AB 1316 would make sweeping changes to charter school oversight requirements

By Kristin Lindgren

The Legislature is once again contemplating charter school reform. In February 2021, Assembly Member Patrick O’Donnell, Chair of the Assembly’s Education Committee, introduced Assembly Bill 1316. AB 1316 contains significant reforms aimed charter schools and, particularly, nonclassroom-based charter schools. The bill, which is currently only in the committee stage of the bill process, contains numerous provisions to increase oversight of charter schools. Many provisions require additional oversight by local educational agencies that are charter school authorizers. This means that the bill, at least in its current form, places additional weighty obligations on chartering LEAs for oversight. It also contains provisions affecting independent study programs run by school districts and county offices of education. We have highlighted several provisions of the bill below in categories that will be of interest to our members.

Nonclassroom-based charter schools

  • Revises provisions regarding the calculation of average daily attendance for charter school nonclassroom-based instruction, including that when pupils are engaged in classroom-based instruction for only 19 percent of their attendance or less, the reported ADA for funding their nonclassroom-based attendance will be reduced by 30 percent.
  • Requires charter schools to adhere to designated minimum school day requirements contained in statutes that generally apply to school districts.
  • Limits the size of the totality of nonclassroom-based charter schools that a school district may authorize based on the ADA of the school district.
  • Requires nonclassroom-based charter schools to provide classroom-based instruction (e.g., a parallel site-based program) for those pupils the charter school determines must return to another program in the charter school due to revocation of the pupil’s independent study agreement.
  • Requires the State Board of Education to adopt new regulations setting forth criteria for the determination of funding for nonclassroom-based instruction.

Independent study

 Sets a specific teacher-to-pupil ratio for independent study programs for all LEAs, including charter schools, at 25 to 1 or less, unless otherwise specified in a collective bargaining agreement.

  • Requires contact between the supervising independent study teacher at least once every three school days. The contact must be in person, or by any other live visual and audio connection.
  • Prohibits LEAs, including charter schools, from claiming ADA for students in adjacent counties for independent study.
  • Requires charter schools to implement independent study policies pursuant to Education Code 51747 (already required for school districts and county offices of education).

Multitrack year-round scheduling

  • Beginning 2022–23, prohibits school districts, county offices of education, or charter schools from operating a multitrack year-round calendar unless authorized by the State Board.
  • The State Board will only authorize the operation of multitrack year-round calendars if a school district, county office of education, or charter school is able to demonstrate impacted facilities.

Oversight, audits and transparency

  • Adds oversight duties for charter authorizers specific to nonclassroom-based charter schools, including verifying: (1) an appropriate method exists for teachers to determine the time value of pupil work product used to compute ADA; (2) the ADA-to-certificated-teacher ratio used by the charter school; and (3) ADA at the first, second and annual principal apportionment reporting. The chartering authority must notify the auditor of the charter school if the school does not provide required documentation for these purposes.
  • Requires each chartering authority to provide for an audit of all funds of charter schools authorized by that charter authority.
  • Requires the governing body of each charter school to either provide for an audit of the books and accounts of the charter school including an audit of income and expenditures by source of funds or make arrangements with the chartering authority to provide for that audit.
  • Requires chartering authorities to reviewing the audit exceptions contained in an audit of a charter school and, by May 15, certify to the county superintendent of schools, the State Superintendent of Public Instruction, and the State Controller that the staff of the chartering authority has reviewed the audits of charter schools under its jurisdiction for the prior fiscal year and identified audit exceptions corrected by the charter school or for which the charter school has prepared an acceptable plan for correction.
  • Requires chartering authorities to certify and verify nonclassroom-based charter schools’ reporting of ADA.
  • Creates the Office of Inspector General department within CDE. The Inspector General would oversee and supervise audits and investigations in CDE programs, including State Board-authorized charter schools.

People v. McManus

The motivation for AB 1316’s significant changes is, at least in part, a recent criminal case in San Diego County, People v. McManus, that arose from a nonclassroom-based charter management company’s fraud in reporting ADA. In February 2021, two charter school management company executives, Sean McManus and Jason Schrock, pled guilty to criminal charges related to their operation of A3 Education, a charter school management company that operated several nonclassroom-based charter schools throughout the state. As part of the criminal case, the San Diego County Grand Jury also indicted several A3 employees and one district superintendent.

The indictment alleged a conspiracy to misappropriate public funds by falsely claiming and obtaining apportionment funding for students attending charter schools when the students were not actually attending or receiving charter school services. According to the indictment, the executives paid private schools, high schools and pre-existing youth programs for enrolling students in a summer program or an A3 charter school that the students never actually attended, backdated the attendance of students in the summer program, and then collected approximately $2,000 per student in state funding. A3 also collected state funding multiple times for the same pupil by transferring students from one nonclassroom-based charter school to another without parental consent. The indictment states that McManus and Schrock used the funds for their own personal benefit and investment opportunities rather than investing it back into A3 charter schools.

A superintendent of one of the school districts involved was charged with misappropriation of public funds by overbilling A3 charter schools for oversight (with the charter schools’ consent). As reported on the CSBA blog in April, as part of the criminal case, the District Attorney for San Diego County and Receiver assigned to oversee A3’s assets filed a “disgorgement motion” to require six school districts who authorized the A3 charter schools to repay oversight fees they collected from the schools because they did not demonstrate the actual costs of the oversight. The judge ruled that LEAs may not charge a flat one or three percent fee for oversight but must demonstrate the actual costs of oversight.

AB 1316 does not appear to specifically address the ruling by the judge regarding oversight fees requiring they be based on the actual costs of oversight, but the bill is clearly directed at the author’s concerns that the lack of required oversight of charter schools under current statutes led to A3’s ability to siphon off millions of dollars in public funds allocated to nonclassroom-based charter schools.

The provisions of AB 1316, if enacted, would impose robust new oversight responsibilities on chartering authorities including requiring them to certify charter school ADA and audit obligations, in addition to revising independent study requirements for all LEAs and ending multitrack year-round calendars. As AB 1316 makes its way through the legislative process, CSBA will keep its members updated regarding the bill’s status.

Kristin Lindgren is CSBA Education Legal Alliance Deputy General Counsel.