BILL ANALYSIS Ó
SENATE COMMITTEE ON EDUCATION
Alan Lowenthal, Chair
2011-12 Regular Session
BILL NO: AB 440
AUTHOR: Brownley
AMENDED: June 29, 2011
FISCAL COMM: Yes HEARING DATE: July 6, 2011
URGENCY: No CONSULTANT:Beth Graybill
SUBJECT : Charter schools: accountability.
SUMMARY
This bill establishes various academic and fiscal
accountability requirements relating to charter schools.
BACKGROUND
Existing law, the Charter Schools Act of 1992, provides for
the establishment of charter schools in California for the
purpose, among other things, of improving student learning
and expanding learning experiences for pupils who are
identified as academically low achieving. Charter schools
may be authorized by a school district governing board, a
county board of education, or the State Board of Education.
(Education Code § 47601 et. seq.)
Existing law authorizes anyone to develop, circulate, and
submit a petition to establish a charter school and
requires developers to collect certain signatures in
support of the petition, as specified. Current law
requires governing boards to grant a charter unless the
petition fails to meet one or more of the following:
1) The charter school presents an unsound educational
program.
2) The petitioners are demonstrably unlikely to
successfully implement the program described in the
petition.
3) The petition does not contain the correct number of
required signatures.
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4) The petition does not contain an affirmation that it
will be nonsectarian in its programs and policies,
will not charge tuition, will not discriminate, and
other affirmations, as specified.
5) The petition does not contain reasonably comprehensive
descriptions of 16 required elements, including a
description of the educational program at the school,
the means by which the school will achieve a racial
and ethnic balance among its pupils, and the manner in
which annual, independent financial audits will be
conducted. (EC § 47605)
Existing law requires a charter school to annually submit
specified financial reports to its chartering authority,
and requires the chartering authority to use any financial
information to assess the fiscal condition of the charter
school. (EC § 47604.33)
Existing law authorizes an initial charter to be granted
for not more than five years and specifies that each
renewal shall be for five years. Existing law requires the
renewal and any material revision of the provisions of the
charter to be made only with the approval of the authority
that granted the charter and be based on the same standards
as the original charter. (EC § 47607)
Existing law requires a charter school to meet at least one
of the following performance standards prior to receiving
renewal: (1) attainment of the school's Academic
Performance Index (API) growth target in two of the last
three years or in the aggregate last three years; (2) an
API decile ranking of four or better in the prior year or
in two of the last three years; (3) a Similar Schools API
ranking of four or better in two of the last three years;
(4) academic performance that is at least equal to the
academic performance of the public schools that the charter
school pupils would otherwise been required to attend; or
(5) qualification for participation in the Alternative
School Accountability Model. (EC § 47607)
Existing law requires the Superintendent of Public
Instruction (SPI), with approval of the State Board of
Education (SBE) to develop an alternative accountability
system for schools under the jurisdiction of a county board
of education or a county superintendent of schools,
community day schools, nonpublic nonsectarian schools, and
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alternative schools serving high-risk pupils, including
continuation high schools and opportunity schools. Schools
under the Alternative School Accountability Model (ASAM)
may receive an API score, but the score is not included in
API rankings. (EC § 52052)
ANALYSIS
With respect to charter school academic accountability,
this bill:
1) Modifies existing requirement for charter school
petitions with regard to pupils to be served by the
charter school:
a) For initial approval: Requires petitions to
include a reasonably comprehensive description of
the means by which the school will serve pupil
populations that are similar to the local school
district populations or local community, or
similar to the pupil populations identified as
the target pupil population to be served,
especially with regard to high-need pupils,
including, but not limited to, students with
disabilities, students living in poverty, and
English learners.
b) For renewal: Requires the 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, or similar to pupil
populations in the school's local community, or
similar to the pupil populations identified in
the charter petition as the target pupil
populations to be served, especially with regard
to high-need pupils, as specified. Permits
authorizers to consider demographic and lottery
fluctuations that could affect the school's
progress in serving a diverse population.
