The California School Finance Authority Act establishes the California School Finance Authority, and authorizes the authority to, among other things, issue revenue bonds to finance or refinance educational facility projects for school districts, charter schools, county offices of education, and community college districts. Existing law establishes the California School Finance Authority Fund, administered by the authority, and continuously appropriates moneys in the fund for purposes of the act.

This bill would create within the authority the California Credit Enhancement Program for the purpose of establishing a fund to insure school facility bonds issued by the authority pursuant to the act, as specified. The bill would create the California Credit Enhancement Account within the California School Finance Authority Fund, would authorize the authority to deposit fees collected pursuant to the program in that account, and would specify that bond insurance, credit enhancement, or other guarantees of the authority shall be payable solely from funds available in that account. By authorizing money in the California School Finance Authority Fund to be used for a new purpose, the bill would make an appropriation. The bill would require the authority to adopt regulations to carry out the program, including, but not limited to, regulations establishing eligibility criteria and a definition of default for purposes of the program.

The California School Finance Authority Act establishes the California School Finance Authority, and authorizes the authority to, among other things, issue revenue bonds to finance or refinance educational facility projects for school districts, charter schools, county offices of education, and community college districts. Existing law establishes the California School Finance Authority Fund, administered by the authority, and continuously appropriates moneys in the fund for purposes of the act.

This bill would create within the authority the California Credit Enhancement Program for the purpose of establishing a fund to insure school facility bonds issued by the authority pursuant to the act, as specified. The bill would create the California Credit Enhancement Account within the California School Finance Authority Fund, would authorize the authority to deposit fees collected pursuant to the program in that account, and would specify that bond insurance, credit enhancement, or other guarantees of the authority shall be payable solely from funds available in that account. By authorizing money in the California School Finance Authority Fund to be used for a new purpose, the bill would make an appropriation. The bill would require the authority to adopt regulations to carry out the program, including, but not limited to, regulations establishing eligibility criteria and a definition of default for purposes of the program.

The California School Finance Authority Act, Act establishes the California School Finance Authority and authorizes it to administer the continuously appropriated Authority, and authorizes the authority to, among other things, issue revenue bonds to finance or refinance educational facility projects for school districts, charter schools, county offices of education, and community college districts. Existing law establishes the California School Finance Authority Fund for the purpose of, among other things, assisting school districts and community college districts by providing financing for working capital and capital improvements. Existing law authorizes the authority to divide the fund into separate accounts. Fund, administered by the authority, and continuously appropriates moneys in the fund for purposes of the act.

This bill would create within the authority the California Credit Enhancement Program to provide lower cost alternatives for public school facilities financing through a leveraged public-private partnership program. The bill would authorize the authority to leverage its funding for the California Credit Enhancement Program, as specified. The bill would create the California Credit Enhancement Program Advisory Board to be appointed by the authority and to be made up of specified subject matter experts. for the purpose of establishing a fund to insure school facility bonds issued by the authority pursuant to the act, as specified. The bill would create the California Credit Enhancement Account within the California School Finance Authority Fund, as specified. Fund, would authorize the authority to deposit fees collected pursuant to the program in that account, and would specify that bond insurance, credit enhancement, or other guarantees of the authority shall be payable solely from funds available in that account. By authorizing money in the California School Finance Authority Fund to be used for a new purpose, the bill would make an appropriation. The bill would require the authority to adopt regulations to carry out the program, including, but not limited to, regulations establishing eligibility criteria and a definition of default for purposes of the program.

Existing law authorizes the California School Finance Authority to, among other things, determine the location and character of any project to be financed or refinanced under the California School Finance Authority Act.

This bill would state the intent of the Legislature to enact legislation that would establish the Credit Enhancement Program within the California School Finance Authority for purposes of providing lower cost alternatives for school facility financing through a leveraged public-private partnership program.

GOVERNOR'S VETO

GV Bill Id:AB 1198

Author:(Dababneh)

As Enrolled Ver:September 2, 2016

2/3 vote

Original Committee Reference: ED.

SUMMARY: Establishes the California Credit Enhancement Program (CCEP). Specifically, this bill:

1. Establishes the California Credit Enhancement Program within the California School Finance Authority (CSFA) to establish a fund to be used to insure facility bonds issued by the CSFA in order to achieve lower cost alternatives for public school facilities financing.
2. Authorizes the CSFA to leverage its funding for the CCEP so that the amount of credit insurance provided pursuant to the CCEP exceeds the amount of funds on deposit in the California Credit Enhancement Account within the California School Finance Authority Fund.
3. Requires the CSFA to adopt regulations to carry out the provisions of this bill. Authorizes the CSFA to consult with subject matter experts in the development of the regulations, which shall include, but not be limited to, all of the following:
   1. Eligibility criteria for participating public schools, including financial, performance, organizational, and governance criteria. A public school that is fiscally sound and that has a good credit rating may participate in the CCEP.
   2. Parameters and procedures for the provision of credit enhancement to eligible financing transactions, including, but not limited to, maximum credit enhancement limits, and provisions necessary to accommodate federal, state, and local regulatory compliance.
   3. The application process and fee schedule.
   4. A definition of "default" for purposes of the program, and procedures so that, in the event of a default, funds from the California Credit Enhancement Account are paid out only after all other sources of payment and credit enhancement to an eligible financing transaction are exhausted.
   5. Options, in the event of a default, to ensure that the first priority of the facility is the continued use for public school purposes. These options may include, but are not limited to, the relet or sale of the facility to another public school and a mechanism by which the state has a right of first refusal to purchase the facility instead of it being sold in a foreclosure sale.
   6. The structure and guidelines for investing in the CCEP.
4. Establishes the California Credit Enhancement Account within the California School Finance Authority fund. Requires the CSFA to deposit funds identified for the CCEP in the California Credit Enhancement Account. Authorizes the CSFA to, at its discretion, deposit fees collected in accordance with the California School Finance Authority Act in the California Credit Enhancement Account. Authorizes the CSFA to designate and hold separately one or more subaccounts within the California Credit Enhancement Account. Specifies that nothing in this bill shall be construed to require the authority to deposit, or the Legislature to appropriate, funds for the purposes of this bill.
5. Specifies that each bond insurance policy, credit enhancement instrument, or other guarantee of the CSFA issued under the CCEP shall include a statement on its face that neither the State of California nor the CSFA is obligated to pay the principal or interest thereon, except from revenues of the CSFA available therefor, and shall also include a statement that neither the faith or credit, nor the taxing power of the State of California, or any political subdivision thereof, is pledged to the payment of the principal or interest of the bonds covered by the CCEP.
6. Specifies that the issuance of bond insurance, credit enhancement, or other guarantees under the CSFA Act shall not directly, indirectly, or contingently obligate the state, or any political subdivision thereof, to levy or pledge any form of taxation, or make any appropriation for their payment.

