.

(D) The payment schedule for payments in lieu of the local matching funds pursuant to this section shall be based upon payment, within a reasonable period of time not to exceed a 30-year period, of one-half of the total eligible project costs, and shall be calculated in a manner that is designed to result in full payment of that portion, together with interest thereon at a rate set by the authority. The interest rate shall be set using the lower of the following:

(i) The rate paid on moneys in the Pooled Money Investment Account as of the date of disbursement of the funding.

(ii) A rate equal to 50 percent of the interest rate paid by the state on the most recent sale of state general obligation bonds, and the interest rate shall be computed according to the true interest cost method.

(E) Notwithstanding subparagraph (D), the authority shall not set the interest rate on a loan at a rate lower than 2 percent. Program participants that have locked in an interest rate before January 1, 2009, may reset their payment schedule based on the interest rate set pursuant to subparagraph (D) as of January 1, 2009. Program participants executing an agreement on and after January 1, 2009, shall have their interest rate set at the time the funding agreement is executed and shall not renegotiate interest rates without prior approval of the authority.

(2) The method for determining whether a charter school is financially sound. In the case of a charter school chartered by a school district that is located outside of the school district that chartered it, the method developed by the authority shall include, but shall not be limited to, a site visit to the school facility currently being used by the charter school during hours when pupils are present and instruction is being provided.

(3) (A) Security provisions, including, but not limited to, whether title to project facilities shall be held by the school district in which the facility is to be physically located, in trust, for the benefit of the state public school system, or by another entity as authorized pursuant to Section 17078.63.

(B) The authority shall adopt a mechanism whereby a person or entity who provides a substantial contribution that is applied to the costs of the project in excess of the state share and the local matching share may be granted a security interest to be satisfied from the proceeds, if any, realized when the property is ultimately disposed of as set forth in paragraph (5) of subdivision (b) of Section 17078.62.

(4) The method for integrating funding pursuant to this article with the general procedures of the authority pursuant to subdivision (i) of Section 17180 for otherwise funding projects eligible for funding under this chapter, if appropriate.

(5) (A) The method for determining whether the 50-percent local share matching obligation or lease payments would result in the charter school suffering an undue financial burden.

(B) The method described in subparagraph (A) shall be adopted by the authority and the board, in consultation with the department and the County Office Fiscal Crisis and Management Assistance Team.

(b) The authority may adopt, amend, or repeal rules and regulations pursuant to this chapter as emergency regulations. The adoption, amendment, or repeal of these regulations is conclusively presumed to be necessary for the immediate preservation of the public peace, health, safety, or general welfare within the meaning of Section 11346.1 of the Government Code.