Bill Analysis: Key provisions of House Bill 530 as amended by the House Rules Committee, June 28-30, 2016

Funding

Charter School Funding Advisory Commission. A statewide funding advisory commission is created to explore funding issues related to charter school entities and make recommendations in one year from the effective date of the act. The members include:

  • The secretary of education
  • An at-large member chosen by the governor, president pro tempore of the Senate and the Speaker of the House
  • Four members of the Senate and four members of the House members, with two appointees from the majority party and two appointees from the minority party in each chamber. The majority chairmen of the Senate and House Education Committee are included in that count and serve as the co-chairs of the commission.
  • A business manager of a charter school
  • A business manager of a cyber charter school
  • A business manager of a rural school district
  • A business manager of an urban school district

Among the duties of the panel are to explore the costs of educating a student in a cyber charter school, and to consider how charters are funded, and make recommendations for appropriate funding for charters. The commission would consider establishing an independent state level board to authorize charter school entities and support charter school quality and accountability through performance monitoring and technical assistance. The group also would consider a process for a performance matrix to compare the academic performance of each charter school entity with the academic performance of the district of residence.

Other issues to be considered include: special education transportation; other funding issues raised in the course of public hearings; consideration of a school district deduction for programs and services to the extent they are funded from the grants or private sources; funding of charter schools that primarily serve adjudicated youth; costs associated with athletic programs provided by charter schools.

Permanent removal of state obligation for retirement and social security contributions. The bill removes the requirement for the state to make payments to charter schools for contributions to retirement and social security payments. 

Additional deductions for cyber charter tuition. Beginning in the 2016-2017 school year, and continuing until a new formula is enacted, school districts may deduct from tuition payments to cyber charter schools for these areas in addition to current deductions allowed: school library services; nonpublic support services; tax assessment and collection services; nonpublic health services; 45% of operation and maintenance of plant services; and community services. The amount to be paid by the school district must be calculated on a form prescribed by PDE. If PDE finds an error, the district must correct the calculation and notify the charter school. PSBA has estimated that these changes amount to approximately $26 million in savings for districts.

A process and timeframe is created for a school district to raise concerns regarding an inaccurate deduction by PDE. A district has 30 days after a payment is made to notify PDE of inaccuracies. The PA Department of Education (PDE) must conduct a hearing within 30 days from the notice, and the burden of proof and production at the hearing is on the school district. Within 30 days from the hearing date the secretary must make a decision regarding the accuracy of the deduction and make an appropriate adjustment. The decision may be appealed to Commonwealth Court. The district is liable for the legal fees of the charter if the charter prevails, and the charter is liable for the district’s fees if the district prevails.

Reconciliation of charter tuition payments. By Oct. 1 of each year, charters must submit to school districts of residence for each student the final documentation of payment to be made based on the average daily membership for students enrolled in the charter school from the resident district for the previous year. If the district fails to make payment to the charter, PDE will deduct and pay the amount as documented by the charter from any and all state payments made to the district from the appropriations for the fiscal year in which the final documentation of payment was submitted to the school district of residence.

Discounts prohibited. Charters may not provide discounts to a school district or waive payments unless the school district has been identified for financial recovery. This would prohibit other school districts from negotiating charter tuition rates similar to that done by Chester Upland School District.

No payment for 4-year old kindergarten. Unless there is a contract between a school district and charter entity, a district will not be required to fund a four-year-old kindergarten program if it does not offer such a program in its own schools. Case law ruled that school districts are already exempt from paying tuition to a charter school for 4-year old kindergarten if the district does not offer the same. This provision gives the charter school the ability to negotiate to obtain a contract to receive tuition for these students.

Debt payment. The charter school must supply its authorizer with an annual list of rental payments which are guarantees for school building debt or bonds coming due during the fiscal year and the amount paid on each item of indebtedness. The charter school must hold in escrow an amount sufficient to pay the annual amount due. If the charter fails to pay the principal or interest due, PDE will withhold payment due to the charter in the amount necessary to pay the bank.

Fund balance limits; return of excess. For 2016-17 and beyond, limits are placed on the unassigned fund balance reserves of charter schools that are 4% higher than the respective limits placed on school districts. Any excess over the established limit must be returned by the charter to school districts within 90 days after June 30. Charter schools must document annually to PDE and all school districts that paid tuition to the charter school information certifying compliance with these requirements by Oct. 31, 2017 and Oct. 31 of each year thereafter. By placing the fund balance limits 4% higher than those allowed for school districts, the bill creates another difference in the standards of operation and fiscal accountability required by school districts and charter schools.

Accountability

Accountability issues. House Bill 530 requires members of charter school boards of trustees and administrators to comply with the Ethics Act, prohibits nepotism, and requires certified audits and charter school budgets to be posted online. A Board of Trustees must include a minimum of five nonrelated voting members, and one must be the parent of an enrolled student. The bill also requires meetings of charter boards of trustees to comply with the Sunshine Act (open meetings). Trustees and charter school administrators must file a statement of financial interests for the preceding year with the State Ethics Commission and the local school board (or PDE in the case of a cyber charter school) by May 1 of each year that they hold the position and of the year after they leave the position.

