(1)The Ralph M. Brown Act requires that all meetings of a legislative body, as defined, of a local agency, including a school district, be open and public and all persons be permitted to attend unless a closed session is authorized. Existing law requires regular meetings of the county board of education and all meetings of a governing board of a school district be conducted in accordance with the Ralph M. Brown Act. The Bagley-Keene Open Meeting Act requires, with specified exceptions, that all meetings of a state body be open and public and all persons be permitted to attend.

This bill would expressly state that a local educational agency, including a charter school and an entity managing a charter school, as defined, is subject to the Ralph M. Brown Act, unless the charter school is operated by an entity governed by the Bagley-Keene Open Meeting Act, in which case the charter school would be subject to the Bagley-Keene Open Meeting Act. This provision would become operative on July 1, 2019.

(2)The California Public Records Act requires state and local agencies to make their records available for public inspection and to make copies available upon request and payment of a fee unless the records are exempt from disclosure.

This bill would expressly state that a local educational agency, including a charter school and an entity managing a charter school, as defined, is subject to the California Public Records Act, except as provided for certain charter schools located on federally recognized California Indian reservations or rancherias. For those charter schools, the bill would require each charter schools chartering authority to be the custodian of records with regard to any request for information submitted to the charter school. These provisions would become operative on July 1, 2019. To the extent these provisions would impose a new duty on a local educational agency, the bill would impose a state-mandated local program.

(3)Existing law prohibits certain public officials, including, but not limited to, state, county, or district officers or employees, from being financially interested in any contract made by them in their official capacity, or by any body or board of which they are members, except as provided. Existing law specifically requires members of governing boards of school districts to be subject to these provisions.

This bill would expressly state that a local educational agency, including a charter school and an entity managing a charter school, as defined, is subject to these provisions, except that the bill would provide that a governing board or body member or a local agency executive, as defined, shall not be deemed to be interested in a contract if his or her interest is that of a person who provides a loan to a public school due to a fiscal emergency, or leases real property to be occupied by a charter school or who signs a guarantor agreement relative to the lease of real property to be occupied by a charter school, and who also serves as a member of the governing board or body or as a local agency executive of the charter school, as provided. The bill would also provide that an employee of a charter school is not disqualified from serving as a member of the governing body of the charter school because of that employment status. The bill would require such a member of the governing body of a charter school to abstain from voting on, or influencing or attempting to influence another member of that body regarding, any matter uniquely affecting his or her own employment. The bill would require a member of the governing body of a charter school to abstain from voting on, or from influencing or attempting to influence another member of that body regarding, personnel matters that uniquely affect a relative of the member, as provided. The bill would prohibit discussion of any item regarding an activity of the governing body of a charter school that is not related to the operation of the charter school at a meeting of the governing body to discuss items related to the operation of the charter school. These provisions would become operative on January 1, 2020.

(4)The Political Reform Act of 1974 requires every state agency and local governmental agency to adopt a conflict-of-interest code, formulated at the most decentralized level possible, that requires designated employees of the agency to file statements of economic interest disclosing any investments, business positions, interests in real property, or sources of income that may foreseeably be affected materially by any governmental decision made or participated in by the designated employee by virtue of his or her position.

This bill would expressly state that a local educational agency, including a charter school and an entity managing a charter school, as defined, is subject to the Political Reform Act of 1974. This provision would become operative on January 1, 2020.

(6)The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that, if the Commission on State Mandates determines that the bill contains costs mandated by the state, reimbursement for those costs shall be made pursuant to the statutory provisions noted above.

(1)The Ralph M. Brown Act requires that all meetings of a legislative body, as defined, of a local agency, including a school district, be open and public and all persons be permitted to attend unless a closed session is authorized. Existing law requires regular meetings of the county board of education and all meetings of a governing board of a school district be conducted in accordance with the Ralph M. Brown Act. The Bagley-Keene Open Meeting Act requires, with specified exceptions, that all meetings of a state body be open and public and all persons be permitted to attend.

This bill would expressly state that the governing board or body of a local educational agency, including a charter school and an entity managing a charter school, as defined, is subject to the Ralph M. Brown Act, unless the charter school is operated by an entity governed by the Bagley-Keene Open Meeting Act, in which case the charter school would be subject to the Bagley-Keene Open Meeting Act.

(2)The California Public Records Act requires state and local agencies to make their records available for public inspection and to make copies available upon request and payment of a fee unless the records are exempt from disclosure.

This bill would expressly state that the governing board or body of a local educational agency, including a charter school and an entity managing a charter school, as defined, is subject to the California Public Records Act, except as provided for certain charter schools located on federally recognized California Indian reservations or rancherias. For those charter schools, the bill would require each charter schools chartering authority to be the custodian of records with regard to any request for information submitted to the charter school. To the extent these provisions would impose a new duty on a local educational agency, the bill would impose a state-mandated local program.

(3)Existing law prohibits certain public officials, including, but not limited to, state, county, or district officers or employees, from being financially interested in any contract made by them in their official capacity, or by any body or board of which they are members, except as provided. Existing law specifically requires members of governing boards of school districts to be subject to these provisions.

This bill would expressly state that the governing board or body of a local educational agency, including a charter school and an entity managing a charter school, as defined, is subject to these provisions, except that the bill would provide that a governing board or body member or a local agency executive, as defined, shall not be deemed to be interested in a contract if his or her interest is that of a person who provides a loan to a public school due to a fiscal emergency, or leases real property to be used for public school purposes occupied by a charter school or who signs a guarantor agreement relative to the lease of real property to be used for charter school purposes, occupied by a charter school, and who also serves as a member of the governing board or body of the charter school, as provided. The bill would also provide that an employee of a charter school is not disqualified from serving as a member of the governing body of the charter school because of that employment status. The bill would require such a member of the governing body of a charter school to abstain from voting on, or influencing or attempting to influence another member of that body regarding, any matter uniquely affecting his or her own employment. The bill would require a member of the governing body of a charter school to abstain from voting on, or from influencing or attempting to influence another member of that body regarding, personnel matters that uniquely affect a relative of the member, as provided. The bill would prohibit discussion of any item regarding an activity of the governing body of a charter school that is not related to the operation of the charter school at a meeting of the governing body to discuss items related to the operation of the charter school.

(4)The Political Reform Act of 1974 requires every state agency and local governmental agency to adopt a conflict-of-interest code, formulated at the most decentralized level possible, that requires designated employees of the agency to file statements of economic interest disclosing any investments, business positions, interests in real property, or sources of income that may foreseeably be affected materially by any governmental decision made or participated in by the designated employee by virtue of his or her position.

This bill would expressly state that the governing board or body of a local educational agency, including a charter school and an entity managing a charter school, as defined, is subject to the Political Reform Act of 1974.

(5)The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that, if the Commission on State Mandates determines that the bill contains costs mandated by the state, reimbursement for those costs shall be made pursuant to the statutory provisions noted above.

(1)The Ralph M. Brown Act requires that all meetings of a legislative body, as defined, of a local agency agency, including a school district, be open and public and all persons be permitted to attend unless a closed session is authorized. Existing law requires regular meetings of the county board of education and all meetings of a governing board of a school district be conducted in accordance with the Ralph M. Brown Act. The Bagley-Keene Open Meeting Act requires, with specified exceptions, that all meetings of a state body be open and public and all persons be permitted to attend.

This bill would expressly state that the governing board or body of a local educational agency, including a charter schools school and entities an entity managing a charter schools are school, as defined, is subject to the Ralph M. Brown Act, unless the charter school is operated by an entity governed by the Bagley-Keene Open Meeting Act, in which case the charter school would be subject to the Bagley-Keene Open Meeting Act.

(2)The California Public Records Act requires state and local agencies to make their records available for public inspection and to make copies available upon request and payment of a fee unless the records are exempt from disclosure.

This bill would expressly state that the governing board or body of a local educational agency, including a charter schools school and entities an entity managing a charter schools are school, as defined, is subject to the California Public Records Act. Act, except as provided for certain charter schools located on federally recognized California Indian reservations or rancherias. For those charter schools, the bill would require each charter schools chartering authority to be the custodian of records with regard to any request for information submitted to the charter school. To the extent these provisions would impose a new duty on a local educational agency, the bill would impose a state-mandated local program.

(3)Existing law prohibits certain public officials, including, but not limited to, state, county, or district officers or employees, from being financially interested in any contract made by them in their official capacity, or by any body or board of which they are members, except as provided. Existing law specifically requires members of governing boards of school districts to be subject to these provisions.

This bill would expressly state that the governing board or body of a local educational agency, including a charter schools school and entities an entity managing a charter schools are school, as defined, is subject to these provisions, except that the bill would provide that a governing board or body member or a local agency executive, as defined, shall not be deemed to be interested in a contract if his or her interest is that of a person who provides a loan to a public school due to a fiscal emergency, or leases real property to be used for public school purposes or who signs a guarantor agreement relative to the lease of real property to be used for charter school purposes, and who also serves as a member of the governing board or body of the charter school, as provided. The bill would also provide that an employee of a charter school is not disqualified from serving as a member of the governing body of the charter school because of that employment status. The bill would require such a member of the governing body of a charter school to abstain from voting on, or influencing or attempting to influence another member of that body regarding, any matter uniquely affecting his or her own employment.

(4)The Political Reform Act of 1974 requires every state agency and local governmental agency to adopt a conflict-of-interest code, formulated at the most decentralized level possible, that requires designated employees of the agency to file statements of economic interest disclosing any investments, business positions, interests in real property, or sources of income that may foreseeably be affected materially by any governmental decision made or participated in by the designated employee by virtue of his or her position.

This bill would expressly state that the governing board or body of a local educational agency, including a charter schools school and entities an entity managing a charter schools are school, as defined, is subject to the Political Reform Act of 1974.

(1)The Ralph M. Brown Act requires that all meetings of a legislative body, as defined, of a local agency be open and public and all persons be permitted to attend unless a closed session is authorized. The Bagley-Keene Open Meeting Act requires, with specified exceptions, that all meetings of a state body be open and public and all persons be permitted to attend.

This bill would expressly state that charter schools and entities managing charter schools are subject to the Ralph M. Brown Act, unless the charter school is operated by an entity governed by the Bagley-Keene Open Meeting Act, in which case the charter school would be subject to the Bagley-Keene Open Meeting Act.

(2)The California Public Records Act requires state and local agencies to make their records available for public inspection and to make copies available upon request and payment of a fee unless the records are exempt from disclosure.

This bill would expressly state that charter schools and entities managing charter schools are subject to the California Public Records Act.

(3)Existing law prohibits certain public officials, including, but not limited to, state, county, or district officers or employees, from being financially interested in any contract made by them in their official capacity, or by any body or board of which they are members, except as provided.

This bill would expressly state that charter schools and entities managing charter schools are subject to these provisions, except that the bill would provide that an employee of a charter school is not disqualified from serving as a member of the governing body of the charter school because of that employment status. The bill would require such a member of the governing body of a charter school to abstain from voting on, or influencing or attempting to influence another member of that body regarding, any matter uniquely affecting his or her own employment.

(4)The Political Reform Act of 1974 requires every state agency and local governmental agency to adopt a conflict-of-interest code, formulated at the most decentralized level possible, that requires designated employees of the agency to file statements of economic interest disclosing any investments, business positions, interests in real property, or sources of income that may foreseeably be affected materially by any governmental decision made or participated in by the designated employee by virtue of his or her position.

This bill would expressly state that charter schools and entities managing charter schools are subject to the Political Reform Act of 1974.

Existing law, known as the Donahoe Higher Education Act, establishes the missions and functions of the states 3 segments of public postsecondary education, which are the University of California, the California State University, and the California Community Colleges. The provisions of the Donahoe Higher Education Act apply to the University of California only to the extent that the Regents of the University of California, by resolution, make them applicable.

This bill would request the Regents of the University of California, the Trustees Chancellors Office of the California State University, the Chancellors Office of the California Community Colleges, and independent institutions of higher education, no later than January 1, 2019, to complete a report that evaluates the current state of cybersecurity education and training programs, including specified information about those programs, offered at the University of California, the California State University, the California Community Colleges, and independent institutions of higher education, respectively, to determine the extent to which the state is meeting the workforce needs of the cybersecurity industry.

Existing law, known as the Donahoe Higher Education Act, establishes the missions and functions of the states 3 segments of public postsecondary education, which are the University of California, the California State University, and the California Community Colleges. The provisions of the Donahoe Higher Education Act apply to the University of California only to the extent that the Regents of the University of California, by resolution, make them applicable.

This bill would request the Regents of the University of California, the Trustees of the California State University, the governing board of each community college district, Chancellors Office of the California Community Colleges, and independent institutions of higher education, no later than January 1, 2019, to complete a report that evaluates the current state of cybersecurity education and training programs, including specified information about those programs, offered at the University of California, the California State University, the California Community Colleges, and independent institutions of higher education, respectively, to determine the best method of educating and training college students to meet the current demand for jobs requiring cybersecurity knowledge and experience. extent to which the state is meeting the workforce needs of the cybersecurity industry.

Existing law, known as the Donahoe Higher Education Act, establishes the missions and functions of the states 3 segments of public postsecondary education, which are the University of California, the California State University, and the California Community Colleges. The provisions of the Donahoe Higher Education Act apply to the University of California only to the extent that the Regents of the University of California, by resolution, make them applicable.

This bill would request the Regents of the University of California, the Trustees of the California State University, the governing board of each community college district, and independent institutions of higher education, no later than January 1, 2019, to complete a report that evaluates the current state of cyber security cybersecurity education and training programs, including specified information about those programs, offered at the University of California, the California State University, the California Community Colleges, and independent institutions of higher education, respectively, to determine the best method of educating and training college students to meet the current demand for jobs requiring cyber security cybersecurity knowledge and experience.

Existing law, known as the Donahoe Higher Education Act, establishes the missions and functions of the states 3 segments of public postsecondary education, which are the University of California, the California State University, and the California Community Colleges. The provisions of the Donahoe Higher Education Act apply to the University of California only to the extent that the Regents of the University of California, by resolution, make them applicable.

This bill would request the Regents of the University of California, the Trustees of the California State University, the governing board of each community college district, and independent institutions of higher education, no later than January 1, 2019, to complete a report that evaluates the current state of cyber security education and training programs, including specified information about those programs, offered at the University of California, the California State University, the California Community Colleges, and independent institutions of higher education, respectively, to determine the best method of educating and training college students to meet the current demand for jobs requiring cyber security knowledge and experience.