The Senate amendments add the provision requiring the regulations to include options in the event of a default to ensure that the first priority of the facility is for the continued use for public school purposes, that the options may include the relet or sale of the facility to another public school, and a mechanism by which the state has a right of first refusal to purchase the facility.

FISCAL EFFECT: According to the Senate Appropriations Committee:

1. CSFA indicates a need for one position and $160,000 to support start-up activities, including developing regulations and administering the CCEP until enough revenue is generated from fees to support the program. (General Fund)
2. Unknown, likely significant cost pressure at least in the millions to support the program. Without an identified funding source, this bill puts pressure on the state to provide funding. (General Fund)
3. To the extent adequate funding is provided at the state level, there could be potential savings to participating charter schools as they may obtain better financing terms due to insured school facility bonds through the CCEP.

COMMENTS: Background on CSFA. The CSFA was established as a conduit to secure financing for working capital and facilities projects for school districts, charter schools and community college districts. The CSFA operates under the Treasurer's Office. According to the Treasurer's Office, because school districts and community colleges are able to issue general obligation bonds on their own, the CSFA has provided financing mostly to charter schools. Over the last six years, CSFA has issued $744.5 million in bonds and notes to almost 30 charter schools. Charter schools are the obligor and make bond payments through an intercept process whereby the State Controller intercepts or redirects state funds allocated to charter schools to make bond payments. According to the CSFA, bonds are typically sold to large institutional investors, with interest rates ranging between 4.19% to 7.58% over the last few years.

Purpose of the bill. According to the sponsor, the California Charter Schools Association Advocates, the purpose of this bill is to establish an account within the CSFA that can be used as credit insurance or credit enhancement. The credit insurance is used to back the bonds CSFA issues on behalf of charter schools. If a charter school defaults on bond payments, the account set up by this bill will be used to pay the debt. According to the sponsor, having a source to guarantee bonds will hopefully lead to lower interest rates for the construction or renovation of charter school facilities. The author states, "The funds would be used to pay for bond payments in the event of a default which would allow the charter schools to receive a higher investment grade rating…. This in turn will provide more favorable financing terms on charter school construction bonds which will provide the charter school significant savings in the long-run and allow them to spend more money "in" the classroom and not "on" the classroom."

According to the author, the CCEP would be funded from multiple sources, both public and private, including fees from charter schools; potentially one-time appropriation of Prop 98 funds, upon appropriation in the Budget; funds from private not-for-profit foundations and organizations for the purposes of funding the social impact bonds; any federal fund dollars received by the state for the program's purposes; and monies from past charter school bond transaction fees.

Similar programs in other states. According to the sponsor, Texas has a similar program. The Texas Credit Enhancement Program (TCEP) received a $10 million federal grant to establish a credit enhancement program for charter schools. A flyer for the program states, "The TCEP will use the $10 million in Credit Enhancement for Charter School Facilities grant funds, combined with a $100,000 TEA [Texas Education Agency] contribution, to establish reserve funds for open enrollment charter schools that are issuing municipal bonds to finance the acquisition, construction, repair, or renovation of Texas charter school facilities. Refinancing of facilities debt may be included if it falls within federal program guidelines. The debt service reserve funds will be held in the State treasury solely to provide security for repayment of the bonds. The funds will not be provided directly to the approved charter schools for construction."

GOVERNOR'S VETO MESSAGE:

To Members of the California State Assembly:

I am returning the following four bills without my signature:

Assembly Bill 1198

Assembly Bill 1783

Assembly Bill 2182

Senate Bill 1113

Each of these bills creates unfunded new programs.

Despite significant funding increases for local educational agencies over the past few years, the Local Control Funding Formula remains only 96 percent funded. Given the precarious balance of the state budget, establishing new programs with the expectation of funding in the future is counterproductive to the Administration's efforts to sustain a balanced budget and to fully fund the Local Control Funding Formula.

Additional spending to support new programs must be considered in the annual budget process.

Analysis Prepared by: Sophia Kwong Kim / ED. / (916) 319-2087 FN: 0005112

CONCURRENCE IN SENATE AMENDMENTS

CSA1 Bill Id:AB 1198

Author:(Dababneh)

As Amended Ver:August 18, 2015

Majority vote

Original Committee Reference: ED.

SUMMARY: Establishes the California Credit Enhancement Program (CCEP). Specifically, this bill:

1. Establishes the California Credit Enhancement Program within the California School Finance Authority (CSFA) to establish a fund to be used to insure facility bonds issued by the CSFA in order to achieve lower cost alternatives for public school facilities financing.
2. Authorizes the CSFA to leverage its funding for the CCEP so that the amount of credit insurance provided pursuant to the CCEP exceeds the amount of funds on deposit in the California Credit Enhancement Account within the California School Finance Authority Fund.
3. Requires the CSFA to adopt regulations to carry out the provisions of this bill. Authorizes the CSFA to consult with subject matter experts in the development of the regulations, which shall include, but not be limited to, all of the following:
   1. Eligibility criteria for participating public schools, including financial, performance, organizational, and governance criteria. A public school that is fiscally sound and that has a good credit rating may participate in the CCEP.
   2. Parameters and procedures for the provision of credit enhancement to eligible financing transactions, including, but not limited to, maximum credit enhancement limits, and provisions necessary to accommodate federal, state, and local regulatory compliance.
   3. The application process and fee schedule.
   4. A definition of "default" for purposes of the program, and procedures so that, in the event of a default, funds from the California Credit Enhancement Account are paid out only after all other sources of payment and credit enhancement to an eligible financing transaction are exhausted.
   5. Options, in the event of a default, to ensure that the first priority of the facility is the continued use for public school purposes. These options may include, but are not limited to, the relet or sale of the facility to another public school and a mechanism by which the state has a right of first refusal to purchase the facility instead of it being sold in a foreclosure sale.
   6. The structure and guidelines for investing in the CCEP.
4. Establishes the California Credit Enhancement Account within the California School Finance Authority fund. Requires the CSFA to deposit funds identified for the CCEP in the California Credit Enhancement Account. Authorizes the CSFA to, at its discretion, deposit fees collected in accordance with the California School Finance Authority Act in the California Credit Enhancement Account. Authorizes the CSFA to designate and hold separately one or more subaccounts within the California Credit Enhancement Account. Specifies that nothing in this bill shall be construed to require the authority to deposit, or the Legislature to appropriate, funds for the purposes of this bill.
5. Specifies that each bond insurance policy, credit enhancement instrument, or other guarantee of the CSFA issued under the CCEP shall include a statement on its face that neither the State of California nor the CSFA is obligated to pay the principal or interest thereon, except from revenues of the CSFA available therefor, and shall also include a statement that neither the faith or credit, nor the taxing power of the State of California, or any political subdivision thereof, is pledged to the payment of the principal or interest of the bonds covered by the CCEP.
6. Specifies that the issuance of bond insurance, credit enhancement, or other guarantees under the CSFA Act shall not directly, indirectly, or contingently obligate the state, or any political subdivision thereof, to levy or pledge any form of taxation, or make any appropriation for their payment.

