BILL ANALYSIS Ó AB 440 Page 1 Date of Hearing: March 30, 2011 ASSEMBLY COMMITTEE ON EDUCATION Julia Brownley, Chair AB 440 (Brownley) - As Introduced: February 14, 2011 SUBJECT : Charter schools. SUMMARY : Establishes academic and fiscal accountability standards related to charter schools. Specifically, this bill : 1)Requires the State Controller (Controller) to propose and the Education Audits Appeal Panel to adopt a charter school supplement to the audit guide in consultation with the California Charter Schools Association; requires charter schools to complete annual audits consistent with the audit guide; requires the Controller to annually publish a directory of public accountants that are qualified to conduct audits of charter schools; and, requires the regular rotation of public accounting firms used to complete these audits consistent with the federal Sarbanes-Oxley Act of 2002. 2)Requires a charter school operated as or by a for-profit corporation to notify the Superintendent of Public Instruction (SPI) of that fact in writing annually. 3)Allows a charter school authorizer to consider during the authorization of a new charter school, whether the charter school petitioner has operated another charter school and any of the following have occurred: the charter has demonstrated academic achievement equivalent to a persistently lowest-achieving school; the charter school has not been renewed; or, the school has had its charter revoked, as specified. 4)Requires a chartering authority to consider, as one factor in determining whether to grant a renewal, the degree to which a charter school serves student populations that are similar to local district student populations, the school's local community, or the population identified in the charter petition, especially related to high-need students, including, but not limited to, students with disabilities, students living in poverty and English learners. AB 440 Page 2 5)Changes the charter school renewal process to include the following academic achievement requirements: a requirement that charter schools achieve academic growth targets for each student subgroup prior to renewal; a requirement that charter schools in program improvement (PI) not be renewed for more than three years; and, a requirement that charter schools in PI year five not be renewed if the school has not exited PI and did not meet adequate yearly progress (AYP) in the year prior to renewal. 6)Allows a charter school authorizer to renew a charter school for between one and five years. 7)Deletes the authorization for a chartering authority to renew a charter petition if the academic performance is equal to the academic performance of the public schools that the charter school students would otherwise have been required to attend. 8)Makes Legislative findings and declarations regarding the importance of establishing academic performance targets and sound fiscal management practices in charter schools. EXISTING LAW : 1)Establishes the Charter Schools Act of 1992 which authorizes a school district, a county board of education or the state board of education (SBE) to approve or deny a petition for a charter school to operate independently from the existing school district structure as a method of accomplishing, among other things, improved student learning, increased learning opportunities for all students, with special emphasis on expanded learning experiences for students who are identified as academically low achieving, holding charter schools accountable for meeting measurable student outcomes, and providing the schools with a method to change from rule-based to performance-based accountability systems. 2)Authorizes a charter school to be granted for not more than five years, and to be granted one or more renewals for five years. Requires the renewals and material revisions of the charter to be based upon the same standards as the original charter petition. 3)Requires a charter school to transmit a copy of its annual, independent financial audit report for the preceding fiscal AB 440 Page 3 year, to its chartering entity, the Controller, the county superintendent of schools of the county in which the charter school is sited, unless the county board of education of the county in which the charter school is sited is the chartering entity, and the department by December 15 of each year. 4)Requires, commencing on January 1, 2005, or after a charter school has been in operation for four years, whichever date occurs later, a charter school shall meet at least one of the following criteria prior to receiving a charter renewal: a) Attained its Academic Performance Index (API) growth target in the prior year or in two of the last three years, or in the aggregate for the prior three years. b) Ranked in deciles 4 to 10, inclusive, on the API in the prior year or in two of the last three years. c) Ranked in deciles 4 to 10, inclusive, on the API for a demographically comparable school in the prior year or in two of the last three years. d) The entity that granted the charter determines that the academic performance of the charter school is at least equal to the academic performance of the public schools that the charter school pupils would otherwise have been required to attend, as well as the academic performance of the schools in the school district in which the charter school is located, taking into account the composition of the pupil population that is served at the charter school. e) Has qualified for an alternative accountability system pursuant to subdivision (h) of Section 52052 FISCAL EFFECT : According to the Assembly Appropriations Committee on a substantially similar bill, annual General Fund/Proposition 98 (GF/98) state reimbursable mandated costs, likely $100,000, to local education agencies (LEAs) to review and verify specified petition and renewal information required under this bill. To the extent that the information required for submission is more readily available to an LEA than current law requirements, this cost may be offset. COMMENTS : According to the California Department of Education (CDE), the 2009-10 count of operating charter schools is 815 with student enrollment of more