SENATE THIRD READING

STR Bill Id:SB 126

Author:(Leyva and O'Donnell)

As Amended Ver:February 14, 2019

Majority vote

SUMMARY:

Requires a charter school and an entity managing a charter school to comply with the same conflict of interest requirements as school districts.

Major Provisions

1. Requires a charter school and an entity managing a charter school to be subject to the Ralph M. Brown Act or the Bagley-Keene Open Meeting Act; the California Public Records Act; Government Code 1090; and, the Political Reform Act.
2. Specifies the location where a charter school governing body and the governing body of an entity managing a charter school may hold meetings; specifies that employees may serve on the governing body; and, defines an entity managing a charter school.

COMMENTS:

This bill requires charter school governing body members and the governing body of the entity that manages a charter school to comply with substantially similar conflict of interest policies by which school district governing board members currently abide. Recent news reports of charter school governing body members engaging in inappropriate financial mismanagement have highlighted the need for charter school conflict of interest laws to be clarified. Currently, these investigations can take many months to resolve partly due to the fact that charter school governing body members and designated employees do not consistently file annual statements of economic interest, which makes public any potential conflicts of interest that individuals may have in their official capacities. While charter schools are given more autonomy than public schools, their governing bodies have authority over public funds to be used for the educational benefit of their students. The intent of the authors are that charter school governing bodies should be held to the same conflict of interest standards as school district governing boards.

This bill requires charter school governing bodies and the governing bodies of the entities managing charter schools to file statements of economic interest according to the Political Reform Act; specifies that charter school governing body members and the governing bodies of the entities managing charter schools may not be financially interested in any decision made by the governing body; requires charter schools and entities managing charter schools to comply with the California Public Records Act; and, requires charter school governing bodies and the governing bodies of the entities managing a charter school to abide by the Brown Act or the Bagley-Keene Open Meetings Act. The bill also expressly authorizes charter school employees to serve on a charter school governing body. Further, the bill specifies the geographic location where the governing body of a charter school and the governing body of an entity managing a charter school may meet.

Attorney General Opinion on Charter School Conflict of Interest. On December 26, 2018, the California Attorney General (AG) published an opinion stating that under existing law, charter schools are subject to the Brown Act, California Public Records Act, Government Code 1090 and the Political Reform Act. While the AG opinion is useful in determining the intent of existing law, this bill provides further clarification by codifying the requirement that charter schools abide by these provisions of law. Additionally, the AG's opinion does not address whether entities that manage charter schools must abide by these laws, as this bill prescribes.

Charter Management Organizations: This measure requires entities managing charter schools to comply with the specified conflict of interest code sections. The intent of the authors of this measure is that entities known as charter management organizations that function in much the same way as a school districts, be subject to these laws. Charter management organizations operate charter schools in many of the following ways: acting as the administrator of the school, appointing the governing body of the school, selecting curriculum, hiring teachers and staff, providing budget and payroll services. It is unclear if all charter management organizations operate in this same way, or if some management organizations play a smaller role in managing charter schools. Since these organizations operate schools in the much same way that school districts operate traditional public schools, it is the intent of the authors that these organizations be subject to the same conflict of interest policies as school districts.

Location of Governing Body Meetings: This measure specifies the location where charter school governing bodies and the governing bodies of entities managing charter schools can physically hold meetings. The intent of the authors of this measure is to have charter school governing bodies and the governing bodies of the entities managing a charter school hold meetings in the closest possible location to their community of students and parents, so those meetings are reasonably accessible. Should this bill be enacted, in most instances, the charter school governing body will be required to meet in the county in which the school is physically located. If the charter school has more than one location across multiple counties, then the governing body of the school and the governing body of the entity managing the charter school would be required to meet in the county with the highest number of enrolled students. This bill further requires a charter school with multiple locations across multiple counties to audio and/or video tape the governing body meetings and post the recordings on the website for each school site. Further, this measure requires all charter school governing body meetings to have a two way teleconference, which is a conference call, available at each school site for the public to listen to the meeting and comment to the governing body members via telephone.

