BILL ANALYSIS Ó
AB 913
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Date of Hearing: April 24, 2013
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
K.H. "Katcho" Achadjian, Chair
AB 913 (Chau) - As Amended: March 12, 2013
SUBJECT : Charter schools.
SUMMARY : Subjects charter schools to the state's existing open
meetings, conflict-of-interest and disclosure laws and makes a
number of other changes to the permissible activities of charter
school governing boards, councils and advisory committees.
Specifically, this bill :
1)Expresses the intent of the Legislature to establish
conflict-of-interest policies for the governing body of
charter schools that mirror existing conflict-of-interest
policies followed by the governing boards of school districts,
provide transparency in the operations of charter schools and
in the use of public funds by the governing body of charter
schools for the educational benefit of their pupils, and
establish standards and procedures consistent with the Charter
Schools Act of 1992 to avoid conflicts of interest in charter
schools.
2)Provides that a charter school is subject to all of the
following:
a) The Ralph M. Brown Act (Brown Act) except that a charter
school operated by an entity governed by the Bagley-Keene
Open Meeting Act (Bagley-Keene Act) is subject to the
Bagley-Keene Act regardless of the authorizing entity;
b) The California Public Records Act (CPRA);
c) Provisions of law that prohibit government officers or
employees from being financially interested in contracts or
purchases made by them in their official capacity (commonly
referred to as Section 1090); and,
d) The Political Reform Act of 1974 (Political Reform Act),
including a requirement to promulgate a Conflict of
Interest Code.
3)Provides that a council or schoolsite advisory committee, as
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specified, of a charter school is subject to current law that
requires meetings of councils and school site advisory
committees to be open to the public.
4)Provides that an employee of a charter school is not
disqualified because of that employment from also serving as a
member of the governing body of the charter school, and that a
member of the governing body of a charter school shall abstain
from voting on, or influencing or attempting to influence
another member of the governing body regarding, all matters
uniquely affecting his or her own employment.
5)Provides that a person who provides a loan to a charter school
due to a school fiscal emergency is not disqualified, because
of that loan agreement, from also serving as a member of the
governing body of the charter school or from being an employee
of the charter school.
6)Prohibits a member of the governing body of a charter school
who provides a loan as described above from voting on, or
influencing or attempting to influence another member of the
governing body regarding, all matters affecting the loan
agreement. The loan agreement shall not disqualify the member
from serving on the governing body of the charter school or
the person from being an employee of the charter school if the
governing body of the charter school, before entering into the
loan agreement, declares the existence of and describes the
fiscal emergency by adopting a resolution at a public meeting
of the governing body.
7)Requires the governing body of the charter school to disclose
and approve the loan agreement described above, including the
terms of the loan, during a public meeting. This bill's loan
agreement provisions apply to a member of the governing body
or an employee of the charter school who signs a guarantor
agreement relative to a line of credit, provided that the
funds from the line of credit shall not be accessed until a
fiscal emergency is declared and described as required
pursuant to this bill.
8)Provides that a person who leases real property to be occupied
by a charter school or signs a guarantor agreement relative to
the lease of real property to be occupied by a charter school
is not disqualified, because of that agreement, from also
serving as a member of the governing body of the charter
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school or from being an employee of the charter school.
9)Prohibits a member of the governing body of a charter school
who is a lessor or guarantor as described above from voting
on, or influencing or attempting to influence another member
of the governing body regarding all matters affecting the real
property lease agreement. The governing body of the charter
school shall disclose and approve the real property lease
agreement, including the terms of the lease and guarantee,
during a public meeting.
10)Defines the loan and lease provisions described above as
"remote interests" for purposes of Section 1090 exemptions, as
specified.
11)Prohibits a member of the governing body of a charter school
from voting on, or influencing or attempting to influence
another member of the governing body regarding, personnel
matters that uniquely affect a relative of the member, but
allows a vote on collective bargaining agreements and
personnel matters that affect a class of employees to which
the relative belongs.
12)Defines "relative" to mean an adult who is related to the
person by blood or affinity within the third degree, as
determined by the common law, or an individual in an adoptive
relationship within the third degree.