 THIRD READING  

Bill No: AB 276

Author:

:

Vote:

SENATE EDUCATION COMMITTEE: 4-2, 6/20/18

AYES: Allen, Leyva, McGuire, Pan

NOES: Wilk, Vidak

NO VOTE RECORDED: Galgiani

SENATE JUDICIARY COMMITTEE: 5-1, 6/26/18

AYES: Jackson, Hertzberg, Monning, Stern, Wieckowski

NOES: Anderson

NO VOTE RECORDED: Moorlach

SENATE APPROPRIATIONS COMMITTEE: 5-2, 8/16/18

AYES: Portantino, Beall, Bradford, Hill, Wiener

NOES: Bates, Nielsen

ASSEMBLY FLOOR: 76-0, 5/4/17 (Consent) - See last page for vote

SUBJECT:

SOURCE: California School Boards Association

California Teachers Association

DIGEST:

This bill subjects charter schools and entities managing charter schools to a variety of the same open meeting, conflict-of-interest, and disclosure laws as traditional school districts.

Senate Floor Amendments of 8/24/18 delay the implementation date of various provisions of the bill and change the definition of an “entity managing a charter school” as specified below.

ANALYSIS:

Existing law:

1. Provides, pursuant to the Charter Schools Act of 1992, for the establishment of charter schools in California for the purpose, among other things, of improving student learning and expanding learning experiences for pupils who are identified as academically low achieving. Existing law declares that charter schools are part of the public school system as defined in Article IX of the California Constitution and are “under the exclusive control of the officers of the public schools.” A charter school is required to comply with statutes governing charter schools and all of the provisions set forth in its charter, but is otherwise exempt from most laws governing school districts except where specifically noted.
2. Authorizes a charter school to elect to operate as, or be operated by, a nonprofit public benefit corporation, formed and organized pursuant to the Nonprofit Public Benefit Corporation Law.
3. Specifies that the governing board of a school district that grants a charter for the establishment of a charter school shall be entitled to a single representative on the board of directors of the nonprofit public benefit corporation.
4. Specifies that an authority that grants a charter to a charter school to be operated by, or as, a nonprofit public benefit corporation is not liable for the debts or obligations of the charter school, or for claims arising from the performance of acts, errors, or omissions by the charter school, if the authority has complied with all oversight responsibilities required by law, including, but not limited to, those required by Education Code Sections 47604.32 and 47605(m). (Education Code § 47604)
5. Requires state and local agencies to conduct business in meetings that are open to the public. The Brown Act requires meetings of a local agency’s board of directors to be open to the public. (Government Code § 54950 et seq.) The Bagley-Keene Open Meeting Act requires meetings of state bodies to be open to the public. (GC § 11120)
6. Declares, pursuant to the California Public Records Act, that the public 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. (GC § 6250 and § 6253)
7. Prohibits members of the Legislature, state, county, district, judicial district, and city officers or employees from being financially interested in any contract made by them in their official capacity, or by anybody or board of which they are members. (GC § 1090 et seq.)
8. Requires, pursuant to the Political Reform Act of 1974 established by the voters through Proposition 9 in June 1974, public officials to carry out their duties in an unbiased manner, free from influence by outside interests, and to follow regulations during elections, as defined. The Political Reform Act also requires government agencies to adopt a conflict-of-interest code that requires designated employees of the agency to file an annual statement of economic interest disclosing any investments, business positions, interests in real property, or sources of income that may be affected materially by a decision made, or participated in, by the designated employee by virtue of his or her position. (GC § 81000 et seq.)
9. Requires, pursuant to the codes governing state corporations (including charter schools operated by non-profit or for-profit corporations), no more than 49 percent of persons serving on the board of any corporation to be "interested persons." "Interested persons" is defined as either of the following: (a) any person currently compensated by the corporation for services rendered to it within the previous 12 months (excluding any reasonable compensation paid to a director); or, (b) any relative, as specified, of any such person. (Corporations Code § 5110 et seq.)
10. Provides no specific requirement for charter school governing board conflict of interest policies.

This bill:

1. Subjects charter schools and entities managing charter schools to a variety of the same open meeting, conflict-of-interest, and disclosure laws as traditional school districts. Specifically, this bill subjects a local educational agency, including a charter school and an entity managing a charter school, to all of the following:
   1. The Brown Act, except that a charter school operated by an entity governed by the Bagley-Keene Open Meeting Act is subject to the Bagley-Keene Open Meeting Act regardless of the authorizing entity, by July 1, 2019.
   2. The California Public Records Act, except that the chartering authority of a charter school that is located on a federally recognized California Indian reservation operated by a nonprofit corporation formed on or before May 31, 2002 shall be the custodian of records with regard to any request for information submitted to the charter school, by July 1, 2019.
   3. The conflict-of-interest provisions commencing with Government Code Section 1090 by January 1, 2020, except for any of the following circumstances:
      1. For a person who provides a loan or line of credit to a public school due to a fiscal emergency, and who also serves as a member of the governing board of the charter school. The member must abstain from voting on or influencing another member of the governing board regarding the loan or line of credit agreement. The loan or line of credit agreement does not disqualify the member from serving on the governing board or from employment by the charter school if the governing board declares the existence of and describes the fiscal emergency by adopting a resolution at a public meeting. The interest rate for the loan or line of credit described in this clause shall be 0 percent. The lender may be reimbursed for the tax implication, if any, that arises because the Internal Revenue Service applies the applicable federal rate.
      2. For a person who leases real property occupied by a charter school or who signs a guarantor agreement relative to the lease of real property to be occupied by a charter school, and who also serves as a member of the governing board or body or as a local agency executive of the charter school, provided that the charter school is not charged more than one dollar ($1.00) per year. The lessor or guarantor may be reimbursed for the tax implication, if any, that arises because the Internal Revenue Service applies the applicable federal rate to the value of the lease. A member of a governing board or body or local agency executive who is a lessor or guarantor as described in this clause shall abstain from voting on, or influencing or attempting to influence another member of the governing board or body regarding, all matters affecting the real property lease agreement. The governing board or body shall disclose and approve the real property lease agreement or guarantee, including the terms of the lease or guarantee, during a public meeting.
      3. An employee of a charter school is not disqualified because of that employment status from also serving as a member of the governing body of the charter school. Such a member of the governing body of a charter school shall abstain from voting on, or influencing or attempting to influence another member of the governing body regarding, all matters uniquely affecting his or her own employment.
   4. The Political Reform Act, with a local educational agency, including a charter school and an entity managing a charter school, considered the most decentralized level for purposes of adopting a conflict-of-interest code, by January 1, 2020.
2. Specifies that a member of the governing body of a charter school shall abstain from voting on, and from influencing or attempting to influence another member of the governing body regarding, a personnel matter that uniquely affects a relative of the member.
3. Specifies that compliance with each of the open meeting, conflict-of-interest, and disclosure laws enumerated above may be delayed an additional 12 months, no later than January 1, 2021, by agreement between a charter school petitioner and its authorizer.
4. Defines, for purposes of the acts enumerated above, an “entity managing a charter school” as an entity that provides management services to one or more charter schools and has the authority over two or more of the following areas of a charter school:
   1. Instructional design.
   2. Finances.
   3. Board membership.
   4. Operations.
   5. Policies.
5. Specifies that where the charter school enters into a contract with an individual entity to provide a single service that does not give policymaking authority to the individual entity over the areas set forth above, the entity does not qualify as an “entity managing a charter school”. The contracts shall be individual contracts with separate entities that are not related.
6. Specifies that a charter school shall not enter into a subcontract to avoid the requirements of the bill.
7. Specifies that, to the extent that a governing body of a charter school, or an entity managing a charter school, engages in activities that are not related to a charter school authorized to operate in California, the acts enumerated above shall not apply to those unrelated activities.

Comments

1. Need for the bill. According to the author, “The creation of charter schools was intended to catalyze locally-driven experimentation, with a structure that could produce better academic results for all children.

While charter schools are unique, they are publicly funded, yet they lack the same transparency and accountability requirements that govern other publicly funded educational institutions, outlined in California’s Education Code.

Furthermore, under the Ralph M. Brown Act and the Bagley-Keene Open Meeting Act all meetings of a legislative or state body of a local agency must be open and public, all persons be permitted to attend, unless a closed session is authorized. The California Public Records Act requires state and local agencies to make their records publicly available. Existing law prohibits public officials from being financially interested in a contract made by them or by an

1. Public accountability laws. County boards of education and school district governing boards are required to conduct public meetings and make information available to the public, upon request. Members of these boards are also subject to conflict-of-interest statutes contained in Government Code 1090 and the Political Reform Act of 1974.
   1. Open meeting laws–entitles the public to have access to meetings of multi-member public bodies. The Brown Act and the Bagley-Keene Act recognize the need to balance the public’s right to open government with the need for boards, on occasion, to have closed session discussions in certain matters such as personnel or litigation. By making charter schools subject to open meeting laws, charter school boards would need to provide advance notice of meetings and conduct their meetings in public.
   2. Public records–the purpose of the California Public Records Act (CPRA) is to give the public an opportunity to monitor the functioning of their local and state government. The fundamental precept of CPRA is that governmental records are to be disclosed to the public when requested, unless there is a specific reason not to do so. The CPRA allows for certain exemptions, such as matters relating to individual privacy. Under CPRA, agencies must segregate or redact exempt information and disclose the remainder of the record.
   3. The Political Reform Act–The Political Reform Act of 1974 established the Fair Political Practices Commission (FPPC) to administer its requirements and receive annual conflict-of-interest statements. According to the FPPC, the California Public Records Act (CPRA) is designed to assure that public officials perform their duties impartially without bias because of personal financial interests or the interests of financial supporters; and that public officials disclose income and assets that could be affected by official actions and to assure that public officials disqualify themselves from participating in decisions when they have conflicts-of-interest.
2. Government Code Section 1090. This is the state’s central conflict-of-interest act. It applies to public officials from members of the Legislature to local officials and employees, including those of school districts. In a 1983 opinion, the Attorney General stated, “Section 1090 of the Government Code codifies the common law prohibition and the general policy of this state against public officials having a personal interest in contracts they make in their official capacity.” Charter school advocates have consistently expressed concern with subjecting charter schools to the provisions of Government Code 1090 because it could make it more difficult for philanthropic board members to provide financial assistance or low-interest loans or make facilities available to charter schools, which may happen during the start-up phase of a charter school. However, others argue that since charter schools are public schools and receive public funds, they have a fiduciary duty to taxpayers with regards to the use of those funds and should be subject to the same conflict-of-interest and disclosure requirements as traditional school districts.
3. Corporations Code. Statute governing corporations requires not more than 49 percent of persons serving on the board of any corporation to be interested persons. "Interested persons" is defined as either of the following: (1) any person currently compensated by the corporation for services rendered to it within the previous 12 months (excluding any reasonable compensation paid to a director); or, (2) any relative, as specified, of any such person. Advocates of charter schools contend they should abide by conflict of interest provisions related to corporations, not local educational agencies, due to the fact that some charter schools are operated by nonprofit corporations.

Related/Prior Legislation

SB 949 (Allen, 2018) amends the Government Code Section 1090 conflict-of-interest requirements and specifies that charter school governing boards are subject to the same requirements and exceptions as school district governing boards. This measure was set to be heard in the Senate Judiciary Committee on April 24, 2018, but was pulled at the request of the author.

SB 1216 (Glazer, 2018) subjects charter schools and their governing boards to the same open meeting and disclosure laws as traditional school districts, with specified exceptions. This measure was held in the Senate Judiciary Committee.

AB 1478 (Jones-Sawyer, 2017) is identical to this measure and failed passage on the Assembly Floor.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

According to the Senate Appropriations Committee:

• There could be unknown, potentially significant reimbursable state mandated costs for school districts and county offices of education due to increased oversight responsibilities. If determined to be a mandate, this would create pressure to increase the K-12 Mandates Block Grant (Proposition 98 General Fund).
  
• There could also be potentially significant local costs to the extent charter schools do not already comply with the specified areas of law. Charter schools have been determined to be ineligible to submit claims for mandate reimbursements, but do participate and receive funding through the K-12 Mandates Block Grant (Proposition 98 General Fund).

SUPPORT: (Verified 8/27/18)

California School Boards Association (co-source)

California Teachers Association (co-source)

American Civil Liberties Union of California

American Federation of State, County and Municipal Employees

Anaheim Secondary Teachers Association

Association of California School Administrators

California Association of School Business Officials

California Federation of Teachers

California State Conference of the NAACP

California State PTA

Public Counsel

San Diego Education Association

School for Integrated Academics and Technologies

United Teachers Los Angeles

OPPOSITION: (Verified 8/27/18)

California Charter Schools Association

California School Employees Association

EdVoice

ASSEMBLY FLOOR: 76-0, 5/4/17

AYES: Acosta, Aguiar-Curry, Arambula, Baker, Berman, Bloom, Bocanegra, Bonta, Brough, Burke, Caballero, Calderon, Cervantes, Chau, Chávez, Chen, Chiu, Choi, Chu, Cooley, Cooper, Cunningham, Dababneh, Dahle, Daly, Eggman, Flora, Fong, Frazier, Friedman, Gallagher, Eduardo Garcia, Gipson, Gloria, Gomez, Gonzalez Fletcher, Gray, Grayson, Harper, Holden, Irwin, Jones-Sawyer, Kalra, Kiley, Lackey, Levine, Limón, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Muratsuchi, Nazarian, Obernolte, O'Donnell, Quirk, Quirk-Silva, Reyes, Ridley-Thomas, Rodriguez, Rubio, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Voepel, Waldron, Weber, Wood, Rendon

NO VOTE RECORDED: Travis Allen, Bigelow, Cristina Garcia, Patterson

Prepared by:

8/30/18 14:10:50

**** END ****

 THIRD READING  

Bill No: AB 276

Author:

:

Vote:

SENATE EDUCATION COMMITTEE: 4-2, 6/20/18

AYES: Allen, Leyva, McGuire, Pan

NOES: Wilk, Vidak

NO VOTE RECORDED: Galgiani

SENATE JUDICIARY COMMITTEE: 5-1, 6/26/18

AYES: Jackson, Hertzberg, Monning, Stern, Wieckowski

NOES: Anderson

NO VOTE RECORDED: Moorlach

SENATE APPROPRIATIONS COMMITTEE: 5-2, 8/16/18

AYES: Portantino, Beall, Bradford, Hill, Wiener

NOES: Bates, Nielsen

ASSEMBLY FLOOR: 76-0, 5/4/17 (Consent) - See last page for vote

SUBJECT:

SOURCE: California School Boards Association

California Teachers Association

DIGEST:

This bill subjects charter schools and entities managing charter schools to a variety of the same open meeting, conflict-of-interest, and disclosure laws as traditional school districts.