According to the Author:

While charter schools are unique, they are publicly funded and yet they lack the same transparency and accountability requirements that govern other publicly funded educational institutions. These laws are essential for ensuring that, as public schools, all charter schools are good stewards of the public funds they receive.

Arguments in Support:

According to several school management associations, labor organizations and social justice organizations, "Public schools' conflict of interest laws and disclosure regulations should apply to charter schools that receive public funds. Companies and organizations that manage charter schools must open board meetings to parents and the public, similar to public school board meetings. The public's business should be transacted in public."

Arguments in Opposition:

According to the Charter Schools Development Center, "This measure imposes various "transparency" laws on charter schools and does so in an especially onerous, expensive and rigid fashion."

FISCAL COMMENTS:

This bill has been keyed non-fiscal by the Office of Legislative Counsel.

VOTES:

SENATE FLOOR: 34-2-2

YES: Allen, Archuleta, Atkins, Bates, Beall, Borgeas, Bradford, Caballero, Chang, Dodd, Durazo, Galgiani, Glazer, Grove, Hertzberg, Hill, Hueso, Hurtado, Jackson, Leyva, McGuire, Mitchell, Monning, Nielsen, Pan, Portantino, Roth, Rubio, Skinner, Stone, Umberg, Wieckowski, Wiener, Wilk

NO: Jones, Morrell

ABS, ABST OR NV: Moorlach, Stern

ASM EDUCATION: 5-1-0

YES: O'Donnell, Kalra, McCarty, Smith, Weber

NO: Kiley

UPDATED:

VERSION: February 14, 2019

CONSULTANT: Chelsea Kelley / ED. / (916) 319-2087 FN: 0000037

Date of Hearing: February 26, 2019

ASSEMBLY COMMITTEE ON EDUCATION

Patrick O'Donnell, Chair

SBPCA Bill Id:SB 126

Author:(Leyva) – As Amended Ver:February 14, 2019

SENATE VOTE: 34-2

SUBJECT: Charter schools

SUMMARY: Requires a charter school and an entity managing a charter school to comply with the same conflict of interest requirements as school districts. Specifically, this bill:

1. Requires a charter school and an entity managing a charter school to be subject to all of the following:
   1. The Ralph M. Brown Act, except that a charter school operated by an entity pursuant to Chapter 5 (commencing with Section 47620) shall be subject to the Bagley-Keene Open Meeting Act, regardless of the authorizing entity.
   2. The California Public Records Act.
   3. Article 4 (commencing with Section 1090) of Chapter 1 of Division 4 of Title 1 of the Government Code.
   4. The Political Reform Act of 1974.
2. Requires the chartering authority of a charter school to be the custodian of records with regard to any request for information submitted to the charter school if either of the following apply:
   1. The charter school is located on a federally recognized California Indian reservation or rancheria.
   2. 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. Requires a charter school and an entity managing a charter school to be considered an agency and the most decentralized level for purposes of adopting a conflict-of-interest code.
4. Requires the following regarding the location of governing body meetings:
   1. The governing body of one charter school shall meet within the physical boundaries of the county in which the charter school is located. A two-way teleconference location shall be established at each schoolsite.
   2. The governing body of one nonclassroom-based charter school that does not have a facility or operates one or more resource centers shall meet within the physical boundaries of the county in which the greatest number of pupils who are enrolled in that charter school reside. A two-way teleconference location shall be established at each resource center.
   3. For a governing body of an entity managing one or more charter schools located within the same county, the governing body of the entity managing a charter school shall meet within the physical boundaries of the county in which that charter school or schools are located. A two-way teleconference location shall be established at each schoolsite and each resource center.
   4. For a governing body of an entity that manages two or more charter schools that are not located in the same county, the governing body of the entity managing the charter schools shall meet within the physical boundaries of the county in which the greatest number of pupils enrolled in those charter schools managed by that entity reside. A two-way teleconference location shall be established at each schoolsite and each resource center. The governing body of the entity managing the charter schools shall audio record, video record, or both, all the governing board meetings and post the recordings on each charter school’s website.
5. Specifies that an employee of a charter school shall not be disqualified from serving as a member of the governing body of the charter school because of that employee’s employment status. Specifies that a member of the governing body of a charter school who is also an employee of the charter school shall abstain from voting on, or influencing or attempting to influence another member of the governing body, regarding all matters uniquely affecting that member’s employment.
6. Specifies that, to the extent a governing body of a charter school or an entity managing a charter school engages in activities that are unrelated to a charter school, Article 4 (commencing with Section 1090) of Chapter 1 of Division 4 of Title 1 of the Government Code, the Ralph M. Brown Act, the Bagley-Keene Open Meeting Act, the California Public Records Act, and the Political Reform Act of 1974 shall not apply with regard to those unrelated activities unless otherwise required by law.
7. Prohibits a meeting of the governing body of a charter school to discuss items related to the operation of the charter school, including the discussion of any item regarding an activity of the governing body that is unrelated to the operation of the charter school.
8. Defines an “entity managing a charter school” as a nonprofit public benefit corporation that operates a charter school consistent with Section 47604. Specifies that an entity that is not authorized to operate a charter school pursuant to Section 47604 is not an “entity managing a charter school” solely because it contracts with a charter school to provide to that charter school goods or task-related services that are performed at the direction of the governing body of the charter school and for which the governing body retains ultimate decision-making authority.