2) Prohibits an authorizer of a charter school that has
been in operation for at least four years from
considering or granting the renewal of the school's
charter unless the school, based on data available as
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of October 1 of the fiscal year of the renewal, meets
at least one of the following criteria:
a) Attain an API score of at least 700 in the
most recent year.
b) Attain academic growth of at least 50 points
over the previous three years as measured by the
API, using the most recent data available.
c) A rank in deciles 6 to 10, inclusive, on the
API for a demographically comparable school in
the prior year or in two of the last three years.
d) Participation in the alternative
accountability system (ASAM), or in the event the
alternative accountability system is repealed or
no longer operative, a drop out recovery high
school as defined in statute.
e) Receipt of a determination of academic
eligibility for renewal from the SBE within the
prior 12 months.
3) Requires a charter school to apply to the SBE for a
determination of academic eligibility if it chooses to
submit its charter for renewal and any of the
following apply:
a) The charter does not meet at least one of
the criteria specified above.
b) The charter has entered into year five of
program improvement, pursuant to the federal No
Child Left Behind Act of 2001, has not exited
program improvement, and does not meet at least
two of the criteria specified above.
i) Specifies that program improvement
shall not be used as criteria for
identifying a school that may seek a
determination of academic eligibility if the
Secretary of the U.S. Department of
Education grants a waiver to the state
related to the suspension or delay in
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requirements of all schools in program
improvement.
4) Specifies that evidence submitted in support of an
application for determination may include, but is not
limited to, information on individual pupil
achievement, including longitudinal data that
demonstrate individual pupil progress, analysis of
similar populations, or other relevant data as
determined by the school.
5) Requires the SPI to make a recommendation to the SBE
on the application for a determination of academic
eligibility for the renewal of the charter. Requires
the SPI's recommendation to include an analysis of the
validity and reliability of the evidence of academic
success submitted by the charter school.
6) Requires the SBE to issue a positive determination of
academic eligibility if it finds that the charter
school clearly demonstrates that pupil academic
performance builds an expectation of continued
academic growth, as specified. Specifies that the
further the school is from satisfying the academic
criteria specified above, the greater the burden of
proof on the school to demonstrate why the school was
unable to satisfy the criterion and demonstrate why
the academic performance is such that the school
deserves a positive determination of academic
eligibility.
7) Specifies that a charter school that is granted a
renewal after obtaining a positive determination of
academic eligibility may be granted a renewal for no
more than three years.
With regard to fiscal and operational accountability, this
bill :
8) Requires a charter school petition to specify the
manner in which annual, independent financial and
compliance audits will be conducted; requires charter
school audits to conform to government auditing
standards instead of generally accepted accounting
principles, and specifies that audits are to be
conducted in a manner consistent with the charter
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school audit guide developed by the Controller.
9) Requires the State Controller (Controller) to propose,
and the Education Audits Appeal Panel to adopt, a
charter school audit guide to provide specific
guidance on the unique nature of charter schools.
Requires the Controller to develop the guide in
consultation with the Department of Finance (DOF), the
California Department of Education (CDE), the
Association of California School Administrators, the
California Charter Schools Association and other
charter school organizations as appropriate. Requires
charter schools to complete annual audits consistent
with the audit guide.
10) Specifies a charter school operated by a for-profit
corporation to notify the SPI of that fact in writing
when the petition is first approved, upon renewal of
the petition, and if there is a change in the school's
for-profit status.
11) Allows a charter school authorizer, when reviewing a
charter school petition and determining whether
petitioners are demonstrably unlikely to successfully
implement the program, to consider whether a
petitioner has operated another charter school for at
least three consecutive years and any of the following
has occurred:
a) The charter school demonstrated academic
achievement equivalent to a persistently
lowest-achieving school.
b) The charter school completed its first cycle
and was not renewed by the authorizing entity,
the county board of education, or the SBE.
c) The school has ever had its charter revoked
and the charter was not restored by the county
board of education or the SBE.
12) Requires the State Controller to annually publish a
directory of certified public accountants (CPA) and
public accountants as specified, deemed by the
Controller to be qualified to conduct audits of the
charter schools; requires charter school audits to be
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conducted by a CPA or public accountant selected by
the charter school from the directory published by the
Controller; and expresses Legislative intent that the
regular rotation of public accounting firms used to
complete these audits consistent with the federal
Sarbanes-Oxley Act of 2002.
13) Makes it unlawful for a public accounting firm to
provide audit services to a charter school if the lead
audit partner or coordinating audit partner having
responsibility for the audit has performed audit
services for that charter school in each of the six
previous fiscal years.