ANALYSIS:

Existing law:

1. Provides, pursuant to the Charter Schools Act of 1992, for the establishment of charter schools in California for the purpose, among other things, of improving student learning and expanding learning experiences for pupils who are identified as academically low achieving. Existing law declares that charter schools are part of the public school system as defined in Article IX of the California Constitution and are “under the exclusive control of the officers of the public schools.” A charter school is required to comply with statutes governing charter schools and all of the provisions set forth in its charter, but is otherwise exempt from most laws governing school districts except where specifically noted.
2. Authorizes a charter school to elect to operate as, or be operated by, a nonprofit public benefit corporation, formed and organized pursuant to the Nonprofit Public Benefit Corporation Law.
3. Specifies that the governing board of a school district that grants a charter for the establishment of a charter school shall be entitled to a single representative on the board of directors of the nonprofit public benefit corporation.
4. Specifies that an authority that grants a charter to a charter school to be operated by, or as, a nonprofit public benefit corporation is not liable for the debts or obligations of the charter school, or for claims arising from the performance of acts, errors, or omissions by the charter school, if the authority has complied with all oversight responsibilities required by law, including, but not limited to, those required by Education Code Sections 47604.32 and 47605(m). (Education Code § 47604)
5. Requires state and local agencies to conduct business in meetings that are open to the public. The Brown Act requires meetings of a local agency’s board of directors to be open to the public. (Government Code § 54950 et seq.) The Bagley-Keene Open Meeting Act requires meetings of state bodies to be open to the public. (GC § 11120)
6. Declares, pursuant to the California Public Records Act, that the public 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. (GC § 6250 and § 6253)
7. Prohibits members of the Legislature, state, county, district, judicial district, and city officers or employees from being financially interested in any contract made by them in their official capacity, or by anybody or board of which they are members. (GC § 1090 et seq.)
8. Requires, pursuant to the Political Reform Act of 1974 established by the voters through Proposition 9 in June 1974, public officials to carry out their duties in an unbiased manner, free from influence by outside interests, and to follow regulations during elections, as defined. The Political Reform Act also requires government agencies to adopt a conflict-of-interest code that requires designated employees of the agency to file an annual statement of economic interest disclosing any investments, business positions, interests in real property, or sources of income that may be affected materially by a decision made, or participated in, by the designated employee by virtue of his or her position. (GC § 81000 et seq.)
9. Requires, pursuant to the codes governing state corporations (including charter schools operated by non-profit or for-profit corporations), no more than 49 percent of persons serving on the board of any corporation to be "interested persons." "Interested persons" is defined as either of the following: (a) any person currently compensated by the corporation for services rendered to it within the previous 12 months (excluding any reasonable compensation paid to a director); or, (b) any relative, as specified, of any such person. (Corporations Code § 5110 et seq.)
10. Provides no specific requirement for charter school governing board conflict of interest policies.

This bill:

1. Subjects charter schools and entities managing charter schools to a variety of the same open meeting, conflict-of-interest, and disclosure laws as traditional school districts. Specifically, this bill subjects a local educational agency, including a charter school and an entity managing a charter school, to all of the following:
   1. The Brown Act, except that a charter school operated by an entity governed by the Bagley-Keene Open Meeting Act is subject to the Bagley-Keene Open Meeting Act regardless of the authorizing entity.
   2. The California Public Records Act, except that the chartering authority of a charter school that is located on a federally recognized California Indian reservation operated by a nonprofit corporation formed on or before May 31, 2002 shall be the custodian of records with regard to any request for information submitted to the charter school.
   3. The conflict-of-interest provisions commencing with Government Code Section 1090, except for any of the following circumstances:
      1. For a person who provides a loan or line of credit to a public school due to a fiscal emergency, and who also serves as a member of the governing board of the charter school. The member must abstain from voting on or influencing another member of the governing board regarding the loan or line of credit agreement. The loan or line of credit agreement does not disqualify the member from serving on the governing board or from employment by the charter school if the governing board declares the existence of and describes the fiscal emergency by adopting a resolution at a public meeting. The interest rate for the loan or line of credit described in this clause shall be 0 percent. The lender may be reimbursed for the tax implication, if any, that arises because the Internal Revenue Service applies the applicable federal rate.
      2. For a person who leases real property occupied by a charter school or who signs a guarantor agreement relative to the lease of real property to be occupied by a charter school, and who also serves as a member of the governing board or body or as a local agency executive of the charter school, provided that the charter school is not charged more than one dollar ($1.00) per year. The lessor or guarantor may be reimbursed for the tax implication, if any, that arises because the Internal Revenue Service applies the applicable federal rate to the value of the lease. A member of a governing board or body or local agency executive who is a lessor or guarantor as described in this clause shall abstain from voting on, or influencing or attempting to influence another member of the governing board or body regarding, all matters affecting the real property lease agreement. The governing board or body shall disclose and approve the real property lease agreement or guarantee, including the terms of the lease or guarantee, during a public meeting.
      3. An employee of a charter school is not disqualified because of that employment status from also serving as a member of the governing body of the charter school. Such a member of the governing body of a charter school shall abstain from voting on, or influencing or attempting to influence another member of the governing body regarding, all matters uniquely affecting his or her own employment.
   4. The Political Reform Act, with a local educational agency, including a charter school and an entity managing a charter school, considered the most decentralized level for purposes of adopting a conflict-of-interest code.
2. Specifies that a member of the governing body of a charter school shall abstain from voting on, and from influencing or attempting to influence another member of the governing body regarding, a personnel matter that uniquely affects a relative of the member.
3. Defines, for purposes of the acts enumerated above, an “entity managing a charter school” as an entity that provides management services to one or more charter schools, defined as the authority to do two or more of the following:
   1. Elect or appoint members of the governing body of a charter school.
   2. Remove members of the governing body of a charter school.
   3. Appoint or remove the officers or chief executive of a charter school.
   4. Vote on or otherwise make changes to the articles or bylaws of a charter school or to the charter petition.
   5. Overrule a decision of the governing body of a charter school.
   6. Control the instructional design, finances, operations, or policies of a charter school. Control means delegated authority to act in these areas and to prohibit the governing body of the charter school from amending, changing, or overruling the actions of the entity, unless the action involves a contract between the charter school and another entity for specified services and the governing body of the charter school has clear authority to enter into, amend, or cancel the contract.
4. Specifies that, to the extent that a governing body of a charter school, or an entity managing a charter school, engages in activities that are not related to a charter school authorized to operate in California, the acts enumerated above shall not apply to those unrelated activities.

Comments

1. Need for the bill. According to the author, “The creation of charter schools was intended to catalyze locally-driven experimentation, with a structure that could produce better academic results for all children.

While charter schools are unique, they are publicly funded, yet they lack the same transparency and accountability requirements that govern other publicly funded educational institutions, outlined in California’s Education Code.

Furthermore, under the Ralph M. Brown Act and the Bagley-Keene Open Meeting Act all meetings of a legislative or state body of a local agency must be open and public, all persons be permitted to attend, unless a closed session is authorized. The California Public Records Act requires state and local agencies to make their records publicly available. Existing law prohibits public officials from being financially interested in a contract made by them or by an

1. Public accountability laws. County boards of education and school district governing boards are required to conduct public meetings and make information available to the public, upon request. Members of these boards are also subject to conflict-of-interest statutes contained in Government Code 1090 and the Political Reform Act of 1974.
   1. Open meeting laws–entitles the public to have access to meetings of multi-member public bodies. The Brown Act and the Bagley-Keene Act recognize the need to balance the public’s right to open government with the need for boards, on occasion, to have closed session discussions in certain matters such as personnel or litigation. By making charter schools subject to open meeting laws, charter school boards would need to provide advance notice of meetings and conduct their meetings in public.
   2. Public records–the purpose of the California Public Records Act (CPRA) is to give the public an opportunity to monitor the functioning of their local and state government. The fundamental precept of CPRA is that governmental records are to be disclosed to the public when requested, unless there is a specific reason not to do so. The CPRA allows for certain exemptions, such as matters relating to individual privacy. Under CPRA, agencies must segregate or redact exempt information and disclose the remainder of the record.
   3. The Political Reform Act–The Political Reform Act of 1974 established the Fair Political Practices Commission (FPPC) to administer its requirements and receive annual conflict-of-interest statements. According to the FPPC, the California Public Records Act (CPRA) is designed to assure that public officials perform their duties impartially without bias because of personal financial interests or the interests of financial supporters; and that public officials disclose income and assets that could be affected by official actions and to assure that public officials disqualify themselves from participating in decisions when they have conflicts-of-interest.
2. Government Code Section 1090. This is the state’s central conflict-of-interest act. It applies to public officials from members of the Legislature to local officials and employees, including those of school districts. In a 1983 opinion, the Attorney General stated, “Section 1090 of the Government Code codifies the common law prohibition and the general policy of this state against public officials having a personal interest in contracts they make in their official capacity.” Charter school advocates have consistently expressed concern with subjecting charter schools to the provisions of Government Code 1090 because it could make it more difficult for philanthropic board members to provide financial assistance or low-interest loans or make facilities available to charter schools, which may happen during the start-up phase of a charter school. However, others argue that since charter schools are public schools and receive public funds, they have a fiduciary duty to taxpayers with regards to the use of those funds and should be subject to the same conflict-of-interest and disclosure requirements as traditional school districts.
3. Corporations Code. Statute governing corporations requires not more than 49 percent of persons serving on the board of any corporation to be interested persons. "Interested persons" is defined as either of the following: (1) any person currently compensated by the corporation for services rendered to it within the previous 12 months (excluding any reasonable compensation paid to a director); or, (2) any relative, as specified, of any such person. Advocates of charter schools contend they should abide by conflict of interest provisions related to corporations, not local educational agencies, due to the fact that some charter schools are operated by nonprofit corporations.

Related/Prior Legislation

SB 949 (Allen, 2018) amends the Government Code Section 1090 conflict-of-interest requirements and specifies that charter school governing boards are subject to the same requirements and exceptions as school district governing boards. This measure was set to be heard in the Senate Judiciary Committee on April 24, 2018, but was pulled at the request of the author.

SB 1216 (Glazer, 2018) subjects charter schools and their governing boards to the same open meeting and disclosure laws as traditional school districts, with specified exceptions. This measure was held in the Senate Judiciary Committee.

AB 1478 (Jones-Sawyer, 2017) is identical to this measure and failed passage on the Assembly Floor.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

According to the Senate Appropriations Committee:

• There could be unknown, potentially significant reimbursable state mandated costs for school districts and county offices of education due to increased oversight responsibilities. If determined to be a mandate, this would create pressure to increase the K-12 Mandates Block Grant (Proposition 98 General Fund).
  
• There could also be potentially significant local costs to the extent charter schools do not already comply with the specified areas of law. Charter schools have been determined to be ineligible to submit claims for mandate reimbursements, but do participate and receive funding through the K-12 Mandates Block Grant (Proposition 98 General Fund).

SUPPORT: (Verified 8/16/18)

California School Boards Association (co-source)

California Teachers Association (co-source)

American Civil Liberties Union of California

American Federation of State, County and Municipal Employees

Anaheim Secondary Teachers Association

Association of California School Administrators

California Charter Schools Association

California Federation of Teachers

California State Conference of the NAACP

California State PTA

Public Counsel

San Diego Education Association

School for Integrated Academics and Technologies

United Teachers Los Angeles

OPPOSITION: (Verified 8/16/18)

California School Employees Association

EdVoice

ASSEMBLY FLOOR: 76-0, 5/4/17

AYES: Acosta, Aguiar-Curry, Arambula, Baker, Berman, Bloom, Bocanegra, Bonta, Brough, Burke, Caballero, Calderon, Cervantes, Chau, Chávez, Chen, Chiu, Choi, Chu, Cooley, Cooper, Cunningham, Dababneh, Dahle, Daly, Eggman, Flora, Fong, Frazier, Friedman, Gallagher, Eduardo Garcia, Gipson, Gloria, Gomez, Gonzalez Fletcher, Gray, Grayson, Harper, Holden, Irwin, Jones-Sawyer, Kalra, Kiley, Lackey, Levine, Limón, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Muratsuchi, Nazarian, Obernolte, O'Donnell, Quirk, Quirk-Silva, Reyes, Ridley-Thomas, Rodriguez, Rubio, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Voepel, Waldron, Weber, Wood, Rendon

NO VOTE RECORDED: Travis Allen, Bigelow, Cristina Garcia, Patterson

Prepared by:

8/19/18 13:37:34

**** END ****

SENATE COMMITTEE ON APPROPRIATIONS

Senator Anthony Portantino, Chair

2017 - 2018 Regular Session

AB 276 (Medina) - Local educational agencies: charter schools

Bill Summary:

This bill subjects charter schools and those entities managing a charter school to a variety of the same open meeting, conflict-of-interest, and disclosure laws as traditional school districts.

*********** ANALYSIS ADDENDUM – SUSPENSE FILE ***********

The following information is revised to reflect amendments

adopted by the committee on August 16, 2018

Fiscal Impact:

• There could be unknown, potentially significant reimbursable state mandated costs for school districts and county offices of education due to increased oversight responsibilities. If determined to be a mandate, this would create pressure to increase the K-12 Mandates Block Grant (Proposition 98 General Fund).
  
• There could also be potentially significant local costs to the extent charter schools do not already comply with the specified areas of law. Charter schools have been determined to be ineligible to submit claims for mandate reimbursements, but do participate and receive funding through the K-12 Mandates Block Grant (Proposition 98 General Fund).

Author Amendments:

Further define an “entity managing a charter school” and make other clarifying changes.

-- END --

SENATE COMMITTEE ON APPROPRIATIONS

Senator Anthony Portantino, Chair

2017 - 2018 Regular Session

AB 276 (Medina) - Local educational agencies: charter schools

This bill meets the criteria for referral to the Suspense File.

Bill Summary:

This bill subjects charter schools and those entities managing a charter school to a variety of the same open meeting, conflict-of-interest, and disclosure laws as traditional school districts.

Fiscal Impact:

• There could be unknown, potentially significant reimbursable state mandated costs for school districts and county offices of education due to increased oversight responsibilities. If determined to be a mandate, this would create pressure to increase the K-12 Mandates Block Grant (Proposition 98 General Fund).
  
• There could also be potentially significant local costs to the extent charter schools do not already comply with the specified areas of law. Charter schools have been determined to be ineligible to submit claims for mandate reimbursements, but do participate and receive funding through the K-12 Mandates Block Grant (Proposition 98 General Fund).