13)Prohibits a person from serving on the governing body of a
charter school if the person is disqualified by the California
Constitution or laws of the state from holding a civil office.
14)Specifies that, to the extent that the governing body of a
charter school engages in activities that are not related to
the operation of the charter school, this bill does not make
those unrelated activities subject to Section 1090, the Brown
Act, the Bagley-Keene Act, or the Political Reform Act.
15)Prohibits a meeting of the governing body of a charter school
that is held to discuss items related to the operation of the
charter school from including discussion of any item regarding
an activity of the governing body that is not related to the
operation of the charter school.
16)Authorizes the governing body of a charter school to meet
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within the physical boundaries of the county or counties in
which one or more of the school's facilities are located
provided that proper notices pursuant to the Brown Act or the
Bagley-Keene Act are posted within the physical boundaries of
each of the counties in which any of the school's facilities
is located. A charter school also may meet in a county
contiguous to the county where one or more of the school's
facilities are located if at least 10% of the pupils who are
enrolled in the school reside in that contiguous county.
17)Allows a nonclassroom-based charter school that does not have
a facility to meet within the boundaries of the county in
which the greatest number of pupils who are enrolled in the
school reside.
18)Provides that this bill's meeting location requirements do
not limit the authority of the governing body to meet outside
the bill's specified boundaries to the extent authorized by
the Brown Act, as specified.
19)Allows the governing body of a charter school to hold closed
sessions to consider a matter regarding pupil discipline
pursuant to current law.
20)Provides that a statement of economic interest that is filed
by a designated person at a charter school after the required
deadline pursuant to the Political Reform Act shall not be the
sole basis for revocation of a charter pursuant to current
law.
21)Defines "facility" to mean a charter school campus, resource
center, meeting space, or satellite facility.
22)Specifies that this bill's provisions do not apply to actions
taken before this bill's operative date.
23)Provides an operative date of July 1, 2014.
EXISTING LAW :
1)Provides, pursuant to the Charter Schools Act of 1992, 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. Existing law declares that
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charter schools are part of the public school system as
defined in Article IX of the California Constitution and are
"under the exclusive control of the officers of the public
schools." A charter school is required to comply with
statutes governing charter schools and all of the provisions
set forth in its charter, but is otherwise exempt from most
laws governing school districts except where specifically
noted.
2)Requires, pursuant to the Brown Act, meetings of a local
agency's governing entity to be open to the public, including
specified public notice requirements.
3)Requires, pursuant to the Bagley-Keene Act, meetings of state
bodies to be open to the public.
4)Requires, pursuant to the CPRA, that public records be
available for inspection, except as provided by an express
provision of law.
5)Prohibits, pursuant to Section 1090, members of the
Legislature, state, county, district, judicial district, and
city officers or employees from being financially interested
in any contract made by them in their official capacity, or by
any body or board of which they are members.
6)Provides for limited exceptions to Section 1090 if a financial
interest is considered a remote interest.
7)Requires, pursuant to the Political Reform Act, public
officials to carry out their duties in an unbiased manner,
free from influence by outside interests, and to follow
regulations during elections, as defined. The Political
Reform Act also requires government agencies to adopt a
conflict of interest code that requires designated employees
of the agency to file an annual statement of economic interest
disclosing any investments, business positions, interests in
real property, or sources of income that may be affected
materially by a decision made, or participated in, by the
designated employee by virtue of his or her position.
FISCAL EFFECT : None
COMMENTS :
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1)This bill requires charter schools to comply with the Brown
Act or the Bagley-Keene Act, the CPRA, existing
conflict-of-interest laws that prohibit specified government
officers or employees from having a financial interest in
contracts made by them in their official capacity, and the
Political Reform Act. This bill also prohibits charter school
board members who are employees of the charter school from
voting on employment matters affecting them or their
relatives, and specifies rules and procedures board members
must follow if they extend a loan or a lease to the school.
This bill also outlines allowable meeting locations for
charter school governing bodies. This bill is co-sponsored by
the California School Boards Association and the California
Teachers Association.