than 323,000 in the state. This includes three statewide benefit charters and 20 SBE-approved charters. Some charter schools are new, while others are conversions from existing public schools. Charter schools are part of the state's public education system and are funded by AB 440 Page 4 public dollars. A charter school is usually created or organized by a group of teachers, parents and community leaders, a community-based organization, or an education management organization. Charter schools are authorized by school district boards, county boards of education or the state board of education. A charter school is generally exempt from most laws governing school districts, except where specifically noted in the law. Specific goals and operating procedures for the charter school are detailed in an agreement (or "charter") between the sponsoring board and charter organizers. The measure ensures successful conditions for high performing charter schools by specifying how charter authorizers shall monitor and hold charter schools accountable, especially with regard to student achievement by: 1)Allowing a charter authorizer to consider track record, if any, a charter school petitioner has made at other charter schools they operate as part of the authorization process of new charter schools. 2)Prohibiting renewal of a charter if the charter school is in federal PI year five. 3)Prohibiting renewal of a charter for more than three years if the school is in federal PI. 4)Deleting the authorization for charter schools to be renewed if the academic performance is equal to the academic performance of the public schools that the charter school students would otherwise have been required to attend. 5)Requiring charter school audits to be conducted by the same quality auditors as for audits of other schools. 6)Encouraging charter schools to serve student populations that are similar to local district student populations, the school's local community, or the population identified in the charter petition, especially relative to high-need students, by requiring a charter authorizer to consider the degree to which a charter school serves these student populations in the charter renewal process. 7)Allowing charter authorizers to renew a charter school for between one and five years. 8)Requiring a charter school operated as or by a for-profit corporation to notify the Superintendent of Public Instruction (SPI) of that fact in writing annually. Charter Schools Serving High Need Students . This bill requires charter authorizers to consider, as one aspect of a charter renewal petition, the extent to which the school serves similar AB 440 Page 5 student populations as the local district, the school's local community, or the population identified in the charter petition, especially students with disabilities, students living in poverty and English learners. This requirement is consistent with the original Legislative intent to establish charter schools to, among other things, increase learning opportunities for all students, with special emphasis on expanded learning experiences for students who are identified as academically low achieving. The 2009 EdSource report on charter schools found that charter high schools enroll 13% fewer students who are either English learners or redesignated as fluent English proficient (RFEP) students compared to noncharter schools; charter middle schools enroll English learner and RFEP students at a 7% lower rate than noncharter schools; and charter elementary schools enroll 11% fewer English learner and RFEP students compared with noncharter schools. Similarly, the EdSource report found that charter schools serve lower proportions of students with disabilities compared to noncharter schools at all grade levels. The study also found that charter schools serve fewer students that participate in the Free and Reduced-Price Meal Program in both elementary and middle school compared to noncharter schools, but slightly more students in high school compared to noncharter schools. ------------------------------------------------------------------ ------------------------------------------------------------------ ------------------------------------------------------------------ (Source: Charter Schools in California: 2009 Update on Issues and Performance, EdSource) A November 2009 report by The Civil Rights Project makes policy recommendations with regard to segregation in charter schools. They recommend that charter schools could "use many of the same provisions that helped magnet schools use choice to increase diversity. These include providing full and extensive information, outreach to all racial/ethnic, socioeconomic and linguistic groups, no admissions/attendance/parent involvement requirements, and free transportation." They also recommend that "tracking and publicly reporting basic information about students should be a requirement for any school that receives public funding. Charter schools should be evaluated to ensure that they are enrolling, retaining, and graduating proportional shares of students by race/ethnicity, ELL status, socioeconomic status, and students with disabilities as their surrounding districts. Schools could also be required to report the number of students in different subgroups who apply to the charter school compared to those who actually enroll, among schools that AB 440 Page 6 are over-subscribed. OCR could and should do this. The federal government should also reinstate its former practice of providing annual reports on the state of charter schools." The committee should consider, with this data in mind, whether chartering authorities should consider, as one factor in determining whether to grant a renewal, the degree to which a charter school serves student populations that are similar to local district student populations, the school's local community, or the population identified in the charter petition, especially related to high-need students, including, but not limited to, students with disabilities, students living in poverty and English learners. Academic Accountability . In creating charter schools, the Legislature declared that the intent of charter schools was to provide opportunities for teachers, parents, students and community members to establish and maintain schools that operate independently from the existing school district structure, as a method to, among other things: 1)Improve student learning. 