The Senate amendments add the provision requiring the regulations to include options in the event of a default to ensure that the first priority of the facility is for the continued use for public school purposes, that the options may include the relet or sale of the facility to another public school, and a mechanism by which the state has a right of first refusal to purchase the facility.

FISCAL EFFECT: According to the Senate Appropriations Committee:

1. CSFA indicates a need for one position and $160,000 to support start-up activities, including developing regulations and administering the CCEP until enough revenue is generated from fees to support the program. (General Fund)
2. Unknown, likely significant cost pressure at least in the millions to support the program. Without an identified funding source, this bill puts pressure on the state to provide funding. (General Fund)
3. To the extent adequate funding is provided at the state level, there could be potential savings to participating charter schools as they may obtain better financing terms due to insured school facility bonds through the CCEP.

COMMENTS: Background on CSFA. The CSFA was established as a conduit to secure financing for working capital and facilities projects for school districts, charter schools and community college districts. The CSFA operates under the Treasurer's Office. According to the Treasurer's Office, because school districts and community colleges are able to issue general obligation bonds on their own, the CSFA has provided financing mostly to charter schools. Over the last six years, CSFA has issued $744.5 million in bonds and notes to almost 30 charter schools. Charter schools are the obligor and make bond payments through an intercept process whereby the State Controller intercepts or redirects state funds allocated to charter schools to make bond payments. According to the CSFA, bonds are typically sold to large institutional investors, with interest rates ranging between 4.19% to 7.58% over the last few years.

Purpose of the bill. According to the sponsor, the California Charter Schools Association Advocates, the purpose of this bill is to establish an account within the CSFA that can be used as credit insurance or credit enhancement. The credit insurance is used to back the bonds CSFA issues on behalf of charter schools. If a charter school defaults on bond payments, the account set up by this bill will be used to pay the debt. According to the sponsor, having a source to guarantee bonds will hopefully lead to lower interest rates for the construction or renovation of charter school facilities. The author states, "The funds would be used to pay for bond payments in the event of a default which would allow the charter schools to receive a higher investment grade rating. …This in turn will provide more favorable financing terms on charter school construction bonds which will provide the charter school significant savings in the long-run and allow them to spend more money "in" the classroom and not "on" the classroom."

According to the author, the CCEP would be funded from multiple sources, both public and private, including fees from charter schools; potentially one-time appropriation of Prop 98 funds, upon appropriation in the Budget; funds from private not-for-profit foundations and organizations for the purposes of funding the social impact bonds; any federal fund dollars received by the state for the program's purposes; and monies from past charter school bond transaction fees.

Similar programs in other states. According to the sponsor, Texas has a similar program. The Texas Credit Enhancement Program (TCEP) received a $10 million federal grant to establish a credit enhancement program for charter schools. A flyer for the program states, "The TCEP will use the $10 million in Credit Enhancement for Charter School Facilities grant funds, combined with a $100,000 TEA [Texas Education Agency] contribution, to establish reserve funds for open enrollment charter schools that are issuing municipal bonds to finance the acquisition, construction, repair, or renovation of Texas charter school facilities. Refinancing of facilities debt may be included if it falls within federal program guidelines. The debt service reserve funds will be held in the State treasury solely to provide security for repayment of the bonds. The funds will not be provided directly to the approved charter schools for construction."

Analysis Prepared by: Sophia Kwong Kim / ED. / (916) 319-2087 FN: 0004602

 THIRD READING  

Bill No: AB 1198

Author:

:

Vote:

SENATE EDUCATION COMMITTEE: 9-0, 7/15/15

AYES: Liu, Runner, Block, Hancock, Leyva, Mendoza, Monning, Pan, Vidak

ASSEMBLY FLOOR: 76-0, 5/26/15 (Consent) - See last page for vote

SUBJECT:

SOURCE: California Charter Schools Association

DIGEST: This bill establishes the California Credit Enhancement Program (CCEP) within the California School Finance Authority (CSFA) to provide lower cost alternatives for public school facilities financing through public-private partnerships.

ANALYSIS:

Existing law:

1. Establishes the CSFA Act, and makes findings and declarations regarding the interest of the state and its people for the state to reconstruct, remodel or replace existing school buildings that do not meet structural safety requirements; acquire new school sites and buildings for school districts, charter schools and community college districts; and assist school districts and community college districts by providing access to financing for working capital and capital improvements. (Education Code § 17170 and § 17171)
2. Establishes the CSFA, comprised of the Treasurer or his/her designee, who serves as the Chairperson; the director of the Department of Finance or his/her designee; and the Superintendent of Public Instruction or his/her designee. (EC § 17172 and § 17174)
3. Specifies the powers and authorities of the CSFA, including the authority to issue revenue bonds to provide funds for the financing or refinancing of a single, a series or several projects, or financing of working capital for a single party or several participating parties. Expresses the intent of the Legislature to provide financing only for projects demonstrated by the participating party to be financially feasible, and specifies that revenue bonds are not and shall not be deemed to constitute a debt or liability of the state, obligate the state to pay the principal or interest, or obligate the state to levy or pledge any form of taxation or make any appropriation for their payment. (EC § 17180, § 17183 and § 17185)

