BILL ANALYSIS
SENATE JUDICIARY COMMITTEE
Senator Ellen M. Corbett, Chair
2009-2010 Regular Session
AB 572
Assemblymember Brownley
As Amended June 22, 2009
Hearing Date: July 1, 2009
Education Code
GMW/GMO:jd
SUBJECT
Charter Schools
DESCRIPTION
This bill would make charter schools, like public school
districts, subject to open meeting laws, the California Public
Records Act, Government Code conflict of interest laws, and the
Political Reform Act. Thus, charter school board meetings would
be made open to the public, charter school records would be
available for public inspection, and charter schools would be
required to adopt more stringent conflict of interest policies.
BACKGROUND
Charter schools were authorized in 1992 to give communities the
opportunity to establish schools that could operate freely from
the structural programs of public school districts. Charter
schools are intended to provide a unique learning environment,
giving students who do not respond well to standard education
programs 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.) Charter schools are
funded in the same way that public schools are funded. In the
17 years of charter school existence in California, however,
many reports of widespread financial mismanagement of charter
schools' public funds have led to the belief that charter
schools' conflict of interest rules need to be tightened.
Following are examples of those reports of abuse and
mismanagement.
(more)
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In 2007, the Los Angeles County Office of Education, through an
outside auditor, found 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. According
to the March 24, 2007 Los Angeles Times article that reported on
this school, 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.
A September 5, 2007 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 chartered school. Cox
was also charged with inappropriately entering into school
service contracts with a company he owned.
In August 2006, the Superintendent of Public Instruction and
various California 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.
AB 572 intends to tighten the rules relating to public
accountability, and regulate the management and operations of
charter schools by making them subject to the same open
meetings, public records access, conflict of interest, and
Political Reform Act laws that govern other public schools and
school districts. This bill was passed by the Senate Committee
on Education, with a vote of 6 to 1, on June 17, 2009.
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CHANGES TO EXISTING LAW
1. Existing law , the Ralph M. Brown Act, requires that a local
agency's board of directors meeting be open to the public.
(Gov. Code Sec. 54950 et seq.)
This bill would subject a charter school's board meetings to
the Ralph M. Brown Act.
2. Existing law , the Bagley-Keene Open Meeting Act, requires
that state body meetings be open to the public. (Gov. Code
Sec. 11120.)
This bill would require charter school board meetings to
comply with standards of the Bagley-Keene Open Meeting Act, if
the charter school is a state body.
3. Existing law , the California Public Records Act, declares
everyone in California has a right to access information that
concerns the people's business and provides that public
records shall be available for inspection, except as provided
by an express provision of law. (Gov. Code Secs. 6250,
6253.)
This bill would subject charter schools to the California
Public Records Act and would make their public records
available for public inspection, unless exempted by law.
4. Existing law prohibits school district officials, and its
employees, while acting within the scope of their duties, from
entering into any contract in which they have a financial
interest. (Gov. Code Sec. 1090 et seq.)
This bill would prohibit a charter school board from entering
into any contracts in which a board member has a financial
interest.
5. Existing law , as provided by the Political Reform Act,
requires public officials to carry out their duties in an
unbiased manner, free from influence by outside interests, and
follow regulations during elections, as defined. (Gov. Code
Sec. 81000.)
This bill would:
(a) subject charter school board members to the Political
Reform Act;
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(b) require a charter school board member to refrain from
voting on matters that affect his or her own employment;
(c) require a charter school board member to refrain from
voting on an issue that would uniquely affect a relative of
that board member; and
(d) not allow a person to serve on the charter school board
if that person is prohibited from holding a civil office by
either the California Constitution or state law.
6. 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.
7. This bill would become operative on July 1, 2011.
COMMENT
1. Stated need for the bill
According to the author,
Recent news reports of charter school members engaging in
inappropriate financial mismanagement have highlighted the
need for charter school conflict of interest laws to be
clarified. This bill will continue the long standing
tradition that charter schools have greater autonomy than
traditional public schools, but at the same time provide
greater transparency to parents and the public regarding the
use of public funds by the charter schools for the educational
benefit of their students. Charter school governing boards
should be held to the same standard as school district boards.
AB 572 will align conflict of interest standards for charter
school boards with that of school district boards.
2.Charter schools may operate independently from public school
districts, but should be accountable for use of public funds
Current law imposes no specific requirements for charter school
conflict of interest policies. Although a recipient of public
funding, a charter school is designed to be able to operate
separately from a traditional school district in order to
enhance the quality of education for its students.
However, the California School Boards Association (CSBA),
sponsor of AB 572, argues that charter schools' abuse of already
lenient accommodations has led to the financial mismanagement of
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funds and the closing of many charter schools. (See
Background.) They argue that to protect the state's public
education funds from future fraudulent use, charter schools
should be held to the same conflict of interest standards
applied to traditional public schools and districts. Requiring
charter schools to comply with the same conflict of interest
restrictions as traditional public schools would help to prevent
charter school board members from personally gaining from their
position and ensure board members are acting in the best
interest of the school and its students, supporters state.
The California Charter Schools Association (CCSA), in
opposition, argues that subjecting charter schools to the same
set of laws as regular school districts would go against the
purpose of charter schools. Charter schools, it argues, are not
meant to mirror traditional public schools, but instead provide
options to public school students and be able to operate freely
and independently from school district mandated programs. While
CCSA agrees that it is necessary to provide transparency into
interested board members' conduct, CCSA does not believe it
would be appropriate to subject charter schools to the
Government Code conflict of interest laws. For example, CCSA
argues that most charter schools are nonprofit organizations,
and already required to abide by the Corporations Code conflict
of interest laws. CCSA would argue that it would be unfair to
subject the nonprofit charter school to conflict of interest
laws which differ, and are not as stringent, than what is
normally required for nonprofit organizations.
