BILL ANALYSIS Ó
SENATE JUDICIARY COMMITTEE
Senator Hannah-Beth Jackson, Chair
2015-2016 Regular Session
AB 709 (Gipson)
Version: June 1, 2015
Hearing Date: July 7, 2015
Fiscal: No
Urgency: No
TMW
SUBJECT
Charter schools
DESCRIPTION
This bill would require charter schools to comply with the open
meeting and public disclosure requirements under the Ralph M.
Brown Act (Brown Act), Bagley-Keene Open Meeting Act
(Bagley-Keene Act), the California Public Records Act (CPRA),
and the conflict of interest disclosure requirements under the
Political Reform Act (PRA).
BACKGROUND
In 1992, the Legislature enacted the California Charter Schools
Act in order to provide communities with the opportunity to
establish schools that could operate freely from the structural
programs of public school districts. (SB 1448 (Hart, Ch. 781,
Stats. 1992).) Charter schools are intended to provide a unique
learning environment, giving students a different approach to
scholastic achievement. In the 2007-2008 State of California
Education report, 675 charter schools were in operation, serving
almost 250,000 students. (Education Data Partnership, May 22,
2009.) In the 18 years of charter school existence in
California, many reports of widespread financial mismanagement
of charter schools' public funds have led to the belief that
public disclosure and conflict of interest laws need to be
established for charter schools.
As reported by the Los Angeles Times, in 2005, the
Superintendent of Public Instruction and various California
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County Offices of Education commissioned an outside audit of
Options for Youth, Inc. (OFY) and Opportunities for Learning,
Inc. (OFL) Charter Schools. The audit revealed OFL and OFY had
contracts with many companies which were owned by overlapping
family members, had several of the same corporate officers,
directors, and staff of OFL and OFY, and all sold and purchased
goods and services from each other. Although financial
interests in transactions between the companies were disclosed,
some of the related party arrangements were questionable. The
audit concluded that both OFY and OFL schools had inadequate
conflict of interest policies and therefore could not be
protected against improper transactions. (Cleeland, Audit
Faults Chain of Charter Schools (Aug. 10, 2006) Los Angeles
Times [as of June 22,
2015].)
In 2007, the Los Angeles Times reported that the Los Angeles
County Office of Education hired an outside auditor to examine
the Gorman Learning Center Charter School. The audit showed
that for the three years audited, the Gorman Learning Center
Charter School provided false information on State Schools Funds
applications and received $7.7 million more than the school
should have received. The audit further revealed that the
school spent thousands of dollars on questionable items, such as
a $14,000 board retreat that included helicopter and yacht
rentals, and horseback riding and diving lessons for board
members and their families. As reported, the school's chief
executive officer inappropriately hired family members and the
director of human resources received $18,000 in school funds to
pay for her rent. (Rubin, School misused funds, audit finds
(Mar. 17, 2007) Los Angeles Times
[as
of June 22, 2015].)
Another Los Angeles Times article reported that Charles Cox,
head and founder of California Charter Academy, was indicted and
charged with the misuse of over $5 million in school funds,
using the money as compensation in the form of wages to himself,
friends, and family members, and to make extravagant purchases
unrelated to the charter school. Cox was also charged with
inappropriately entering into school service contracts with a
company he owned. (Reston and Landsberg, Charter schools'
founder indicted (Sept. 5, 2007) Los Angeles Times
[as
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of June 22, 2015].)
Over the years, the Legislature has made clear that public
agency actions should be open to the scrutiny of the public. In
1961, the Legislature enacted the Brown Act, which provided
public access to local public agency information. In 1967, the
Legislature enacted the Bagley-Keene Act, which provided public
access to state public agency information. In 1975, the Brown
Act was amended to provide for disclosure of public agency acts
taken during closed meetings. In 1986, the Brown Act, among
other things, was amended to provide for the posting of public
agency agendas. In 2004, Proposition 59 added to the California
Constitution the people's right of access to public body
information. (Cal. Const., art. I, Sec. 3(b)(1).)
This bill seeks to address the reports of fiscal mismanagement
by subjecting a governing board of a charter school to the same
open meetings, public records disclosure, and conflict of
interest laws that govern public schools and school districts.
