Today's Law As Amended

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SB-806 Charter schools: operation: for-profit entities.(2017-2018)



SECTION 1.
 (a) This act shall be known and may be cited as the Charter Schools Transparency and Standards of Governance Act of 2018.
(b) The Legislature hereby finds and declares all of the following:
(1) Charter schools provide opportunities for teachers, parents, pupils, and community members to establish and maintain schools that operate independently from the existing school districts, and therefore should be recognized as the most local of all forms of public education.
(2) Charter schools should be governed with transparency and according to the highest ethical standards.
(3) Charter schools should operate with monitoring and oversight that is the least restrictive possible while still protecting the best interests of the students and the public.
(4) Therefore, it is the intent of the Legislature, in enacting this act, that all of the following occur:
(A) All charter schools shall operate under the requirements set forth in this act for open meetings, public records, and conflicts of interest, and these requirements shall be the only ones applied to charter schools.
(B) No charter school authorizer, with or without the approval of an existing charter school or a charter petitioner seeking approval of a charter school, shall adopt a memorandum of understanding that includes any requirements in addition to those described in this act.
(C) It is in the best interests of charter schools, their pupils, and the public that all charter schools operate under the same clear set of transparency and governance standards and that these standards be implemented in all schools as soon as possible after January 1, 2019.

SEC. 2.

 Section 47604 of the Education Code is amended to read:

47604.
 (a) Charter schools may elect to  A charter school shall  operate as, or be operated by, a nonprofit public benefit corporation, corporation  formed and organized pursuant to the Nonprofit Public Benefit Corporation Law (Part 2 (commencing with Section 5110) of Division 2 of Title 1) 1  of the Corporations Code). Code), or shall be operated by a school district or county office of education. 
(b) The governing board of a school district  An authority  that grants a charter for the establishment of a charter school formed and organized as a nonprofit public benefit corporation  pursuant to this section shall be entitled to a single representative on the board of directors of the nonprofit public benefit corporation.
(c) 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 Section 47604.32 and subdivision (m) of Section 47605.
(d) (1) A charter school shall not operate as, or be operated by, a for-profit entity.
(2) This subdivision shall not apply to any charter school that was operated by a for-profit entity on or before April 1, 2018, until the date the charter school submits its next renewal to its authorizer pursuant to Section 47607.
(e) A for-profit entity shall not participate in the candidate review or be involved in any way or influence the appointment or selection of members of the board of directors of the nonprofit public benefit corporation operating a charter school.
(f) A for-profit entity providing direct instructional services to charter school pupils shall not supervise or direct any certificated employees of the charter school and no more than 25 percent of the full-time equivalent certificated employees serving pupils of the charter schools may be employees of a for-profit entity.
(g) A for-profit entity shall not approve, validate, deny, or veto the annual budget or individual expenditures of a charter school.
(h) A contract between a charter school and a for-profit entity to provide instructional services shall be approved at a publicly noticed meeting of the governing body of the charter school and provided to any member of the public upon request.

SEC. 3.

 Section 47604.1 is added to the Education Code, to read:

47604.1.
 (a) Subject to the limitations of this subdivision and with respect to the operation of a charter school only, the governing body of a charter school is subject to all of the following:
(1) The Ralph M. Brown Act (Chapter 9 (commencing with Section 54950) of Part 1 of Division 2 of Title 5 of the Government Code), except that a charter school operated by an entity governed by the Bagley-Keene Open Meeting Act (Article 9 (commencing with Section 11120) of Chapter 1 of Part 1 of Division 3 of Title 2 of the Government Code) is subject to the Bagley-Keene Open Meeting Act regardless of the authorizing entity.
(2) The California Public Records Act (Chapter 3.5 (commencing with Section 6250) of Division 7 of Title 1 of the Government Code).
(3) Article 4 (commencing with Section 1090) of Chapter 1 of Division 4 of Title 1 of the Government Code, unless the charter school is operated as, or is operated by, a nonprofit public benefit corporation pursuant to Section 47604.
(4) The Political Reform Act of 1974 (Title 9 (commencing with Section 81000) of the Government Code). For purposes of Article 3 (commencing with Section 87300) of Chapter 7 of Title 9 of the Government Code, a charter school shall be considered an agency and is the most decentralized level for purposes of adopting a conflict-of-interest code.
(5) The Nonprofit Public Benefit Corporation Law (Part 2 (commencing with Section 5110) of Division 2 of Title 1 of the Corporations Code), if the charter school is operated by or as a nonprofit public benefit corporation.
(b) (1) Notwithstanding Section 5233 of the Corporations Code, for those charter schools formed as a nonprofit public benefit corporation pursuant to the Nonprofit Public Benefit Corporation Law (Part 2 (commencing with Section 5110) of Division 2 of Title 1 of the Corporations Code), and except as provided in paragraph (2), for the purpose of this subdivision, a self-dealing transaction means a transaction to which the corporation is a party and in which one or more of its directors have a material financial interest and that does not meet the requirements of subparagraph (A), (B), or (C) of paragraph (4). Such director is an “interested director” for the purpose of this subdivision.
(2) This subdivision does not apply to any of the following:
(A) An action of the board fixing the compensation of a director as a director or officer of the corporation.
(B) A transaction that is part of a public or charitable program of the corporation if it: (i) is approved or authorized by the corporation in good faith and without unjustified favoritism; and (ii) results in a benefit to one or more directors or their families because they are in the class of persons intended to be benefited by the public or charitable program.
(C) A transaction, of which the interested director or directors have no actual knowledge, and that does not exceed the lesser of 1 percent of the gross receipts of the corporation for the preceding fiscal year or one hundred thousand dollars ($100,000).
(3) The Attorney General or, if the Attorney General is joined as an indispensable party, any of the following may bring an action in the superior court of the proper county for the remedies specified in paragraph (8):
(A) The corporation, or a member asserting the right in the name of the corporation pursuant to Section 5710 of the Corporations Code.
(B) A director of the corporation.
(C) An officer of the corporation.
(D) Any person granted relator status by the Attorney General.
(4) In any action brought under paragraph (3), the remedies specified in paragraph (8) shall not be granted if:
(A) The Attorney General, or the court in an action in which the Attorney General is an indispensable party, has approved the transaction before or after it was consummated.
(B) The following facts are established:
(i) The corporation entered into the transaction for its own benefit.
(ii) The transaction was fair and reasonable as to the corporation at the time the corporation entered into the transaction.
(iii) Before consummating the transaction or any part of the transaction, the board authorized or approved the transaction in good faith by a vote of a majority of the directors then in office without counting the vote of the interested director or directors, and with knowledge of the material facts concerning the transaction and the director’s interest in the transaction. Except as provided in subparagraph (C), action by a committee of the board shall not satisfy this paragraph.
(iv) Before authorizing or approving the transaction, the board considered and in good faith determined after reasonable investigation under the circumstances that the corporation could not have obtained a more advantageous arrangement with reasonable effort under the circumstances or the corporation in fact could not have obtained a more advantageous arrangement with reasonable effort under the circumstances.
(C) The following facts are established:
(i) A committee or person authorized by the board approved the transaction in a manner consistent with the standards set forth in subparagraph (B).
(ii) It was not reasonably practicable to obtain approval of the board before entering into the transaction.
(iii) The board, after determining in good faith that the conditions of clauses (i) and (ii) were satisfied, ratified the transaction at its next meeting by a vote of the majority of the directors then in office without counting the vote of the interested director or directors.
(5) Except as provided in paragraph (6), an action under paragraph (3) must be filed within two years after written notice setting forth the material facts of the transaction and the director’s interest in the transaction is filed with the Attorney General in accordance with regulations, if any, as the Attorney General may adopt or, if no such notice is filed, within three years after the transaction occurred, except for the Attorney General, who shall have 10 years after the transaction occurred within which to file an action.
(6) In any action for breach of an obligation of the corporation owed to an interested director, where the obligation arises from a self-dealing transaction that has not been approved as provided in paragraph (4), the court may, by way of offset only, make any order authorized by paragraph (8), notwithstanding the expiration of the applicable period specified in paragraph (5).
(7) Interested directors may be counted in determining the presence of a quorum at a meeting of the board that authorizes, approves, or ratifies a contract or transaction.
(8) If a self-dealing transaction has taken place, the interested director or directors shall do the things and pay the damages as in the discretion of the court will provide an equitable and fair remedy to the corporation, taking into account any benefit received by the corporation and whether the interested director or directors acted in good faith and with intent to further the best interest of the corporation. Without limiting the generality of the foregoing, the court may order the interested director or directors to do any or all of the following:
(A) Account for any profits made from the transaction, and pay them to the corporation.
(B) Pay the corporation the value of the use of any of its property used in the transaction.
(C) Return or replace any property lost to the corporation as a result of the transaction, together with any income or appreciation lost to the corporation by reason of the transaction, or account for any proceeds of sale of the property, and pay the proceeds to the corporation together with interest at the legal rate. The court may award prejudgment interest to the extent allowed in Section 3287 or 3288 of the Civil Code. In addition, the court may, in its discretion, grant exemplary damages for a fraudulent or malicious violation of this section.
