Some California lawmakers are pushing for a massive bill that would institute sweeping changes to charter schools and their oversight for the first time since the San Diego A3 fraud scandal six years ago prompted calls for reforms to prevent further mishandling of public money.
The legislation, Assembly Bill 84, would, among other things, require more transparency and auditing, create a statewide education inspector general, reduce per-student funding for nontraditional charter schools and end a controversial practice whereby charter schools allocate enrichment funds to home-schooling students.
Like its defeated predecessor from four years ago, AB 84 faces heavy opposition from charter school advocates, who say it would financially hurt all charter schools — especially so-called “non-classroom-based” charter schools, which offer education models different from traditional classroom learning, such as hybrid learning, home-schooling, virtual school, independent study and drop-in centers.
Perhaps the most controversial part of the bill is that it would reduce per-pupil funding for these non-classroom based schools depending on how much time students spend doing traditional in-person instruction. Such charters would see funding cuts of up to 30% per student under AB 84.
Charter advocates are instead pushing for competing legislation, Senate Bill 414, that would implement far fewer changes but supporters say is more narrowly tailored to the kind of fraud exposed in A3.
“We share the overall goals, stated goals of AB 84. Unfortunately, AB 84 takes a very heavy-handed approach that would be harmful to all charter schools,” said Myrna Castrejón, CEO of the California Charter Schools Association, at a legislative hearing Wednesday. “(SB 414) offers meaningful reforms without being excessively burdensome, costly or punitive.”
On Wednesday, AB 84 advanced out of the Assembly Education Committee by a 5-1 vote, despite a crowd of opposition, and will next be deliberated in the Appropriations Committee.
“As public funding dollars for public education get tighter and tighter … we definitely want to make sure that our taxpayers are able to know and feel confident that their money is being spent on instruction that meets the standards,” said Assemblymember Darshana Patel, a San Diego Democrat and member of the education committee, at the hearing.
The author of AB 84, Education Committee Chair Al Muratsuchi, a Torrance Democrat, says he is open to negotiating with charter advocates on details of the bill.
“I have always worked with the charter school association in the past. If they want to negotiate in good faith rather than through press releases, then my door is open,” he said at Wednesday’s hearing.
California has enacted no significant charter school or school accountability reforms in the six years since San Diego prosecutors revealed how operators of the now-defunct A3 charter network exploited California’s school systems for profit, bilking the state of $400 million in public school dollars and evading accountability by auditors and the school district authorizers that were supposed to oversee them. Charter schools are public schools run independently of school districts.
AB 84 is meant to fix not only the weaknesses in charter accountability that facilitated the A3 scandal, but also problems found with other California charter school networks whose financial and organizational practices have variously included conflicts of interest, offering families money to enroll and paying all kinds of vendors to educate students with virtually no regulation.
Those pushing for new charter legislation say time is up for lawmakers to enact it, because a state moratorium on new non-classroom-based charter schools is expiring in January. The aim of that moratorium, which took effect in 2020, was to give the legislature time to mull changes to charter school laws in light of the fraud discovered in A3 and other charter cases.
AB 84 incorporates recommendations from two major reports urging charter school reforms that have been published in the past year.
One was co-written by the Legislative Analyst’s Office and the state’s school auditing agency, called the Fiscal Crisis and Management Assistance Team, or FCMAT. The other came from a task force, ordered by a judge in the A3 case and led by the state controller, that included the charter schools association.
The competing bill being pushed by charter advocates, SB 414, includes fewer of those reports’ recommendations.
“We’re talking about the LAO and FCMAT here, institutions that should have unquestioned bipartisan respect and support,” Muratsuchi said at the hearing. “These are good-government proposals from the LAO and FCMAT, and we shouldn’t be cherry-picking their recommendations.”
AB 84 goes beyond incorporating recommendations from the reports and also resurrects provisions from past bills that aimed to improve charter school accountability.
