Date: May 5, 2004
UPDATE OF ENACTED CHARTER SCHOOL LEGISLATION
During the first half of the 2003-04 legislative session, only one major bill affecting charter school law was enacted. This communication intended to provide you with an overview of Assembly Bill (AB) 1137 (Reyes, Chapter 892, Statutes of 1993), which took effect January 1, 2004. Charter schools and their authorizing entities are encouraged to review the full text of AB 1137 , (Outside Source) the chaptered version, may be found on the Internet.
AB 1137 (Outside Source) makes comprehensive changes to charter law in three main areas: funding, oversight and reporting, and conditions for charter renewal. In addition, AB 1137 (Outside Source) provides for extended year funding determinations for qualifying nonclassroom-based charter schools. The following will summarize the changes enacted by AB 1137; (Outside Source) please refer to the full text of the law for specific language.
Funding
AB 1137 (Outside Source) removes the sunset provision allowing a charter school to be deemed a 'school district' for purposes of directly receiving charter school general purpose block grant funding. In effect, this means that charter schools will continue to have the option, annually, of electing to receive funding either as a 'direct-funded' or a 'locally funded' charter school. While the 'direct funding' option provides charter schools with more flexibility over expenditure of their funds, it also carries with it many of the responsibilities that would otherwise apply to a school district, such as completion of the local educational plan for those direct-funded charter schools that receive federal funds. As always, charter schools are advised to carefully consider the pros and cons of their annual funding selection prior to electing one method over the other.
Three programs are added to the in-lieu categorical block grant: the State Instructional Materials Fund (reference Education Code Section 60240 (Outside Source) et seq.), the Instructional Materials Funding Realignment Program (reference Education Code Section 60240 (Outside Source) et seq.), and the Mathematics and Reading Professional Development Program (reference Education Code Section 99230 (Outside Source) et seq.). Charter schools in the block grant funding model are not eligible to receive separate funding for programs identified as being in the in-lieu categorical block grant ( Education Code Section 47634) (Outside Source) or any other state categorical aid programs established on or after July 1, 1999, that are included in the calculation of the in-lieu categorical block grant and for which charter schools are not otherwise required to apply separately.
AB AB 1137 (Outside Source) clarifies what is meant by 'charter school revenues' as it pertains to the supervisorial oversight fees that a charter-authorizing entity may charge a charter school (reference Education Code Section 47613). (Outside Source) Supervisorial oversight fees are limited to a percentage (either one percent or three percent, depending on whether facilities are provided by the charter authorizer to the charter school substantially rent-free) of the total general-purpose entitlement and in-lieu categorical block grant (the sum of the charter school block grant funding model).
Oversight and Reporting Issues
Prior to AB 1137, (Outside Source) a charter authorizing entity could not be held liable for the debts or obligations of the charter school, or for any claims arising from the performance of acts, errors, or omissions by the charter school, if the charter school was to be operated by, or as, a nonprofit public benefit corporation (reference Education Code Section 47604). (Outside Suorce) AB 1137 (Outside Source) places a caveat on that blanket exemption. Specifically, a charter authorizing entity is free from liability in the case of a charter school that is operated by, or as, a nonprofit public benefit corporation if the charter authorizer has complied with specific new oversight responsibilities required by law (reference Education Code Section 47604.32 and 47605[m]). (Outside Source)
AB 1137 (Outside Source) adds requirements that charter authorizers identify at least one staff member as a contact person for the charter school, that annual site visits of the charter school be conducted, that the charter school complies with all reports required by law, that the fiscal condition of the charter school be monitored, and that timely notification be given by the charter authorizer to the California Department of Education in cases where renewal of the charter is either granted or denied, the charter is revoked, or the charter school is to cease operations (regardless of reason).
AB 1137 (Outside Source) places new reporting requirements on charter schools; specifically, charter schools must submit a preliminary budget on or before July 1, an interim financial report on or before December 15, a second interim financial report on or before March 15, and a final unaudited report on or before September 15 for the full prior year. Reports are to be submitted to the charter authorizing entity and the county superintendent of schools, or only to the county superintendent of schools if the county board of education is the chartering entity (reference Education Code Section 47604.33). (Outside Source)
The cost of performing oversight responsibilities, including monitoring of the reports required of charter schools, is required to be funded from the supervisorial oversight fees authorized by Education Code Section 47613.(Outside Source) AB 1137 (Outside Source) defines the 'revenue of the charter school' for purposes of the supervisorial oversight fees, as the general-purpose entitlement and categorical block grant.
Conditions for Charter Renewal
Education Code Section 47607 (Outside Source) provides that a school district governing board, county office of education governing board, or the State Board of Education may grant one or more subsequent renewals of a charter granted by that entity, in increments of five years. The Education Code does not provide flexibility for renewals of any period other than five years, and does not provide for extensions of a charter approval.
Commencing on January 1, 2005, or after a charter school has been in operation for four years, whichever is later, a charter school's charter may not be renewed unless specific performance standards have been met. Among the performance standards that may be used to satisfy this requirement are: (1) attainment of the school's Academic Performance Index (API) growth target; (2) an API decile ranking of 4 or better; (3) an API Similar Schools decile ranking of 4 or better; (4) documented evidence that the charter school students are performing at least equal to that of the students in schools of the district that the students would otherwise be attending; or (5) the school qualifies for participation in the Alternative Accountability System Model (ASAM). For specific information about the new performance standards that will be conditions of a charter renewal, please refer to Education Code Section 47607. (Outside Source)
Extended Funding Determinations for Qualifying Nonclassroom-Based Charter Schools
Charter schools operating a nonclassroom-based instruction program that would otherwise be required to obtain an annual funding determination pursuant to Education Code Section 47634.2(b) (Outside Source) may qualify for a five-year funding determination under new provisions of law (reference Education Code Section 47612.5 [d][2]) (Outside Source) if the charter school has received a decile ranking of 6 or better on the API for the two years immediately prior to receiving its funding determination. Schools receiving a five-year funding determination will not need to annually reapply for a funding determination unless the information relied upon by the State Board of Education at the time of its initial review has changed such that the updated information represents a material revision.
The information contained in this memorandum is advisory only. Charter schools and authorizing entities are encouraged to review the actual laws that provide the basis for this memo and consult with their own legal counsel regarding the application of any of these issues to a specific situation.
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