2)According to the author's office, "Overall, the goal of AB 913
is to have charter schools operate with integrity and
transparency, and to ensure that their employees are not
deemed ineligible to participate in governmental pension
plans. Charter school employees are part of the public
education system and should be treated equitably by receiving
the protections and benefit plans afforded to all public
educational employees, including participation in CalSTRS and
CalPERS?Unless we take immediate action, the retirement
benefits of these employees is in jeopardy."
3)The IRS treats government pension plans differently from
private pension plans. Some government plans are completely
set aside from the tax rules that apply to private sector
plans, while other government plans are subject to tailored
tax rules to reflect their unique circumstances and the state
or local government sector they serve.
To help clarify which government plans are eligible for
special tax rules, the United States Internal Revenue Service
(IRS) in November 2011 issued an advance notice of rulemaking
to solicit feedback from affected parties as it developed
proposed regulations to define the term "governmental plan"
under the Internal Revenue Code. In response to this proposed
rulemaking, the California State Teachers Retirement System
(CalSTRS) issued a fact sheet explaining the proposed
regulations and analyzing their possible impact on charter
schools.
CalSTRS reported that the proposed regulations were likely to
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list a number of facts and circumstances tests, categorized as
"main factors" and "other factors," that would determine
whether an entity is an instrumentality of a state or
political subdivision and therefore eligible to have its
employees participate in a government pension plan. CalSTRS
concluded that public charter schools in California operated
by nonprofit organizations probably would not pass most of
those tests, and that CalSTRS would then have to prohibit
those employees from participating in CalSTRS in order to
maintain CalSTRS' government plan status.
CalSTRS reported that the IRS was considering the following
list of "main factors" to determine whether an entity's
employees are eligible for a government plan:
a) The entity's governing board or body is controlled by a
state or political subdivision;
b) The members of the entity's governing board or body are
publicly nominated or elected;
c) A state or political subdivision has fiscal
responsibility for the general debts and other liabilities
of the entity, including the responsibility for the funding
of benefits under the entity's employee benefits plans;
d) The entity's employees are treated in the same manner as
employees of the state or political subdivision for
purposes other than providing employee benefits; and,
e) The entity is designated the authority to exercise
sovereign powers, which generally means the power of
taxation, eminent domain or police power.
CalSTRS concluded that charter schools would be unlikely to
pass most of these tests, because a nonprofit operator is a
layer of oversight and management separate from the school
district, which would lead to ineligibility.
The list of "other factors" reported by CalSTRS includes:
a) The entity's operations are controlled by a state or
political subdivision;
b) The entity is directly funded through tax revenues or
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other public sources;
c) The entity is created by a state government or political
subdivision pursuant to a specific enabling statute that
prescribes the purposes, powers and manners in which the
entity is to be established and operated;
d) The entity is treated as a governmental entity for
federal employment tax or income tax purposes, such as the
authority to issue tax-exempt bonds;
e) The entity is determined to be an agency or
instrumentality of a state or political subdivision for
purposes of state laws: for example, the entity is subject
to open meetings laws or the requirement to maintain public
records that apply only to governmental entities, or the
state attorney general represents the entity in court under
state statute that only permits representation of state
entities;
f) The entity is determined to be an agency or
instrumentality of a state or political subdivision by a
state or federal court;
g) A state or political subdivision has the ownership
interest in the entity and no private interests are
involved; and,
h) The entity serves a governmental purpose.
CalSTRS concluded that charter schools would likely pass tests
b), c) and h), but passing the other tests was either unknown
or unlikely. With regard to test e), which pertains to the
provisions of this bill, CalSTRS stated that "while school
districts strongly encourage charter schools to comply with
open meeting laws and public records laws, these laws do not
apply to nonprofit boards operating charter schools" and that,
therefore, charter schools would not pass this test.
The comment period on the IRS' proposed rulemaking closed
February 6, 2012. The status of this rulemaking process is
unknown.
Approximately 88% of the charter school workforce participates
in CalSTRS. Out of the 908 charter schools that elected to
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join CalSTRS, 590 are run by nonprofit corporations. These
schools account for about 10,000 employees, who CalSTRS
anticipated could become ineligible under the IRS' proposed
regulations.
