BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                     SB 739


                                                                    Page  1





          Date of Hearing:  June 17, 2015


                           ASSEMBLY COMMITTEE ON EDUCATION


                              Patrick O'Donnell, Chair


          SB  
          739 (Pavley) - As Amended May 6, 2015


          SENATE VOTE:  23-11


          SUBJECT:  Charter schools:  sited outside boundaries:   
          prohibition


          SUMMARY:  Prohibits the governing board of a school district to  
          authorize new charter schools to locate outside the boundaries  
          of the school district if the school district is assigned a  
          negative budget certification.


          EXISTING LAW: 


          1)Specifies that a charter school that is unable to locate  
            within the jurisdiction of the chartering school district may  
            establish one site outside the boundaries of the authorizer,  
            but within the county in which that school district is  
            located, if the school district within the jurisdiction of  
            which the charter school proposes to operate is notified in  
            advance of the charter petition approval, the county  
            superintendent of schools and the Superintendent are notified  
            of the location of the charter school before it commences  
            operations, and either of the following circumstances exists:








                                                                     SB 739


                                                                    Page  2








             a)   The school has attempted to locate a single site or  
               facility to house the entire program, but a site or  
               facility is unavailable in the area in which the school  
               chooses to locate.



             b)   The site is needed for temporary use during a  
               construction or expansion project. (Education Code 47605  
               and 47605.1)



          2)Requires the governing board of each school district to  
            certify, in writing, within 45 days after the close of the  
            period being reported, whether the school district is able to  
            meet its financial obligations for the remainder of the fiscal  
            year and, based on current forecasts, for the subsequent  
            fiscal year. These certifications shall be based upon the  
            governing board of the school district's assessment, on the  
            basis of standards and criteria for fiscal stability adopted  
            by the state board, of the school district budget, as revised  
            to reflect current information regarding the adopted State  
            Budget, school district property tax revenues, and ending  
            balances for the preceding fiscal year. The certifications  
            shall be classified as positive, qualified, or negative, as  
            prescribed by the Superintendent for purposes of determining  
            subsequent actions by the Superintendent, the Controller, or  
            the County Superintendent of Schools.  A negative  
            certification shall be assigned to any school district that,  
            based upon current projections, will be unable to meet its  
            financial obligations for the remainder of the fiscal year or  
            the subsequent fiscal year. A qualified certification shall be  
            assigned to any school district that, based upon current  
            projections, may not meet its financial obligations for the  
            current fiscal year or two subsequent fiscal years. A positive  








                                                                     SB 739


                                                                    Page  3





            certification shall be assigned to any school district that,  
            based upon current projections, will meet its financial  
            obligations for the current fiscal year and subsequent two  
            fiscal years. (Education Code 42131)

          FISCAL EFFECT: According to the Senate Appropriations Committee,  
          the prohibition of a school district assigned a negative  
          certification to authorize new charter schools outside of the  
          school district's jurisdiction, is not expected to result in a  
          significant increase in state costs.





          COMMENTS:  Background on Charters: According to the California  
          Department of Education (CDE), in the 2013-14 academic year  
          there were 1,125 schools charter schools in California, with an  
          enrollment of over 514,000 students.  Some charter schools are  
          new, while others are conversions from existing public schools.  
          Charter schools are part of the state's public education system  
          and are funded by public dollars. A charter school is usually  
          created or organized by a group of teachers, parents and  
          community leaders, a community-based organization, or an  
          education management organization. Charter schools are  
          authorized by school district boards, county boards of education  
          or the state board of education. A charter school is generally  
          exempt from most laws governing school districts, except where  
          specifically noted in the law. Specific goals and operating  
          procedures for the charter school are detailed in an agreement  
          (or "charter") between the sponsoring board and charter  
          organizers.





          This bill prohibits a school district from authorizing new  
          charter schools outside their district boundaries if the school  








                                                                     SB 739


                                                                    Page  4





          district receives a negative budget certification.  Two  
          arguments are presented as rationale for this bill. First, that  
          a school district with a negative budget certification is  
          experiencing an urgent budget crisis and is ill equipped to take  
          on the oversight responsibilities of new charter schools,  
          especially those located a distance away.  And second, that  
          there could be a perverse incentive for school districts with a  
          negative budget certification to approve new charter schools  
          located outside their district boundaries in order to increase  
          district revenues through oversight fees.





          According to the author, California law gives school districts  
          and county offices of education the authority to authorize and  
          oversee charter schools operating within their boundaries. In  
          most cases, charter schools are located within the boundaries of  
          the local educational agency that authorized the school.  
          However, current law allows a charter school to locate a  
          facility in a school district other than the one it is  
          authorized by under a very limited number of circumstances.  
          Unfortunately, there have been a number of high-profile cases in  
          which cash-strapped school districts have authorized charter  
          schools outside of the district in order to generate revenue  
          through "oversight fees."  In the Santa Clarita area, the  
          Acton-Agua Dulce Unified School District authorized a charter  
          school that was subsequently located in another school district  
          that had previously denied the school. In return, the school  
          then paid a 3.5% oversight fee to the school district. Though  
          the situation in Santa Clarita has brought more attention to  
          this statewide problem, other school districts, including Los  
          Angeles Unified, Culver City Unified, Beverly Hills Unified,  
          Pomona Unified, and San Diego Unified have all had charter  
          schools located within their boundaries by other school  
          districts. SB 739 restricts school districts in negative  
          certification (at risk of not meeting financial obligations)  
          from locating charter schools outside of their district  








                                                                     SB 739


                                                                    Page  5





          boundaries. This will remove incentives for school districts to  
          use charter authorization as a means to generate revenues.