Mike Fine, the chief executive of FCMAT, said FCMAT supports the audit sections of AB 84 but it doesn’t plan to weigh in on all the sections of the bill.
“It does address a whole bunch of long-standing concerns. It doesn’t address them all,” he said. “AB 84 does a pretty darn good job of listening to a lot of people.”
Charter school leaders disagree. The leaders of two locally-authorized charters said the bill’s proposed funding cuts for charters are “simply not survivable.”
“This approach suggests that certain educational models and their students deserve less support — a troubling precedent in public education,” wrote Krystin Demofonte and Jenna Lorge, the executive directors of Pacific Coast Academy and Cabrillo Point Academy.
The California Society of CPAs, which represents auditors, opposes both AB 84 and SB 414. The association argues that school audits are already expensive and complex and that the extra auditor training and audit requirements both bills propose would be too burdensome. Both bills would require 16 to 24 hours of education-specific training for school auditors every two years.
Here are some of the main things AB 84 would do:
Give less funding to non-classroom-based charter schools
AB 84 would reduce funding for non-classroom-based charters on a sliding scale, down to as little as 70% of the standard per-student funding rate, based on how much of each student’s instructional time happens in a classroom.
This change was suggested by the legislative analyst in an effort to reduce the bureaucracy of the state’s current so-called “funding determination process,” which applies only to non-classroom-based charters and decides their per-student funding rate.
AB 84 proponents say non-classroom-based charters — which include virtual charter schools that do not offer in-person facilities, as well as home-schooling charters where thousands of dollars per student are outsourced to private vendors — don’t need as much funding per student as traditional schools do.
Charter advocates say this will financially ruin many non-classroom-based charters. They also say it’s inequitable to give less state funding per student based on what learning model they choose, especially given that traditional classroom learning isn’t a good fit for all students.
Several San Diego County charter schools told The San Diego Union-Tribune that if AB 84 is approved in its current form, they may be forced to cut student programs.
Guajome Park Academy, a charter school based in Vista that offers both full-time in-person learning and independent study, says it could lose up to half a million dollars to higher oversight fees and another $300,000 in funding cuts based on the bill’s proposed sliding scale for non-classroom instruction.
“That kind of hit would be devastating. It would force us to cut teachers, scale back technology access, and potentially dismantle the very programs that make our learning center a lifeline for students who need it most,” Superintendent Kevin Humphrey said in an email.
Julian Charter Schools, an independent study charter network with schools authorized by rural San Diego County districts, said that under the legislation it would no longer afford to provide any facilities to teach students, even those who attend four days a week and who would qualify for 100% funding under the proposed model.
“We are an answered prayer for so many students and families who found the conventional public school system didn’t work for them. If this bill passes, this option will be gone,” said Superintendent Jennifer Cauzza in an email.
By contrast, SB 414 instead proposes to keep the funding determination process and include changes that would make it easier for charters to qualify for full funding.
Let authorizers charge charters more for oversight
The bill would increase how much charter authorizers can charge all charter schools for oversight from 1% of a charter school’s total revenue to 3%, starting in 2028.
This was recommended by the LAO report because analysts said 1% is often not enough for authorizers to afford to provide sufficient oversight, noting that some small school district authorizers oversee charters with thousands more students than the district’s own students.
Charter advocates say this would hurt them financially by potentially tripling their oversight fees.
No more enrichment funds for home-schooling charter students
AB 84 would end a controversial practice — detailed in a 2019 Union-Tribune investigation — whereby home-schooling charters provide each student’s family thousands of dollars to pay private vendors for education or enrichment activities and goods, which can include ice skating, horseback riding, private music lessons and annual zoo passes.
The practice, which critics have likened to school vouchers, is not acknowledged or regulated in state law and has raised questions about equity for traditional public school students who don’t get access such luxuries and whether it’s a prudent use of taxpayer dollars.
To crack down on it, AB 84 would require that staff, including vendors, providing services directly to students that counts as instructional time must have a proper teaching credential.