Background:

Existing law, the Charter Schools Act of 1992, provides for the establishment of charter schools in California for the purpose, among other things, of improving student learning and expanding learning experiences for pupils who are identified as academically low achieving. Existing law declares that charter schools are part of the public school system as defined in Article IX of the California Constitution and are “under the exclusive control of the officers of the public schools.” A charter school is required to comply with statutes governing charter schools and all of the provisions set forth in its charter, but is otherwise exempt from most laws governing school districts except where specifically noted.

Existing law authorizes a charter school to elect to operate as, or be operated by, a nonprofit public benefit corporation, formed and organized pursuant to the Nonprofit Public Benefit Corporation Law. It also specifies that the governing board of a school district that grants a charter for the establishment of a charter school shall be entitled to a single representative on the board of directors of the nonprofit public benefit corporation. Existing law specifies that an authority that grants a charter to a charter school to be operated by, or as, a nonprofit public benefit corporation is not liable for the debts or obligations of the charter school, or for claims arising from the performance of acts, errors, or omissions by the charter school, if the authority has complied with all oversight responsibilities required by law.

Existing law requires state and local agencies to conduct business in meetings that are open to the public. Specifically, the Brown Act requires meetings of a local agency’s board of directors to be open to the public and the Bagley-Keene Open Meeting Act requires meetings of state bodies to be open to the public. The California Public Records Act declares that the public 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.

Existing law prohibits members of the Legislature, state, county, district, judicial district, and city officers or employees from being financially interested in any contract made by them in their official capacity, or by anybody or board of which they are members. The Political Reform Act of 1974, established by the voters through Proposition 9 in June 1974, requires public officials to carry out their duties in an unbiased manner, free from influence by outside interests, and to follow regulations during elections, as defined. The Political Reform Act also requires government agencies to adopt a conflict-of-interest code that requires designated employees of the agency to file an annual statement of economic interest disclosing any investments, business positions, interests in real property, or sources of income that may be affected materially by a decision made, or participated in, by the designated employee by virtue of his or her position.

The codes governing state corporations (including charter schools operated by non-profit or for-profit corporations) require no more than 49 percent of persons serving on the board of any corporation to be "interested persons." "Interested persons" is defined as either of the following: (a) any person currently compensated by the corporation for services rendered to it within the previous 12 months (excluding any reasonable compensation paid to a director); or, (b) any relative, as specified, of any such person. (Corporations Code § 5110 et seq.)

Existing law provides no specific requirement for charter school governing board conflict of interest policies.

Proposed Law:

This bill subjects charter schools and an entity managing a charter school to the same open meeting, conflict-of-interest, and disclosure laws as traditional school districts. Specifically this bill subjects them to the following

1. The Brown Act, except that a charter school operated by an entity governed by the Bagley-Keene Open Meeting Act is subject to the Bagley-Keene Open Meeting Act regardless of the authorizing entity.
2. The California Public Records Act, except as provided for certain charter schools located on federally recognized California Indian reservations or rancherias and those operated by a nonprofit public benefit corporation that was formed on or prior to May 31, 2002 and is current operated by a federal recognized California Indian tribe.
3. The conflict-of-interest provisions commencing with Government Code Section 1090, except that an employee of a charter school may also serve as a member of the governing board. Such a member may not vote on, or influence other members regarding, matters affecting his or her employment. The bill contains other exceptions related to a person who provides a loan or leases real property, as specified.
4. The Political Reform Act, as specified.

Related Legislation:

AB 406 (McCarty) prohibits a charter school from operating as, or by, a for-profit corporation after January 1, 2019. This bill is pending on the Assembly Floor.

AB 1478 is nearly identical to this measure and failed passage on the Assembly Floor.

SB 949 (Allen) provides that charter school governing boards are subject to the same requirements and exceptions as school district governing boards. This measure was scheduled to be heard by the Senate Judiciary Committee on April 24, 2018 but was pulled at the author’s request.

SB 1216 (Glazer) is similar to this bill and failed passage in the Senate Judiciary Committee.

Staff Comments:

Unlike local government entities, charter schools are ineligible for state mandate reimbursements through the traditional claiming process (they do receive funding through the K-12 mandate block grant). Thus, workload and costs related to compliance with this bill’s requirements are not considered direct state costs (though charter schools primarily receive state funding for their operations).

This bill will likely increase workload for charter authorizers to train staff in the relevant laws; increases the scope of oversight authorizers must provide, and could increase costs related to responding to disputes, revocations, and renewals of petitions in conflict with these laws.

These additional oversight activities will add unknown, but potentially significant, costs if they are found to be a reimbursable state mandate and create cost pressures to increase funding provided through the mandates block grant to reflect the new mandate. The existing Charter Schools I–III mandates reimburse authorizers for reviewing proposed charters, holding associated public hearings, and monitoring charter schools after approval. The Charter Schools IV mandate includes additional oversight activities, including authorizing county offices of education that review proposed countywide charter schools to claim reimbursement for the activities associated with this review.

Likewise, this bill expands the scope of oversight required by charter authorizers and may be found to be a reimbursable state mandate. Costs attributed to these activities would depend on a number of factors, such as how many schools are within the authorizer’s jurisdiction and how much staff time is invested in these assessments.

-- END --

SENATE JUDICIARY COMMITTEE

Senator Hannah-Beth Jackson, Chair

2017-2018 Regular Session

Bill No: AB 276 (Author:Medina)

Version: April 10, 2018

Hearing Date: June 26, 2018

Fiscal: No

Urgency: No

Consultant: MEC

SUBJECT

Charter schools

DESCRIPTION

This bill would codify that the governing board of a local educational agency, including a charter school and an entity managing a charter school, is subject to: the California Public Records Act, as specified; the conflict of interest provisions of Government Code Section 1090 et seq., as specified; the Political Reform Act of 1974, as specified; and the Ralph M. Brown Act, except that a charter school operated by an entity governed by the Bagley-Keene Open Meeting Act is subject to the Bagley-Keene Open Meeting Act regardless of the authorizing entity.

This bill passed out of the Senate Committee on Education with amendments to be taken in the Senate Committee on Judiciary. The amendments are reflected below in Comment 2. This analysis of the bill is based on the provisions detailed in Comment 2.

BACKGROUND

In 1992, the Legislature enacted the California Charter Schools Act in order to provide communities with the opportunity to establish schools that could operate freely from the structural programs of public school districts. (SB 1448 (Hart, Ch. 781, Stats. 1992).) Charter schools are intended to provide a unique learning environment, giving students 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.) In the 25 years of charter school existence in California, many reports of widespread financial mismanagement of charter schools’ public funds have surfaced, as well as violations of self-dealing.^[1]

In 2007, the Los Angeles Times reported that the Los Angeles County Office of Education hired an outside auditor to examine the Gorman Learning Center Charter School. The audit showed that for the three years audited, the Gorman Learning Center Charter School provided false information on State School Fund 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. As reported, 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. (Rubin, School misused funds, audit finds (Mar. 17, 2007) Los Angeles Times <http://articles.latimes.com/2007/mar/17/local/me-school17> [as of April 22, 2018].)

Another 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 charter school. Cox was also charged with inappropriately entering into school service contracts with a company he owned. (Reston and Landsberg, Charter schools’ founder indicted (Sept. 5, 2007) Los Angeles Times <http://articles.latimes.com/2007/

sep/05/local/me-charter5> [as of April 22, 2018].)

Over the years, the Legislature has made clear that public agency actions should be open to the scrutiny of the public. In 1961, the Legislature enacted the Ralph M. Brown Act, which provided public access to local public agency information. In 1967, the Legislature enacted the Bagley-Keene Act, which provided public access to state public agency information. In 1975, the Brown Act was amended to provide for disclosure of public agency acts taken during closed meetings. In 1986, the Brown Act, among other things, was amended to provide for the posting of public agency agendas. In 2004, Proposition 59 added to the California Constitution the people’s right of access to public body information. (Cal. Const., art. I, Sec. 3(b)(1).)

The California Legislative Counsel, this Legislature’s legal counsel, was asked to render an opinion with regard to the following question: whether charter schools are subject to the Brown Act, the California Public Records Act, the conflict-of-interest provisions of the Political Reform Act of 1974, and Government Code Section 1090. The following is the opinion of the California Legislative Counsel:

In summary, it is our opinion that a charter school is subject to the Ralph M. Brown Act, the California Public Records Act, the conflict-of-interest provisions of the Political Reform Act of 1974, and Government Code section 1090. It is also our opinion that the conflict-of-interest provisions of the Political Reform Act of 1974 and Government Code section 1090 apply concurrently with the conflict-of-interest provisions of Corporations Code section 5233 to a member of the governing body of a charter school, operated by a nonprofit public benefit corporation, who is also a director of that corporation. (Legislative Counsel Opinion #152326, p. 17, Aug. 14, 2015.)

In line with the Legislative Counsel opinion which had not yet been released, this Committee, on July 1, 2015, passed AB 709 (Gipson, 2016)^[2], which would have codified that a charter school is subject to all of the following without exceptions:

• the California Public Records Act;
• the Ralph M. Brown Act, except that a charter school operated by an entity governed by the Bagley-Keene Open Meeting Act is subject to the Bagley-Keene Open Meeting Act regardless of the authorizing entity;
• the Political Reform Act of 1974 (Title 9 (commencing with Section 81000) of the Government Code). For purposes of Section 87300 of the Government Code, a charter school shall be considered an agency; and
• Article 4 (commencing with Section 1090) of Chapter 1 of Division 4 of Title 1 of the Government Code.

This bill currently before this Committee would likewise codify that the governing board of a local educational agency, including a charter school and an entity managing a charter school, is subject to the California Public Records Act, as specified; Ralph M. Brown Act, except that a charter school operated by an entity governed by the Bagley-Keene Open Meeting Act is subject to the Bagley-Keene Open Meeting Act regardless of the authorizing entity; the Political Reform Act of 1974; and the conflict of interest provisions of Government Code Section 1090 et seq., with two exceptions, as specified. This bill would further provide that notwithstanding the conflict of interest provisions of Government Code Section 1090 et seq. an employee of a charter school is not disqualified because of that employment status from also serving as a member of the governing body of the charter school. However, this bill would also provide that such a member of the governing body of a charter school shall abstain from voting on, or influencing or attempting to influence another member of the governing body regarding, all matters uniquely affecting his or her own employment.

This bill passed out of the Senate Committee on Education on June 20, 2018 with a 4-2 vote.

CHANGES TO EXISTING LAW

Existing law provides that a charter school is deemed to be a “school district” for purposes of appropriations, disbursements, and apportionment from state school and lottery funding. (Ed. Code Secs. 47612, 47638, and 47650.)

Existing law provides that a charter school is provided with local operational funding that is equal to the total funding that would be available to a similar school district serving a similar pupil population. (Ed. Code Sec. 47630.)

Existing law provides that an authority that grants a charter to a charter school to be operated as, or operated by, a nonprofit public benefit corporation is not liable for the debts or obligations of the school, or for claims arising from the performance of acts, errors, or omissions by the school, if the authority has complied with all oversight responsibilities required by law. (Ed. Code Sec. 47604.)

Existing law provides that a charter school is deemed to be a “school district” for purposes of appropriations, disbursements, and apportionment from state school and lottery funding. (Ed. Code Secs. 47612, 47638, and 47650.)

Existing law provides that a charter school is provided with local operational funding that is equal to the total funding that would be available to a similar school district serving a similar pupil population. (Ed. Code Sec. 47630.)

Existing law provides that a private person or organization can provide funding to assist in the establishment or operation of a charter school. (Ed. Code Sec. 47603.)

Existing law provides that a charter school may elect to operate as, or be operated by, a nonprofit public benefit corporation, formed and organized pursuant to the Nonprofit Public Benefit Corporation Law. (Ed. Code Sec. 47604.)

Existing law provides that a state community college district or state university can establish an auxiliary organization to solicit funds for the benefit of the community college district, and the board members of such auxiliary organizations are subject to conflict of interest disclosure requirements. (Ed. Code Secs. 72670 et seq. and 89907 et seq.)

Existing law provides that the people have the right of access to information concerning the people’s business and requires meetings of public bodies and the writings of public officials and agencies to be open to public scrutiny. (Cal. Const., art. I, Sec. 3(b)(1).)

This bill would provide that it is the intent of the Legislature to:

• ensure that charter school governance is transparent; and
• ensure that monitoring and oversight of charter schools are conducted to protect the public interest.

Existing law, the Brown Act, provides statutory requirements of local school districts to keep the public informed. (Gov. Code Sec. 54950 et seq.) Existing law requires a school district board to post notices and agendas of school district board meetings. (Gov. Code Secs. 54953, 54954.2, 54954.6, and 54956.) Existing law requires a school district board to publicly report any action taken in closed sessions. (Gov. Code Secs. 54957.1 and 54957.7.) Existing law requires a school district board to disclose in an open meeting the items to be discussed in closed sessions. (Gov. Code Sec. 54957.7.)

Existing law, the Bagley-Keene Act, provides statutory requirements of state school districts to keep the public informed. (Gov. Code Sec. 11120 et seq.) Existing law requires state school district boards to post notices and agendas of state public body meetings. (Gov. Code Secs. 11123, 11125, 11125.4, 11125.5, 11125.9, and 11126.) Existing law requires state school district boards to publicly report any action taken in closed sessions. (Gov. Code Secs. 11125.2, 11126, and 11126.3.)

Existing law provides that all meetings of the governing board of the school district and the county board of education at which the granting, revocation, appeal, or renewal of a charter petition is discussed shall comply with the Brown Act. (Gov. Code Sec. 47608.)

Existing law requires a local school district board to hold open meetings, unless otherwise exempt, as specified. (Ed. Code Sec. 35147.)

This bill would provide that the governing board of a local educational agency, including a charter school and an entity managing a charter school, is subject to the Ralph M. Brown Act, except that a charter school operated by an entity governed by the Bagley-Keene Open Meeting Act is subject to the Bagley-Keene Open Meeting Act regardless of the authorizing entity.

Existing law, the California Public Records Act (CPRA), governs the disclosure of information collected and maintained by public agencies, including school districts. (Gov. Code Sec. 6250 et seq.) Generally, all public records are accessible to the public upon request, unless the record requested is exempt from public disclosure. (Gov. Code Sec. 6254.) There are 30 general categories of documents or information that are exempt from disclosure, essentially due to the character of the information. The agency shall justify withholding any record by demonstrating that the record in question is exempt under express provisions of the CPRA or that on the facts of the particular case the public interest served by not disclosing the record clearly outweighs the public interest served by disclosure of the record. (Gov. Code Sec. 6255.)

This bill would provide that the governing board of a local educational agency, including a charter school and an entity managing a charter school, is subject to the California Public Records Act.