2)Increase learning opportunities for all students, with special emphasis on expanded learning experiences for students who are identified as academically low achieving. 3)Hold the schools established under this part accountable for meeting measurable student outcomes, and provide the schools with a method to change from rule-based to performance-based accountability systems. 4)Provide vigorous competition within the public school system to stimulate continual improvements in all public schools. With Legislative intent in mind, AB 440 establishes academic accountability standards that will ensure that charter schools are providing opportunities for improved student learning. If charter schools are not demonstrating improved student learning, AB 440 will establish a system to close those low-performing charter schools. This bill will prohibit renewal of a charter if the school is in federal PI year five and prohibit renewal of a charter for more than three years if the school is in federal PI. This bill will allow a charter authorizer to consider track record, if any, a charter school petitioner has made at other charter schools they operate as part of the authorization process of new charter schools. The bill will further delete the authorization for charter schools to be renewed if the academic performance is equal to the academic performance of the AB 440 Page 7 public schools that the charter school students would otherwise have been required to attend. These conditions for renewal will ensure that high quality charter schools will continue to thrive and low achieving charter schools will close. The June 2009 Center for Research on Education Outcomes (CREDO) report, "reveals that a decent fraction of charter schools, 17 percent, provide superior education opportunities for their students. Nearly half of the charter schools nationwide have results that are no different from the local public school options and over a third, 37 percent, deliver learning results that are significantly worse than their student would have realized had they remained in traditional public schools. These findings underlie the parallel findings of significant statebystate differences in charter school performance and in the national aggregate performance of charter schools. The policy challenge is how to deal constructively with varying levels of performance today and into the future." Fiscal Accountability . This bill requires charter schools to complete annual independent audits using a charter school supplement to the audit guide and requires the same high quality auditors to complete charter school audits that complete school district audits. Existing law requires charter schools to have annual audits, but does not provide a charter school supplement to the audit guide and does not require charter schools to hire qualified auditors approved by the Controller. For-Profit Corporations . This bill would require a charter school operated as or by a for-profit corporation to notify the Superintendent of Public Instruction (SPI) of that fact in writing annually. This will bring further transparency to charter schools operated as for-profit corporations. Further, by making parents of students at these charter schools aware of the school's for-profit status, this will ensure that state taxpayer dollars spent in charter schools to educate public school children are accurately accounted for and utilized to support student instruction. Renewal Timeline . This bill allows a charter authorizer to grant a charter renewal for between one and five years. Existing law requires that charter renewals be granted for five years. By giving authorizers more flexibility to grant renewals for between one and five years, authorizers will be able to more closely monitor charter schools that are struggling. For AB 440 Page 8 example, if a charter authorizer has reservations about renewing a charter school for fiscal mismanagement, the authorizer would have the flexibility to renew the charter school for a shorter period of time enabling the authorizer to examine the schools fiscal stability earlier than the current five year renewal model. According to the Los Angeles County Office of Education, permitting initial charter renewals for less than five years would increase the likelihood of renewals by original authorizers and appeal bodies. Requiring a five year renewal may not be prudent when there is question as to the soundness of a charter school's fiscal, educational, or management/governance status. A shorter renewal length allows the charter to continue while the authorizer monitors. This is particularly pertinent when the term of the original charter was less than five years. Previous legislation : AB 1950 (Brownley) from 2010, which was held by the author in the Senate Education Committee, established academic and fiscal accountability standards related to charter schools and was substantially similar to this measure. AB 8 X5 (Brownley) from 2009 proposed comprehensive changes to the Education Code consistent with the federal Race to the Top (RTTT) program; this bill addressed the four RTTT policy reform areas of standards and assessments, data systems to support instruction, great teachers and leaders and turning around the lowest-achieving schools. Deleted the statewide charter school cap; proposed enhanced charter school fiscal and academic accountability standards. This bill was held in the Senate Education Committee at the request of the author. AB 3 X5 (Torlakson) from 2009 deleted the statewide charter school cap and proposed changes to the measurable student outcomes, renewal and revocation procedures for charter schools. This bill was introduced but was not referred to a committee. REGISTERED SUPPORT / OPPOSITION : Support California School Employees Association Public Advocates Opposition AB 440 Page 9 California Charter Schools Association Analysis Prepared by : Chelsea Kelley / ED. / (916) 319-2087