What is the Meaning of “Administrator Salaries”? Which Costs Can and Cannot be Charged to SCB Funds?

FAQ 39

What is the Meaning of “Administrator Salaries” for Determining Allowable

Charges to Proposition 39 School Construction Bond (SCB) Funds?

Which Costs Can and Cannot be Charged to SCB Funds?

Salaries for the personnel who administer the teaching and direct educational administration and support activities of a K-12 or community college district may not be charged to SCB funds, but the salaries for administering the actual SCB program may.

This requirement is found in the California Constitution, Article XIII A, Section 1. (b)(3)(A). For Proposition 39 bond measures to qualify to be approved by a 55% majority, the use of bond funds must include:

A requirement that the proceeds from the sale of the bonds be used only for the purposes specified in Article XIII A, Section 1(b)(3), and not for any other purpose, including teacher and administrator salaries and other school operating expenses (emphasis added).

Unfortunately, these terms were not defined in Proposition 39, but the California Attorney General has issued an opinion on this subject (page 1):

A school district may use Proposition 39 school bond proceeds to pay the salaries of district employees to the extent they perform administrative oversight work on construction projects authorized by a voter-approved bond measure.

Further (pp. 5-6):

We believe that “the construction, reconstruction, rehabilitation, or replacement of school facilities” embraces project administrative costs, such as monitoring contracts and project funding, overseeing construction progress, and performing overall project management and accounting that facilitates timely completion of the construction project. A construction project generates not only the costs of materials and equipment, architectural and engineering design work, and construction worker salaries, but also costs of project administration — work that the school district would not be required to undertake or to fund but for the existence of the construction project. This administrative work is performed, whether by private consultants under contract with the school district or by school district employees with expertise in project management, to ensure that all aspects of the construction project are properly coordinated; that each step satisfies the specifications; that invoices are reviewed, revised where appropriate, and paid promptly; that costs do not exceed the project’s budget; and that the project is completed on schedule. (See 78 Ops.Cal.Atty.Gen. 48 (1995).) …

Therefore, Proposition 39 school bond proceeds may fund such project management costs unless the expenditures are expressly prohibited under the phrase “teacher and administrator salaries and other school operating expenses.” The “teacher and administrator salaries” in question are limited to those that qualify as “school operating expenses” because of the word “other” contained in the phrase.5 We believe that “school operating expenses” are those regular, ongoing, day-to-day costs associated with maintaining and operating a school. Among such expenses would be (1) the cost of managing the educational services provided, including the salaries of school administrators, and (2) the cost of providing instruction to students, including teachers’ salaries. (See 22 Ops.Cal.Atty.Gen. 105, 108 (1953) [school district’s routine operating expenses include the purchase of supplies and payment of salaries of school administrators, teachers, and janitors].)

In the absence of a specific statutory provision, such as in the California State Constitution or state statute, case law from a court decision, or state regulations implementing the same, generally, the best legal authority will be from an opinion of a qualified attorney.  In general, an opinion of the California Attorney General is regarded as superior in power to that of any other attorney but junior to that of statute or case law.

We note that this opinion should not be regarded as authorizing all facilities-related costs of a district to be charged to SCB funds.  For example, while the costs of the facilities department related to school construction activities are likely allowable, those related to maintenance and non-capital repairs are likely not.  So, for example, if the district facilities manager spends 60% of their time on SCB capital projects and 40% on maintenance, service, cleaning, etc., then 60% of the costs of the facilities manager would generally be chargeable SCB funds.

(Best practice would be for the district to have a cost allocation study prepared at the beginning of the SCB program, periodically updated after that, and reviewed and approved by district finance, legal, and bond counsel, and that the district implements a proper cost accounting methodology, including, in particular, detail time reporting for those district employees and contractor personnel who split their time between allowable SCB and non-SCB activities.)