Access to budgets and other information. Charter schools must provide their local school boards with access to records such as financial reports, financial audits, aggregate standardized test scores (without student-identifying information), and teacher certification and personnel records. They also must provide a copy of their annual budget that must identify the source of funding for all expenditures, the amount of funds received from a foundation and a description of the use of such funds, administrator salaries and expenses for an educational management service provider.

Audits. Charter schools are required to have an audit of the charter school entity’s operations conducted annually by a qualified independent certified public accountant. The audit must include a verification of student enrollment, full review of expense reimbursements and receipts, federal and state tax filings, financial statements of any charter school foundation, review of the process for all publicly bid contracts, board policies and procedures. The audit and annual budget are public documents and must be made available on the charter’s website.

Conflicts of interest. A charter school trustee or administrator may not participate in the selection, award or administration of a contract if he or she has a conflict of interest, subject to penalties imposed by the Ethics Commission. An administrator or immediate family member may not serve on the Board of Trustees. An immediate family member who is on the authorizing school board also may not serve as a trustee. An administrator must be immediately dismissed upon conviction for a felony or offense pertaining to fraud, theft or mismanagement of public funds or any crime involving moral turpitude. Members of the board of trustees for their duties as trustees are prohibited from being compensated.

Performance matrix will be created and used to assess renewal terms. The bill requires the State Board of Education to create within 24 months a performance matrix and create regulations to measure and assess the academic performance of charter school entities. In developing the matrix, the State Board must convene an advisory committee that includes a minimum of seven representatives of charter schools, regional charter schools, cyber charter schools, and school district personnel. The bill does not specify a maximum number of committee members or how many representatives from each school should be seated on the committee. The State Board also must determine an academic quality benchmark which will qualify a charter school entity for longer charter terms. The matrix developed by the State Board is the only matrix that may be used for evaluating a charter school entity. It will be subject to PDE review every three years. In current law, charters can be revoked for poor academic performance. Additionally, under case law, if a charter school does not meet specific, measurable academic benchmarks required under federal law it may be subject to charter revocation if the sending school districts are performing better. This provision contained in House Bill 530 eliminates the ability to compare charter schools and their sending school districts, and undermines the original intent of the Charter School Law to create schools that provide something above and beyond that provided by traditional public schools.

Teacher evaluation. House Bill 530 does not require charter school teachers and principals to participate in the state-developed evaluation system required for school districts. Rather, it requires all initial and renewal charter school applications to include an evaluation system for teachers only that includes at least four rating categories of educator performance and multiple measures of student performance which must include, but may not be limited to, value-added assessment system data and student performance on the most recent assessments for which results have been released to the public and may include goals specific to the mission of the charter school entity’s charter. The evaluations apply to all professional employees who are certified as teachers and noncertified staff members who teach in a charter school entity. This creates a separate standard by which charter teachers will have a different system of evaluation from teachers in traditional public schools, and it does not include a requirement for evaluation of principals.

Applications, Terms

Charter applications. The Department of Education must develop a standard application for charter applicants and for the renewal of existing charters. The application must include an organizational chart presenting the proposed governance structure of the school, with lines of authority between the board of trustees, administrators, staff and any educational management service provider (EMO). It also must include a clear description of the roles and responsibilities of all entities in the organizational chart and standards for the performance of the board. If the charter contracts with an EMO, it must provide detailed evidence of demonstrated student achievement, and management of non-academic school functions, conditions for oversight and enforcement, renewal and terminations of the contract. The application also must include a plan for satisfying the proper criminal history record clearances and employment history reviews required for staff and policies regarding truancy, absences and withdrawal of students. A school board may not impose additional terms or use its own application or require additional information outside of the standard application form.

Multiple charter school organizations. Provisions here allow two or more high-performing charter schools to consolidate into an organization. A charter that has not met student performance requirements within either of the most recent two school years or has failed to meet accepted standards of fiscal management is not eligible to consolidate with another school. The organization may be managed by a single board of trustees and a single administrator, rather than having a board at each school. This requires the approval of PDE and each school district that granted the initial charter of any charter school included in the proposed consolidation. The provisions do not affect the terms or conditions of individual charters and the ability of local school districts to approve or deny individual charters. Each charter school remains under the oversight of its initial authorizing board of school directors.

Expansion of charter schools. A charter school that does not have any limits on student enrollment or caps is permitted to operate its schools at more than one location and to expand into additional grade levels. The permission to expand is ambiguous as to student population or size of the school and has led to multiple interpretations of this section. The amendment process placed in this legislation may deal with this issue, but many are unsure as to what standards or subjects may be amended.

Deadline for application. The date for a charter school application to be submitted is changed from November 15 to October 1 of the school year preceding the year in which the charter school wishes to commence operation.