(c) (1) Notwithstanding subdivision (b), a member of the governing body of a charter school shall not provide a loan to the charter school or sign a guarantor agreement relative to a line of credit for the charter school unless all of the following are satisfied:
(A) The governing body of the charter school adopts a resolution at a public meeting declaring and describing the need for the loan or the line of credit. In the case of a line of credit, the funds from the line of credit shall not be accessed until the governing body of the charter school complies with this paragraph.
(B) The interest rate for the loan or line of credit is below the fair market rate.
(C) The governing body of a charter school discloses and approves the loan agreement or line of credit, including the terms of the loan or the line of credit, during a public meeting.
(D) The member of the governing body of the charter school who offers the loan or the guarantor agreement relative to a line of credit abstains from voting on, influencing, or attempting to influence another member of the governing body of the charter school regarding all matters affecting the loan agreement or the line of credit.
(2) Notwithstanding subdivision (b), a member of the governing body of a charter school shall not lease real property or sign a guarantor agreement relative to a lease of real property to be occupied by a charter school unless all of the following are satisfied:
(A) The lease rate for the real property lease agreement is below the fair market rate.
(B) The governing body of the charter school discloses and approves the real property lease agreement, including the terms of the lease and the guaranty, if applicable, during a public meeting.
(C) The member of the governing body of the charter school who is a lessor or guarantor of the real property to be occupied by the charter school abstains from voting on, influencing, or attempting to influence another member of the governing body of the charter school regarding all matters affecting the real property lease agreement.
(d) A member of the governing body of a charter school shall abstain from voting on, influencing, or attempting to influence another member of the governing body of the charter school regarding personnel matters that uniquely affect a relative of the member but may vote on collective bargaining agreements and personnel matters that affect a class of employees to which the relative belongs. For purposes of this section, “relative” means an adult who is related to the person by blood or affinity within the third degree, as determined by common law, or an individual in an adoptive relationship within the third degree.
(e) To the extent that the governing body of a charter school engages in activities that are not related to the operation of the charter school, this section does not make those unrelated activities subject to Section 1090 of the Government Code, the Ralph M. Brown Act, the Bagley-Keene Open Meeting Act, or the California Public Records Act. 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 of any item regarding an activity of the governing body of the charter school that is not related to the operation of the charter school.
(f) Notwithstanding the requirements of the Ralph M. Brown Act or the Bagley-Keene Open Meeting Act, the governing body of a charter school shall hold its meetings within the physical boundaries of the state in accordance with all of the following:
(1) Proper notices pursuant to the Ralph M. Brown Act or the Bagley-Keene Open Meeting Act are posted at all charter school facilities.
(2) The meeting is held at the charter school facility, or a teleconference location is available in at least one of the charter school’s facilities, within the physical boundaries of each county in which any of the charter school’s facilities are located.
(3) A nonclassroom-based charter school that does not have a facility shall meet within the boundaries of the county in which the greatest number of pupils who are enrolled in the charter school reside.
(4) This subdivision shall not limit the authority of the governing body of the charter school to meet outside these boundaries to the extent authorized by Section 54954 of the Government Code, provided that the meeting place is in compliance with Section 54961 of the Government Code.
(g) Neither the Ralph M. Brown Act nor the Bagley-Keene Open Meeting Act shall apply to committees of the charter school, unless the committee is comprised of a majority of the members of the governing body of the charter school.
(h) The governing body of a charter school may hold closed sessions to consider a matter regarding pupil discipline as described in Section 48912.
(i) A statement of economic interest that is filed by a designated person at a charter school after the required deadline pursuant to the Political Reform Act of 1974 shall not be the sole basis for revocation of a charter pursuant to Section 47607.
(j) Notwithstanding Sections 6253 and 6253.9 of the Government Code, a charter school may require payment of actual costs from the person making the request before producing the records.
(k) A school district, county board of education, or the state board shall not impose on a charter school any public official conflict of interest requirements other than those specified in this section.
(l) (1) If a charter school authorizer identifies, or suspects, based on an internal or independent review, that a violation of subdivision (b), relating to self-dealing, may have occurred, the charter school authorizer may initiate action in accordance with paragraph (3) of subdivision (b). For purposes of initiating this action, a charter school authorizer shall be deemed to have relator status as described in subparagraph (D) of paragraph (3) of subdivision (b), without having been granted that status by the Attorney General.
(2) If a charter school authorizer initiates action pursuant to this section, the following shall occur:
(A) If, after the proceedings pursuant to subdivision (b), the court finds no violation has occurred, the charter school authorizer shall take no further action nor impose any corrective action on the charter school.
(B) If, after proceedings pursuant to subdivision (b), the court finds a violation has occurred, the charter school shall implement the court’s final ruling in the matter. In addition, the charter school shall remove any board member, or terminate any employee, who was the subject of the complaint and found in violation of the law.
(C) Notwithstanding subparagraph (B), if the charter school authorizer finds the violation was so pervasive to constitute a systemic problem that suggests a high risk to the continued successful and transparent operation and governance of the charter school such that additional controls are necessary, the charter school authorizer may, for a period not to exceed five years, prohibit the charter school from having any board members or officers that have a material financial interest in the operations or contracts of the school.
(3) This subdivision does not limit the authority of the charter school authorizer pursuant to this part.
(m) Notwithstanding any other law, this section shall not apply to actions taken before the operative date of this section.
(n) This section shall become operative on July 1, 2019. Any policies adopted by a charter school or its authorizer in accordance with this section shall not constitute a material revision to the charter in operation on January 1, 2019.