CCSA's argument, however, fails to distinguish between charter
school operations free from traditional public school district
structures, and charter school operations free from public
accountability and standards for use of public funds. The two
are distinct interests. AB 572 does not affect the former, but
is intended to correct perceived deficiencies in the latter.
Charter schools allow community members to create a school that
has substantial freedom to develop innovative techniques.
However, this freedom should arguably not extend to uncontrolled
and irresponsible financial management and expenditure of public
funds. This bill involves setting accountability standards for
the manner in which public money is spent and business
conducted. According to the proponents, these standards should
have no impact on the education techniques the school may choose
to apply.
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3. Higher conflict of interest standards proposed
Under Corporations Code conflict of interest laws, 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 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, as
noted above in the Background, demonstrate why it is not
appropriate to allow even an incorporated nonprofit charter
school to follow the more lenient Corporations Codes' conflict
of interest laws. (See Background.) 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. Proponents
assert that requiring charter schools to comply with the more
stringent standard under the Government Code is necessary in
order to protect the public from financial mismanagement of
taxpayer money, and the students from an unstable learning
environment.
4.Charter schools' use of public funds should be subject to
public access and scrutiny
The Public Records Act sets forth the people's right to have
access to information that is related to the people's business.
(Gov. Code Sec. 6250.) 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. (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
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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 California Public Records Act would allow access
to their records, hence the scrutiny required to prevent
misconduct and misappropriation of public funds.
5.Are charter schools public agencies?
Education Code Section 47650 treats charter schools like school
districts for the purpose of receiving state funds. As
discussed earlier, school districts are considered public
agencies.
In 2000, AB 101 (Steinberg, Chap. 14, Stats. 2000) was enacted,
providing that a charter school may be considered a public
agency eligible for membership in a Joint Powers Authority
(JPA). (Gov. Code Sec. 6528.) A JPA is a government-regulated
entity that is formed by two or more public agencies to pool
their assets together for purposes of risk management and pay
claims against its member entities.
Earlier this session, this committee heard and passed SB 108
(Walters). SB 108 would prohibit a JPA from denying membership
to a charter school for the sole reason that it is a charter
school. SB 108, sponsored by the CCSA, is pending in the
Assembly Judiciary Committee. Thus, both AB 101 and SB 108
would treat charter schools as public entities.
The argument, therefore, that charter schools are not intended
to be public entities subject to the statutes that make a public
entity's business transparent to the taxpayers that fund it is
in direct contradiction to the actions the Legislature has taken
to characterize charter schools as a public agency or having a
public agency-like structure. In fact, if enacted, AB 572 would
be entirely consistent with SB 108 and AB 101.
6.Recent delayed operative date amendment addresses CCSA's
timing concern
CCSA has stated concerns that enactment of this bill would
immediately cause charter schools to not be in conformity with
their charters, leaving the schools vulnerable to revocation by
the school district. It asserts that charter schools would not
be given enough time to make the extreme number of changes
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needed to conform to the new standards. CCSA states that some
school districts have been eager to revoke charter petitions and
will surely use this opportunity to do so.
However, the bill has been recently amended to provide a delayed
implementation date of July 1, 2011. This would give charter
schools 18 months to comply with the new standards, which
appears to address the CCSA's timing concerns.
7.Proposed amendment to allow employees to serve on governing
board
This bill provides that a person who is employed as a teacher in
a charter school may also serve on that school's governing
board. It leaves out the option that an employee of the charter
school who is not a teacher may serve on the governing board.
The author wishes to clarify that the intent of this provision
was to allow employees of the charter school, including
teachers, to be eligible to serve on the board. Therefore,
committee staff suggests, and the author has accepted, the
following amendment:
Suggested amendment:
On page 3, lines 34 - 35, delete "be employed as a teacher in a
charter school and serve as a member of the governing board of
that charter school" and insert "serve as a member of the
governing body of a charter school and be employed in a separate
position at that charter school."
Support : California Teachers Association; California
Association of School Business Officials (CASBO); California
State PTA; Association of California School Administrators;
Public Advocates; California Federation of Teachers; San Diego
County Office of Education; San Bernardino County Office of
Education; Santa Clara County Office of Education; Palos Verdes
Unified School District; Saddleback Valley Unified School
District; St. Helena Unified School District; San Francisco
Unified School District; Antioch Unified School District; Orange
County Department of Education; California School Employees
Association; Kern County Superintendent of Schools, Los Angeles
Unified School District; Fresno Unified School District; Los
Angeles County Office of Education; Alameda County
Superintendent of Schools Sheila Jordan, 175 individuals
Opposition : California Charter Schools Association; two
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individuals
HISTORY
Source : California School Board Association
Related Pending Legislation :
SB 108 (Walters, 2009.) This bill is currently pending in the
Assembly Committee on Judiciary. (See Comment 5.)
Prior Legislation :
AB 1197 (Wiggins, 2004) would have required individuals who
govern charter schools to file statements of economic interest
in compliance with the Political Reform Act. AB 1197 died on
the Senate Floor.
AB 2115 (Mullin, 2008) proposed to require charter schools to
adopt a conflict of interest policy that would require charter
school board members to follow the same standards as local
education agency board members. This bill was vetoed by the
Governor, stating that "the measure runs counter to the intent
of charter schools to be free from many laws governing school
districts."
Prior Vote :
Assembly Committee on Education (Ayes 8, Noes 3)
Assembly Floor (Ayes 51, Noes 29)
Senate Committee on Education (Ayes 6, Noes 1)
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