HBA-JEK H.B. 6 77(R)BILL ANALYSIS Office of House Bill AnalysisH.B. 6 By: Dunnam Public Education 8/7/2001 Enrolled BACKGROUND AND PURPOSE On May 30, 1995, the Texas Legislature authorized an initial set of 20 open-enrollment charter schools to create competition and innovation in Texas public schools as a whole. The House Public Education Committee established an interim subcommittee on charter schools to evaluate the charter school program and report to the 77th Legislature. The subcommittee reports that there is little evidence to support that charter schools are using innovative teaching methods or that they are performing as well as traditional public schools. Financial troubles and statutory ambiguities have contributed to the abrupt failures of several charter schools. In some cases, the sudden closing of the schools resulted in displaced students having to repeat a grade. Yet the number of charter schools has grown to approximately 200, and the subcommittee reports that without restrictions, Texas could see more than 1,000 charter campuses established in the next few years. Unless the growth of charter schools is slowed and the accountability and oversight strengthened, the subcommittee concludes problems will continue to occur at a faster rate than the State Board of Education can discover and solve them. House Bill 6 converts at-risk charter schools to open-enrollment charter schools, sets a cap on the number of charter schools that may be granted, and strengthens the accountability and oversight provisions regarding the operation of openenrollment charter schools. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that rulemaking authority is expressly delegated to the commissioner of education in SECTION 5 (Section 12.104, Education Code), SECTION 7, (Section 12.106, Education Code), SECTION 10 (Section 12.1101, Education Code), SECTION 13 (Section 12.1162, Education Code), SECTION 18 (Sections 12.123 and 12.128, Education Code), SECTION 19 (Section 12.153, Education Code), SECTION 27 (Section 39.0731, Education Code), SECTION 37, and SECTION 40 of this bill. ANALYSIS House Bill 6 amends the Education, Government, and Local Government codes to set forth provisions regarding open-enrollment charter schools (charter school). Restrictions on the Granting of Charters H.B. 6 authorizes the State Board of Education (SBOE) to grant a charter for an open-enrollment charter school only to an applicant that meets any financial, governing, and operational standards for charter schools adopted by the commissioner of education (commissioner). The bill prohibits SBOE from granting a total of more than 215 charters (SECTION 2, Sec. 12.101). H.B. 6 repeals the provision authorizing SBOE to grant at-risk charters (SECTION 36). Applicability of Laws and Rules H.B. 6 provides that the Local Government Records Act, the Professional Services Procurement Act, and laws regarding open meetings, public information, preservation and management of local government records, real property held in trust, competitive bidding on public work contracts, authorized investments for local governments, and conflicts of interest apply to the operation of a charter school, the governing body of a charter holder, the governing body of a charter school, and charter school students to the same extent the laws apply to a public school district, the board of trustees of a school district, and public school students. The bill provides that a charter school is subject to laws relating to public purchasing and contracts unless the school's charter otherwise describes procedures that are approved by SBOE. The bill considers a member of the governing body of a charter school to be a local public official. The bill specifies that nepotism laws and rules apply to a charter school unless the school has been rated academically acceptable or higher for at least two of the preceding three school years, in which case only certain laws for public officials apply (SECTION 6, Secs. 12.1051-12.1055). The bill specifies that a charter school is subject to the federal and state laws governing municipal zoning ordinances regarding public schools, but that a charter school campus in a municipality with a population of 20,000 or less is not subject to such ordinances (SECTION 4, Sec. 12.103). H.B. 6 provides that a charter school is entitled to the same level of services provided to school districts by regional education service centers. The bill authorizes the commissioner to adopt rules that provide for the representation of open-enrollment charter schools on the boards of directors of regional education service centers as well as rules to permit a charter school to voluntarily participate in any state program available to school districts including a purchasing program if the school complies with all terms of the program (SECTION 5, Sec. 12.104). The bill provides that a charter school, its employees and volunteers, and a member of the governing body of a charter school or charter holder is immune from liability to the same extent as a school district and its employees, volunteers, and trustees (SECTION 6, Sec. 12.1056). The bill requires a charter school in existence on September 1, 2001 to fulfill records management requirements no later than September 1, 2002 (SECTION 38). Funding H.B. 6 restructures how charter schools receive funding under the foundation school program. The bill no longer entitles a charter school to the distribution from the available school fund and local taxes that the district in which the student resides would be entitled to, but instead provides that a charter holder is entitled to receive funds as if it were a school district without a tier one local share and without any local revenue. A charter school's allotment is to be calculated based on the average small and mid-sized district adjustment, the average sparsity adjustment, the average district enrichment for the state, and the average costs of education adjustment (SECTION 7, Sec. 12.106). The bill establishes a plan to transition to the new system of state funding incrementally until the 2012-2013 school year, and authorizes the commissioner to adopt rules to implement the plan (SECTION 40). The bill provides that a charter school is entitled to funds that are available to school districts from the Texas Education Agency (TEA) or the commissioner in the form of grants or other discretionary funding unless specifically prohibited elsewhere in statute. The bill authorizes the commissioner to adopt rules to provide and account for state funding of charter schools (SECTION 7, Sec. 12.106). H.B. 6 provides that funds