HBA-JEK C.S.H.B. 6 77(R)BILL ANALYSIS


Office of House Bill AnalysisC.S.H.B. 6
By: Dunnam
Public Education
3/26/2001
Committee Report (Substituted)



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 over 1,000 charter campuses 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. C.S.H.B. 6 establishes a two-year
moratorium on new charters for open-enrollment charter schools and
strengthens the accountability and oversight provisions regarding the
operation of open-enrollment 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 3 (Section 12.104, Education Code) and SECTION 19 (Sections 12.125
and 12.127, Education Code) and to the State Board of Education in SECTION1
(Section 12.1014, Education Code) and SECTION 19 (Section 12.123, Education
Code) and SECTION 26 of this bill. 

ANALYSIS

C.S.H.B. 6 amends the Education, Government, and Local Government codes to
set forth provisions regarding open-enrollment charter schools (charter
schools). 

Moratorium

C.S.H.B. 6 prohibits the State Board of Education (board) from issuing a
charter for a charter school after August 31, 2001.  The bill also
prohibits the board from approving an expansion of an existing charter
school not rated as academically acceptable or higher for each of the three
preceding school years to an additional campus or site beyond the campuses
or sites stated in the charter.  The moratoriums expire September 1, 2003
(SECTION 1, Sec. 12.1015 and SECTION 10, Sec. 12.114). 

Minimum Student Enrollment

C.S.H.B. 6 prohibits the State Board of Education (board) from granting or
renewing a charter unless the board determines that the school will have
and maintain an enrollment of at least 50 students, except that a school
may have at least 20 students if the board specifically finds that the
nature of the school requires an enrollment of fewer than 50 students.  The
bill authorizes the board to revoke a school's charter if for  a period
prescribed by board rule the school's enrollment is lower than the
authorized minimum (SECTION 1, Sec. 12.1014).   

Delegation

The bill authorizes the board to delegate to the commissioner of education
(commissioner) any power or duty regarding charter schools other than the
power to grant, deny, modify, place on probation, deny renewal of, or
revoke a charter for an open-enrollment charter school (SECTION 1, Sec.
12.1013). 

Applicability of Laws and Rules

C.S.H.B. 6 specifies that a charter school is subject to the federal and
state laws governing public school districts unless the commissioner
determines it would be impractical or inefficient to apply a law or rule to
charter schools (SECTION 2, Sec. 12.103).  The bill 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 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 (SECTION
5, Secs. 12.1051-12.1053).  The bill considers a member of the governing
body of a charter school to be a local public official, and specifies that
such a member or an officer of a charter school is considered to have a
substantial interest in a business entity if a person related to the member
or officer in the third degree has a substantial interest in that business
entity (SECTION 5, Sec. 12.1053).  The bill requires a charter school in
existence on September 1, 2001 to designate a records management officer,
establish a records management program, and prepare and file records
control schedules by September 1, 2002 (SECTION 29).   

C.S.H.B. 6 provides that charter schools are subject to provisions
governing purchasing and contracting by a public school.  The bill also
specifies that a charter school is subject to the requirement that a school
day be at least seven hours each day unless the commissioner grants the
open-enrollment charter school a waiver.  The bill prohibits the
commissioner from denying a school-day-length waiver to a charter school
that has received an academically acceptable rating for each of the
preceding three school years.  The bill authorizes the commissioner to
adopt rules to apply other provisions of the Education Code to charter
schools to the extent the commissioner determines these rules are necessary
or advisable to provide and account for state funding of charter schools
(SECTION 3, Sec. 12.104 and SECTION 4, Sec. 12.1041). 

Funding

C.S.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
adjustment for geographic variation in known resource costs and costs of
education due to factors beyond the school district's control (SECTION 6,
Sec. 12.106). 

C.S.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 these 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 to the Texas Education Agency (TEA) a copy of the
depository contract (SECTION 6,  Sec. 12.106 and SECTION 19, Sec. 12.127). 

C.S.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 openenrollment charter
school's property that has been bought or leased with state funds (SECTION
19, Sec. 12.127).  

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 6, Sec. 12.108).  The bill amends the Local
Government Code to require the governing body of an open-enrollment charter
school to prepare and publish an annual financial statement for each fund
subject to its authority (SECTION 23, Sec. 140.005 and SECTION 24, Sec.
140.006). 

Teachers and Employees

C.S.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 or high school
equivalency certificate.  The bill provides that a teacher assigned to
teach a subject in the foundation curriculum must have a bachelor's degree
or teaching certification from an institution equivalent to a higher
education institution unless the commissioner waives the requirement
(SECTION 19, Sec. 12.128).  The bill provides an exception for a current
teacher who does not have a bachelor's degree and is under contract as a
teacher for the 2001-2002 school year if the person enrolls in an
institution of higher education no later than January 1, 2002 and obtains a
bachelor's degree no later than July 1, 2007 (SECTION 19, Sec. 12.1281).
The bill requires each charter to specify the manner in which the school
will distribute to parents information related to the qualifications of
each professional employee of the program, including any professional or
education degree, certification, or relevant experience of each employee
(SECTION 8, Sec. 12.111). 