This bill would provide that the chartering authority of a charter school shall be the custodian of records with regard to any request for information submitted to the charter school if:

• the charter school is located on a federally recognized California Indian reservation or Rancheria; and
• the charter school is operated by a nonprofit public benefit corporation that was formed on or before May 31, 2002, and is currently operated by a federally recognized California Indian tribe.

This bill would provide that nothing in the above provision regarding the charter school located on a federally recognized California Indian reservation or Rancheria shall be construed to allow a chartering authority to delay or obstruct access to records otherwise required under the California Public Records Act.

Existing law, the Political Reform Act of 1974 (PRA), requires public officials to file annual statements of financial interest. (Gov. Code Sec. 81000.)

This bill would provide that the governing board of a local educational agency, including a charter school and an entity managing a charter school, is subject to the Political Reform Act of 1974.

This bill would provide that a local educational agency shall be considered an agency and is the most decentralized level for purposes of adopting a conflict of interest code.

Existing law prohibits members of the Legislature, state, county, district, judicial district, and city officers or employees from being financially interested in any contract made by them in their official capacity, or by any body or board of which they are members, and prohibits them from being purchasers at any sale or vendors at any purchase made by them in their official capacity; (Gov. Code Sec. 1090 (a).) and prohibits an individual from aiding or abetting a Member of the Legislature or a state, county, district, judicial district, or city officer or employee in violating this provision. (Gov. Code Sec. 1090 (b).)

Existing law provides that an officer shall not be deemed to be interested in a contract entered into by a body or board of which the officer is a member within the meaning of this article if the officer has only a remote interest in the contract and if the fact of that interest is disclosed to the body or board of which the officer is a member and noted in its official records, and thereafter the body or board authorizes, approves, or ratifies the contract in good faith by a vote of its membership sufficient for the purpose without counting the vote or votes of the officer or member with the remote interest. (Gov. Code Sec. 1091 (a).) The willful failure of an officer to disclose the fact of his or her interest in a contract pursuant to this section is punishable as provided in Government Code Section 1097. (Gov. Code Sec. 1091 (d).) This violation does not void the contract unless the contracting party had knowledge of the fact of the remote interest of the officer at the time the contract was executed. (Gov. Code Sec. 1091 (d).) The remote interest exceptions do not apply to any officer interested in a contract who influences or attempts to influence another member of the body or board of which he or she is a member to enter into the contract. (Gov. Code Sec. 1091 (c).)

Existing law specifies 17 “remote interests.” (Gov. Code Sec. 1091 (b).)

Existing law provides that an officer or employee shall not be deemed to be interested in a contract if his or her interest is one of the fourteen interests listed out in statute. (Gov. Code. Sec. 1091.5 (a)(1)-(14).)

Existing law provides that every officer or person prohibited by the laws of this state from making or being interested in contracts, or from becoming a vendor or purchaser at sales, or from purchasing scrip or other evidences of indebtedness, including any member of the governing board of a school district, who willfully violates any of the provisions of those laws, is punishable by a fine of not more than one thousand dollars ($1,000), or by imprisonment in the state prison, and is forever disqualified from holding any office in this state. (Gov. Code Sec. 1097 (a).)

Existing law provides that an individual who willfully aids or abets an officer or person in violating a prohibition by the laws of this state from making or being interested in contracts, or from becoming a vendor or purchaser at sales, or from purchasing scrip, or other evidences of indebtedness, including any member of the governing board of a school district, is punishable by a fine of not more than one thousand dollars ($1,000), or by imprisonment in the state prison, and is forever disqualified from holding any office in this state. (Gov. Code Sec. 1097 (b).)

Existing law provides that every contract made in violation of any provisions of Government Code Section 1090 may be avoided at the instance of any party except the officer interested therein. However, existing law also provides that no such contract may be avoided because of the interest of an officer therein unless the contract is made in the official capacity of the officer, or by a board or body of which he or she is a member. (Gov. Code 1092(a).). Existing law also provides that an action under this section shall be commenced within four years after the plaintiff has discovered, or in the exercise of reasonable care should have discovered, a violation. (Gov. Code 1092 (b).)

Existing case law provides that when a public official or officer violates Section 1090 et seq., the contract entered into is void, not just voidable. (Thomson Gilbane Building Co. v. Super. Court, 233 Cal. App. 4^th 1527 (2014).)

This bill would provide that the governing body of a local educational agency, including a charter school and an entity managing a charter school, is subject to the conflict of interest provisions of Government Code Section 1090 et seq.

This bill would provide that notwithstanding Government Code Section 1090, et seq., a board member or local agency executive, as defined in Government Code Section 3511.1, shall not be deemed to be interested in a contract if he or she provides a loan to a public school due to a fiscal emergency, as specified, or leases real property to be used for public school purposes, as specified.

Existing law prohibits an employee of a school district from serving as a board member of the school district. (Ed. Code Sec. 35107(b).)

This bill would provide that notwithstanding the conflict of interest provisions of Government Code Section 1090 et seq. an employee of a charter school is not disqualified because of that employment status from also serving as a member of the governing body of the charter school. However, such a member of the governing body of a charter school shall abstain from voting on, or influencing or attempting to influence another member of the governing body regarding, all matters uniquely affecting his or her own employment.

COMMENT

1. Stated need for the bill

According to the author:

Charter schools are intended to provide a unique learning environment, and to catalyze locally-driven experimentation while giving students a different approach to scholastic achievement. I believe [that for] this intent to have been achieved; however, there have been increasing concerns about the lack of explicit guidance in current transparency and accountability laws which charter schools are to adhere to.

As the industry has continued to thrive and innovate since California’s original charter school law was signed in 1992, existing law falls short in providing necessary oversight to coincide with exponential growth over the last two decades.

This bill would provide useful clarity and certainty while retaining consistency with the intent of the Charter School Act. This bill would require a charter school to hold open meetings and provide public access in the same fashion as public school districts. When public agencies receive state and local funds, it becomes necessary to provide public access and scrutiny over the use of these funds to ensure that the public’s business is being properly conducted.

2. The bill passed out of the Senate Committee on Education with the following

amendments, reflected in the Mock-up below, to be taken in the Senate Committee

on Judiciary

SEC. 1.

 It is the intent of the Legislature in enacting this act to do both of the following:

(a) Ensure that charter school governance is transparent.

(b) Ensure that monitoring and oversight of charter schools are conducted to protect the public interest.

SEC. 2.

Section 47604.1 is added to the Education Code, to read:

47604.1.

 (a) The governing board of a local educational agency, including aA charter school and an entity managing a charter school, areis subject to all of the following:

(1) (A) The Ralph M. Brown Act (Chapter 9 (commencing with Section 54950) of Part 1 of Division 2 of Title 5 of the Government Code), except that a charter school operated by an entity governed by the Bagley-Keene Open Meeting Act (Article 9 (commencing with Section 11120) of Chapter 1 of Part 1 of Division 3 of Title 2 of the Government Code) is subject to the Bagley-Keene Open Meeting Act regardless of the authorizing entity.

(2) (A) The California Public Records Act (Chapter 3.5 (commencing with Section 6250) of Division 7 of Title 1 of the Government Code).

(B) The chartering authority of a charter school that meets the criteria specified in clauses (i) and (ii) shall be the custodian of records with regard to any request for information submitted to the charter school. Nothing in this paragraph shall be construed to allow a chartering authority to delay or obstruct access to records otherwise required under the California Public Records Act.

(i) The charter school is located on a federally recognized California Indian reservation or Rancheria.

(ii) The charter school is operated by a nonprofit public benefit corporation that was formed on or before May 31, 2002, and is currently operated by a federally recognized California Indian tribe.

(3) (A) Article 4 (commencing with Section 1090) of Chapter 1 of Division 4 of Title 1 of the Government Code.

(B) Notwithstanding Article 4 (commencing with Section 1090) of Chapter 1 of Division 4 of Title 1 of the Government Code, a board member or local agency executive, as defined in Government Code Section 3511.1, shall not be deemed to be interested in a contract if his or her interest is any of the following:

(A) That of a person who provides a loan to a public school due to a fiscal emergency, and who also serves as a member of the governing body or board of the charter school. A member of a governing body or board who provides a loan as described in this paragraph shall abstain from voting on, or influencing or attempting to influence another member of the governing body or board regarding, all matters affecting the loan agreement. The loan agreement shall not disqualify the member from serving on the governing body or board or from employment by the charter school if the governing body or board, before entering into the loan agreement, declares the existence of and describes the fiscal emergency by adopting a resolution at a public meeting. The governing body or board shall disclose and approve the loan agreement, including the terms of the loan, during a public meeting. This paragraph shall also apply to a member of the governing body or board or a local agency executive of the charter school who signs a guarantor agreement relative to a line of credit, provided that the funds from the line of credit shall not be accessed until a fiscal emergency is declared and described as required pursuant to this paragraph. The interest rate for the loan or line of credit described in this paragraph shall be 0 percent plus the applicable federal rate as set by the Internal Revenue Service. A charter school shall notify its authorizer of the loan within 48 hours of taking action to execute the loan.

(B) That of a person who leases real property to be used for public school purposes or who signs a guarantor agreement relative to the lease of real property to be used for charter school purposes, and who also serves as a member of the governing body or board or as a local agency executive of the charter school, provided that the charter school is not charged more than $1 per year plus the applicable federal rate as set by the Internal Revenue Service applied to the value of the lease for as long as the charter school uses the real property. A member of a governing body or board or local agency executive who is a lessor or guarantor as described in this paragraph shall abstain from voting on, or influencing or attempting to influence another member of the governing body or board regarding, all matters affecting the real property lease agreement. The governing body or board shall disclose and approve the real property lease agreement or guarantee, including the terms of the lease or guarantee during a public meeting.

(4) (A) The Political Reform Act of 1974 (Title 9 (commencing with Section 81000) of the Government Code).

(B) A local educational agency shall be considered an agency and is the most decentralized level for purposes of adopting a conflict of interest code.

(b) Notwithstanding Article 4 (commencing with Section 1090) of Chapter 1 of Division 4 of Title 1 of the Government Code, an employee of a charter school is not disqualified because of that employment status from also serving as a member of the governing body of the charter school. Such a member of the governing body of a charter school shall abstain from voting on, or influencing or attempting to influence another member of the governing body regarding, all matters uniquely affecting his or her own employment.

3. Open meetings requirement

Existing law provides that the people have the right of access to information concerning the people’s business and requires meetings of public bodies and the writings of public officials and agencies to be open to public scrutiny. (Cal. Const., art. I, Sec. 3(b)(1).) The Legislature has declared a charter school to be a school district, and thus a public agency, for purposes of state and local funding. (Ed. Code Secs. 47612, 47630, 47638, 47650.) When public agencies receive state and local funds, it becomes necessary to provide public access and scrutiny over the use of these funds to ensure that the public’s business is being properly conducted.

Existing law, the Brown Act, provides statutory requirements for local school districts to keep the public informed by holding properly noticed public meetings and requiring disclosure of certain information before and after closed meetings. (Gov. Code Sec. 54950 et seq.) The Brown Act generally requires that the meetings of a legislative body of a local agency be open and public and that all persons be permitted to attend. (Gov. Code Sec. 54953.) Existing law, the Bagley-Keene Act, provides similar statutory requirements for a state agency. (Gov. Code Sec. 11120 et seq.)

Charter schools, like public schools, receive public funds. Students of the charter schools, as well as the parents of those students, have a stake in all discussions and decisions of the charter school governing boards. Since the charter schools are also publicly funded, the taxpayers also have a strong interest in all discussions and decisions of the charter school governing boards. Students, parents, communities, and taxpayers have a strong interest in attending to observe and participate in the meetings of the charter school governing boards.

Legislative Counsel’s opinion is that a charter school is a local agency for purposes of the Brown Act, thus the governing body of a charter school is the legislative body of a local agency, and is, therefore, subject to the Brown Act. (Legislative Counsel Opinion #152326, p. 5, Aug. 14, 2015.)

Consistent with the history of this Committee in passing AB 709 in 2015 with regard to applying the Brown Act and Bagley-Keene Act to charter schools, this bill would provide that a charter school and an entity managing a charter school is subject to the Ralph M. Brown Act, except that a charter school operated by an entity governed by the Bagley-Keene Open Meeting Act is subject to the Bagley-Keene Open Meeting Act regardless of the authorizing entity.

4. Public disclosure of information pursuant to the California Public Records Act (CPRA)

Existing law, the CPRA, governs the disclosure of information collected and maintained by public agencies, including school districts. (Gov. Code Sec. 6250 et seq.) Generally, all public records are accessible to the public upon request, unless the record requested is exempt from public disclosure. (Gov. Code Sec. 6254.)

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, according to the Legislative intent language contained in the Charter Schools Act of 1992. (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.)

Because charter schools are funded by taxpayer money, the public should have access to information that would allow them to evaluate charter schools. Subjecting charter schools to the CPRA would increase accountability and public scrutiny required to prevent misconduct and misappropriation of public funds. According to the Los Angeles Times, a recent report concluded that “at least 253 California charter schools, more than 20 percent of the state total, had enrollment policies that illegally excluded some students or discouraged them from applying, such as those with poor academic scores, limited English-speaking skills or disabilities.” (“Charter schools are growing in number where they are not needed, new report says,” Los Angeles Times, April 10, 2017, Howard Blume) <http://www.latimes.com/local/lanow/la-me-edu-california-charter-laws-criticized-20170409-story.html> (as of April 22, 2018).

Legislative Counsel’s opinion is that charter schools are subject to the California Public Records Act. (Legislative Counsel Opinion #152326, p. 6, Aug. 14, 2015.) Consistent with the history of this Committee in passing AB 709 (Gipson, 2015) with regard to applying the CPRA to charter schools, this bill would provide that the governing board of a local educational agency, including a charter school and an entity managing a charter school, is subject to the California Public Records Act, with one exception that the Senate Committee on Education voted to amend into the bill.

This bill passed out of the Senate Committee on Education on June 20, 2018 with amendments to be taken in the Senate Committee on Judiciary. The amendment relating to the California Public Records Act was proposed by the Barona Band of Mission Indians (Barona). Barona asserts, to its knowledge, that they are the only federally-recognized tribe to have a charter school on the reservation. Accordingly, the amendment would apply only to charter schools operated by a nonprofit public benefit corporation that was formed on or before May 31, 2002, and is currently operated by a federally recognized California Indian Tribe. The amendment also would provide that the chartering authority of the charter school shall be the custodian of records with regard to any request for information submitted to the charter school. Additionally, the amendment would provide that it shall not be construed to allow a chartering authority to delay or obstruct access to records otherwise required under the California Public Records Act.