EXISTING LAW pertaining to charter schools:

1. Provides no specific requirement for charter school governing board conflict of interest policies.
2. Deems charter schools to be school districts for the purposes of receiving state education funds.

EXISTING LAW pertaining to school districts:

1. Specifies that Members of the Legislature, state, county, district, and city officers or employees shall not be financially interested in any contract made by them in their official capacity, or by any body or board of which they are members. (Government Code 1090)
2. Specifies that an employee of a school district (or local agency) may not be sworn into office as an elected or appointed member of that school district's (or local agency's) governing board unless and until the individual resigns as an employee. (Education Code 35107)
3. Requires members of school district governing boards and designated employees of the school district to file statements of financial interest according to the Political Reform Act. (Government Code 87100 et. seq.)
4. Requires a county, city (whether general law or chartered), city and county, town, school district, municipal corporation, district, political subdivision, or any board, commission or agency thereof, or other local public agency to comply with the Brown Act. (Government Code 54950 et. seq.)
5. Requires a county; city; city and county; school district; municipal corporation; district; political subdivision; or any board, commission or agency thereof; other local public agency; or a board, commission, committee, or other multimember body that governs a private corporation, limited liability company, or other entity that either is created by the elected legislative body in order to exercise authority that may lawfully be delegated by the elected governing body to a private corporation, limited liability company, or other entity; or, receives funds from a local agency and the membership of whose governing body includes a member of the legislative body of the local agency appointed to that governing body as a full voting member by the legislative body of the local agency to comply with the California Public Records Act. (Government Code 6250 et. seq.)

FISCAL EFFECT: This bill is keyed non-fiscal by the Office of Legislative Counsel.

COMMENTS: This bill requires charter school governing body members and the governing body of the entity that manages a charter school to comply with substantially similar conflict of interest policies by which school district governing board members currently abide. Recent news reports of charter school governing body members engaging in inappropriate financial mismanagement have highlighted the need for charter school conflict of interest laws to be clarified. Currently, these investigations can take many months to resolve partly due to the fact that charter school governing body members and designated employees do not consistently file annual statements of economic interest, which make public any potential conflicts of interest that individuals may have in their official capacities. While charter schools are given more autonomy than public schools, their governing bodies have authority over public funds to be used for the educational benefit of their students. The authors’ intent is that charter school governing bodies should be held to the same conflict of interest standards as school district governing boards.

