BILL ANALYSIS ------------------------------------------------------------ |SENATE RULES COMMITTEE | AB 572| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ THIRD READING Bill No: AB 572 Author: Brownley (D) Amended: 9/2/09 in Senate Vote: 21 SENATE EDUCATION COMMITTEE : 6-1, 6/17/09 AYES: Romero, Alquist, Hancock, Liu, Maldonado, Simitian NOES: Wyland NO VOTE RECORDED: Huff, Padilla SENATE JUDICIARY COMMITTEE : 3-2, 7/1/09 AYES: Corbett, Florez, Leno NOES: Harman, Walters ASSEMBLY FLOOR : 51-29, 5/28/09 - See last page for vote SUBJECT : Charter schools SOURCE : California School Boards Association DIGEST : This bill makes 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. Becomes operative on July 1, 2011. CONTINUED AB 572 Page 2 Senate Floor Amendments of 9/2/09 further clarify how a charter school board is to operate, so that it may meet these open meeting and open records laws, while conducting the business of charter schools. Specifically, the amendments (1) clarify that a meeting of the charter school's governing body to discuss charter school business shall not include discussion of any item not related to the operation of the charter school (in other words, the charter school board must have separate meetings for school operations, for example, and for discussion of their nonprofit corporation business activities, (2) define where meetings of the charter school may be held (within the boundaries of the school facilities or where 10 percent or more of the enrolled students reside or where the greatest number of pupils in the school reside), (3) permit the governing body of a charter school to hold closed sessions to consider a matter regarding pupil discipline (which is actually existing law), (4) define the jurisdiction of a charter school for purposes of the Political Reform Act of 1974, and (5) clarify that the failure of a designated person to file a required Statement of Economic Interest on time shall not be the sole basis for revocation of a charter. ANALYSIS : 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. The following are examples of those reports of AB 572 Page 3 abuse and mismanagement. 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 Page 4 The bill 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 Education Committee with a 6-1 vote on June 17, 2009. Changes to Existing Law Existing law, the Ralph M. Brown Act, requires that a local agency's board of directors meeting be open to the public. (Section 54950 et seq. of the Government Code) This bill subjects a charter school's board meetings to the Ralph M. Brown Act. Existing law, the Bagley-Keene Open Meeting Act, requires that state body meetings be open to the public. (Section 11120 of the Government Code) This bill requires charter school board meetings to comply with standards of the Bagley-Keene Open Meeting Act, if the charter school is a state body. 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. (Section 6250 and 6253 of the Government Code) This bill subjects charter schools to the California Public Records Act and makes their public records available for public inspection, unless exempted by law. 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. (Section 1090 et seq. of Government Code) This bill prohibits a charter school board from entering AB 572 Page 5 into any contracts in which a board member has a financial interest. 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. (Section 81000 of the Government Code) This bill: 1. Subjects charter school board members to the Political Reform Act. 2. Requires a charter school board member to refrain from voting on matters that affect his/her own employment. 3. Requires a charter school board member to refrain from voting on an issue that would uniquely affect a relative of that board member. 4. Does 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. This bill allows an individual to serve as a member of the school's governing body of a charter school and be employed in a separate position at that charter school. This bill further clarifies how a charter school board is to operate, so that it may meet these open meeting and open records laws, while conducting the business of charter schools. Specifically, this bill (1) clarifies that a meeting of the charter school's governing body to discuss charter school business shall not include discussion of any item not related to the operation of the charter school (in other words, the charter school board must have separate meetings for school operations, for example, and for discussion of their nonprofit corporation business activities, (2) defines where meetings of the charter school may be held (within the boundaries of the school facilities or where 10 percent or more of the enrolled students reside or where the greatest number of pupils in AB 572 Page 6 the school reside), (3) permits the governing body of a charter school to hold closed sessions to consider a matter regarding pupil discipline (which is actually existing law), (4) defines the jurisdiction of a charter school for purposes of the Political Reform Act of 1974, and (5) clarifies that the failure of a designated person to file a required Statement of Economic Interest on time shall not be the sole basis for revocation of a charter. This bill becomes operative on July 1, 2011. Prior Legislation AB 1197 (Wiggins), 2003-04 Session, would have required individuals who govern charter schools to file statements of economic interest in compliance with the Political Reform Act. The bill died on the Senate Floor. AB 2115 (Mullin), 2007-08 Session, 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. The 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." FISCAL EFFECT : Appropriation: No Fiscal Com.: No Local: No SUPPORT : (Verified 9/2/09) California School Boards Association (source) Antioch Unified School District Association of California School Administrators California Association of School Business Officials California Federation of Teachers California School Employees Association California State PTA California Teachers Association Fresno Unified School District Grizzly Challenge Charter School Kern County Superintendent of Schools Los Angeles Unified School District Orange County Department of Education AB 572 Page 7 Palos Verdes Unified School District Public Advocates Saddleback Valley Unified School District San Bernardino County Office of Education San Diego County Office of Education San Francisco Unified School District Santa Clara County Office of Education St. Helena Unified School District OPPOSITION : (Verified 9/2/09) California Charter Schools Association ARGUMENTS IN SUPPORT : 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." The California School Boards Association (CSBA), the bill's sponsor, argues that charter schools' abuse of already lenient accommodations has led to the financial mismanagement of funds and the closing of many charter schools. 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. ARGUMENTS IN OPPOSITION : The California Charter Schools AB 572 Page 8 Association (CCSA) 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. ASSEMBLY FLOOR : AYES: Ammiano, Arambula, Beall, Block, Blumenfield, Brownley, Buchanan, Caballero, Charles Calderon, Carter, Chesbro, Coto, Davis, De La Torre, De Leon, Eng, Evans, Feuer, Fong, Fuentes, Furutani, Galgiani, Hall, Hayashi, Hernandez, Hill, Huber, Huffman, Jones, Krekorian, Lieu, Bonnie Lowenthal, Ma, Mendoza, Monning, Nava, John A. Perez, V. Manuel Perez, Portantino, Price, Ruskin, Salas, Saldana, Skinner, Solorio, Swanson, Torlakson, Torres, Torrico, Yamada, Bass NOES: Adams, Anderson, Bill Berryhill, Tom Berryhill, Blakeslee, Conway, Cook, DeVore, Duvall, Emmerson, Fletcher, Fuller, Gaines, Garrick, Gilmore, Hagman, Harkey, Jeffries, Knight, Logue, Miller, Nestande, Niello, Nielsen, Silva, Smyth, Audra Strickland, Tran, Villines DLW:mw 9/2/09 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END ****