Charters would also be forbidden from contracting with religious vendors or a private school to serve students. In the A3 case, churches and private schooling programs were paid by A3 to educate charter students.
The charter-supported competing bill, SB 414, would instead enshrine the enrichment fund practice in law. It would also require that charter schools write policies to ensure “educational value, pupil safety and fiscal reasonableness,” have charter teachers approve enrichment activities and require that vendors undergo background checks and demonstrate business licenses, insurance and evidence of qualifications.
Gregory McGinity, chief government and political affairs officer for the charter schools association, said the enrichment funds allow charter schools to personalize learning for students.
“Those are not just funds that are given willy-nilly to parents,” he said. “This is part of making sure that students are getting the education that’s appropriate for their needs and interests.”
Require competitive bidding, and crack down on charter management organizations
Muratsuchi’s bill would require charters to competitively bid contracts, as school districts do, and would prohibit contractors from charging charter schools a percentage of their revenue for management services.
Some charter school networks in California are operated by charter management organizations, also known as CMOs, that charge their member schools as much as 15% of the school’s revenue in exchange for providing much of the school’s operations.
These contracts, which are often not put out to bid, have raised questions of whether individual charter schools are getting the best deal for their money or have control over their own programs.
Limit enrollment in non-classroom-based charter schools
As the legislative analyst’s report recommended, AB 84 would limit how many students a non-classroom-based charter school can enroll, based on how many students are enrolled in the charter’s authorizing district.
A3 had grown so large that its schools enrolled thousands more students than their authorizing districts, which some experts say made it harder for those districts to keep a good eye over the charters’ activities.
Charter advocates as well as the executive director of California Charter Authorizing Professionals, which supports charter authorizers, oppose this. They say basing enrollment just off a district’s size isn’t fair, considering there are some small districts they believe have done a good job overseeing charters.
Add new requirements for school audits
Both bills would require school auditors to select their own samples, audit monthly enrollment and attendance by calendar track, review student-teacher ratios, identify material relationships between charters and third parties, as well as a charter school or district’s 25 largest payments or transfers.
Experts recommended those provisions because A3 and other charter schools have manipulated student attendance data and calendar enrollment tracks to get more state funding per student than they were allowed; A3 had also manipulated the audit process by selecting the samples auditors would review. These provisions also intend to help detect the kind of conflicts of interest and related-party transactions that have been found with charter networks such as A3 and Inspire.
In addition, AB 84 would require more details, including about the charter board membership, leadership of a charter’s management organization, staff shared among schools within a charter network and the charter authorizers’ oversight activities and fees charged. SB 414 would require a review of credit card payment samples.
Create an independent education watchdog
Both California Charter Authorizing Professionals and A3 prosecutors had called for a body like an inspector general that would investigate bad actors in the state’s public school system, noting that most district attorney’s offices in California lack the capacity or expertise to prosecute school fraud like that seen with A3.
Under AB 84, an inspector general would be appointed by the governor to investigate school districts, charter schools and county education offices for alleged fraud and abuse.
The charter schools association argues an inspector general would add more bureaucracy. SB 414 would leave it to the state board of education to investigate alleged fraud, misuse of school dollars and “persistent failure to improve student outcomes.”
Expand oversight duties for charter authorizers
Both SB 414 and AB 84 would add oversight duties for authorizers, which are the education agencies — most often school districts — that approve a charter school to open and are supposed to hold it accountable. California’s hundreds of authorizers vary widely in the quality of their oversight and have few legally prescribed oversight obligations.
AB 84 would require authorizers to review charters’ student-teacher ratios, review attendance data multiple times a year, test monthly enrollment and attendance and ensure charter audit compliance.
SB 414 would require authorizers to review enrollment and attendance data and a sample of credit and debit transactions and to tell the state and county if it suspects charter fraud.
AB 84 would also require FCMAT to have a team to support charter authorizers in their oversight.