This bill requires charter school governing bodies and the governing bodies of the entities managing charter schools to file statements of economic interest according to the Political Reform Act; specifies that charter school governing body members and the governing bodies of the entities managing charter schools may not be financially interested in any decision made by the governing body; requires charter schools and entities managing charter schools to comply with the California Public Records Act; and, requires charter school governing bodies and the governing bodies of the entities managing charter schools to abide by the Brown Act or the Bagley-Keene Open Meetings Act. The bill also expressly authorizes charter school employees to serve on a charter school governing body. Further, the bill specifies the geographic location where the governing body of a charter school and the governing body of an entity managing a charter school may meet.

The Brown Act. The Brown Act governs meetings conducted by local legislative bodies, such as boards of supervisors, city councils, and school boards. The Brown Act represents the Legislature's determination of how the balance should be struck between public access to meetings of multi-member public bodies and the need for confidential candor, debate, and information gathering. The Brown Act requires meetings of the board to be publicly noticed 72 hours before their meetings, among other requirements.

California Public Records Act (CPRA). The CPRA was enacted in 1968 and, according to the Attorney General, in enacting the CRPA the Legislature stated that access to information concerning the conduct of the public’s business is a fundamental and necessary right for every person in the state. Cases interpreting the CRPA also have emphasized that its primary purpose is to give the public an opportunity to monitor the functioning of their government affirming the principle that the greater and more unfettered a public official’s power, the greater the public’s interest in monitoring the governmental action. The fundamental precept of CPRA is that governmental records shall be disclosed to the public, upon request, unless there is a specific reason not to do so. Most of the reasons for withholding disclosure of a record are set forth in specific exemptions contained in the CPRA. Several CPRA exemptions are based on a recognition of the individual’s right to privacy. If a record contains exempt information, the agency generally must segregate or redact the exempt information and disclose the remainder of the record.

Government Code 1090. Government Code 1090 states that members of the Legislature, state, county, district, judicial district, and city officers or employees shall not be financially interested in any contract made by them in their official capacity, or by any body or board of which they are members. 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 capacities. Mindful of the ancient adage that 'no man can serve two masters,' the section was enacted to ensure that public officials 'making' official contracts not be distracted by personal financial gain from exercising absolute loyalty and undivided allegiance to the best interest of the entity which they serve."

Corporations Code. Statute governing corporations (including charter schools operated by non-profit corporations) requires not more than 49% 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. This bill specifies that non-profit corporation charter schools must comply with Government Code 1090, which prohibits any member of the governing body from having a financial interest in the decisions made by the body.

Political Reform Act. The Fair Political Practices Commission (FPPC) was created by the Political Reform Act of 1974, a ballot initiative passed by California voters as Proposition 9. The FPPC provides written and oral advice to public agencies and officials; conducts seminars and training sessions; develops forms, manuals and instructions; and receives and files statements of economic interests from many state and local officials. The FPPC investigates alleged violations of the Political Reform Act, imposes penalties when appropriate, and assists state and local agencies in developing and enforcing conflict-of-interest codes. The FPPC regulates campaign financing and spending; financial conflicts of interest; lobbyist registration and reporting; post-governmental employment; mass mailings at public expense; and gifts and honoraria given to public officials and candidates. School board members are required to comply with the PRA, and in so doing, must file a statement of economic interest annually.

Attorney General Opinion. On December 26, 2018, the California Attorney General (AG) published an opinion on the following questions:

1. Are a California charter school and its governing body subject to the Ralph M. Brown Act and the California Public Records Act?
2. Is a California charter school’s governing body subject to Government Code 1090?
3. Is a California charter school’s governing body subject to the Political Reform Act of 1974?
4. Are the books and records of a California charter school subject to review and inspection by the grand jury?

The AG answered each question with “yes,” with one narrow exception: that the records of State-approved charter schools are not subject to grand jury review. While the AG opinion is useful in determining the intent of existing law, this bill provides further clarification by codifying the requirement that charter schools abide by these provisions of law. Additionally, the AG’s opinion does not address whether entities that manage charter schools must abide by these laws, as this bill prescribes.