5. Conflict-of-interest provisions--Government Code Section 1090, et seq.

Current law prohibits public officials and officers, acting in their official capacities, from making any contracts in which they are financially interested, unless the interest is remote, as defined. (Government Code (GC) Section 1090.) The courts have held that the purpose of Section 1090’s prohibition “is to remove or limit the possibility of any personal influence, either directly or indirectly which might bear on an official’s decision, as well as to void contracts which are actually obtained through fraud or dishonest conduct.” (See, e.g., Stigall v. City of Taft (1962) 58 Cal.2d 565, 569; see also City of Imperial Beach v. Bailey (1980) 103 Cal.App.3d 191, 197 (purpose of Section 1090 is to “not only strike at actual impropriety, but also to strike at the appearance of impropriety”).) The courts have also held that even a contract that is demonstrably fair, equitable, just, and beneficial to the body or board violates Section 1090. (See, e.g., Thomson v. Call (1985) 38 Cal.3d 633, 646-649.)

In Eden Tp. Healthcare Dis. V. Sutter Health, (202 Cal. App. 4^th 208 (2011)), the court explained that the purpose of the statute prohibiting public officials from being financially interested in contracts made by them in their official capacity is to prevent a situation where a public official would stand to gain or lose something with respect to the making of a contract over which in his official capacity he could exercise some influence.

Current law provides that any willful violation of the financial conflict of interest provisions of the Government Code (Section 1090 et seq.), is punishable by a fine of not more than $1,000, or by imprisonment in the state prison, and the public official is forever disqualified from holding any office in this state. (GC Section 1097.) California courts have also generally held that when a public official or officer violates Section 1090 et seq., the contract entered into is void, not just voidable. (See, e.g., Thomson, supra.)

Existing law prohibits officers, board members, and employees of a school district from having a financial interest in any contract made by the officer, board member, or employee, in an official capacity on behalf of the school district. (Gov. Code Sec. 1091.)

Government Code Section 1090 prohibits an officer or employee of the enumerated entities from being financially interested in a contract made by the officer or employee in his or her official capacity or by a body or board of which the officer or employee is a member. Section 1090 also prohibits an officer or employee of the enumerated entities from making, in their official capacity, either a purchase from the entity or a sale to the entity. As used here, the term “financially interested” refers to any financial interest that might interfere with the officer or employee’s unqualified devotion to their public duty. However, an officer is not deemed to be interested in a contract entered into by a board or school district in which the officer, board member, or employee is a member if that individual has only a remote interest in the contract and that interest is disclosed to the board or district of which the individual is a member, as specified. (Id.) Under existing law, a contract in which a public officer is interested is void, not merely voidable. (Thomson v. Call (1985) 38 Cal.3d 633, 646, fn. 15; Gov. Code Sec. 1092.)

In 1992, the Legislature enacted the California Charter Schools Act in order to provide communities with the opportunity to establish schools that could operate freely from the structural programs of public school districts. (SB 1448 (Hart, Ch. 781, Stats. 1992).) Charter schools are intended to provide a unique learning environment, giving students 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.) In the 25 years of charter school existence in California, many reports of widespread financial mismanagement of charter schools’ public funds have surfaced as well as violations of self-dealing.^[3]

In 2011, the Los Angeles Unified School District reported that its Inspector General identified a number of conflict of interest situations in Los Angeles charter schools:

• a charter school director transferred public funds in excess of $230,000 to a private corporation in which the director had a financial interest;
• a husband and wife team served together as board members for a charter and then conducted a lease transaction for the charter with another organization of which they were officers; and
• charter board directors wearing additional hats as officers and employees of the same charter school.

Charter Schools are ultimately funded by taxpayer dollars and should be held to the most protective standard to ensure the interests of the students, parents, and the public are placed above financial interests of board members. The purpose of Government Code Section 1090 is to protect a public agency’s interests and those of its constituency by assuring undivided loyalty and allegiance, removing direct and indirect influence of an interested officer and discouraging dishonesty. (Chapman v. Superior Court (2005) 130 Cal.App.4th 261, 266.) This bill would provide that Government Code Section 1090, et. seq. applies to Charter Schools.

It is the opinion of Legislative Counsel that under current law, a charter school is subject to Government Code Section 1090. (Legislative Counsel Opinion #152326, p. 17, Aug. 14, 2015.) In line with this opinion, the Senate Committee on Judiciary has voted on several occasions that Government Code Section 1090 applies to Charter Schools without exception. This bill would provide that the governing board of a local educational agency, including a charter school and an entity managing a charter school, is subject to the conflict of interest provisions of Government Code Section 1090 et seq.. This bill would add new circumstances under which an officer or employee shall not be deemed to be interested in a contract. This bill would also provide that notwithstanding the conflict of interest provisions of Government Code Section 1090 et seq. an employee of a charter school is not disqualified because of that employment status from also serving as a member of the governing body of the charter school. However, such a member of the governing body of a charter school shall abstain from voting on, or influencing or attempting to influence another member of the governing body regarding, all matters uniquely affecting his or her own employment.

a. This bill would add new circumstances under which an officer or employee shall not be deemed to be interested in a contract

Current law specifies that an officer or employee shall not be deemed to be interested in a contract in certain circumstances. For example, an officer shall not be deemed to be interested in a contract if his or her interest is that of an officer in being reimbursed for his or her actual and necessary expenses incurred in the performance of official duties. Another example where an officer or employee shall not be deemed to be interested in a contract is where his or her interest is that of a recipient of public services, generally provided by the public body or board of which he or she is a member, on the same terms and conditions as if he or she were not a member of the body or board.

The bill passed out of the Senate Committee on Education on June 20, 2018 with amendments to be taken in the Senate Committee on Judiciary. The amendment relating to Government Code Section 1090, et seq. provides that notwithstanding Government Code Section 1090, et seq., a board member or local agency executive, as defined in Government Code Section 3511.1, shall not be deemed to be interested in a contract if he or she provides a 0 percent interest loan to a public school due to a fiscal emergency, as specified, or leases real property to be used for public school purposes for $1.00 per year, as specified.

Permitting charter schools to receive a 0 percent interest loan or line-of-credit from board members during fiscal emergencies arguably provides schools flexibility during uncertain financial circumstances, while arguably preventing profiteering or other inappropriate financial relationships. However, the bill would also permit the individual lending the money at 0 percent interest to recover the taxes on the imputed interest that he or she is paying to the Internal Revenue Service (IRS). This provision in the bill is designed to allow the lender to be made whole for the federal tax debt that would result due to the IRS imputing interest on the lender.

Prior attempts to allow Charter School directors to loan money to the charter school while serving on the board of directors were met with opposition because of the profit motivation behind such transactions. The bill currently before this committee contains some safeguards from profit motive. Specifically, the loan would have to be sought due to a fiscal emergency, the member providing the loan must abstain from voting on, or influencing or attempting to influence members regarding the loan, and the interest rate for the loan would have to be 0 percent plus the applicable federal rate as set by the Internal Revenue Service. It is unclear what is meant by “applicable federal rate as set by the Internal Revenue Service,” and the author should clarify this provision and ensure it is not interpreted to mean that a lender can charge the applicable federal rate. The following amendment (Amendment 1) would clarify that the lender can charge only the tax implication, if any, that arises because the Internal Revenue Service applies the applicable federal rate. Additionally, there should be a prohibition on the lender charging any other form of compensation. Finally, the lender should be required to prove up their actual tax losses to the governing board before the governing board reimburses the member. The reimbursement of tax losses should also only occur if approved at a meeting of the governing body. The bill also contains a provision that would require the charter school to notify its authorizer of the loan within 48 hours of taking action to execute the loan. It would arguably be more protective of the public to inform the authorizer with sufficient time before action is taken to execute the loan. The following amendment would require earlier notice.

Amendment 1

The amendment in concept is as follows:

The interest rate for the loan or line of credit described in this paragraph shall be 0 percent plus the tax implication, if any, that arises because the Internal Revenue Service applies the applicable federal rate as set by the Internal Revenue Service. The lender shall not charge any other form of compensation. The lender shall be required to demonstrate their tax implication to the Board. The Board shall not issue the reimbursement to the lender unless the Board approves the reimbursement at an open meeting of the Board. A charter school shall notify its authorizer about their intent to enter into the loan at least 48 hours before the public meeting scheduled for approving the loan.

Under the provisions of the bill, a board member or local agency executive would not be deemed interested in a contract for a lease to the charter school, provided the charter school is not charged more than $1 per year plus the applicable federal rate as set by the Internal Revenue Service applied to the value of the lease for as long as the charter school uses the real property. This provision should be amended to clarify that the charter school shall not be charged more than $1 per year plus the tax implication, if any, that arises because the Internal Revenue Service applies the applicable federal rate as set by the Internal Revenue Service. The following amendment (Amendment 2) would clarify that the lessor can charge only the tax implication, if any, that arises because the Internal Revenue Service applies the applicable federal rate. Additionally, there should be a prohibition on the lessor charging any other form of compensation. Finally, the lessor should be required to prove up their actual tax losses to the governing board before the governing board reimburses the member. The reimbursement of tax losses should also only occur if approved at a meeting of the governing body. Unlike in the lease context, this bill, as passed out of Senate Education Committee, would not contain a provision that would require the charter school to notify its authorizer of the lease. The following amendment would require notice be given to the authorizer of the intent to enter into a $1 lease with a board member.

Amendment 2

The amendment in concept is as follows:

This provision should be amended with the clarification regarding only charging $1 per year plus the tax implication, if any, that arises because the Internal Revenue Service applies the applicable federal rate as set by the Internal Revenue Service. The lessor shall not charge any other form of compensation. The lessor shall be required to demonstrate their tax implication to the Board. The Board shall not issue the reimbursement to the lessor unless the Board approves the reimbursement at an open meeting of the Board. A charter school shall notify its authorizer about their intent to enter into a lease, under these provisions, at least 48 hours before the public meeting scheduled for approving the lease.

6. Disclosure of conflicts of interest pursuant to the Political Reform Act of 1974 (PRA)

Existing law, the PRA, requires public officials to file annual statements of financial interest. (Gov. Code Sec. 81000.) The Legislature declared this necessary because “[p]ublic officials, whether elected or appointed, should perform their duties in an impartial manner, free from bias caused by their own financial interests or the financial interests of persons who have supported them.” (Gov. Code Sec. 81001.)

Having charter school boards subject to the PRA protects funding for public education by applying requirements that have proven to be effective in minimizing conflicts of interest in traditional public schools. Charter school boards have the responsibility to ensure that the public’s money is used appropriately. In order to ensure that charter school board members are not receiving inappropriate gifts for the purpose of compromising the board member’s decisions relating to the charter school, a charter school and its board members should be required to comply with financial interest disclosure requirements under the PRA.

Legislative Counsel’s opinion is that charter schools are subject to the California Political Reform Act and that the PRA conflict-of-interest provisions apply to members of the governing body of a charter school. (Legislative Counsel Opinion #152326, p. 7, Aug. 14, 2015.) Consistent with the history of this Committee in passing AB 709 in 2015 with regard to applying the Political Reform Act to charter schools, this bill would provide that a charter school and an entity managing a charter school is subject to the Political Reform Act of 1974.

This bill would provide that the governing board of a local educational agency, including a charter school and an entity managing a charter school, is subject to the Political Reform Act of 1974 (Title 9 (commencing with Section 81000) of the Government Code). The bill would also specify that a local educational agency shall be considered an agency and is the most decentralized level for purposes of adopting a conflict of interest code.

In support of the bill, the California Association of Clerks and Election Officials explain:

Existing law in the Political Reform Act provides that the code reviewing body makes the determination as to what should be the “most decentralized level” for an entity to be considered an “agency” for purposes of adopting a conflict of interest code. In the case of a charter school whose jurisdiction is located wholly within a single county, the code reviewing body is the board of supervisors. SB 276 declared that, for purposes of adopting a conflict of interest code for a charter school, the most decentralized level was the charter school. This was in direct conflict with a long-standing section of the Government Code in the Political Reform Act.

It is the policy of some county boards of supervisors that the most decentralized level is more appropriately the chartering entity that created the charter school, whether it be a school district or the County Office of Education. Thus, the charter school officials who should make economic disclosure are named in the district’s or Office of Education’s conflict of interest code. School districts and the Office of Education are far more knowledgeable with respect to the organization, operations, and decision-making structures of schools than is the county board of supervisors and staff and are far better positioned to make such detailed determinations.

7. Opposition

In opposition, Ed Voice writes:

The latest proposed amendments to AB 276 continue to send a blunt message that serving in a leadership role helping a charter public school through tough budget times or with facility issues at start-up or renewal or when Proposition 39 facility offers are inadequate—even in high poverty and rural communities—is an act of partnership not welcome in California and is a criminal act punishable in state prison.

AB 276 makes it a felony to sit on a charter school board and provide a lease to a school unless the lease is $1 per year or help facilitate a below market rate loan or line of credit to assist with anything more than periods of financial emergency, which is undefined and could itself result in a finding of financial mismanagement.

Support: American Civil Liberties Union of California; American Federation of State, County and Municipal Employees; Association of California School Administrators; California Association of Clerks and Elected Officials; California Federation of Teachers; California Labor Federation; CASBO; California School Employees Association; California State Conference of the National Association for the Advancement of Colored People; California State PTA; Public Advocates; San José Teachers Association; SD Education Association; Service Employees International Union, California; SIA Tech

Opposition: Ed Voice

HISTORY

Source: California Teachers Association; California School Board Association

Related Pending Legislation:

SB 949 (Allen, 2018) would codify that Government Code section 1090 applies to charter schools with exceptions and would create a right to cure a violation of section 1090. This bill is in the Senate Committee on Judiciary.

SB 1216 (Glazer, 2018) would have codified that charter schools are subject to the California Public Records Act, with exceptions. This bill would also codify that charter schools are subject to the open meeting laws, with exceptions. This bill failed passage in the Senate Committee on Judiciary.

Prior Legislation:

SB 806 (Glazer, 2017) would have weakened the application of the following to charter schools: CPRA, Bagley Keene, Brown Act, Political Reform Act, and Government Code Section 1090, et seq. conflict of interest provisions. The bill died in the Senate Committee on Judiciary.

AB 1478 (Jones-Sawyer, 2017) would require charter schools to comply with the open meeting and public disclosure requirements under the Ralph M. Brown Act, Bagley-Keene Open Meeting Act, the California Public Records Act, and the conflict of interest disclosure requirements under the Political Reform Act. This bill is currently on the Assembly Floor.