This bill:

1. Makes various findings and declarations regarding charter school facilities and the programs administered by the CSFA, as specified.
2. Establishes the CCEP within the CSFA to establish a fund to be used to insure facility bonds issued by the CSFA in order to achieve lower cost alternatives for public school facilities financing.
3. Authorizes the CSFA to leverage its funding for the CCEP so the amount of credit insurance provided pursuant to the program exceeds the amount of funds on deposit in the California Credit Enhancement Account, as proposed to be established by this bill within the existing CSFA Funds.
4. Requires the CSFA to deposit funds and fees identified for the CCEP in this account. Authorizes CSFA to designate and hold separately one or more subaccounts. Specifies that nothing shall be construed to require the CSFA to deposit, or the Legislature to appropriate, funds for the purposes of the CCEP.
5. Requires CSFA to adopt regulations to implement the CCEP and specifies that they may consult with subject matter experts in the development of the regulations, including eligibility criteria for participating public schools, e.g., financial performance, organizational and governance criteria, parameters and procedures for the provision of credit enhancement to eligible financing transactions, and the application process and fee schedule.
6. Provides that a public school that is fiscally sound and that has a good credit rating may participate in the CCEP.
7. Requires the regulations to include a definition of “default” for purposes of the CCEP, and procedures so that, in the event of a default, funds from the California Credit Enhancement Account are paid out only after all other sources of payment and credit enhancement to an eligible financing transaction are exhausted.
8. Requires the regulations to create options, in the event of a default, to ensure that the first priority of the facility is for the continued use of school purposes. These options may include, but not be limited to, the re-let or sale of the facility to another public school or a mechanism whereby the state has a right of first refusal to purchase the facility instead of it being sold in a foreclosure sale.
9. Specifies that bond insurance, credit enhancement, or other guarantees issued under this program shall not be deemed to constitute a debt or liability of the state and shall not be deemed to be a pledge of the faith and credit of the state other than the authority. Bond insurance, credit enhancement, or other guarantees of the authority shall be payable solely from funds available in the California Credit Enhancement Account.
10. Requires that each bond insurance policy, credit enhancement instrument, or other guarantee of the CSFA issued under the CCEP shall include a statement on its face that neither the State of California nor the CSFA is obligated to pay the principal or interest of the bonds covered by the CCEP.
11. Provides that the issue of bond insurance, credit enhancement, or other guarantees shall not directly, indirectly, or contingently obligate the state or any political subdivision thereof, to levy or pledge any form of taxation, or make any appropriation for their payment.

Comments

Need for the bill. The author’s office indicates that “the biggest challenge currently faced by charter schools is finding a suitable facility and funding for that facility. Charter public schools typically do not receive local funding through bonds, as traditional public schools do, and must pay for their facility out of their general operating expenses, taking money out of the classroom to pay for that classroom. As a result, many charter schools turn to private financing and bond transactions in order to pay for a long-term facilities solution.” According to the bill’s sponsor, the California Charter Schools Association, the purpose of this bill is to establish an account within the CSFA that can be used as credit insurance or credit enhancement. The credit insurance is used to back the bonds CSFA issues on behalf of charter schools. If a charter school defaults on bond payments, the account set up by this bill will be used to pay the debt. The sponsor indicates that having a source to guarantee bonds will hopefully lead to lower interest rates for the construction or renovation of charter school facilities.

Charter school facilities. Unlike traditional public school districts, charter schools are unable to fund facilities with general obligation bonds approved by local voters. A majority of charter schools lease their facilities and pay the associated costs from their operating budgets, with roughly half of them receiving grants from the Charter School Facility Grant Program (SB 740, O’Connell, Chapter 892, Statutes of 2001). This program provides funding for charter schools in non-district facilities that have a specified percentage of students qualifying for free or reduced-price meals at their school or in the surrounding school attendance area. Eligible schools receive funding for lease payments, building improvements, and maintenance.

A majority of the remaining charter schools that do not lease private facilities occupy space provided by school districts. Proposition 39, approved by voters in November 2000, requires a school district to provide a charter school having a projected daily attendance of at least 80 or more students from that district with “reasonably equivalent” facilities to accommodate the charter school’s needs. A school district can provide a charter school with existing facilities or use discretionary funds or other revenues, such as local school bond funds, to meet this requirement. A small percentage of charter schools have constructed their own facilities. Given the continuing growth in charter school enrollment combined with limited options for charters to finance their facilities, this bill could provide an additional means to help address their facility needs.

California School Finance Authority. The CSFA was established as a conduit to secure financing for working capital and facilities projects for school districts, charter schools and community college districts. The CSFA operates under the Treasurer's Office. According to the Treasurer's Office, because school districts and community colleges are able to issue general obligation bonds on their own, the CSFA has provided financing mostly to charter schools. Over the last four years, CSFA has issued $279.6 million bonds for 120 charter school facilities. Charter schools are the obligor and make bond payments through an intercept process whereby the State Controller intercepts or redirects state funds allocated to charter schools to make bond payments. According to the CSFA, bonds are typically sold to large institutional investors, with interest rates ranging between 4.19% to 7.58% over the last four years.

Other states. The program proposed by this bill is modeled after similar programs in Texas and Colorado. The Texas Credit Enhancement Program received a $10 million federal grant to establish a credit enhancement program for charter schools to finance the acquisition, construction, repair, or renovation of charter school facilities. As part of this program, debt service reserve funds are held in the State treasury solely to provide security for repayment of the bonds. The funds are not provided directly to the approved charter schools for construction. Colorado has the "Moral Obligation Program." According to the Colorado Department of Treasury Web site, this program enhances the credit of a qualified charter school. A qualified charter school is one that has obtained an investment grade credit rating on a "stand-alone" basis. The enhancement enables these qualified schools to obtain even more favorable financing terms on their capital construction bonds. The program is funded from a separate source of monies from which the Treasury would make bond payments in the case of a default by a charter school.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

According to the Senate Appropriations Committee:

• CSFA indicates a need for one position and $160,000 to support start-up activities, including developing regulations and administering the CCEP until enough revenue is generated from fees to support the program. (General Fund)
• Unknown, likely significant cost pressure at least in the millions to support the program. Without an identified funding source, this bill puts pressure on the state to provide funding. (General Fund)
• To the extent adequate funding is provided at the state level, there could be potential savings to participating charter schools as they may obtain better financing terms due to insured school facility bonds through the CCEP.