Charter Management Organizations. This measure requires entities managing charter schools to comply with the conflict of interest code sections described above. The intent of the authors of this measure is that entities known as charter management organizations that function in much the same way as a school district should be subject to these laws. Charter management organizations operate charter schools in many of the following ways: acting as the administrator of the school, appointing the governing body of the school, selecting curriculum, hiring teachers and staff, providing budget and payroll services.

Since these organizations operate schools in the much same way that school districts operate traditional public schools, the authors’ intent is that these organizations be subject to the same conflict of interest policies as school districts. It is unclear if all charter management organizations operate in this same way, or if some management organizations play a smaller role in managing charter schools.

Location of Governing Body Meetings. This measure specifies the location where charter school governing bodies and the governing bodies of entities managing charter schools can physically hold meetings. The intent of the authors is to have charter school governing bodies and the governing bodies of the entities managing a charter school hold meetings in the closest possible location to their community of students and parents, so that those meetings are reasonably accessible. Should this bill be enacted, in most instances, the charter school governing body will be required to meet in the county in which the school is physically located. If the charter school has more than one location across multiple counties, the governing body of the school and the governing body of the entity managing the charter school would be required to meet in the county with the highest number of enrolled students. This bill further requires a charter school with multiple locations across multiple counties to audio and/or videotape the governing body meetings and post the recordings on the website for each school site. Further, this measure requires all charter school governing body meetings to have a two way teleconference, which is a conference call, available at each school site for the public to listen to the meeting and comment to the governing body members via telephone.

Previous Legislation. Measures substantially similar to this have been introduced eight times, and at least once during every Legislative Session since 2008.

AB 276 (Medina) from the 2017-2018 Session, which was held on the Senate Floor, would have required charter schools and entities managing charter schools to comply with the same conflict of interest requirements as school districts.

AB 1478 (Jones Sawyer) from the 2017-2018 Session, which failed passage on the Assembly Floor, would have required charter schools and entities managing charter schools to comply with the same conflict of interest requirements as school districts.

AB 709 (Gibson) of the 2015-2016 Session, would have required charter schools to comply with the same conflict of interest requirements as school districts. The bill was vetoed by Governor Brown, with the following message:

This bill requires charter schools to be subject to the Brown Act, Public Records Act, Political Reform Act and Government Code section 1090. In 2014, I vetoed AB 913, a virtually identical bill. My reasons then were: 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. That's still my view.

AB 913 (Chau), of the 2013-2014 Session, would have required charter schools to comply with the same conflict of interest requirements as school districts, commencing July 1, 2014. The bill was vetoed by Governor Brown, with the following 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.

AB 360 (Brownley), of the 2011-2012 Session, which died on the Assembly inactive file on concurrence, would have required charter schools to comply with the same conflict of interest requirements as school districts.

AB 572 (Brownley), of the 2009-2010 Session would have required, commencing July 1, 2011, charter schools to comply with the same conflict of interest requirements as school districts, by specifying that charter schools are subject to the Brown Act, the CPRA, Government Code 1090, and the PRA. The bill was vetoed by Governor Schwarzenegger, with the following message:

Charter school educators have proven that poverty is not destiny for students that attend public schools in California. Repeatedly, charter schools with high proportions of disadvantaged students are among the highest performing public schools in California. Any attempt to regulate charter schools with incoherent and inconsistent cross-references to other statutes is simply misguided. Parents do not need renewed faith in charter schools as suggested in this bill. On the contrary, tens of thousands of parents in California have children on waiting lists to attend a public charter school. Legislation expressing findings and intent to provide "greater autonomy to charter schools" may be well intended at first glance. A careful reading of the bill reveals that the proposed changes apply new and contradictory requirements, which would put hundreds of schools immediately out of compliance, making it obvious that it is simply another veiled attempt to discourage competition and stifle efforts to aid the expansion of charter schools.