AB 709 (Gipson, 2015) would have required charter schools to comply with the open meeting and public disclosure requirements under the Ralph M. Brown Act (Brown Act), Bagley-Keene Open Meeting Act (Bagley-Keene Act), the California Public Records Act (CPRA), and the conflict-of-interest disclosure requirements under the Political Reform Act (PRA). The bill was vetoed by the Governor.^[4]

AB 1057 (Medina, 2015); AB 913 (Chau, 2014); AB 360 (Brownley, 2011); and AB 572 (Brownley, 2010) all would have required charter schools to comply with the open meeting requirements of the Brown Act, or Bagley-Keene Open Meeting Act, the Public Records Act, and conflict-of-interest laws. These bills were vetoed by the Governor.

SB 1317 (Huff, 2014) would have required that charter schools be subject to a variety of the same open meeting, conflict-of-interest, and disclosure laws as school districts, including the Ralph M. Brown Act (Brown Act), the California Public Records Act (CPRA), and the Political Reform Act of 1974 (PRA). Under this measure, charter schools would not have to adhere fully to Government Code Section 1090. The bill died in the Senate Appropriations Committee.

AB 2115 (Mullin, 2008) would have required charter schools to adopt and comply with a conflict-of-interest policy and require that members of the governing board of a charter school comply with current conflict-of-interest laws that apply to school district governing boards. This bill would have required charter school governing boards to comply with open meeting requirements of the Brown Act, or in the case of state agency operated charter schools, the Bagley-Keene Open Meeting Act. This bill was vetoed by the Governor.

AB 1197 (Wiggins, 2004) would have required individuals who govern charter schools to file statements of economic interest under the Political Reform Act. The bill failed passage on the Senate Floor.

SB 1448 (Hart, Ch. 781, Stats. 1992) See Background.

Prior Vote:

Senate Committee on Education (Ayes 4, Noes 2)

Assembly Floor (Ayes 76, Noes 0)

Assembly Appropriations Committee (Ayes 16, Noes 0)

Assembly Privacy and Consumer Protection Committee (Ayes 10, Noes 0)

Assembly Higher Education Committee (Ayes 13, Noes 0)

**************

1. See Inside Celerity Charter School Network, Questionable Spending and Potential Conflicts of Interest Abound,” March 6, 2017 Los Angeles Times <http://www.latimes.com/local/education/la-me-edu-celerity-beginnings-20170306-story.html> (as of April 22, 2018); Ex-Oakland charter schools director charged with grant application fraud, money laundering, March 31, 2017 East Bay Times <http://www.eastbaytimes.com/2017/03/30/former-oakland-charter-schools-director-charged-with-grant-application-fraud-money-laundering-scheme/> [as of April 22, 2018]; (Cleeland, Audit Faults Chain of Charter Schools, Aug. 10, 2006, Los Angeles Times <http://articles.latimes.com/2006/aug/10/local/me-audit10> (as of April 22, 2018); Blume, L.A. Unified says PUC Schools should have unearthed Rodriguez’s alleged conflict three years ago, Oct. 31, 2017, Los Angeles Times <http://www.latimes.com/local/lanow/la-me-edu-la-unified-faults-puc-and-rodriguez-20171030-story.html> [as of April 22, 2018]. ↑

2. AB 709 (Gipson, 2016) was vetoed by the Governor. ↑

3. See Inside Celerity Charter School Network, Questionable Spending and Potential Conflicts of Interest Abound,” March 6, 2017 Los Angeles Times <http://www.latimes.com/local/education/la-me-edu-celerity-beginnings-20170306-story.html> (as of April 22, 2017); Ex-Oakland charter schools director charged with grant application fraud, money laundering, March 31, 2017 East Bay Times <http://www.eastbaytimes.com/2017/03/30/former-oakland-charter-schools-director-charged-with-grant-application-fraud-money-laundering-scheme/> (as of April 22, 2017); (Cleeland, Audit Faults Chain of Charter Schools, Aug. 10, 2006, Los Angeles Times <http://articles. latimes.com/2006/aug/10/local/me-audit10> (as of April 22, 2017); Blume, L.A. Unified says PUC Schools should have unearthed Rodriguez’s alleged conflict three years ago, Oct. 31, 2017, Los Angeles Times <http://www.latimes.com/local/lanow/la-me-edu-la-unified-faults-puc-and-rodriguez-20171030-story.html> [as of Jan. 8, 2018]. ↑

4. The Governor wrote the following in his veto message: “Starting a charter school requires the strong commitment of dedicated individuals willing to serve on a governing board. While I support transparency, this bill goes further than simply addressing issues of potential conflicts of interest and goes too far in prescribing how these boards must operate.” ↑

SENATE COMMITTEE ON EDUCATION

Senator Benjamin Allen, Chair

2017 - 2018 Regular

Bill No: Hearing Date: June 20, 2018

Subject:

NOTE: This bill has been referred to the Committees on Education and Judiciary. A "do pass" motion should include referral to the Committee on Judiciary.

SUMMARY

This bill subjects charter schools to a variety of the same open meeting, conflict-of-interest, and disclosure laws as traditional school districts.

BACKGROUND

Existing law, the Charter Schools Act of 1992, provides for the establishment of charter schools in California for the purpose, among other things, of improving student learning and expanding learning experiences for pupils who are identified as academically low achieving. Existing law declares that charter schools are part of the public school system as defined in Article IX of the California Constitution and are “under the exclusive control of the officers of the public schools.” A charter school is required to comply with statutes governing charter schools and all of the provisions set forth in its charter, but is otherwise exempt from most laws governing school districts except where specifically noted.

Existing law:

1. Authorizes a charter school to elect to operate as, or be operated by, a nonprofit public benefit corporation, formed and organized pursuant to the Nonprofit Public Benefit Corporation Law.
2. Specifies that the governing board of a school district that grants a charter for the establishment of a charter school shall be entitled to a single representative on the board of directors of the nonprofit public benefit corporation.
3. Specifies that an authority that grants a charter to a charter school to be operated by, or as, a nonprofit public benefit corporation is not liable for the debts or obligations of the charter school, or for claims arising from the performance of acts, errors, or omissions by the charter school, if the authority has complied with all oversight responsibilities required by law, including, but not limited to, those required by Education Code Sections 47604.32 and 47605(m). (EC § 47604)

Existing law requires state and local agencies to conduct business in meetings that are open to the public:

1. The Brown Act requires meetings of a local agency’s board of directors to be open to the public. (Government Code § 54950 et seq.)
   
2. The Bagley-Keene Open Meeting Act requires meetings of state bodies to be open to the public. (GC § 11120)
   

The California Public Records Act declares that the public 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.

(GC § 6250 and § 6253)

Existing law prohibits members of the Legislature, state, county, district, judicial district, and city officers or employees from being financially interested in any contract made by them in their official capacity, or by anybody or board of which they are members.

(GC § 1090 et seq.)

The Political Reform Act of 1974, established by the voters through Proposition 9 in June 1974, requires public officials to carry out their duties in an unbiased manner, free from influence by outside interests, and to follow regulations during elections, as defined. The Political Reform Act also requires government agencies to adopt a conflict-of-interest code that requires designated employees of the agency to file an annual statement of economic interest disclosing any investments, business positions, interests in real property, or sources of income that may be affected materially by a decision made, or participated in, by the designated employee by virtue of his or her position. (GC § 81000 et seq.)

The codes governing state corporations (including charter schools operated by non-profit or for-profit corporations) require no more than 49 percent of persons serving on the board of any corporation to be "interested persons." "Interested persons" is defined as either of the following: (a) any person currently compensated by the corporation for services rendered to it within the previous 12 months (excluding any reasonable compensation paid to a director); or, (b) any relative, as specified, of any such person. (Corporations Code § 5110 et seq.)

Existing law provides no specific requirement for charter school governing board conflict of interest policies.

ANALYSIS

This bill subjects charter schools to a variety of the same open meeting, conflict-of-interest, and disclosure laws as traditional school districts. Specifically this bill subjects charter schools to the following:

1. The Brown Act, except that a charter school operated by an entity governed by the Bagley-Keene Open Meeting Act is subject to the Bagley-Keene Open Meeting Act regardless of the authorizing entity.
2. The California Public Records Act.
3. The conflict-of-interest provisions commencing with Government Code Section 1090, except that an employee of a charter school may also serve as a member of the governing board. Such a member may not vote on, or influence other members regarding, matters affecting his or her employment.
4. The Political Reform Act.

STAFF COMMENTS

1. Need for the bill. According to the author, “The creation of charter schools was intended to catalyze locally-driven experimentation, with a structure that could produce better academic results for all children.

While charter schools are unique, they are publicly funded, yet they lack the same transparency and accountability requirements that govern other publicly funded educational institutions, outlined in California’s Education Code.

Furthermore, under the Ralph M. Brown Act and the Bagley-Keene Open Meeting Act all meetings of a legislative or state body of a local agency must be open and public, all persons be permitted to attend, unless a closed session is authorized. The California Public Records Act requires state and local agencies to make their records publicly available. Existing law prohibits public officials from being financially interested in a contract made by them or by an

1. Public accountability laws. County boards of education and school district governing boards are required to conduct public meetings and make information available to the public, upon request. Members of these boards are also subject to conflict-of-interest statutes contained in Government Code 1090 and the Political Reform Act of 1974.
   
   1. Open meeting laws–entitles the public to have access to meetings of multi-member public bodies. The Brown Act and the Bagley-Keene Act recognize the need to balance the public’s right to open government with the need for boards, on occasion, to have closed session discussions in certain matters such as personnel or litigation. By making charter schools subject to open meeting laws, charter school boards would need to provide advance notice of meetings and conduct their meetings in public.
   2. Public records–the purpose of the California Public Records Act (CPRA) is to give the public an opportunity to monitor the functioning of their local and state government. The fundamental precept of CPRA is that governmental records are to be disclosed to the public when requested, unless there is a specific reason not to do so. The CPRA allows for certain exemptions, such as matters relating to individual privacy. Under CPRA, agencies must segregate or redact exempt information and disclose the remainder of the record.
   3. The Political Reform Act–The Political Reform Act of 1974 established the Fair Political Practices Commission (FPPC) to administer its requirements and receive annual conflict-of-interest statements. According to the FPPC, the California Public Records Act (CPRA) is designed to assure that public officials perform their duties impartially without bias because of personal financial interests or the interests of financial supporters; and that public officials disclose income and assets that could be affected by official actions and to assure that public officials disqualify themselves from participating in decisions when they have conflicts-of-interest.
2. Government Code Section 1090. This is the state’s central conflict-of-interest act. It applies to public officials from members of the Legislature to local officials and employees, including those of school districts. In a 1983 opinion, the Attorney General stated, “Section 1090 of the Government Code codifies the common law prohibition and the general policy of this state against public officials having a personal interest in contracts they make in their official capacity.” Charter school advocates have consistently expressed concern with subjecting charter schools to the provisions of Government Code 1090 because it could make it more difficult for philanthropic board members to provide financial assistance or low-interest loans or make facilities available to charter schools, which may happen during the start-up phase of a charter school. However, others argue that since charter schools are public schools and receive public funds, they have a fiduciary duty to taxpayers with regards to the use of those funds and should be subject to the same conflict-of-interest and disclosure requirements as traditional school districts.
3. Corporations Code. Statute governing corporations requires not more than 49 percent of persons serving on the board of any corporation to be interested persons. "Interested persons" is defined as either of the following: (1) any person currently compensated by the corporation for services rendered to it within the previous 12 months (excluding any reasonable compensation paid to a director); or, (2) any relative, as specified, of any such person. Advocates of charter schools contend they should abide by conflict of interest provisions related to corporations, not local educational agencies, due to the fact that some charter schools are operated by nonprofit corporations.
4. Committee amendments. As currently drafted, this bill would apply to charter schools the open meeting, public records, and political reform laws that currently apply to traditional public schools, without exception. However, this Committee has consistently passed bills that allow exceptions for charter schools, recognizing that (1) charter school campuses are not always located within the boundaries of a single school district for open meeting purposes, and (2) charter school board members are often a needed source of philanthropic support as it relates to existing conflict-of-interest provisions, and (3) certain modifications to the way in which charter schools comply with public records and political reform requirements are reasonable. Therefore, if it is the desire of the Committee to pass this measure, staff recommends that the bill be amended as follows:
   1. Amend subdivision (a) of Section 47604.1 to read “The governing board of a local educational agency is subject to all of the following:”
   2. Add the following after paragraph (2) of subdivision (a) of Section 47604.1:

“The chartering authority of a charter school that meets the criteria specified in clauses (A) and (B) shall be the custodian of records with regard to any request for information submitted to the charter school. Nothing in this paragraph shall be construed to allow a chartering authority to delay or obstruct access to records otherwise required under the California Public Records Act.

(A) The charter school is located on a federally recognized California Indian reservation or Rancheria.

(B) The charter school is operated by a nonprofit public benefit corporation that was formed on or before May 31, 2002, and is currently operated by a federally recognized California Indian tribe.”

• 1. Add the following after subdivision (b) of Section 47604.1:

“(B) Notwithstanding Article 4 (commencing with Section 1090) of Chapter 1 of Division 4 of Title 1 of the Government Code, a board member or local agency executive, as defined in Government Code Section 3511.1, shall not be deemed to be interested in a contract if his or her interest is any of the following:

(A) That of a person who provides a loan to a public school due to a fiscal emergency, and who also serves as a member of the governing body or board of the charter school. A member of a governing body or board who provides a loan as described in this paragraph shall abstain from voting on, or influencing or attempting to influence another member of the governing body or board regarding, all matters affecting the loan agreement. The loan agreement shall not disqualify the member from serving on the governing body or board or from employment by the charter school if the governing body or board, before entering into the loan agreement, declares the existence of and describes the fiscal emergency by adopting a resolution at a public meeting. The governing body or board shall disclose and approve the loan agreement, including the terms of the loan, during a public meeting. This paragraph shall also apply to a member of the governing body or board or a local agency executive of the charter school who signs a guarantor agreement relative to a line of credit, provided that the funds from the line of credit shall not be accessed until a fiscal emergency is declared and described as required pursuant to this paragraph. The interest rate for the loan or line of credit described in this paragraph shall be 0 percent plus the applicable federal rate as set by the Internal Revenue Service. A charter school shall notify its authorizer of the loan within 48 hours of taking action to execute the loan.

