New Laws for California Schools: Assembly Bill 406

This new, weekly feature from CSBA will highlight a new education law signed by the Governor in 2018. All laws are effective Jan. 1, 2019, unless otherwise noted. The full What’s New for 2019 report on all new laws affecting K-12 education is available at

AB 406, for-profit charter schools

The long-running legislative kerfuffle over for-profit charter schools reached its conclusion in September, when Gov. Jerry Brown signed into law Assembly Bill 406 (McCarty, D-Sacramento), officially prohibiting for-profit charter schools in California. The bill was supported by CSBA along with other organizations (including the California Charter Schools Association), and will go into effect on July 1, 2019.

Brown vetoed a similar bill, AB 787 (Hernandez) in 2015, writing at the time that, “I don’t believe the case has been made to eliminate for-profit charter schools in California.”

Three years later, the case is closed.

Although for-profit charter schools have not been as common in California as in some other states, the facilities still serve tens of thousands of students in California – legislative analysis on AB 406 found there are 34 charter schools in the state run by for-profit education management organizations or for-profit charter management organizations, serving over 25,000 students.

The track record of these for-profit charter schools in the state has been inadequate on several measures, including transparency and student achievement.

Current California law authorizes charter schools to operate as nonprofit corporations but, prior to the signing of AB 406, had been silent on whether a charter school is permitted to operate as a for-profit.

Beginning July 1, 2019, the new law prohibits a charter school from being operated as, or operated by, a for-profit corporation. A petitioner that submits a charter petition, charter renewal, or material revision application cannot operate as, or be operated by, a for-profit corporation, for-profit educational management organization, or for-profit charter management organization.

The bill defines “operating” a charter school as any of the following:

  • Nominating, appointing, or removing board members or officers of the charter school; employing, supervising, or dismissing employees of the charter school;
  • Managing the charter school’s day-to-day operations;
  • Approving, denying, or managing the budget or any expenditures of the charter school that are not authorized by the governing body of the charter school; and
  • Providing services to a charter school before the governing body of the school has approved the contract for those services at a publicly noticed meeting.

The bill also specifies that a charter school may not enter into a subcontract to avoid the requirements of the bill.

School boards and county offices of education should review the organizational structure of charter schools which they have authorized. When reviewing charter petitions, renewals, or material revisions on or after July 1, 2019, school boards and county offices of education should ensure the charter school is not operated by a for-profit corporation, as defined under AB 406.