AB 2115 (Mullin), of the 2007-2008 Session required charter schools to adopt and comply with a conflict of interest policy that requires its governing board members to abide by the same conflict of interest requirements as local education agency governing board members. The bill was vetoed by Governor Schwarzenegger, with the following message:

Not only would this bill create state mandated costs for charter schools to comply with its provisions, the measure runs counter to the intent of charter schools, which were created to be free from many of the laws governing schools districts.

AB 1772 (Garcia), of the 2007-2008 Session, which was held in the Assembly Appropriations Committee, would have required a charter school to adopt and comply with a conflict-of-interest policy that included, but was not necessarily limited to, the requirements that charter school governing board members abide Government Code 1090, among other requirements.

AB 1197 (Wiggins), of the 2003-2004 Session, would have required that individuals who govern charter schools file statements of economic interest under the PRA. This bill failed passage on the Senate Floor.

REGISTERED SUPPORT / OPPOSITION:

Support

American Civil Liberties Union Of California
American Federation Of State, County And Municipal Employees, Council 57
Association Of California School Administrators
California Association Of School Business Officials
California County Superintendents Educational Services Association
California Federation Of Teachers
California Federation Of Teachers AFL-CIO
California Labor Federation, AFL-CIO
California NAACP
California School Boards Association
California State PTA
California Teachers Association
Kern County Superintendent Of Schools

League of Women Voters of California
Public Advocates Inc.
Riverside County Office Of Education
San Diego Unified School District
San Francisco Unified School District
School Employers Association Of California
Service Employees International Union California
Small School Districts Association

Oppose

Charter Schools Development Center

Analysis Prepared by: Chelsea Kelley / ED. / (916) 319-2087

 THIRD READING  

Bill No: SB 126

Author: Leyva (D) and Assemblymember O'Donnell (D)

Amended: 2/14/19

Vote: 21

SENATE EDUCATION COMMITTEE: 7-0, 2/19/19

AYES: Leyva, Wilk, Chang, Durazo, Glazer, McGuire, Pan

SUBJECT: Charter schools

SOURCE: Author

DIGEST:

This bill requires charter school governing boards to comply with a variety of the same open meeting, conflict-of-interest, and disclosure laws as traditional school district governing boards.

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 (EC) Sections 47604.32 and 47605(m). (EC § 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 [GC] § 54950 et seq.) The Bagley-Keene Open Meeting Act (Bagley-Keene Act) requires meetings of state bodies to be open to the public. (GC § 11120)
6. Declares, pursuant to the California Public Records Act (CPRA), 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 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 Act, is subject to the Bagley-Keene Act regardless of the authorizing entity. The governing body of one charter school shall meet within the physical boundaries of the county in which the charter school is located. A two-way teleconference location shall be established at each school site and each resource center. The governing body of an entity managing one or more charter schools shall meet within the physical boundaries of the county in which the charter school or schools are located. A two-way teleconference location shall be established at each school site and each resource center, with audio and/or video recording posted on the website of each school.
   2. The CPRA 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 GC Section 1090, except for 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. Defines, for purposes of the Acts enumerated above, an “entity managing a charter school” as any non-profit public benefit corporation that operates a charter school consistent with the definition in EC Section 47604. An entity that is not authorized to operate a charter school under Section 47604 is not an “entity managing a charter school” solely because it contracts with a charter school to provide to that charter school goods or task-related services that are performed at the direction of the charter school governing board and for which the charter school governing body retains ultimate decision-making authority.
3. 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.
4. Specifies that a meeting of the governing body of a charter school to discuss items related to the operation of the charter school shall not include discussion on any item regarding an activity of the governing body that is not related to the operation of the charter school.

Comments

1. Need for the bill. According to the author, “The Charter Schools Act of 1992 was adopted to catalyze locally-driven experimentation, with a structure that could produce better academic results and then be expanded to all California students. 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.