This bill is substantially similar to AB 913 (Chau, 2014), which
was vetoed by Governor Brown, SB 1317 (Huff, 2014), which was
held under submission in the Senate Appropriations Committee,
and AB 360 (Brownley, 2011), which died on the Assembly Inactive
File after returning to the Assembly on Concurrence. This bill
is also substantially similar to AB 2115 (Mullin, 2008) and AB
572 (Brownley, 2010), which were both vetoed by Governor
Schwarzenegger. (See Comment 5.)
This bill was heard by the Senate Education Committee on July 1,
2015, and approved by a vote of 5-2.
CHANGES TO EXISTING LAW
Existing law provides that the people have the right of access
to information concerning the people's business and requires
meetings of public bodies and the writings of public officials
and agencies to be open to public scrutiny. (Cal. Const., art.
I, Sec. 3(b)(1).)
Existing law , the Brown Act, provides statutory requirements of
local school districts to keep the public informed. (Gov. Code
Sec. 54950 et seq.) Existing law requires a school district
board to post notices and agendas of school district board
meetings. (Gov. Code Secs. 54953, 54954.2, 54954.6, and 54956.)
Existing law requires a school district board to publicly
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report any action taken in closed sessions. (Gov. Code Secs.
54957.1 and 54957.7.) Existing law requires a school district
board to disclose in an open meeting the items to be discussed
in closed sessions. (Gov. Code Sec. 54957.7.)
Existing law , the Bagley-Keene Act, provides statutory
requirements of state school districts to keep the public
informed. (Gov. Code Sec. 11120 et seq.) Existing law requires
state school district boards to post notices and agendas of
state public body meetings. (Gov. Code Secs. 11123, 11125,
11125.4, 11125.5, 11125.9, and 11126.) Existing law requires
state school district boards to publicly report any action taken
in closed sessions. (Gov. Code Secs. 11125.2, 11126, and
11126.3.)
Existing law provides that all meetings of the governing board
of the school district and the county board of education at
which the granting, revocation, appeal, or renewal of a charter
petition is discussed shall comply with the Brown Act. (Gov.
Code Sec. 47608.)
Existing law provides that a charter school is deemed to be a
"school district" for purposes of appropriations, disbursements,
and apportionment from state school and lottery funding. (Ed.
Code Secs. 47612, 47638, 47650.)
Existing law provides that a charter school is provided with
local operational funding that is equal to the total funding
that would be available to a similar school district serving a
similar pupil population. (Ed. Code Sec. 47630.)
Existing law requires a local school district board to hold open
meetings, unless otherwise exempt, as specified. (Ed. Code Sec.
35147.)
Existing law , the California Public Records Act (CPRA), governs
the disclosure of information collected and maintained by public
agencies, including school districts. (Gov. Code Sec. 6250 et
seq.) Generally, all public records are accessible to the
public upon request, unless the record requested is exempt from
public disclosure. (Gov. Code Sec. 6254.) There are 30 general
categories of documents or information that are exempt from
disclosure, essentially due to the character of the information,
and unless it is shown that the public's interest in disclosure
outweighs the public's interest in non-disclosure of the
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information, the exempt information may be withheld by the
public agency with custody of the information. (Id.)
Existing law authorizes the person whose request for a public
record under the CPRA is denied to file an action in superior
court for an order requiring disclosure. (Gov. Code Sec. 6258.)
The test for a determination of whether a record may be
withheld from public access is whether the public's interest in
disclosure is outweighed by the public's interest in withholding
disclosure of the record. (Gov. Code Sec. 6255.)
Existing law provides that a private person or organization can
provide funding to assist in the establishment or operation of a
charter school. (Ed. Code Sec. 47603.)
Existing law provides that a charter school can elect to operate
or be operated by a nonprofit public benefit corporation. (Ed.
Code Sec. 47604.)
Existing law provides that a state community college district or
state university can establish an auxiliary organization to
solicit funds for the benefit of the community college district,
and the board members of such auxiliary organizations are
subject to conflict of interest disclosure requirements. (Ed.
Code Secs. 72670 et seq. and 89907 et seq.)
Existing law prohibits officers, board members, and employees of
a school district from having a financial interest in any
contract made by the officer, board member, or employee, in an
official capacity on behalf of the school district. (Gov. Code
Sec. 1091.)