14) Provides for local educational agencies to be
reimbursed for costs associated with the requirements
of this act if the Commission on State Mandates
determines that the act contains mandated costs.
STAFF COMMENTS
1) Need for the bill : According to the CDE, there are
over 900 authorized charter schools serving more than
323,000 pupils statewide. According to the author's
office, the purpose of this bill is to encourage
higher levels of academic performance and improve
fiscal management practices among charter schools.
The fiscal accountability standards are intended to
ensure that charter school audits are conducted in the
same manner as school district audits while allowing
for the unique nature of charter schools. The
academic accountability standards establish minimum
academic performance criteria for the renewal of
charter schools and will ensure that charter schools
serve diverse pupil populations.
2) Hoover Commission findings and recommendations . In
November 2010, the Little Hoover Commission released a
report "Smarter Choices, Better Education: Improving
California Charter Schools" that contained findings
and recommendations regarding the charter school
authorization, renewal, and appeal process. The
Commission found that there was broad agreement about
the need to improve the current renewal criteria for
charter schools. The Commission reports it was told
repeatedly that "the state's renewal criteria are too
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vague and the bar is set too low, making it difficult
for authorizers to close down poor performing
schools." Under current law, a school can be renewed
if the school's performance is comparable to that of
district schools its students would otherwise attend.
The Commission noted that if schools within a
neighborhood are performing poorly but the charter
school provides a safe haven for students, parents and
students may pressure the local school board to keep
the school open even if it is not meeting its academic
goals. Since achievement test scores may not provide
a complete picture of student learning, the Commission
recommended that the state expand the renewal criteria
to include other factors, such as graduation rates,
employment readiness, as well as college attendance
and completion rates. The Commission urged the state
to "raise the bar for charter school renewal while
still maintaining options for certain charter schools
serving the most difficult student populations."
3) Academic Performance Index . The Academic Performance
Index (API) is a single number on a scale of 200 to
1,000 that is an annual measure of test score
performance in schools. The API is used to summarize
the performance of students and a school, and is based
on results of the Standardized Testing and Reporting
(STAR) program and the California High School Exit
Examination (CAHSEE). The system is based on a
two-year cycle that gives a "base" score for the first
year and a "growth" score in the second year. The
Base API is released in the spring and is derived from
the previous spring's test scores. The Growth API,
which is released in the fall, comes from the previous
spring's test scores. The SBE has established a
statewide goal of 800 for the API. Schools with API
scores below 800 are expected to improve and are given
a "growth target" that is 5 percent of the difference
between their API score and 800, with a minimum target
of 5 points. (Schools with an API above the statewide
target are expected to stay above 800.) A school's
Base API score plus its growth target becomes that
school's goal for its next Growth API. For example, a
school with a Base API of 320 would be expected to
improve its performance by 24 points in the next
cycle, or attain an API of 344.
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4) Academic accountability . According to the author,
various studies indicate that while there are many
outstanding and diverse charter schools, there are
also charter schools that are not "living up to the
promise" to improve student learning and expand
learning experiences for academically low-achieving
pupils. A July 2003 RAND study concluded that charter
and noncharter students generally performed similarly
on statewide achievement tests, with differences in
some grades and subject areas. A 2009 EdSource report
concluded that after "adjusting for differences in
student demographics, charter high schools scored
modestly higher than noncharter schools in English,
but lagged in mathematics." A 2009 report by the
Center for Research and Education Outcomes (CREDO)
found wide variations in charter school performance.
Based on longitudinal student achievement data in 15
states (including California) and the District of
Columbia, the CREDO study found that 17 percent of
charter schools provided superior education
opportunities for their students. Nearly half of the
charter schools had results that were no different
from local public schools and 37 percent delivered
learning results that were significantly worse than
their students would have realized had they remained
in traditional public schools. This bill addresses
some of the issues identified in these reports.
Performance record: Under current law, an authorizer may
only consider the extent to which a petitioner has
provided comprehensive responses to each of the 16
elements required in a charter school application.
While some authorizers may consider past performance
in evaluating the soundness of the petitioner's
educational program, it is not clear that a governing
board could deny a charter on the basis of known
information about the quality of other charter schools
operated by the petitioner. This bill provides
explicit authority for governing boards to consider a
petitioner's track record before granting the initial
charter, which could help governing boards determine
the capacity of the developer to deliver on the
promises made in the charter petition.