SUPPORT: (Verified 8/12/16)

California Charter Schools Association (source)

OPPOSITION: (Verified 8/12/16)

None received

ASSEMBLY FLOOR: 76-0, 5/26/15

AYES: Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang, Chau, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Roger Hernández, Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low, Maienschein, Mayes, McCarty, Medina, Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Perea, Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams, Wood, Atkins

NO VOTE RECORDED: Bloom, Chávez, Harper, Mathis

Prepared by:

8/18/16 15:42:34

**** END ****

SENATE COMMITTEE ON APPROPRIATIONS

Senator Ricardo Lara, Chair

2015 - 2016 Regular Session

AB 1198 (Dababneh) - School facilities: California School Finance Authority: California Credit Enhancement Program

This bill meets the criteria for referral to the Suspense File.

Bill Summary:

This bill establishes the California Credit Enhancement Program (CCEP) within the California School Finance Authority (CSFA) to provide lower cost alternatives for public school facilities financing.

Fiscal Impact:

• CSFA indicates a need for one position and $160,000 to support start-up activities, including developing regulations and administering the CCEP until enough revenue is generated from fees to support the program. (General Fund)

• Unknown, likely significant cost pressure at least in the millions to support the program. Without an identified funding source, this bill puts pressure on the state to provide funding. (General Fund)

• To the extent adequate funding is provided at the state level, there could be potential savings to participating charter schools as they may obtain better financing terms due to insured school facility bonds through the CCEP.

Background:

Existing law establishes the California School Finance Authority Fund to be administered by the CSFA. The CSFA may pledge any or all of the moneys in the fund as security for payment of the principal of, and interest on, any particular issuance of bonds. (EC 17181)

Unlike traditional public school districts, charter schools are unable to fund facilities with general obligation bonds approved by local voters. A majority of charter schools lease their facilities and pay the associated costs from their operating budgets, with roughly half of them receiving grants from the Charter School Facility Grant Program (SB 740). This program provides funding for charter schools in non-district facilities that have a specified percentage of students qualifying for free or reduced-price meals at their school or in the surrounding school attendance area. Eligible schools receive funding for lease payments, building improvements, and maintenance.

A majority of the remaining charter schools that do not lease private facilities occupy space provided by school districts. Proposition 39, approved by voters in November 2000, requires a school district to provide a charter school having a projected daily attendance of at least 80 or more students from that district with “reasonably equivalent” facilities to accommodate the charter school’s needs. A school district can provide a charter school with existing facilities or use discretionary funds or other revenues, such as local school bond funds, to meet this requirement. A small percentage of charter schools have constructed their own facilities.

Proposed Law:

This bill establishes the CCEP to insure facility bonds issued by CSFA to provide lower cost alternatives for public school facilities financing. This bill also establishes the California Credit Enhancement Account (Account) within the CSFA.

This bill requires the CSFA to adopt regulations to implement this bill. The regulations must include various components, including: (1) eligibility criteria for participating public schools, in which a public school that is fiscally sound and that has a good credit rating may participate in the CCEP; (2) parameters and procedures for credit enhancement to eligible financing transactions; (3) the application process and fee schedule; (4) a definition of “default” so that funds from the Account are paid out only after all other sources of payment and credit enhancement to an eligible financing transaction are exhausted; (5) options, in the event of a default, to ensure that the first priority of the facility is the continued use for public school purposes; and (6) the structure and guidelines for investing in the CCEP.

The CSFA is required to deposit funds identified for the CCEP in the Account. The CSFA may deposit fees collected from participants in the Account, in addition to the funds authorized to be collected pursuant to the California School Finance Authority Fund.

This bill specifies that the CCEP must not be deemed to constitute a debt or liability of the state, and must not be deemed to be a pledge of the faith and credit of the state, other than the CSFA. Bond insurance, credit enhancement, or other guarantees of the authority must be payable solely from funds available in the Account. Issuance of bond insurance, credit enhancement, or other guarantees must not directly, indirectly, or contingently obligate the state, to levy or pledge any form of taxation, or make any appropriation for their payment.

Staff Comments:

According to the CSFA, in 2010 it administered the federally-funded Credit Enhancement for Charter School Facilities Program. The grant award of $8.3 million was awarded to 38 charter schools. This program funded debt service reserve accounts for eligible charter schools to reduce borrowing costs by the amount of the reserve account and associated interest. Though this program successfully reduced charter school borrowing costs, it did not increase the overall credit quality of the financing, which appears to be the intent of the proposed CCEP. If adequate funding is provided, which is difficult to determine at this time, it may be possible that the CCEP could help reduce the overall bond financing amount and therefore further reducing charter school borrowing costs.

-- END --

SENATE COMMITTEE ON EDUCATION

Senator Carol Liu, Chair

2015 - 2016 Regular

Bill No: AB 1198

Subject: School facilities: California School Finance Authority: California Credit Enhancement Program

SUMMARY

This bill establishes the California Credit Enhancement Program within the California School Finance Authority (CSFA) to provide lower cost alternatives for public school facilities financing through public-private partnerships.

BACKGROUND

Existing law:

1. Establishes the CSFA Act, and makes findings and declarations regarding the interest of the state and its people for the state to reconstruct, remodel or replace existing school buildings that do not meet structural safety requirements; acquire new school sites and buildings for school districts, charter schools and community college districts; and assist school districts and community college districts by providing access to financing for working capital and capital improvements. (Education Code § 17170 and § 17171)

2. Establishes the CSFA, comprised of the Treasurer or his/her designee, who serves as the Chairperson; the director of the Department of Finance or his/her designee; and the Superintendent of Public Instruction or his/her designee.

(EC § 17172 and § 17174)

3. Specifies the powers and authorities of the CSFA, including the authority to issue revenue bonds to provide funds for the financing or refinancing of a single, a series or several projects, or financing of working capital for a single party or several participating parties. Expresses the intent of the Legislature to provide financing only for projects demonstrated by the participating party to be financially feasible, and specifies that revenue bonds are not and shall not be deemed to constitute a debt or liability of the state, obligate the state to pay the principal or interest, or obligate the state to levy or pledge any form of taxation or make any appropriation for their payment. (EC § 17180, § 17183 and § 17185)

ANALYSIS

This bill:

1. Makes various findings and declarations regarding charter school facilities and the programs administered by the CSFA, as specified.