“There has been a longstanding debate within the education community about whether charter school board members are subject to the same open meeting, public disclosure, and conflict-of-interest requirements that school district board members already comply with under state law. The state’s Attorney General (AG) recently published an opinion stating ‘yes’ these good government laws apply to charter school governing boards. The AG expressly rejected arguments that charter schools operated as, or by, nonprofit public benefit corporations are entitled to different treatment under these laws.

“While the AG opinion greatly influences the debate about whether or not these laws apply to charter school governing boards, it should be noted that the opinion is only advisory and not legally binding on courts, agencies, or individuals. Absent legislation codifying the AG opinion, we will continue to see disputes over how these laws apply to charter schools.”

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 GC Section 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 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 to administer its requirements and receive annual conflict-of-interest statements. According to the Fair Political Practices Commission, the 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 AG 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.” Violations of Section 1090 carry serious penalties, including the possibility of felony charges. In addition, contracts made in violation of Section 1090 are generally deemed to be null and void.

Charter school advocates have consistently expressed concern with subjecting charter schools to the provisions of GC Section 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.

1. 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: (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. 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.
2. Recent Attorney General Opinion on Charter Schools. On December 26, 2018, the state’s AG published an opinion on the following questions:
   1. Are a California charter school and its governing body subject to the Ralph M. Brown Act and the CPRA?
   2. Is a California charter school’s governing body subject to Government Code 1090?
   3. Is a California charter school’s governing body subject to the Political Reform Act of 1974?
   4. Are the books and records of a California charter school subject to review and inspection by the grand jury?

These questions have been debated since the adoption of the Charter Schools Act in 1992, and the focus of several failed pieces of legislation in recent years. The AG answered each question with “yes”–with one narrow exception: that the records of state-approved charter schools are not subject to grand jury review.

Some charter schools are already complying with these laws because of enforcement by their authorizers. However, other charter schools have not agreed to comply with these laws—in particular GC Section 1090. Key to the AG’s analysis is the fact that charter schools are funded by taxpayer dollars and considered “school districts” for funding purposes.

Opinions of the California AG are advisory only and are not legally binding on courts, agencies, or individuals. However, they are afforded great respect and weight by the courts and often indicate how a judge may rule on the issues if presented in court.

Related/Prior Legislation

AB 276 (Medina, 2018) would have subjected charter schools and their governing boards to the same open meeting and disclosure laws as traditional school districts, with specified exceptions. The bill was held on the Senate Floor.

SB 949 (Allen, 2018) would have amended the GC Section 1090 conflict-of-interest requirements and specified that charter school governing boards are subject to the same requirements and exceptions as school district governing boards. The bill 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) would have subjected charter schools and their governing boards to the same open meeting and disclosure laws as traditional school districts, with specified exceptions. The bill was held in the Senate Judiciary Committee.

FISCAL EFFECT: Appropriation: No Fiscal Com.: No Local: No

SUPPORT: (Verified 2/20/19)

American Civil Liberties Union

American Federation of State, County and Municipal Employees, Council 57

Association of California School Administrators

California Association of School Business Officials

California County Superintendents Educational Services Association

California Federation of Teachers

California Labor Federation

California School Boards Association

California Teachers Association

Kern County Superintendent of Schools

National Association for the Advancement of Colored People

Public Advocates

Riverside County Office of Education

San Diego Unified School District

San Francisco Unified School District

Service Employees International Union

Small School Districts Association

OPPOSITION: (Verified 2/20/19)

Charter Schools Development Center

Prepared by: Ian Johnson / ED. /

2/20/19 15:46:10

**** END ****

SENATE COMMITTEE ON EDUCATION

Senator Connie Leyva, Chair

2019 - 2020 Regular

Bill No: SB 126 Hearing Date: February 19, 2019

Subject: Charter Schools.

SUMMARY

This bill requires charter school governing boards to comply with a variety of the same open meeting, conflict-of-interest, and disclosure laws as traditional school district governing boards.

BACKGROUND

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.