Renewal of charter terms. The bill expands the initial charter period from three to five years and the renewal term from five to 10 years. The ten year renewal is subject to the academic quality benchmark established by the performance matrix (until the performance matrix is established, renewal will be for 5 years). Beginning in the sixth year of any 10-year period of renewal, a charter that fails for two consecutive years to meet the benchmark will be subject to review by the local school board. A charter or regional charter school that does not meet the benchmark is subject to a five year renewal. A review is not a renewal trigger. In current law, school districts already have the ability to close a charter for poor academic performance.

Causes for nonrenewal or termination. A school board may choose to revoke or not renew a charter based on established criteria. If a school board, or PDE in the case of a cyber school, proves by a preponderance of evidence that an administrator or trustee has violated the law, PDE may require the person to be replaced and the findings may be referred to a district attorney or Office of the Attorney General.
Amending a charter.
The bill includes a process for a charter school to request amendments to its charter. The authorizing school board must hold a public hearing on the request within 60 days of receipt of the request. Failure to hold a hearing and/or grant or deny the request will be deemed an approval. Applicant charter schools have the ability to appeal the district’s decision, but have no time limit or parameters set on their right to appeal.

Charter School Appeal Board. The bill expands the state Charter School Appeal Board from six to nine members to include a public school principal, an administrator and a member of the board of trustees of a charter school entity. It also requires the parent member to have a school aged child enrolled at a charter school entity. These changes can provide an opportunity for charter school proponents to control the charter appeal board. PSBA was able to negotiate for the addition of a principal to create the potential to have a more even split on the board. However, this board could have a makeup of seven pro-charter representatives to –two pro-traditional public school representatives. Under the best circumstances, the board could be comprised of five pro-traditional public education representatives to four pro-charter representatives.

Enrollment

Admission and enrollment requirements. The bill requires PDE to create the enrollment form that limits the information collected to student, grade level and residency information. Students must submit a completed enrollment form to be qualified for admission to a charter school and its lottery. Preference in the lottery process must be given to students residing in the school district and may be given to a child of a parent actively involved in the charter school’s development and to siblings of students currently enrolled or selected during the lottery process. The charter school is prohibited from requesting additional information beyond the contents of the enrollment form, but it may limit its academic focus based on a particular grade level, targeted population group of at-risk students, or area of study such as math, science or arts.

Nonresident student enrollment/caps. Charters are allowed to enroll out-of-district students once the waiting list for resident students has been exhausted, regardless of whether the charter school and authorizing school district have voluntarily capped enrollment or if the district attempts to involuntarily cap enrollment of resident students. Currently, charter schools may enroll students from outside of the district in which they are located under certain circumstances, such as if it is a regional charter school or if the waiting list of students applying from inside the district has been exhausted. However, this provision provides a way for charter schools that have reached their agreed-to enrollment cap of resident students to circumvent that cap by enrolling students from outside of the district in which it is located.

Other provisions

Establishment of cyber charter schools. School districts and intermediate units may establish cyber charter schools pursuant to the Charter School Law. It does not preclude school districts and intermediate units from offering online instruction that is not recognized as a cyber charter school.

Charters may contract with school districts and intermediate units for services. Charter schools may request the intermediate unit or school district to provide non-special education and special education services. The IU or school district must provide the services and bill the charter.

Special education in cyber charter schools. Allows cyber charter schools to use in-person interaction, testing or instruction for special education students (covered under federal Individuals with Disabilities Education Act and Section 504 of the Rehabilitation Act of 1973).

Cyber charter access to buildings for testing. School districts, intermediate units, community colleges and State System institutions of higher education must provide cyber charters with reasonable access to its facilities for testing. The cyber charter must provide 60 days advance notice of the need. Districts (and other entities listed) are not required to make their facilities available on dates and times that cause interference with its own educational programs, and they may charge a facility rental fee in accordance with the same policy that would be applied generally to other organizations and community groups. The ability to charge a rental fee was a request made by PSBA.

Compulsory attendance/truancy provisions will apply to charters. All initial and renewal charter school applicants must address how the prosecution of truancy will be handled. The charter school must demonstrate, to the satisfaction of their authorizer that it is in compliance with the truancy provisions of the School Code. Legislation to improve truancy is contained in two other bills that PSBA has helped craft and support.

Charter first right of refusal to public school buildings. A charter school entity has the right of first refusal to purchase or lease an existing public school building, a part of an existing public school building or space in a public school building for educational purposes only. The bill includes process for pricing and sale.

Use of sectarian buildings. Charter schools may utilize sectarian facilities of there are separate and discrete entrances to the buildings and if religious objects and symbols that may be within portions of the building used by the schools are covered or removed. Prohibition of alcoholic beverages in charter facilities. Alcoholic beverages are prohibited to be available for consumption or sale in any charter school facility. If the local school board reasonably believes sale or consumption of such beverages is occurring, it must notify PDE and fines will be imposed.