High-need students: The 2009 EdSource report noted above
found that California charter high schools serve 13%
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fewer students who are either English learners or
redesignated as fluent English proficient (RFEP)
compared to noncharter schools and found that charter
schools serve lower proportions of students with
disabilities compared to noncharter schools at all
grade levels. The EdSource study also found that
charter schools serve fewer students that participate
in the federal Free and Reduced-Price Meal Program in
both elementary and middle school compared to
noncharter schools.
This bill requires a charter school's student body to be
similar to the pupil population of a local school
district, the local community, or be similar to the
"target" population identified in the charter. The
bill also requires charter school petitions to clearly
specify how those students will be served, with
special attention to high-need students including
pupils with disabilities, pupils living in poverty,
and English learners. At renewal, chartering
authorities would be required to consider, the degree
to which a charter school has served those
populations, allowing for fluctuations that may result
from demographic changes or enrollment lotteries. To
the extent that authorizers hold charter schools
accountable for meeting the student population goals
established in the charter, this bill may help ensure
that high-need students have better access to charter
schools.
Student performance: Current law requires charter schools
to meet at least one of the specified academic
criteria prior to being renewed. Under current law, a
charter school's charter can be renewed if it is
meeting its API growth targets, is ranked in API
deciles 4-10 in the prior year or in two of the
previous three years, is ranked in deciles 4-10 for
similar schools, or has an academic performance that
is "at least equal" to other public schools in the
district.
This bill establishes a higher level of scrutiny for
charter schools by prohibiting authorizers from
renewing a charter unless the school meets one of the
following academic targets:
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a) Achieve an API score of 700.
b) Achieve 50 points of growth over the
previous 3 years.
c) Attain a decile 6 to 10 ranking for
demographically similar schools.
Charter schools that don't achieve one of these
targets would need to obtain a determination of
academic eligibility from the SBE before seeking
renewal by their authorizer. This process essentially
establishes "default closure" for charter schools that
fail to meet the success criteria specified in the
bill. (Charter schools that operate under the ASAM
would continue to qualify for renewal as they do under
current law.) This default closure could eliminate
the emotional and political pressures that can occur
when a school board considers renewal of a failing
charter school.
Schools that apply to the SBE for a "second look"
would be required to provide valid and reliable
evidence that clearly demonstrates that pupils at the
school will continue to improve academically. The SBE
would be required to consider that the farther a
charter school is from meeting the academic criteria
established by the bill, the greater the burden of
proof the school must overcome in demonstrating why
the school deserves a positive academic determination.
In other words, the lowest performing schools will be
required to provide more overwhelming evidence of
their current and projected progress than schools that
narrowly missed the academic thresholds. Schools that
receive a positive determination from the SBE could
only receive a three-year renewal from their
authorizer. This will provide the opportunity for the
authorizer to more closely monitor the academic
progress of the school. To clarify the final step in
the process, the SPI should transmit the findings and
determination of the SBE to the local authorizer.
The provisions of this bill that govern charter school
renewal criteria are similar to SB 645 (Simitian) that
the Committee passed earlier this year, with some
notable differences. The differences include a higher
academic threshold by requiring a school to have 50
points of growth over three years rather than 30
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points of growth over three years; requiring Program
Improvement 5 schools that do not meet at least two of
the academic criteria to also seek an academic
determination from the SBE prior to seeking renewal
from their local authorizer; and limiting renewal to
three years for schools that must obtain the SBE
academic determination prior to renewal. Staff notes
that SB 645 has been amended to include these same
requirements.
Technical amendments:
Staff recommends an amendment that requires the SPI to
transmit the findings and determination of the SBE to
the authorizing board for final approval.
Staff recommends an amendment to clarify program
improvement year 5 charter schools that do not meet
two of the three academic criteria shall not be
renewed unless the school seeks and receives a
positive
determination of academic eligibility from the SBE if
they wish to submit a renewal application.
5) Fiscal and operational accountability . This bill
clarifies and codifies existing accounting practices
and corrects a technical error in existing law that
requires annual charter school audits to be conducted
according to Generally Accepted Accounting Principles
(GAAP). In practice, charter schools maintain their
"books" according to GAAP, while audits are conducted
according to Government Auditing Standards. The audit
guide to be developed pursuant to AB 440 will be based
on the current K-12 audit guide and include provisions
that will address the uniqueness of charter schools.