Existing law provides that an officer will not be deemed to be
interested in a contract entered into by a board or school
district in which the officer, board member, or employee is a
member if that individual has only a remote interest in the
contract and that interest is disclosed to the board or district
of which the individual is a member, as specified. Existing law
provides numerous financial transactions that qualify as a
"remote interest." (Gov. Code Sec. 1091.)
Existing law , the Political Reform Act of 1974 (PRA), requires
public officials to file annual statements of financial
interest. (Gov. Code Sec. 81000.)
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Existing law prohibits an employee of a school district from
serving as a board member of the school district. (Ed. Code
Sec. 35107(b).)
This bill would require a charter school and its board to comply
with the open meeting requirements of the Brown Act or
Bagley-Keene Act, as appropriate according to whether the
charter school is operated by a local or state entity, and the
existing requirement for local school district boards to hold
open meetings.
This bill would require a charter school to comply with the
public disclosure requirements under the CPRA.
This bill would require a charter school to comply with the
restrictions on financial interests, and the financial interest
disclosure requirements under the PRA.
This bill will allow an individual to be employed as a teacher
in a charter school and also serve as a member on the school's
governing body provided the individual abstains from voting on
all matters uniquely affecting his or her own employment.
This bill would provide legislative intent to ensure that
charter school governance is transparent and ensure that
monitoring and oversight of charter schools is conducted to
protect public interest.
COMMENT
1. Stated need for the bill
The author writes:
Current law governing charter schools was established through
the Charter Schools Act of 1992 and is referenced in
California Education Code, Section[s] 47600 - 47664. In
Wilson v. State Board of Education (1999) a California state
appellate court determined that charter schools were exempt
from complying with most state laws that apply uniquely to
school districts. Nonetheless the provisions of the Brown
Act, California Public Records Act, Political Reform Act, and
Government Code 1090, were all established with the intent to
be broadly construed in their application to public and
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private entities, which include, but are not limited to,
school districts.
The deficiency in existing law lies within the lack of
explicit guidance on whether charter schools are subject to
the provisions of this bill. Common legal and executive
interpretation suggests that they are; however, the fact that
charter schools are stated to be exempt from most of the
California Education Code has left this open to
interpretation. AB 709 seeks to expressly require California
charter schools to comply with the Brown Act, California
Public Records Act, Political Reform Act and Government Code
[Section] 1090.
The California Teachers Association (CTA), co-sponsor, writes:
"Charter governing boards, though they may be formally organized
as nonprofit corporations, must operate as public bodies
representing the communities served by the school. California's
charter school law was signed in 1992, when the schools were
expected to be only a small component of state systems of public
education. There was little concern over unethical charter
operators because a cap (which has since been removed) was
established at 100 schools. The exponential growth of the
charter industry over the last twenty years has not coincided
with increased oversight, and there is a need to strengthen
accountability measures at charter schools."
The California School Employees Association AFL-CIO, co-sponsor,
writes:
A paramount characteristic of any agency that uses public
funds is that the operations of that agency be open to public
oversight. This includes the ability for the public to attend
business meetings of the agency [and] review the records of
that agency. . . .
Every traditional school board across the state is held
accountable to the public by having open meetings where
parents, community members, and the press are allowed to
attend. The records of school board meetings are also made
available for review. . . . AB 709 brings California charter
schools into the reasonable and rational fold of requiring
open meetings, open records, and financial security for
taxpayers' money.
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2.Subjecting charter school's use of public funds to public
disclosure
This bill would require a charter school to hold open meetings
and provide public access in the same fashion as public school
districts. Existing law provides that the people have the right
of access to information concerning the people's business and
requires meetings of public bodies and the writings of public
officials and agencies to be open to public scrutiny. (Cal.
Const., art. I, Sec. 3(b)(1).) The Legislature has declared a
charter school to be a school district, and thus a public
agency, for purposes of state and local funding. (Ed. Code
Secs. 47612, 47630, 47638, 47650.) When public agencies receive
state and local funds, it becomes necessary to provide public
access and scrutiny over the use of these funds to ensure that
the public's business is being properly conducted.
a. Open Meetings Requirement
Existing law, the Brown Act, provides statutory requirements
for local school districts to keep the public informed by
holding properly noticed public meetings and requiring
disclosure of certain information before and after closed
meetings. (Gov. Code Sec. 54950 et seq.) Existing law, the
Bagley-Keene Act, provides similar statutory requirements for
state school districts. (Gov. Code Sec. 11120 et seq.)