SEC. 4.

 Section 47604.2 is added to the Education Code, to read:

47604.2.
 (a) If the charter school is operated as or by a nonprofit public benefit corporation and that corporation has a financial relationship with an organization that is either the corporation’s member, as defined in Section 5056 of the Corporations Code, or is a related organization as that term is used by the Internal Revenue Service’s schedules and instructions for “Form 990” pursuant to Section 501(a) of Title 26 of the United States Code, the charter school shall do both of the following:
(1) Provide a list in the charter petition, described in Section 47605, the name of the related organization and describe the related organization’s financial relationship, powers, and duties with respect to the charter school.
(2) If there are any changes to the list described in paragraph (1) during a charter school’s fiscal year, provide to its charter school authorizer within 60 days after the end of the fiscal year, an update of the changes that occurred.
(b) With respect to any contracts, transactions, or other transfers of public funds, or transfers of assets acquired with public funds, in excess of one hundred thousand dollars ($100,000) in value from the nonprofit public benefit corporation operating a charter school to a related organization identified in paragraph (1) of subdivision (a), and any contracts, transactions, or other transfers of public funds, or transfers of assets acquired with public funds, from the nonprofit public benefit corporation operating a charter school to the same related organization in a 12-month period that exceeds the aggregate amount of one hundred thousand dollars ($100,000) in value, the governing board of the charter school or a duly appointed committee of the board exercising board-delegated powers shall take action in a public meeting that shall include all of the following:
(1) Make findings that describe the purpose of the contract, transaction, or other transfer, the benefit to the charter school, and how the contract, transaction, or other transfer was reasonable.
(2) Document the contract, transaction, or other transfers in public records retained by the charter school.
(3) Require the related organization to comply with all applicable laws, including, but not limited to, laws governing conflicts of interest and self-dealing.
(c) All contracts, transactions, and transfers described in subdivision (b) shall be subject to the examination and audit of the State Auditor and the charter school’s authorizer, for a period of three years after final payment under the contract or after the transaction or transfer, as applicable, and subject to notice of the reason for the audit and the audit scope, and all documents, contracts, or resolutions constituting or relating to the contracts, transactions, or transfers shall contain a provision stating that the charter school and the related organization consent to the examination and audit pursuant to this section. The examination or audit under this section shall be confined to whether the contract, transaction, or other transfer of public funds met the requirements of this section.
(d) If the contracts, transactions, or other transfers of public funds or assets acquired with public funds from the nonprofit public benefit corporation operating the charter school to the same related organization in a 12-month period exceed the aggregate amount of one hundred thousand dollars ($100,000) in value, the charter school’s governing board or a duly appointed committee of the board exercising board-delegated powers may take a single action that satisfies paragraphs (1) to (3), inclusive, of subdivision (b).
(e) This section shall not be applicable to contracts, or to any transactions or other transfers made pursuant to any contract or obligation, that became binding before January 1, 2019.

SEC. 5.

 Section 47604.21 is added to the Education Code, immediately following Section 47604.2, to read:

47604.21.
 (a) For purposes of Section 6 of Article XIII   B of the California Constitution, a charter school shall be considered a local government.
(b) For purposes of Article 1 (commencing with Section 17550) of Chapter 4 of Part 7 of Division 4 of Title 2 of the Government Code, a charter school shall be considered a school district.
(c) For purposes of Section 33050, a charter school shall be considered a school district.
SEC. 6.
 The Legislature finds and declares that Section 3 of this act, which adds Section 47604.1 to the Education Code, imposes limitations on the public’s right of access to the meetings of public bodies or the writings of public officials and agencies within the meaning of Section 3 of Article I of the California Constitution. Pursuant to that constitutional provision, the Legislature makes the following findings to demonstrate the interest protected by these limitations and the need for protecting that interest:
In order to facilitate full and timely compliance with public records requests by nonprofit public benefit corporations operating schools as part of the public school system, it is necessary to reduce the costs and staff burdens associated with public records requests.
SEC. 7.
 If the Commission on State Mandates determines that this act contains costs mandated by the state, reimbursement to local agencies and school districts for those costs shall be made pursuant to Part 7 (commencing with Section 17500) of Division 4 of Title 2 of the Government Code.