By requiring charter school audits to be conducted by
auditors approved by the State Controller and
requiring audits to follow an audit guide specific to
charter schools, this bill will establish uniform
rules for all charter schools that could provide both
schools and authorizers with better guidance relative
to appropriate fiscal management practices.
6) Fiscal impact . According to the Assembly
Appropriations Committee analysis, this bill could
result in annual General Fund/Proposition 98
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state-reimbursable mandated costs of $100,000 to local
educational agencies to review and verify specified
petition and renewal information required under this
bill, although some of these costs could be offset to
the extent that the information required for
submission is more readily available to an LEA.
Additionally, there would be one-time General Fund
administrative costs, likely less than $80,000 for the
State Controller to complete the development of an
audit guide for charter schools, as specified. Staff
notes that although the Legislative Counsel's digest
notes that this bill contains mandated costs, staff
notes that according to a May 2006 decision by the
Commission on State Mandates, charter schools are not
eligible to claim mandate reimbursements because they
are "voluntarily" created.
7) Related and prior legislation . This bill is similar
to AB 1950 (Brownley, 2010), which would have
established new academic and fiscal accountability
standards for charter schools. This measure was
pulled from the Committee's agenda at the request of
the author.
SB 433 (Liu) would require charter schools to comply with
state statutes governing the suspension and expulsion
of pupils. This measure was heard in this Committee
on May 4, 2011 and was held at the request of the
author.
SB 645 (Simitian) establishes new academic criteria for
charter school renewal. This measure was passed as
amended by this Committee on May 4, 2011 on a 7-1
vote. To avoid potential chaptering out problems,
recent amendments to this measure conform the renewal
criteria and process to the requirements in AB 440.
AB 86 (Mendoza) expands signature requirements for
charter school petitions to include classified
employees and non-instructional certificated staff.
This measure was passed by this Committee on a 6-2
vote on June 15, 2011.
AB 360 (Brownley) makes charter schools subject to the
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Ralph M. Brown Act or Bagley-Keene Open Meeting Act,
depending on the entity operating the school. Also
subjects charters to the California Public Records Act
and the Political Reform Act. This measure was passed
by this Committee on a 7-2 vote on June 22, 2011.
AB 1034 (Gatto) requires charter schools to report
specified information relating to pupil demographics
and academic progress, requires charter schools to
collect data regarding pupils who transfer out of the
school, and modifies existing law regarding charter
school admissions. This measure was passed by this
Committee on a 7-2 vote on June 22, 2011.
AB 1741 (Coto, 2010), would have required charter
schools that expect 15% of their pupil population to
be English learners to meet additional petition
requirements. This bill was passed by the Senate
Education Committee and was subsequently held in the
Senate Rules Committee.
AB 2363 (Mendoza, 2010) would have required charter
school petitioners to obtain the signatures of half of
the number of teachers and half of the number of
classified employees, as specified. This bill was
heard by the Senate Education Committee and failed
passage on a 2-6 vote.
AB 2320 (Swanson, 2010) would have added new
requirements to the charter school petition process,
deleted the authority of a charter school petitioner
to submit a petition to a County Board of Education
and would have eliminated the authority of the SBE to
approve charter school petition appeals. This bill
was heard by the Senate Education Committee and failed
passage on a 2-3 vote.
AB 572 (Brownley, 2009) would have required charter
schools to comply with the Brown Act open meeting law,
the California Public Records Act, and the Political
Reform Act. This bill was passed by the Senate
Education Committee and subsequently vetoed by
Governor Schwarzenegger.
ABX5 8 (Brownley, Fifth extraordinary session of 2009)
would have deleted the cap on charter schools and
would have made other changes to provisions governing
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audit and fiscal standards, and the authorization,
renewal and revocation of charter schools. The Senate
Education Committee hearing for this bill was canceled
at the request of the author and the bill was
subsequently held by the Committee.
SUPPORT
California Charter Schools Association
California State PTA
San Francisco Unified School District
The Classical Academies
Submitted for previous version of the bill :
California Federation of Teachers
California School Boards Association
California School Employees Association
California Teachers Association
Californians Together
Public Advocates
San Bernardino County District Advocates for Better Schools
United Teachers Los Angeles
OPPOSITION
Association of Personalized Learning Schools and Services
Submitted for previous version of the bill :
Charter Schools Development Center