CTA argues that "all charter school governing boards should be
free of conflicts of interest, and the Ralph M. Brown Act
(open meetings law) and the Public Records Act should apply to
the operation of charter schools. There is a role for charter
schools in California's education system; that role should be
performed to at least the same high standards of integrity,
transparency and openness required of traditional public
schools. AB 709 is an important step to ensure that will
happen." This bill would require a charter school and its
board to comply with the open meeting requirements under the
Brown Act or Bagley-Keene Act, as appropriate according to
whether the charter school is operated by a local or state
entity, and open meeting and public notice requirements under
the Education Code. The author argues that a charter school
should be required to conduct properly noticed, open public
meetings to provide students, parents, and communities with
transparency and information regarding the use of public
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funds.
b. Public disclosure of information pursuant to the
California Public Records Act (CPRA)
Existing law, the CPRA, governs the disclosure of information
collected and maintained by public agencies, including school
districts. (Gov. Code Sec. 6250 et seq.) Generally, all
public records are accessible to the public upon request,
unless the record requested is exempt from public disclosure.
(Gov. Code Sec. 6254.)
Charter schools, financed by the State School Fund, are deemed
school districts for purposes of funding, but are free from
many of the constrictions placed on school districts in order
to increase the learning opportunities for all students,
according to the Legislative intent language contained in the
Charter Schools Act of 1992. (Ed. Code Secs. 47601, 47650.)
Although charter schools are able to operate independently
from school district construction, charter schools are still
considered to be members of the public school system and under
the control of the officers of the public school system. (Ed.
Code Sec. 47615.)
Proponents assert that since charter schools are funded by
taxpayer money, it is the public's business to ensure that its
taxes are being spent in a proper manner. Therefore, actions
taken by a charter school and its financial administration
should be available for public scrutiny. Subjecting charter
schools to the CPRA would allow access to their records, hence
the scrutiny required to prevent misconduct and
misappropriation of public funds.
c. Disclosure of conflicts of interest pursuant to the
Political Reform Act of 1974 (PRA)
Existing law, the PRA, requires public officials to file
annual statements of financial interest. (Gov. Code Sec.
81000.) The Legislature declared this necessary because
"[p]ublic officials, whether elected or appointed, should
perform their duties in an impartial manner, free from bias
caused by their own financial interests or the financial
interests of persons who have supported them." (Gov. Code
Sec. 81001.)
The California Association of School Business Officials, in
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support, contends that "AB 709 will protect funding for public
education by applying requirements that have proven to be
effective in minimizing conflict of interest in traditional
public schools to charter schools. Charter school boards have
the same responsibility as local elected school board members
to uphold the public trust and to ensure that the public's
money is used appropriately. By allowing transparency of
charter school operations, AB 709 would strengthen the
educational and fiscal viability of charter schools through
greater accountability and oversight." In order to ensure
that charter school board members are not receiving
inappropriate gifts for the purpose of compromising the board
member's decisions relating to the charter school, this bill
would require a charter school and its board members to comply
with financial interest disclosure requirements under the PRA.
1.Conflicts of interest
Existing law prohibits officers, board members, and employees of
a school district from having a financial interest in any
contract made by the officer, board member, or employee, in an
official capacity on behalf of the school district. (Gov. Code
Sec. 1091.) However, an officer is not deemed to be interested
in a contract entered into by a board or school district in
which the officer, board member, or employee is a member if that
individual has only a remote interest in the contract and that
interest is disclosed to the board or district of which the
individual is a member, as specified. (Id.)
In 2011, the Los Angeles Unified School District reported that
its Inspector General identified a number of conflict of
interest situations in Los Angeles charter schools:
a charter school director transferred public funds in excess
of $230,000 to a private corporation in which the director had
a financial interest;
a husband and wife team served together as board members for a
charter and then conducted a lease transaction for the charter
with another organization of which they were officers; and
charter board directors wearing additional hats as officers
and employees of the same charter school.
Under conflict of interest laws in the Corporations Code, the
board of directors of a nonprofit organization may have up to 49
percent interested directors. (Corp. Code Sec. 5227.) The
board may enter into transactions where its members are
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financially interested, as long as each member's financial
interest is disclosed to the board and the member does not
participate in the decision making. (Corp. Code Sec. 5233.) In
comparison, under Government Code Section 1091, which governs
public school districts, no director may have a material
financial interest in a decision made by the Board.