2. Establishes the California Credit Enhancement Program (CCEP) within the California School Finance Authority (CSFA) for the purpose to establish a fund to be used to insure facility bonds issued by the CSFA in order to achieve lower cost alternatives for public school facilities financing.

3. Authorizes the CSFA to leverage its funding for the CCEP so the amount of credit insurance provided pursuant to the program exceeds the amount of funds on deposit in the California Credit Enhancement Account, as proposed to be established by this measure within the existing CSFA Funds.

4. Requires the CSFA to deposit funds and fees identified for the CCEP in this account. Authorizes CSFA to designate and hold separately one or more subaccounts. Specifies that nothing shall be construed to require the CSFA to deposit, or the Legislature to appropriate, funds for the purposes of the CCEP.

5. Requires CSFA to adopt regulations to implement the CCEP and specifies that they may consult with subject matter experts in the development of the regulations, including eligibility criteria for participating public schools, e.g., financial performance, organizational and governance criteria, parameters and procedures for the provision of credit enhancement to eligible financing transactions, and the application process and fee schedule.

6. Provides that a public school that is fiscally sound and that has a good credit rating may participate in the CCEP.

7. Requires the regulations to include a definition of “default” for purposes of the CCEP, and procedures so that, in the event of a default, funds from the California Credit Enhancement Account are paid out only after all other sources of payment and credit enhancement to an eligible financing transaction are exhausted.

8. Specifies that bond insurance, credit enhancement, or other guarantees issued under this program shall not be deemed to constitute a debt or liability of the state and shall not be deemed to be a pledge of the faith and credit of the state other than the authority. Bond insurance, credit enhancement, or other guarantees of the authority shall be payable solely from funds available in the California Credit Enhancement Account.

9. Requires that each bond insurance policy, credit enhancement instrument, or other guarantee of the CSFA issued under the CCEP shall include a statement on its face that neither the State of California nor the CSFA is obligated to pay the principal or interest of the bonds covered by the CCEP.

10. Provides that the issue of bond insurance, credit enhancement, or other guarantees shall not directly, indirectly, or contingently obligate the state or any political subdivision thereof, to levy or pledge any form of taxation, or make any appropriation for their payment.

STAFF COMMENTS

1. Need for the bill. The author’s office indicates that “the biggest challenge currently faced by charter schools is finding a suitable facility and funding for that facility. Charter public schools typically do not receive local funding through bonds, as traditional public schools do, and must pay for their facility out of their general operating expenses, taking money out of the classroom to pay for that classroom. As a result, many charter schools turn to private financing and bond transactions in order to pay for a long-term facilities solution.” According to the bill’s sponsor, the California Charter Schools Association, the purpose of this measure is to establish an account within the California School Finance Authority (CSFA) that can be used as credit insurance or credit enhancement. The credit insurance is used to back the bonds CSFA issues on behalf of charter schools. If a charter school defaults on bond payments, the account set up by this bill will be used to pay the debt. The sponsor indicates that having a source to guarantee bonds will hopefully lead to lower interest rates for the construction or renovation of charter school facilities.

2. Charter school facilities. Unlike traditional public school districts, charter schools are unable to fund facilities with general obligation bonds approved by local voters. A majority of charter schools lease their facilities and pay the associated costs from their operating budgets, with roughly half of them receiving grants from the Charter School Facility Grant Program (SB 740). This program provides funding for charter schools in non-district facilities that have a specified percentage of students qualifying for free or reduced-price meals at their school or in the surrounding school attendance area. Eligible schools receive funding for lease payments, building improvements, and maintenance.

A majority of the remaining charter schools that do not lease private facilities occupy space provided by school districts. Proposition 39, approved by voters in November 2000, requires a school district to provide a charter school having a projected daily attendance of at least 80 or more students from that district with “reasonably equivalent” facilities to accommodate the charter school’s needs. A school district can provide a charter school with existing facilities or use discretionary funds or other revenues, such as local school bond funds, to meet this requirement. A small percentage of charter schools have constructed their own facilities. Given the continuing growth in charter school enrollment combined with limited options for charters to finance their facilities, this bill could provide an additional means to help address their facility needs.

3. California School Finance Authority. The CSFA was established as a conduit to secure financing for working capital and facilities projects for school districts, charter schools and community college districts. The CSFA operates under the Treasurer's Office. According to the Treasurer's Office, because school districts and community colleges are able to issue general obligation bonds on their own, the CSFA has provided financing mostly to charter schools. Over the last four years, CSFA has issued $279.6 million bonds for 120 charter school facilities. Charter schools are the obligor and make bond payments through an intercept process whereby the State Controller intercepts or redirects state funds allocated to charter schools to make

bond payments. According to the California School Finance Authority (CSFA), bonds are typically sold to large institutional investors, with interest rates ranging between 4.19% to 7.58% over the last four years.

4. Other states. The program proposed by this measure is modeled after similar programs in Texas and Colorado. The Texas Credit Enhancement Program (TCEP) received a $10 million federal grant to establish a credit enhancement program for charter schools to finance the acquisition, construction, repair, or renovation of charter school facilities. As part of this program, debt service reserve funds are held in the State treasury solely to provide security for repayment of the bonds. The funds are not provided directly to the approved charter schools for construction. Colorado has the "Moral Obligation Program." According to the Colorado Department of Treasury Web site, this program enhances the credit of a qualified charter school. A qualified charter school is one that has obtained an investment grade credit rating on a "stand-alone" basis. The enhancement enables these qualified schools to obtain even more favorable financing terms on their capital construction bonds. The program is funded from a separate source of monies from which the Treasury would make bond payments in the case of a default by a charter school.

5. Charter defaults. While the bill requires the regulations to include a definition of “default” for purposes of the program, it does not contemplate in a default situation where CSFA has paid off the remaining debt through this new program, which entity would hold title to the facility. For this reason, staff recommends an amendment requiring the CSFA to develop regulations that create options, in the event of a default, to ensure that the first priority of the facility is for the continued use of school purposes. These options may include, but not be limited to, the re-let or sale of the facility to another public school or a mechanism whereby the state has a right of first refusal to purchase the facility instead of it being sold in a foreclosure sale.

6. Fiscal impact. According to the Assembly Appropriations Committee, there would be no direct state costs. There would be cost pressures on the California School Finance Authority Fund absent sufficient funds on deposit in the new California Credit Enhancement Account. CSFA will also have upfront administrative costs to promulgate regulations and create the new California Credit Enhancement Program; however, CSFA is currently supported through fee revenue.