(B) That of a person who leases real property to be used for public school purposes or who signs a guarantor agreement relative to the lease of real property to be used for charter school purposes, and who also serves as a member of the governing body or board or as a local agency executive of the charter school, provided that the charter school is not charged more than $1 per year plus the applicable federal rate as set by the Internal Revenue Service applied to the value of the lease for as long as the charter school uses the real property. A member of a governing body or board or local agency executive who is a lessor or guarantor as described in this paragraph shall abstain from voting on, or influencing or attempting to influence another member of the governing body or board regarding, all matters affecting the real property lease agreement. The governing body or board shall disclose and approve the real property lease agreement or guarantee, including the terms of the lease or guarantee during a public meeting.”

• 1. Add the following after paragraph (4) of subdivision (a) of Section 47604.1:

“(A) A local educational agency shall be considered an agency and is the most decentralized level for purposes of adopting a conflict of interest code.”

1. Related legislation.

AB 1478 (Jones-Sawyer) is identical to this measure and failed passage on the Assembly Floor.

SB 949 (Allen) amends the Government Code Section 1090 conflict-of-interest requirements and specifies that charter school governing boards are subject to the same requirements and exceptions as school district governing boards. This measure was set to be heard in the Senate Judiciary Committee on April 24, 2018, but was pulled at the request of the author.

SB 1216 (Glazer) subjects charter schools and their governing boards to the same open meeting and disclosure laws as traditional school districts, with specified exceptions. This measure was held in the Senate Judiciary Committee.

SUPPORT

California School Boards Association (co-sponsor)

California Teachers Association (co-sponsor)

American Civil Liberties Union of California

American Federation of State, County and Municipal Employees

Anaheim Secondary Teachers Association

Association of California School Administrators

California Association of Clerks and Election Officials

California Federation of Teachers

California School Employees Association

California State Conference of the NAACP

California State PTA

Public Counsel

San Diego Education Association

School for Integrated Academics and Technologies

United Teachers Los Angeles

OPPOSITION

California Charter Schools Association

EdVoice

-- END --

Date of Hearing: April 26, 2017

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez Fletcher, Chair

ABPCA Bill Id:AB 276

Author:(Medina) – As Amended Ver:April 17, 2017

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill requests the Regents of the University of California (UC), the California State University (CSU) Chancellor’s Office, the Chancellor’s Office of the California Community Colleges, and independent institutions of higher education, to complete a report by January 1, 2019, on the current state of cybersecurity and training programs at their institutions.

FISCAL EFFECT:

1. UC estimates $28,750 for a quarter of a full-time employee to compile the requested information.
2. The CSU Chancellor’s Office would incur approximately $15,000 in staff time to generate the report.
3. Minor and absorbable cost to the Chancellor’s Office of the California Community Colleges. The Chancellor’s Office is only required to report data available from participating community college districts.
4. Minor cost to California’s independent institutions of higher education. According to the Association of Independent Colleges and Universities, which represents 80 of these institutions, cost would be minor and absorbable for institutions that do have a cybersecurity and training program.

COMMENTS:

1. Purpose. This bill is intended to assemble a comprehensive picture of cybersecurity programs throughout California’s colleges and universities and determine whether existing programs are sufficient to meet current and projected demand. According to the author, “California is home to some of the best postsecondary institutions in the United States, and educates thousands of people every year. The degree programs at all California’s higher education institutions create and grow numerous industries, and supply the trained workforce necessary to sustain them. These industries are an economic asset to the state, not only providing well-paying jobs, but stability and growth.”
2. Related Legislation. AB 364 (Chau) requires the Governor’s Office of Business and Economic Development to commission a study to evaluate the economic impact of California’s cybersecurity industry. This bill has been referred to the Appropriations Committee.

AB 405 (Irwin), authorizes the board of Governors of the California Community Colleges to establish a baccalaureate degree cybersecurity pilot program at up to ten community college districts. AB 405 is currently pending a hearing in the Assembly Higher Education Committee.

Analysis Prepared by: Daisy Gonzales / APPR. / (916) 319-2081

Date of Hearing: March 28, 2017

ASSEMBLY COMMITTEE ON PRIVACY AND CONSUMER PROTECTION

Ed Chau, Chair

ABPCA Bill Id:AB 276 (

Author:Medina) – As Amended Ver:March 8, 2017

SUBJECT: Postsecondary education: report: cybersecurity education and training programs

SUMMARY: Requests that California's higher education institutions complete a report by January 1, 2019, on the current state of cybersecurity education and training programs at those institutions. Specifically, this bill:

1. Requests that the Regents of the University of California (UC), the Trustees of the California State University (CSU), the Chancellor's Office of the California Community Colleges (CCC) and the state's independent institutions of higher education complete a report by January 1, 2019, regarding their respective cybersecurity training programs.
2. Specifies that the requested report should include a list of the educational institutions offering cybersecurity education and training and the specific programs offered at those institutions.
3. Specifies that all of the following information for each program should be included in the requested report:
   1. Name of the degree or certificate offered and the total number of students currently enrolled;
   2. Number of degrees and certificates awarded in each of the last three academic years, and whether the program is currently impacted;
   3. Postgraduate employment rates, to the extent available;
   4. Amount of any private funding provided for the program;
   5. Examples of projected career paths for students in the programs;
   6. A breakdown by ethnicity of current students and graduates, over the last three academic years; and
   7. A description of each program.
4. States that the intent of the report is to provide information to be used in determining the extent to which the state is meeting the workforce needs of the cybersecurity industry.
5. Clarifies that the report completed by the Chancellor's Office of the CCC be based on data available from participating community college districts.

FISCAL EFFECT: Unknown

COMMENTS:

1. Purpose of this bill: This bill is intended to assemble a comprehensive picture of cybersecurity programs throughout California’s colleges and universities and determine whether existing programs are sufficient to meet current and projected demand. AB 276 is author-sponsored.
2. Author’s statement: According to the author, “California is home to some of the best postsecondary institutions in the United States, and educates thousands of people every year. The degree programs at all California’s higher education institutions create and grow numerous industries, and supply the trained workforce necessary to sustain them. These industries are an economic asset to the state, not only providing well-paying jobs, but stability and growth.”

“One industry that has experienced tremendous growth is the cybersecurity sector. Currently there are 45,000 openings for cyber security jobs in California and over 350,000 nationally. Cybersecurity professional salaries can average nearly $100,000 a year. The industry has openings in all segments from technicians to auditors, and analytics all the way to system architects.

“Although the cyber security sector has grown rapidly it is unclear whether California’s higher education institutions can meet the rising demand for trained personnel. As a relatively young industry, it would be helpful to cohesively/comprehensively define this emerging space and how best to address its current future needs.”

1. The cybersecurity threat: Cybersecurity threats are a growing problem in both the government and private sectors. Cyber-attacks can have varying consequences, from service disruption and theft of intellectual property to ransomware infections and large-scale data breaches.
   
   The Identity Theft Resource Center reports that data breaches increased 40% in 2016, reaching an all-time high of 1,093 breaches and exposing more than 36 million records. Cybersecurity Ventures, a research firm, estimated that global spending on cybersecurity reached $77 billion in 2015 and that it will reach $170 billion by 2020. The company also estimates that global annual cybercrime costs will grow from $3 trillion in 2015 to $6 trillion annually by 2021. This indicates that cybercrimes will continue to have a large impact on the global economy as well as California’s economy.
2. The cybersecurity workforce: However, multiple sources report that the cybersecurity industry is having difficulty finding enough trained professionals to do the job. In a 2016 Deloitte survey of state chief information officers, 51% cite inadequate availability of cybersecurity professionals as a main challenge in combating cyber threats. According to the website Cyberseek.org, which tracks cybersecurity job postings, there were more than 45,000 cybersecurity job openings in California between July 2015 and June 2016.

The National Governors Association has outlined four major challenges to the cybersecurity workforce gap in a whitepaper entitled “Building a Cybersecurity Workforce Pipeline.” These challenges include being unable to find or hire employees with the required skill, schools struggling to attract new students to the field, a gap in finding qualified teachers to educate cybersecurity students and cybersecurity specialists choosing more lucrative positions in the private sector, leaving government agencies struggling to fill basic positions.

While the author is not aware of any publically available studies that have recently assessed the overall impact of the cybersecurity industry in California, the city of San Diego has assessed the industry’s impact on the local economy and found impressive rates of growth in job and revenue impacts. Their 2016 Economic Impact and Analysis and Workforce Study found that San Diego is home to more than 10,000 cybersecurity employees, economic activity that also indirectly impacts over 16,000 jobs - a 25% increase from San Diego's previous economic impact study in 2014. Additionally, the study estimated a $1.9 billion contribution in GDP, a 26% increase from 2014. However, as the industry expands in California, it is unclear whether California's educational system will be able to produce enough trained graduates to keep pace with industry growth.

Some states, like Virginia and Maryland, are making the promotion and expansion of the cybersecurity industry within their states a top priority. The chair of the National Governors Association, Virginia Governor Terry McAuliffe, has chosen cybersecurity to be his initiative during his tenure as chair. Virginia established a cybersecurity commission in 2014 and cybersecurity certificates, associate and bachelor degrees are offered at 30 Virginia higher educational institutions. Moreover, as early as 2013, the state of Virginia was spending $520,000 for "cyber-security data analytics for the identification of strategies to bring cyber-security related jobs and industries to Virginia", and 2014 saw requests for a total of nearly $1 million for that purpose.

1. Cybersecurity education in California: California’s higher education system is composed of the UC, CSU, the CCC, and private institutions, and enrolls more than two million students per year. However, this constellation of systems has no coordinating body between them, and because of its large structure, it is unclear what types of degree programs related to cybersecurity are being offered at each these education institutions.
   
   Likely in response to increasing public awareness of cybersecurity threats and booming job growth, multiple cybersecurity programs have been established in recent years. However, these programs are not uniform or coordinated. For example, the National Centers of Academic Excellence in Information Assurance/Cyber Defense (CAE IA/CD) designation applies to 184 schools offering cybersecurity programs that match CAE IA/CD criteria, including eight in California representing UC, CSU and private universities. A 2014 study by Hewlett Packard and the Ponemon Institute ("2014 Best Schools for Cybersecurity") examined 183 schools. And website Universities.com lists 49 colleges offering a cybersecurity degree. But each system may be using different criteria to distinguish a cybersecurity program from a standard computer science degree, and new programs may have developed since that time.

In response, this bill aims to gather comprehensive information about the current state of cybersecurity education in California. Once compiled, this data will allow leaders in state government as well as the higher education and business communities, to identify the types and amounts of degree holders being produced annually, and determine if the current system can meet the projected needs of the cybersecurity industry in the state, or if particular programs need to be changed or expanded.

1. Related Legislation: AB 364 (Chau) requires the Governor’s Office of Business and Economic Development to commission a study to evaluate the economic impact of California’s cybersecurity industry. AB 364 is currently pending in the Assembly Privacy and Consumer Protection Committee.

AB 405 (Irwin) authorizes the board of Governors of the California Community Colleges to establish a baccalaureate degree cybersecurity pilot program at up to ten community college districts. AB 405 is currently pending in the Assembly Higher Education Committee.

1. Double-referral: This bill was double-referred to the Assembly Committee on Higher Education, where it was heard March 14, 2017, and passed out on a unanimous vote.

REGISTERED SUPPORT / OPPOSITION:

Support

None on file

Opposition

None on file

Analysis Prepared by: Jennifer Chase / P. & C.P. / 916-319-2200

Date of Hearing: March 14, 2017

ASSEMBLY COMMITTEE ON HIGHER EDUCATION

Jose Medina, Chair

ABPCA Bill Id:AB 276 (

Author:Medina) – As Amended Ver:March 8, 2017

[Note: This bill is double-referred to the Assembly Committee on Privacy and Consumer Protection and will be heard as it relates to issues under its jurisdiction.]

SUBJECT: Postsecondary education: report: cybersecurity education and training programs

SUMMARY: This bill seeks information on the state of cybersecurity education and training programs at California's colleges and universities. Specifically, this bill:

1. Requests that Regents of the University of California (UC), the Trustees of the California State University (CSU), the Chancellor's Office of the California Community Colleges (CCC)—based on data provided by community college districts—and the state's independent institutions complete a report by January 1, 2019 regarding their respective cybersecurity training programs.
2. Requires the report to include a list of the educational institutions offering cybersecurity education and training and the specific programs offered at those institutions.
3. Requires all of the following for each program identified in (2):
   1. Name of the degree or certificate offered and the total number of students currently enrolled;
   2. Number of degrees and certificates awarded in each of the last three academic years, and whether the program is currently impacted;
   3. Postgraduate employment rates, to the extent available;
   4. Amount of any private funding provided for the program;
   5. Examples of projected career paths for students in the programs;
   6. A breakdown of current students and graduates, over the last three academic years, by ethnicity;
   7. A description of each program, and;
   8. The estimated time for completion of each program.
4. States that the intent of the report is to provide information to be used in determining the extent to which the state is meeting the workforce needs of the cybersecurity industry.

EXISTING LAW: Requires the Department of Technology, by July 1, 2018 and in consultation with the Office of Emergency Services, to update the Technology Recovery Plan element of the State Administrative Manual to ensure the inclusion of cybersecurity strategy incident response standards for each state agency to secure its critical infrastructure controls and critical infrastructure information. (Government Code Section 8592.35.)

FISCAL EFFECT: Unknown.

COMMENTS:

Background and Purpose. According to the author's office, there are insufficient numbers of graduates in cybersecurity-related fields to fill industry employment demands. The website Cyberseek.org indicates that there are currently 45,000 openings for cybersecurity jobs in California and 350,000 nationwide. Examples of jobs in this field include information security analyst, penetration and vulnerability tester, incident analyst responder, operations research analyst, and computer network architect.

A recent economic analysis done for the industry in the San Diego region indicates that local cybersecurity employers have recently experienced, and continue to project, double-digit annual employment growth. Most employers, however, cited having at least some difficulty hiring qualified cybersecurity employees.

While numerous California colleges and university currently offer cybersecurity degree and certificate programs, including some online programs, this bill seeks to gather comprehensive information on the types and scale of these programs. Obtaining this baseline data will help the state to determine how best to meet industry employment needs going forward.

Related Legislation. AB 364 (Chau), pending in Privacy and Consumer Protection, requires the Governor’s Office of Business and Economic Development by July 1, 2018, to evaluate the economic impact of California’s cybersecurity industry so that the state can encourage and promote the its growth.

AB 405 (Irwin), pending in this committee, authorizes the Board of Governors of the California Community Colleges to authorize the establishment of cybersecurity baccalaureate degree programs at up to 10 community college districts.

REGISTERED SUPPORT / OPPOSITION:

Support

None on file

Opposition

None on file

Analysis Prepared by: Chuck Nicol / HIGHER ED. / (916) 319-3960