Blogs

On Friday, July 1, Governor Gavin Newsom signed Senate Bill 938 (Hertzberg) into law, a bill developed through an inclusive, thorough, multi-year working group process between CSDA, the California Association of Local Agency Formation Commissions (CALAFCO), and other stakeholders in response to recommendations by the Little Hoover Commission.

Importantly, SB 938 creates a new voter protest threshold for LAFCO-initiated dissolutions of special districts that meet specified criteria. Special districts meeting this criteria include those that: 

• have one or more documented chronic service provision deficiencies;
• spent public funds in an unlawful or reckless manner inconsistent with the principal act or other statute governing the district;
• have shown willful neglect by failing to consistently adhere to the California Public Records Act and other public disclosure laws;
• have failed to meet the minimum number of times required in its principal act in the prior calendar year;
• have consistently failed to perform timely audits in the prior three years, or failed to meet minimum financial requirements under California Government Code; or
• have recent annual audits showing chronic issues with the district’s fiscal controls

Special districts meeting one or more of the criteria above are entitled to a fair and procedurally-equitable process, where determinations for the proposed dissolution must be documented in a municipal services review (MSR) and presented at a public hearing. As part of this process, the affected special district will receive a one-year period to resolve the documented deficiency.

Additionally, SB 938 simplifies the statutes related to the conducting authority for LAFCOs to implement reorganizations of special districts, significantly reducing the number of cross-referenced statutes.

The provisions of this bill were fundamentally developed through a working group process that was responsive to a key Little Hoover Commission recommendation in its 2017 report “Special Districts: Improving Oversight & Transparency.” As a key stakeholder, CSDA supported the passage of this bill and provided lead testimony at each of the bill’s policy committees alongside the CALAFCO. The bill’s signing at the beginning of this month marked the completion of this chapter of the working group’s efforts. CSDA will remain involved in additional developments related to district formation, reorganization, and dissolution as they arise.