C.S.H.B. 6 provides that an employee of a charter school's management
company who qualifies for membership under the Teacher Retirement System of
Texas (TRS) shall be covered under TRS to the same extent a qualified
employee of a school district is covered (SECTION 5, Sec. 12.1055). 

Charter Applications and Revisions

C.S.H.B. 6 requires the board to adopt an application form and procedure
that must be used to apply for the renewal of a charter.  The bill provides
that an application for a charter or renewal of a charter must include a
description of the types of instructional approaches used, the program to
be provided during each typical school day, and the number of hours each
day the program will operate (SECTION 7, Sec. 12.110).  The bill provides
that the charter must specify the powers or duties of the school's
governing body that may be delegated and prohibit discrimination in the
school's admission policy on the basis of artistic ability (SECTION 8, Sec.
12.111).  The bill requires TEA to investigate existing charter schools to
determine if any of them are operating in a  manner that effectively
requires students to possess special artistic, athletic, or other abilities
to be considered for admission and to report any violations to the board by
January 1, 2002 (SECTION 25).  The bill requires a charter school that
receives more acceptable applications for admission than available
positions to fill the available positions by lottery (SECTION 14, Sec.
12.117). 

C.S.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 9, Sec. 12.113).  The bill provides that a
charter holder that seeks to increase grade levels or enrollment or expand
to an additional campus or site beyond what is stated in the charter must
submit an application for approval in a form approved by the board.  The
bill provides that the board must interview appropriate school
representatives and carefully review an application for revision (SECTION
10, Sec. 12.114).  The bill requires a charter holder to file a copy of its
articles of incorporation with the board if applicable (SECTION 17, Sec.
12.119).  
 
Evaluation of Open-Enrollment Charter Schools

The bill authorizes the board to modify, place on probation, revoke, or
deny the renewal of a charter school's charter if the board determines that
the charter holder failed to protect the health, safety, or welfare of the
students enrolled at the school (SECTION 11, Sec. 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 under these
provisions (SECTION 12, Sec. 12.116 and SECTION 13, Sec. 12.1162).  

C.S.H.B. 6 prohibits a charter school whose charter has been revoked or
surrendered from continuing to operate or receive state funds, and
authorizes a charter school whose renewal is denied by the board to
continue to operate and receive state funds only for the remainder of the
school year (SECTION 13, Sec. 12.1161).  

C.S.H.B. 6 provides that the evaluation of charter schools must include an
evaluation of whether a school district or its employees are informing
students at risk of dropping out of school of the opportunity to attend an
open-enrollment charter school for the purpose of enabling the district or
campus to avoid responsibility for those students (SECTION 15, Sec.
12.118).  The bill requires the commissioner to authorize a special
accreditation investigation of the school district in response to such an
allegation (SECTION 21, Sec. 39.075).  The bill establishes criteria for
the evaluation of a charter school that assists students in earning a high
school diploma or high school equivalency certificate (SECTION 15, Sec.
12.118). 

C.S.H.B. 6 requires TEA to study the use of and effectiveness of innovative
instructional methods by charter schools and the procedures TEA uses to
obtain information regarding the performance of charter schools.  The bill
requires TEA to report its assessment and recommendations in the
comprehensive biennial report by December 1, 2002.  These provisions expire
January 1, 2003  (SECTION 16, Secs. 12.1181 and 12.1182).   

Governing Body of a Charter School

C.S.H.B. 6 prohibits a person or a person whose spouse has a substantial
interest in a management company from serving as a member of the governing
body of a charter holder or as an officer or employee of an open-enrollment
charter school (SECTION 18, Sec. 12.120).  The bill requires the governing
body of a charter school to govern and oversee the management of the
school, including the use of state funds. The bill prohibits the governing
body of a charter school from delegating the governing body's powers and
duties unless the charter provides for such a delegation.  The bill
requires the governing body of a charter school to provide for appeals to
the governing body or its designee concerning student disciplinary matters
(SECTION 19, Sec. 12.121).   

C.S.H.B. 6  provides that a member of the governing body of a charter
holder or a member of the governing body of a charter school is personally
liable for a misapplication of state funds or property purchased or leased
with state funds, including any use of funds that results in an improper
personal benefit for the member, unless the misapplication was made in good
faith on the advice of legal counsel.  A person held liable under this
provision is entitled to contribution from any other person who knowingly
accepted funds that violated these provisions (SECTION 19, Sec. 12.122).
The bill authorizes the board to adopt rules prescribing training for
officers and members of governing bodies of open-enrollment charter schools
by January 1, 2002.  The bill describes what the rules must include and
establishes penalties for a person who does not complete the minimum
training (SECTION 19, Sec. 12.123 and SECTION 26). 

C.S.H.B. 6 authorizes only a member of the governing body or officer of a
charter school that has been rated as academically acceptable or higher for
each of the preceding three school years to be compensated  (SECTION 5,
Sec. 12.1053).   