ANALYSIS

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 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. The governing body of one charter school shall meet within the physical boundaries of the county in which the charter school is located. A two-way teleconference location shall be established at each school site and each resource center. The governing body of an entity managing one or more charter schools shall meet within the physical boundaries of the county in which the charter school or schools are located. A two-way teleconference location shall be established at each school site and each resource center, with audio and/or video recording posted on the website of each school.
   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 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. Defines, for purposes of the acts enumerated above, an “entity managing a charter school” as any non-profit public benefit corporation that operates a charter school consistent with the definition in Education Code Section 47604. An entity that is not authorized to operate a charter school under Section 47604 is not an “entity managing a charter school” solely because it contracts with a charter school to provide to that charter school goods or task-related services that are performed at the direction of the charter school governing board and for which the charter school governing body retains ultimate decision-making authority.
3. 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.
4. Specifies that a meeting of the governing body of a charter school to discuss items related to the operation of the charter school shall not include discussion on any item regarding an activity of the governing body that is not related to the operation of the charter school.

STAFF COMMENTS

1. Need for the bill. According to the author, “The Charter Schools Act of 1992 was adopted to catalyze locally-driven experimentation, with a structure that could produce better academic results and then be expanded to all California students. 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.

There has been a longstanding debate within the education community about whether charter school board members are subject to the same open meeting, public disclosure, and conflict-of-interest requirements that school district board members already comply with under state law. The state’s Attorney General (AG) recently published an opinion stating “yes” these good government laws apply to charter school governing boards. The AG expressly rejected arguments that charter schools operated as, or by, nonprofit public benefit corporations are entitled to different treatment under these laws.

While the AG opinion greatly influences the debate about whether or not these laws apply to charter school governing boards, it should be noted that the opinion is only advisory and not legally binding on courts, agencies, or individuals. Absent legislation codifying the AG opinion, we will continue to see disputes over how these laws apply to charter schools.”

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 to administer its requirements and receive annual conflict-of-interest statements. According to the Fair Political Practices Commission, the California Public Records Act 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.” Violations of Section 1090 carry serious penalties, including the possibility of felony charges. In addition, contracts made in violation of Section 1090 are generally deemed to be null and void.

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.

1. 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.
2. Recent Attorney General Opinion on Charter Schools. On December 26, 2018, the state’s Attorney General published an opinion on the following questions:
   1. Are a California charter school and its governing body subject to the Ralph M. Brown Act and the California Public Records Act?
   2. Is a California charter school’s governing body subject to Government Code 1090?
   3. Is a California charter school’s governing body subject to the Political Reform Act of 1974?
   4. Are the books and records of a California charter school subject to review and inspection by the grand jury?

These questions have been debated since the adoption of the Charter Schools Act in 1992, and the focus of several failed pieces of legislation in recent years. The Attorney General (AG) answered each question with “yes”–with one narrow exception: that the records of State-approved charter schools are not subject to grand jury review.
 
Some charter schools are already complying with these laws because of enforcement by their authorizers. However, other charter schools have not agreed to comply with these laws—in particular Government Code 1090. Key to the AG’s analysis is the fact that charter schools are funded by taxpayer dollars and considered “school districts” for funding purposes.
 
Opinions of the California AG are advisory only and are not legally binding on courts, agencies, or individuals. However, they are afforded great respect and weight by the courts and often indicate how a judge may rule on the issues if presented in court.

1. Previous Legislation.

AB 276 (Medina, 2018) would have subjected 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 on the Senate Floor.

SB 949 (Allen, 2018) would have amended 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) would have subjected 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

American Federation of State, County and Municipal Employees, Council 57

Association of California School Administrators

California County Superintendents Educational Services Association

California Federation of Teachers

California School Boards Association

California Teachers Association

National Association for the Advancement of Colored People

Public Advocates

Riverside County Office of Education

San Diego Unified School District

School for Integrated Academics and Technologies

Small School Districts Association

OPPOSITION

None received

-- END --