SUPPORT

California Charter Schools Association

OPPOSITION

None received.

-- END --

Date of Hearing: May 20, 2015

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Jimmy Gomez, Chair

ABPCA Bill Id:AB 1198

Author:(Dababneh) – As Amended Ver:May 6, 2015

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill creates the California Credit Enhancement Program (CCEP), administered by the California School Finance Authority (CSFA), for the purposes of establishing a fund to be used to insure facility bonds issued by the authority to achieve lower cost alternatives for school facilities financing. Specifically, this bill:

1. Creates the California Credit Enhancement Account within the existing CSFA Fund. Requires CSFA to deposit funds and fees identified for the CCEP in this account. Authorizes CSFA to designate and hold separately one or more subaccounts. Specifies nothing shall be construed to require the authority to deposit, or the Legislature to appropriate, funds for the purposes of the CCEP.

2. Authorizes the CSFA to leverage its funding for the CCEP so the amount of credit insurance provided by the program exceeds the amount of funds on deposit in the California Credit Enhancement Account.

3. Requires CSFA to adopt regulations to implement the CCEP and specifies they may consult with subject matter experts in the development of the regulations.

4. Specifies bond insurance, credit enhancement, or other guarantees issued under this program shall not be deemed to constitute a debt or liability of the state and shall not be deemed to be a pledge of the faith and credit of the state other than the authority. Bond insurance, credit enhancement, or other guarantees of the authority shall be payable solely from funds available in the California Credit Enhancement Account. Further, requires a statement on its face that neither the State of California nor the authority is obligated to pay the principal or interest of the bonds covered by the CCEP.

FISCAL EFFECT:

No direct state costs. Cost pressures on the California School Finance Authority Fund absent sufficient funds on deposit in the new California Credit Enhancement Account. CSFA will also have upfront administrative costs to promulgate regulations and create the new California Credit Enhancement Program (CCEP); however, CSFA is currently supported through fee revenue.

COMMENTS:

1. Background. The CSFA was established as a conduit to secure financing for working capital and facilities projects for school districts, charter schools and community college districts. The CSFA operates under the Treasurer's Office. According to the Treasurer's Office, because school districts and community colleges are able to issue general obligation bonds on their own, the CSFA has provided financing mostly to charter schools. Over the last four years, CSFA has issued $279.6 million bonds for 120 charter school facilities. Charter schools are the obligor and make bond payments through an intercept process whereby the State Controller intercepts or redirects state funds allocated to charter schools to make bond payments. According to the CSFA, bonds are typically sold to large institutional investors, with interest rates ranging between 4.19% to 7.58% over the last four years.

2. Purpose. According to the sponsor, the California Charter Schools Association Advocates, the purpose of this bill is to establish an account within the CSFA that can be used as credit insurance or credit enhancement. The credit insurance is used to back the bonds CSFA issues on behalf of charter schools. If a charter school defaults on bond payments, the account set up by this bill will be used to pay the debt. According to the sponsor, having a source to guarantee bonds will hopefully lead to lower interest rates for the construction or renovation of charter school facilities.

According to the author, the CCEP would be funded from multiple sources, both public and private, including fees from charter schools; potentially one-time appropriation of Prop 98 funds, upon appropriation in the Budget; funds from private not-for-profit foundations and organizations for the purposes of funding the social impact bonds; any federal fund dollars received by the state for the program’s purposes; and monies from past charter school bond transaction fees. Nothing in the bill requires the use of state funding to support this program.

This program is modeled after similar programs in Texas and Colorado. The Texas Credit Enhancement Program (TCEP) received a $10 million federal grant to establish a credit enhancement program for charter schools. Colorado has the "Moral Obligation Program." According to the Colorado Department of Treasury Web site, "This program enhances the credit of a "qualified charter school." A qualified charter school is one that has obtained an investment grade credit rating on a "stand-alone" basis. The enhancement enables these qualified schools to obtain even more favorable financing terms on their capital construction bonds. The program is funded from a separate source of monies from which the Treasury would make bond payments in the case of a default by a charter school.

Analysis Prepared by: Misty Feusahrens / APPR. / (916) 319-2081

Date of Hearing: April 29, 2015

ASSEMBLY COMMITTEE ON EDUCATION

Patrick O'Donnell, Chair

ABPCA Bill Id:AB 1198

Author:(Dababneh) – As Amended Ver:March 26, 2015

SUBJECT: School facilities: California School Finance Authority: California Credit Enhancement Program

SUMMARY: Establishes the California Credit Enhancement Program (CCEP). Specifically, this bill:

1. Establishes the California Credit Enhancement Program within the California School Finance Authority (CSFA) to provide lower cost alternatives for public school facilities financing through a leveraged public-private partnership program.

2. Authorizes the CSFA to leverage its funding for the CCEP in such a way that the amount of credit insurance provided pursuant to the CCEP exceeds the amount of funds on deposit in the California Credit Enhancement Account within the California School Finance Authority Fund.

3. Establishes the CCEP Advisory Board, which shall be appointed by the CSFA and shall be made up of subject matter experts, including, but not limited to, in the fields of municipal bond insurance, municipal finance, and charter school law to advise the CSFA on the creation and administration of the CCEP.

4. Establishes the California Credit Enhancement Account within the California School Finance Authority Fund. Requires the CSFA to deposit funds for the CCEP in the California Credit Enhancement Account, and in addition to funds authorized to be collected in the California School Finance Authority Fund, authorizes the CSFA to deposit fees collected in accordance to this bill in the California Credit Enhancement Account. Authorizes the CSFA to designate and hold separately one or more subaccounts within the California Credit Enhancement Account.