1)Supporters state that AB 913 "has become necessary because US
Internal Revenue Service (IRS) is evaluating the status of
charter schools, among other entities, and the eligibility of
affected employees for governmental pension plans. Under the
IRS proposed regulations, all individuals who benefit from a
state retirement system would have to be employed by a
government entity, such as a state, an elected school board or
the federal government and no private interests are involved.
"Though the law considers charters to be independently run
public schools, their governing boards are not 'publicly
nominated and elected' nor are they subject to open meeting
laws or the requirements to maintain public records that apply
only to government entities. That excludes them from the IRS'
definition of a governmental entity and would seem to make
their employees ineligible to participate in the state pension
plan."
Supporters also note that "the intent of our laws is not to
allow charter school governing boards to determine what they
want to share and not share with the public. To the contrary,
the public must remain informed so that the public may retain
control over charter schools and their governing boards."
2)Opponents argue that "charter school teachers are not at risk
of losing their eligibility for STRS. More than a year ago,
the IRS issued an early draft of possible regulations that
made incorrect assumptions about charter schools and its
employees. The IRS received substantial public comment from
charter schools on that draft and has been completely silent
on the issue ever since. Moreover, AB 913 does not directly
address any of the factors identified in the IRS notice. As
such, it has no practical or legal impact on charter school
employees' participation in STRS."
Opponents are also concerned with the bill's requirement that
charter schools comply with Section 1090 conflict-of-interest
provisions, stating that "the threshold for determining
whether each exemption (provided for in the bill) applies is
subject to interpretation, which may put charter school board
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members at risk of criminal or civil penalties if an
enforcement body disagrees that the charter school board
member complied with the threshold requirements. This
uncertainty would chill efforts by board members to provide
financial assistance to the charter school."
Finally, opponents are concerned with the bill's provision
that subjects councils and school site advisory committees to
the Brown Act or the Bagley-Keene Act, stating that "Charter
schools are not subject to any of the statutes that define the
establishment of councils and advisory committees" and that
the "cross-reference to Section 35147 (puts) charter schools
at risk of being forced to comply with the range of statutes
pertaining to councils and school site advisory committees."
3)This bill is nearly identical to AB 360 (Brownley, 2011),
which died on concurrence on the Assembly floor. This bill is
also similar to AB 572 (Brownley, 2010), which would have
required charter schools to comply with the Brown Act, the
California Public Records Act, and the Political Reform Act.
AB 572 was vetoed by Governor Schwarzenegger with the
following veto message:
Charter school educators have proven that poverty is not
destiny for students that attend public schools in
California. Repeatedly, charter schools with high
proportions of disadvantaged students are among the highest
performing public schools in California. Any attempt to
regulate charter schools with incoherent and inconsistent
cross-references to other statutes is simply misguided.
Parents do not need renewed faith in charter schools as
suggested in this bill. On the contrary, tens of thousands
of parents in California have children on waiting lists to
attend a public charter school. Legislation expressing
findings and intent to provide "greater autonomy to charter
schools" may be well intended at first glance. A careful
reading of the bill reveals that the proposed changes apply
new and contradictory requirements, which would put
hundreds of schools immediately out of compliance, making
it obvious that it is simply another veiled attempt to
discourage competition and stifle efforts to aid the
expansion of charter schools.
4)Support arguments : Supporters argue that this bill is
necessary to maintain CalSTRS eligibility for charter school
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employees, and is an appropriate transparency measure so that
the public can retain control over charter schools and their
governing boards.
Opposition arguments : Opponents contend that this bill is an
overreaching intrusion into the independent governance of
charter schools, and that it is not necessary to maintain
CalSTRS eligibility for charter school employees.
5)This bill is double-referred to the Education Committee.
REGISTERED SUPPORT / OPPOSITION :
Support
California School Boards Association [SPONSOR]
California Teachers Association [SPONSOR]
California Association of School Business Officials
California Federation of Teachers
California School Employees Association
Public Advocates
Service Employees International Union
Two individuals
Opposition
California Charter Schools Association Advocates
Analysis Prepared by : Angela Mapp / L. GOV. / (916) 319-3958