Management Contracts

C.S.H.B. 6 requires the governing body of a charter school to enter into a
contract for management services if the governing body determines that
contracting is necessary and desirable (SECTION 19, Sec. 12.121).  The bill
prohibits the charter holder or the governing body of a charter school from
accepting a loan and entering into a contract to provide management
services with the same management company (SECTION 19, Sec. 12.124).
C.S.H.B. 6 requires a charter school to submit to the commissioner any
proposed contract between the school and a management company and provides
that such a contract may not take effect until approved by the
commissioner.  The bill requires the commissioner to adopt specific
criteria to use in determining whether to approve a management contract by
November 1, 2001.  The bill prescribes what the criteria must include and
sets forth the conditions under which the commissioner is authorized to
suspend, revoke, or deny the renewal or approval of the contract of a
management company. The bill requires the commissioner to adopt rules to
administer provisions relating to the approval of management contracts.
The bill provides that an approved contract is not assignable (SECTION 19,
Sec. 12.125 and SECTION 27). 

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.  The bill does not
entitle an affected school district to bring suit on its own behalf against
a management company, but does authorize such a district to participate in
a suit brought by the attorney general (SECTION 19, Sec. 12.126). 

Access to Criminal History Records

C.S.H.B. 6 requires a charter school to obtain criminal history record
information that relates to a person who serves as or agrees to serve as a
member of the school's governing body or a person whom the school intends
to employ as an educator who is not certified by the State Board for
Educator Certification.  The bill authorizes 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 the above or
other capacities, 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 the school (SECTION 22, Sec. 411.097). 

EFFECTIVE DATE

The Act takes effect September 1, 2001.  The provisions regarding state
funding apply beginning with the 2003-2004 school year. 

COMPARISON OF ORIGINAL TO SUBSTITUTE

C.S.H.B. 6 differs from the original by exempting charter schools from
state laws or rules that the commissioner of education (commissioner)
determines are impracticable or inefficient for charter schools (SECTION 2,
Sec. 12.103).  The substitute removes the requirement that schools notify
parents of undercertified teachers, but provides that each charter must
specify the manner in which the school will distribute to parents
information related to the qualifications, including any professional or
education degree held, of each professional employee of the program
(SECTION 3, Sec. 12.104 and SECTION 8, Sec. 12.111). The substitute
prohibits the State Board of Education from approving the revision unless
the school has received a rating of academically acceptable or higher for
each of the preceding three school years (SECTION 10, Sec. 12.114). 

 The substitute requires state funds for charter schools to be deposited in
a Federal Deposit Insurance Corporation insured bank with which the school
has a depository contract rather than a school direct depository, and
requires a charter holder to deliver to the Texas Education Agency (TEA) a
copy of the depository contract (SECTION 3, Sec. 12.104 and SECTION 6, Sec.
12.106).  The substitute provides that a charter school's allotment is to
be calculated based on the average adjustment for geographic variation in
known resource costs and costs of education due to factors beyond the
school district's control in addition to the average small and mid-sized
district adjustment, the average sparsity adjustment, and the average
district enrichment for the state (SECTION 6, Sec. 12.106). 

C.S.H.B. 6 prohibits the commissioner from denying an application for a
school day length waiver if the school has been rated academically
acceptable or higher for the preceding three school years (SECTION 4,
Section 12.1041).   

C.S.H.B. 6 also removes the provision in the original that applied nepotism
laws to charter schools, and instead sets forth provisions regarding
nepotistic relationships and substantial interest of members of charter
governing bodies or charter school officers in business entities (SECTION
5, Secs. 12.1051 and 12.1053). The substitute provides that a governing
board member or officer of a charter school that has been rated as
academically acceptable or higher for each of the preceding three school
years may be compensated (SECTION 5, Sec. 12.1053). 

C.S.H.B. 6 provides that a person is not liable for a misapplication of
state funds or property purchased or leased with state funds if the
misapplication was made in good faith and with the advice of legal counsel.
The substitute entitles a person held liable for a misapplication to
contribution from any other person who knowingly accepted or received funds
in proportion to the amount of funds accepted or received by that person
(SECTION 19, Sec. 12.122).  While the original provided that real property
purchased prior to September 1, 2001 was state property if it was purchased
with state funds, C.S.H.B. 6 specifies that the charter holder owns the
property if less than 50 percent of the funds were state funds (SECTION 19,
Sec. 12.127).  The substitute removes the provisions prohibiting a person
from providing management services without being registered with the
commissioner.  The substitute removes the criteria for issuance, renewal,
suspension, and revocation of registration for providers of management
services from the original and applies the criteria to management contract
approval, renewal, suspension and revocation (SECTION 19, Sec. 12.125). 

C.S.H.B. 6 requires  all charter school teachers to have the equivalent of
a high school diploma rather than a bachelor's degree or teaching
certificate.  The substitute requires only those teachers of foundation
curriculum subjects to have a bachelor's degree or teaching certificate
(SECTION 19, Sec. 12.128).  The substitute provides that the changes in
funding for charter schools apply beginning with the 2003-2004 school year
rather than with the effective date of this bill (SECTION 30).