Proponents argue that the cases of the California Charter
Academy and Options for Youth and Opportunities Learning (see
Background) demonstrate why it is not appropriate to allow even
an incorporated nonprofit charter school to follow the more
lenient conflict of interest laws under the Corporations Code.
They argue that these cases and others demonstrate that giving
charter school board members more flexibility in the management
of finances has led to the misappropriation of funds and
unethical personal gain, resulting in the closing of some
charter schools.
Accordingly, in order to expose potential conflicts of interest
for the personal gain of a board member, this bill would
prohibit a charter school board member from being a party to a
contract with a charter school in which the board member has a
financial interest. Although this bill would not disqualify an
employee of a charter school from also serving as a board
member, the bill would require the employee to abstain from
voting on, or influencing, or attempting to influence another
member of the board concerning all matters uniquely affecting
the employee's own employment.
1.Oppositions' concerns
The California Charter School Association Advocates (CCSAA),
opposed, argues that this bill is silent on the need for this
law to occupy the field of transparency and conflict of interest
policies for charter schools. CCSAA urges the stakeholders to
agree on a set of policies for charter schools rather than enact
a statute and let individual school districts continue to impose
additional restrictions and obligations on charter schools.
CCSAA also argues that this bill fails to accommodate public
access to board meetings of charter management organizations
(CMOs) that serve multiple counties. CCSAA would rather ensure
access for all parents and community members in all counties by
requiring teleconferencing of board meetings in all counties in
which the CMO has schools. CCSAA also notes that this bill is
silent on what entity would be the charter school's conflict of
interest code reviewing body, which is important because one
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challenge for CMOs is determining which of multiple authorizing
districts would have the responsibility to review the CMOs
conflict of interest code. CCSAA also argues that the CPRA
response requirement this bill would create will be a burden on
small schools, which should be allowed to respond to CPRA
requests within 20 days and charge for actual costs.
EdVoice, in opposition, contends that this bill fails to
consider necessary and legitimate operations of charter schools
as it relates to employees and fails to consider the necessary
and legitimate operation needs and membership of charter school
governing boards.
2.Governor's vetoes of AB 2115, AB 572, and AB 913
This bill contains provisions substantially similar to the
enrolled versions of AB 2115 (Mullin, 2008), AB 572 (Brownley,
2010), and AB 913 (Chau, 2014). In vetoing AB 2115, Governor
Schwarzenegger stated:
Not only would this bill create state mandated costs for
charter schools to comply with its provisions, the measure
runs counter to the intent of charter schools, which were
created to be free from many of the laws governing school
districts.
In vetoing AB 572, Governor Schwarzenegger stated:
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
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the expansion of charter schools.
In vetoing AB 913, Governor Brown stated:
Starting a charter school requires the strong commitment of
dedicated individuals willing to serve on a governing board.
While I support transparency, this bill goes further than
simply addressing issues of potential conflicts of interest
and goes too far in prescribing how these boards must operate.
Support : California Association of School Business Officials;
California School Boards Association; California State PTA; San
Francisco Unified School District
Opposition : California Center for Parent Empowerment;
California Charter Schools Association Advocates; EdVoice
HISTORY
Source : California School Employees Association; California
Teachers Association
Related Pending Legislation : AB 1057 (Medina, 2015) contains
provisions substantially similar to this bill. AB 1057 is
currently in the Assembly Education Committee.
Prior Legislation :
AB 913 (Chau, 2014) See Background; Comment 5.
SB 1317 (Huff, 2014) See Background.
AB 360 (Brownley, 2011) See Background.
AB 572 (Brownley, 2010) See Background; Comment 5.
AB 2115 (Mullin, 2008) See Background; Comment 5.
AB 1197 (Wiggins, 2004) would have required individuals who
govern charter schools to file statements of economic interest
under the Political Reform Act. The bill failed passage on the
Senate Floor.
SB 1448 (Hart, Ch. 781, Stats. 1992) See Background.
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Prior Vote :
Senate Education Committee (Ayes 5, Noes 2)
Assembly Floor (Ayes 47, Noes 27)
Assembly Education Committee (Ayes 5, Noes 2)
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