EXISTING LAW:

1. Establishes the CSFA Act, and makes findings and declarations regarding the interest of the state and its people for the state to reconstruct, remodel or replace existing school buildings that do not meet structural safety requirements; acquire new schoolsites and buildings for school districts, charter schools and community college districts; and assist school districts and community college districts by providing access to financing for working capital and capital improvements. (Education Code (EC) Sections 17170 and 17171)

2. Establishes the CSFA, comprised of the Treasurer or his/her designee, who serves as the Chairperson; the director of the Department of Finance or his/her designee; and the Superintendent of Public Instruction or his/her designee. (EC Sections 17172 and 17174)

3. Defines "bonds" or "revenue bonds" as bonds, notes, lease obligations, certificates of participation, commercial paper, and any other evidence of indebtedness. (EC Section 17173 (d))

4. Specifies the powers and authorities of the CSFA, including the authority to issue revenue bonds to provide funds for the financing or refinancing of a single, a series or several projects, or financing of working capital for a single party or several participating parties. Expresses the intent of the Legislature to provide financing only for projects demonstrated by the participating party to be financially feasible, and specifies that revenue bonds are not and shall not be deemed to constitute a debt or liability of the state, obligate the state to pay the principal and interest, or obligate the state to levy or pledge any form of taxation or make any appropriation for their payment. (EC Sections 17180, 17183 and 17185)

FISCAL EFFECT: Unknown

COMMENTS: Background on CSFA. The CSFA was established as a conduit to secure financing for working capital and facilities projects for school districts, charter schools and community college districts. The CSFA operates under the Treasurer's Office. According to the Treasurer's Office, because school districts and community colleges are able to issue general obligation bonds on their own, the CSFA has provided financing mostly to charter schools. Over the last four years, CSFA has issued $279.6 million bonds for 120 charter school facilities. Charter schools are the obligor and make bond payments through an intercept process whereby the State Controller intercepts or redirects state funds allocated to charter schools to make bond payments. According to the CSFA, bonds are typically sold to large institutional investors, with interest rates ranging between 4.19% to 7.58% over the last four years.

What is the purpose of the bill? According to the sponsor, the California Charter Schools Association Advocates, the purpose of this bill is to establish an account within the CSFA that can be used as credit insurance or credit enhancement. The credit insurance is used to back the bonds CSFA issues on behalf of charter schools. If a charter school defaults on bond payments, the account set up by this bill will be used to pay the debt. According to the sponsor, having a source to guarantee bonds will hopefully lead to lower interest rates for the construction or renovation of charter school facilities. The author states, "The funds would be used to pay for bond payments in the event of a default which would allow the charter schools to receive a higher investment grade rating…. This in turn will provide more favorable financing terms on charter school construction bonds which will provide the charter school significant savings in the long-run and allow them to spend more money "in" the classroom and not "on" the classroom."

According to the author, the CCEP would be funded from multiple sources, both public and private, including fees from charter schools; potentially one-time appropriation of Prop 98 funds, upon appropriation in the Budget; funds from private not-for-profit foundations and organizations for the purposes of funding the social impact bonds; any federal fund dollars received by the state for the program’s purposes; and monies from past charter school bond transaction fees.

Similar programs in other states. According to the sponsor, Texas and Colorado have similar programs. The Texas Credit Enhancement Program (TCEP) received a $10 million federal grant to establish a credit enhancement program for charter schools. A flyer for the program states, "The TCEP will use the $10 million in Credit Enhancement for Charter School Facilities grant funds, combined with a $100,000 TEA [Texas Education Agency] contribution, to establish reserve funds for open enrollment charter schools that are issuing municipal bonds to finance the acquisition, construction, repair, or renovation of Texas charter school facilities. Refinancing of facilities debt may be included if it falls within federal program guidelines. The debt service reserve funds will be held in the State treasury solely to provide security for repayment of the bonds. The funds will not be provided directly to the approved charter schools for construction."

Colorado has the "Moral Obligation Program." According to the Colorado Department of Treasury Web site, "This program enhances the credit of a "qualified charter school." A qualified charter school is one that has obtained an investment grade credit rating on a "stand-alone" basis. The enhancement enables these qualified schools to obtain even more favorable financing terms on their capital construction bonds. The program is funded from a separate source of monies from which the Treasury would make bond payments in the case of a default by a charter school. C.R.S. 22-30.5-407 created the state charter school interest savings account within the state charter school debt reserve fund. Each qualified charter school allowed into this program annually pays ten basis points of the principal amount of bonds outstanding into this fund. At September 30, 2014, the fund had a balance of $3.6 million. In the event that a default occurs that exhausts the balance in the fund, as well as the $1 million appropriated in FY 2002-2003 from the State Education Fund, the statute directs the Governor to notify the General Assembly so that it may consider whether or not to appropriate funds to pay off the bonds."

Staff does not recommend modeling the program established by this bill after Colorado's program. Both programs use good credit rating as a criterion for eligibility. Staff recommends adopting the same criterion for this bill.

The bill does not contain detailed parameters. The bill creates the CCEP and authorizes the CSFA to leverage its funding for the CCEP in such a way that the amount of credit insurance exceeds the amount of funds on deposit in the account. The bill establishes the California Credit Enhancement Program Advisory Board, appointed by the CSFA and comprised of subject matter experts, including, but not limited to, in the fields of municipal bond insurance, municipal finance, and charter school law to advise the CSFA on the creation and administration of the CCEP. The bill does not offer any other structure or parameters for the program. Staff recommends striking the Advisory Board and instead requiring the CSFA to adopt regulations in consultation with subject matter experts if necessary.

Committee amendments:

1. Specify that the purpose of the CCEP is to establish an account to insure or guarantee facility bonds issued by the CSFA on behalf of charter schools.

2. Require the CSFA to adopt regulations that shall include, but not be limited to, the following:

1. Establish eligibility criteria for participating public schools, including financial, includes credit rating; performance; organizational; and governance criteria.

2. Establish the parameters and procedures for the provision of credit enhancement to eligible financing transaction, including, but not limited to, establishment of maximum program limits, and provisions necessary to accommodate federal, state and local regulatory compliance.

3. Establish the application process and fee schedule.

4. Define "default" for purposes of the program and establish procedures so that, in the event of a default, funds from the California Credit Enhancement Account are paid out only after all other sources of payment and credit enhancement to an eligible financing are exhausted.

5. Establish the structure and guidelines for investing in the CCEP.

6. Specify that the credit enhancement or other guarantees issued shall not constitute a debt or liability of the state.

3. Specify that nothing in this bill shall be construed to require the CSFA or the state to deposit or appropriate funds for the purposes established by this bill.

4. Delete the Advisory Board and authorize CSFA to consult with subject matter experts in developing the regulations.

REGISTERED SUPPORT / OPPOSITION:

Support

StudentsFirst

Opposition

None on file

Analysis Prepared by: Sophia Kwong Kim / ED. / (916) 319-2087