          How Common is Negative Budget Certification?: According to data  
          from the Interim Reports filed with the California Department of  
          Education, there were four districts in 2014-15, eight districts  
          in 2013-14, and eight districts in 2012-13 that received a  
          negative certification. This means that the school district will  
          be unable to meet its financial obligations for the remainder of  
          the fiscal year or the subsequent fiscal year.  The district  
          mentioned above, Acton-Aqua Dulce Unified School District was  
          assigned a negative budget certification in 2013-14. 



          Arguments in Support: The California School Employees  
          Association supports the bill and states, "Districts with  
          negative certification are likely to be ill equipped to provide  
          the necessary oversight and support for charters that they  
          authorize beyond the boundaries of the school district.  This  
          bill will also have a positive consequence of disincentivizing  
          the authorization of charters outside of district boundaries,  
          solely to collect a portion of the charter school's average  
          daily attendance funding."





          Arguments in Opposition: The California Charter Schools  
          Association Advocates opposes the bill and states, "This bill  
          grows out of a situation in the Santa Clarity Valley region of  
          the author's district in which a school district (Acton-Aqua  
          Dulce Unified School District) was viewed as "out of control"  
          because it was authorizing too many charter schools, including  








                                                                     SB 739


                                                                    Page  6





          one that sought to site a single school facility in a  
          neighboring school district under current law.  At the time the  
          perceived offenses by Acton-Aqua Dulce occurred, the district  
          was in negative certification by the state. Curiously, the  
          author's solution to the situation with Action-Aqua Dulce is too  
          late because the district is no longer in negative  
          certification.  So, SB 739 would have no impact on the charter  
          school authorizing activities of Acton-Agua Dulce."





          Previous Legislation: SB 1263 (Pavley) from 2014, which was  
          vetoed by the Governor, would have authorized a charter school  
          to locate outside the jurisdiction of the chartering school  
          district with written approval from the school district within  
          the jurisdiction of which the charter school chooses to operate  
          and for purposes of construction, as specified; authorized  
          existing charter schools that are located outside the  
          jurisdiction of the chartering school district to continue  
          operation if they were approved prior to April 1, 2013, and are  
          in operation with students enrolled and attending before  
          September 15, 2014; and, prohibited a school district with a  
          negative certification from authorizing new charter schools  
          located outside of their jurisdiction. Governor's veto message:   






               This bill seeks to reverse the application of a limited  
               exemption in law that allows a charter school petitioner to  
               locate a single school site outside of its authorizing  
               school district, under specific circumstances. This bill  
               would instead require the charter school to first get  
               permission from the host district where it intends to  
               locate.








                                                                     SB 739


                                                                    Page  7








               Unfortunately, it appears that some districts and charter  
               schools have gone against the spirit of the law and the  
               exemption has instead become the rule.  This has led to  
               litigation and strained relationships among districts and  
               charter schools.

               While this bill attempts to solve a real problem, I am not  
               comfortable with the retroactive language that could force  
               existing charter schools to change locations. 

               I have assembled a team to examine this situation and come  
               back with solutions that minimize disruption to students  
               and parents.



          AB 2954 (Liu) from 2006, which was vetoed by the Governor, would  
          have added "negative fiscal impact" as a reason for a school  
          district to deny a charter school petition and authorizes a  
          condition for approval of a petition as it relates to providing  
          free and reduced priced meals. Governor's veto message:

               While I understand the plight of school districts faced  
               with fiscal challenges of declining enrollment and other  
               management issues, I cannot condone allowing them to deny  
               parents and students their rights to petition for the  
               establishment of a charter school.  In essence, this bill  
               would grant school districts the authority to punish  
               charter petitioners because of problems caused by their own  
               fiscal management issues or their unwillingness to make  
               tough decisions, or both.

               In addition, allowing school districts to require, as a  
               condition of approval, that the petition describe how the  
               charter school will provide free and reduced-priced meals  
               to eligible pupils would simply provide districts with  








                                                                     SB 739


                                                                    Page  8





               another pretext on which to deny a charter.  Charter  
               schools are generally exempt from most laws and regulations  
               governing school districts and they should continue to be  
               exempt from this one.

               In sum, this bill runs counter to the intent of charter  
               schools, which is to provide parents and students with  
               other options within the public school system and to  
               stimulate competition that improves the quality not only of  
               charter schools, but of non-charter schools as well.



          REGISTERED SUPPORT / OPPOSITION:




          Support


          American Federation of State, County and Municipal Employees


          Association of California School Administrators


          California School Employees Association


          California Teachers Association


          Castaic Union Elementary School District


          Los Angeles Unified School District










                                                                     SB 739


                                                                    Page  9





          Newhall Elementary School District


          Saugus Springs Union Elementary School District


          School Employers Association of California


          Sulphur Springs Union Elementary School District


          William S. Hart Union High School District




          Opposition


          California Charter Schools Association Advocates




          Analysis Prepared by:Chelsea Kelley / ED. / (916)  
          319-2087