BILL ANALYSIS                                                                                                                                                                                                    



                                                                       



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                                 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





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           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  







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          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.  








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          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  







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          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  







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          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







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          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  







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          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

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