received by a charter holder after September 1, 2001 and land bought or leased by a charter holder the cost of which is funded at least 50 percent by state funds after September 1, 2001 are considered to be public funds or public property to the extent the land was purchased with state funds. These funds or lands are to be held in trust for the benefit of the students of the charter school, and may be used only for a purpose for which a school district is authorized to use local school funds or property. The bill provides that the funds must be deposited into a Federal Deposit Insurance Corporation insured bank with which the charter holder has a depository contract, and requires a charter holder to deliver a copy of the depository contract to TEA (SECTION 7, Sec. 12.107 and SECTION 18, Sec. 12.128). The bill provides that a charter holder who accepts state funding after September 1, 2001 agrees to accept all liability for any funds accepted before September 1, 2001 (SECTION 8, Sec. 12.1071). H.B. 6 requires the commissioner to take possession and assume control of the property of a charter school that ceases to operate and to supervise the disposition of the property in accordance with law. The security interests in a lien on charter school property of secured property are not affected by such an occurrence. The bill authorizes the commissioner to adopt rules regarding the administration of an open-enrollment charter school's property that has been bought or leased with state funds (SECTION 18, Sec. 12.128). H.B. 6 specifies that a charter school is not entitled to funding under the instructional facilities allotment or the existing debt allotment (SECTION 30, Sec. 46.012 and SECTION 31, Sec. 46.036). The bill requires the Texas Public Finance Authority (authority) to establish a nonprofit corporation to issue revenue bonds on behalf of charter schools for the acquisition, construction, repair, or renovation of educational facilities of those schools. The bill requires the authority to appoint the directors of the corporation in connection with the commissioner. The bill requires the corporation to adopt rules governing the issuance of bonds on behalf of an authorized charter school and requires the comptroller to establish a fund dedicated to the credit enhancement of these bonds. The bill sets forth provisions regarding revenue bonds and exemption from taxation (SECTION 32, Sec. 53.351). The bill authorizes the governing body of a charter school to require a student to pay only those fees that the board of trustees of a school district may charge (SECTION 9, Sec. 12.108). The bill amends the Local Government Code to require the governing body of a charter school to prepare and make available an annual financial statement for each fund subject to its authority (SECTION 34, Sec. 140.005 and SECTION 35, Sec. 140.006). Teachers, Employees, and Parents H.B. 6 amends the Education Code to provide that a person employed as a teacher by a charter school must hold a high school diploma (SECTION 18, 12.129). The bill requires each charter school to provide to parents information related to the qualifications of each of its teachers (SECTION 18, Sec. 12.130). The bill requires a charter school to notify a student's parent in writing if the student has five unexcused absences in a six month period (SECTION 25, Sec. 25.095). Charter Applications and Revisions H.B. 6 requires the governing body of a charter school to require an applicant to complete and submit an application by a reasonable deadline, and provides that a charter school must publish notice of the opportunity to apply for admission. The bill requires a charter holder to file a copy of its articles of incorporation or bylaws if possible. The bill requires a charter school that receives more acceptable applications for admission than available positions to fill the available positions by lottery or in the order the applications received before the deadline were received (SECTION 14, Sec. 12.117 and SECTION 16, Sec. 12.119). H.B. 6 requires the commissioner by rule to adopt a procedure for providing notice on SBOE's receipt of an application for a charter school to the board of trustees of each school district from which the charter school is likely to draw students and to each member of the legislature that represents the geographic area to be served by the proposed school (SECTION 10, Sec. 12.1101). The bill provides that the charter must specify the powers or duties of the school's governing body that may be delegated. The charter must also prohibit discrimination in the school's admission policy on the basis of artistic ability (SECTION 11, Sec. 12.111). H.B. 6 establishes that the grant of a charter does not create an entitlement to a renewal of a charter on the same terms as it was originally issued (SECTION 11, Sec. 12.113). Evaluation and Accountability The bill provides that a revision of a charter may be made only with the approval of the commissioner rather than SBOE, and authorizes the commissioner to modify, place on probation, revoke, or deny the renewal of a charter school's charter if the commissioner determines that the charter holder failed to protect the health, safety, or welfare of the students enrolled at the school (SECTION 12, Secs. 12.114 and 12.115). The bill authorizes the commissioner to temporarily withhold funding, suspend the authority of a charter school to operate, or take any other reasonable action to protect the health, safety, or welfare of the school's students based on evidence until further determination is made by the commissioner or the board that conditions did not or no longer present a danger (SECTION 13, Sec. 12.1162). The Administrative Procedure Act does not apply to a hearing that is related to a modification, placement on probation, revocation, denial of renewal, or suspension of a charter (SECTION 12, Sec. 12.116). H.B. 6 prohibits a charter school whose charter has been revoked or surrendered from continuing to operate or receive state funds, but authorizes a charter school whose renewal is denied by the commissioner to continue to operate and receive state funds only for the remainder of the school year. The bill authorizes the commissioner to take actions or accreditation sanctions against a charter school that commits a material violation of the school's charter, fails to satisfy generally accepted accounting standards of fiscal management, or fails to comply with statute or rule governing charter schools. The bill requires the commissioner to adopt rules to implement these provisions (SECTION 13, Secs. 12.1161 and 12.1162). H.B. 6 authorizes