BILL ANALYSIS Ó
AB 913
Page 1
ASSEMBLY THIRD READING
AB 913 (Chau)
As Amended May 29, 2013
Majority vote
LOCAL GOVERNMENT 6-3 EDUCATION 5-0
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|Ayes:|Levine, Alejo, Bradford, |Ayes:|Buchanan, Campos, |
| |Gordon, Mullin, Stone | |Nazarian, Weber, Williams |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Achadjian, Melendez, | | |
| |Waldron | | |
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APPROPRIATIONS 12-5
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|Ayes:|Gatto, Bocanegra, | | |
| |Bradford, | | |
| |Ian Calderon, Campos, | | |
| |Eggman, Gomez, Hall, | | |
| |Ammiano, Pan, Quirk, | | |
| |Weber | | |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Harkey, Bigelow, | | |
| |Donnelly, Linder, Wagner | | |
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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
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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 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.
4)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.
5)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
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fiscal emergency by adopting a resolution at a public meeting
of the governing body.
6)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.
7)Provides that a person who 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 school or from being an employee of the charter
school.
8)Prohibits a member of the governing body of a charter school
who is a 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 guaranty,
during a public meeting.
9)Defines the loan and lease provisions described above as
"remote interests" for purposes of Section 1090 exemptions, as
specified.
10)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.
11)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.
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12)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.
13)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.
14)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.
15)Authorizes the governing body of a charter school to meet
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
are 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.
16)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.
17)Provides that this bill's meeting location requirements shall
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.
18)Allows the governing body of a charter school to hold closed
sessions to consider a matter regarding pupil discipline
pursuant to current law.
19)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
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sole basis for revocation of a charter pursuant to current
law.
20)Defines "facility" to mean a charter school campus, resource
center, meeting space, or satellite facility.
21)Specifies that this bill's provisions shall not apply to
actions taken before this bill's operative date.
22)Provides an operative date of July 1, 2014.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, General Fund/Proposition 98 (GF/98) cost pressure,
likely less than $100,000, to charter schools to comply with the
requirements of this bill. There were 1,062 charter schools in
2012-13. Charter schools participating in the K-12 Mandate
Block Grant (93% of the 1,062) receive reimbursement for the
RBA/Bagley Keen mandate. If the CPRA is added to the block
grant, participating charter schools will receive reimbursement
for this activity as well.
COMMENTS : 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 to, or sign a guarantor agreement relative to
the lease of property that will be occupied by, a charter
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.
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
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immediate action, the retirement benefits of these employees is
in jeopardy."
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
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:
1)The entity's governing board or body is controlled by a state
or political subdivision.
2)The members of the entity's governing board or body are
publicly nominated or elected.
3)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
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the entity's employee benefits plans.
4)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.
5)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:
1)The entity's operations are controlled by a state or political
subdivision.
2)The entity is directly funded through tax revenues or other
public sources.
3)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.
4)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.
5)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.
6)The entity is determined to be an agency or instrumentality of
a state or political subdivision by a state or federal court.
7)A state or political subdivision has the ownership interest in
the entity and no private interests are involved.
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8)The entity serves a governmental purpose.
CalSTRS concluded that charter schools would likely pass tests
2), 3) and 8), but passing the other tests was either unknown or
unlikely. With regard to test 5), 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.
Approximately 88% of the charter school workforce participates
in CalSTRS. Out of the 908 charter schools that elected to 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.
Supporters state that AB 913 "has become necessary because the
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."
Opponents argue that "charter school teachers are not at risk of
losing their eligibility for CalSTRS. More than a year ago, the
IRS issued an early draft of possible regulations that made
incorrect assumptions about charter schools and its employees.
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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 CalSTRS."
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 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."
This bill is nearly identical to AB 360 (Brownley) of 2011,
which died on concurrence on the Assembly Floor. This bill is
also similar to AB 572 (Brownley) of 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
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stifle efforts to aid the expansion of charter
schools.
Analysis Prepared by : Angela Mapp / L. GOV. / (916) 319-3958
FN: 0001014