the commissioner to audit the records of a charter school, charter holder, and management company, and provides that an audit must be limited to matters directly related to the management or operation of a charter school (SECTION 13, Sec. 12.1163). The bill also requires the commissioner to authorize special accreditation investigations to be conducted as the commissioner determines necessary (SECTION 28, Sec. 39.075). The bill provides that the evaluation of charter schools must include an evaluation of issues determined by the commissioner. The bill authorizes the commissioner to determine how all indicators may be used to determine accountability ratings and to select districts and campuses for acknowledgment (SECTION 15, Sec. 12.118 and SECTION 26, Sec. 39.073). The bill authorizes the commissioner to order closure of all programs operated under the charter of a school that does not satisfy the accreditation criteria. The bill provides that if a district fails or refuses to pay the costs of a monitor, master, management team, or special campus intervention team, the commissioner may pay the costs using amounts withheld from funds to which the district is otherwise entitled or recover the amount in the manner provided for recovery of an overallocation of state funds (SECTION 29, Sec. 39.131). H.B. 6 authorizes the commissioner by rule to develop an alternative accreditation status pilot program for the 2001-2002 school year that is designed to reflect the academic performance and improvement of students enrolled at a district, campus, or charter school that primarily serves at-risk students or is not required to administer assessment instruments. The bill provides that a district, campus, or charter school participating in the pilot program will also continue to receive a regular accountability rating and is subject to any applicable sanctions based on that rating. The bill requires the commissioner to report on the pilot program to the governor, lieutenant governor, speaker of the house of representatives, and the presiding officer of each legislative committee having primary jurisdiction over public education. The pilot program provisions expire January 1, 2003 (SECTION 27, Sec. 39.0731). Governing Body of a Charter School H.B. 6 prohibits a person or a person from serving as a member of the governing body of a charter holder or charter school, or as an officer or employee of a charter school if the person has been convicted of certain serious or violent offenses or has a substantial interest in a management company (SECTION 17, Sec. 12.120). The bill provides that the governing body of a charter school is responsible for the management, operation, and accountability of the school regardless of whether the governing body delegates the governing body's powers and duties to another person. The bill authorizes the attorney general to bring suit against a member of the governing body for breach of a fiduciary duty by the member, including misapplication of public funds. The bill sets forth provisions regarding training for officers and members of governing bodies and requires the commissioner to adopt rules relating to the training no later than January 1, 2002 (SECTION 18, Secs. 12.121 and 12.123, and SECTION 37). The bill authorizes the governing body of a charter school to select a school attendance officer, and requires the duties of the attendance officer to be performed by peace officers in the county if no attendance officer is appointed (SECTION 21, Sec. 25.088 and SECTION 23, Sec. 25.090). Management Contracts H.B. 6 prohibits a charter holder or governing body of a charter school from accepting a loan from a management company that has a contract to provide management services to that charter school or another charter school operating under a charter granted to the same charter holder. The bill provides that any contract between a charter school and a management company proposing to provide management services to the school must require the management company to maintain all records related to the management services separately from any other records (SECTION 18, Secs. 12.124 and 12.125). The bill authorizes the commissioner to prohibit, deny renewal of, suspend, or revoke a contract between a charter school and a management company if the commissioner determines that the company has failed to provide educational or related services in compliance with the company's contractual or legal obligations, has violated statute or rules regarding charter schools, or has failed to protect the health, safety, or welfare of the students served by the company. The bill establishes that a management company is liable for damages incurred by the state or an affected school district as a result of the company's failure to comply with its legal obligations to the charter school. The bill authorizes the attorney general on request of the board to bring suit on behalf of the state or any affected school district against a management company liable under these provisions (SECTION 18, Secs. 12.126 and 12.127). College or University Charter Schools H.B. 6 authorizes SBOE to grant a charter on the application of a public senior college or university for a charter school to operate on the campus of the public senior college or university or in the same county in which the campus of the college or university is located. The bill sets forth criteria for the granting of such a charter and provides that the name of the charter school must include the name of the public senior college or university operating the school. The bill authorizes the commissioner to adopt rules to implement these provisions, and specifies that provisions regarding charter schools apply to a charter school run by a college or university. A charter granted under these provisions is not considered for purposes of the limit on the number of charter schools (SECTION 19, Secs. 12.152-12.156). Access to Criminal History Records H.B. 6 requires a charter school to obtain from any law enforcement or criminal justice agency all criminal history information regarding a person the school intends to employ in any capacity or a person who has indicated in writing an intention to serve as a volunteer with the school (SECTION 20, Sec. 22.083). The bill amends the Government Code to entitle a charter school to obtain from the Department of Public Safety criminal history information for members of the governing body of a charter school (SECTION 33, Sec. 411.097). EFFECTIVE DATE The Act takes effect September 1, 2001. The provisions regarding state funding apply beginning with the 2001-2002 school year.