CHARTER SCHOOL REVISIONS; EDUCATION MANAGEMENT CORPORATIONS

(Under the code, there is one school district of the first class in Michigan, and that is the Detroit Public School District.)

In contrast, the bill specifies two types of public school academies--special purpose public school academies, and regular or general education public school academies--and it would set limits on their growth. Overall, the "cap" for academies that could be authorized by higher education institutions would increase from 150 to a total of 230--an additional 55 general education academies, and the bill would add up to 175 special purpose academies. The growth would be regulated as follows.

Regular charter school growth. Specifically, general education academy growth could:

· increase by five academies to 155 through 2002;

· increase by 10 to 165 academies through 2003;

· increase by 10 to 175 academies through 2004;

· increase by 10 to 185 academies through 2005;

· increase by 10 to 195 academies through 2006; and,

· increase by 10 to 205 academies thereafter.

However, the combined total issued by all governing boards of higher education institutions could not exceed two times the combined total number issued during the preceding calendar year (except this restriction could not reduce the total number issued to fewer than two year each year). Further and under the bill, if less than the maximum total contracts were issued between 2004 and 2008, the un-issued number could be issued after 2008.

Special purpose charter school growth. The bill would provide for 15 new special purpose academies each year for five years (2003 through 2007), and then also 10 new special purpose academies for another 10 years (2008 through 2017). More specifically, the bill would define "special purpose public school academy" to mean an academy that met the requirements of section 510 of the law, and was so identified in its contract. Under section 510 of the bill, a public school academy would qualify as a special purpose public school academy if it met all of the following:

a) the contract issued to the academy identified it as a special purpose academy and was contingent upon the academy continuing to quality as a special purpose academy (although the bill would allow for re-designation as a regular academy; see below);

b) at least 50 percent of the students enrolled were "enrollment priority pupils" (see definition that follows), and all of the following applied: i) the academy determined whether a student was an enrollment priority student at the time he or she applied, and that as part of the application process, a parent or legal guardian would be given an opportunity to elect whether the child would be so designated, and only if so identified by the parent, then designated "enrollment priority" by the academy; ii) once an enrollment priority designation had been given, then the designation would continue as long as the student was enrolled; and iii) post-enrollment designation with parental consent to the designation would be possible.

Special purpose academy; enrollment priority pupil. Under the bill, "enrollment priority pupil" would mean a student who met at least one of the following:

a) if enrolled in grades K to 3, the academy had documented that the student met at least one of the following: i) was a victim of child abuse or neglect; ii) was below grade level in English language and community skills, or in mathematics; iii) was eligible for a federal free or reduced-price lunch subsidy; iv) had an atypical behavior or attendance pattern; v) had a family history of school failure, incarceration, or substance abuse;

b) if the student was enrolled in grade 4 or above, the academy had documented that the student met at least one of the following: i) was a victim of child abuse or neglect; ii) was below grade level in English language and communication skills, or in mathematics; iii) was a pregnant teenager or teenage parent; iv) was eligible for a federal free or reduced-price lunch subsidy; v) had an atypical behavior or attendance pattern; or vi) had a family history of school failure, incarceration, or substance abuse.

c) the student had not achieve at least a score of moderate on the most recent MEAP reading or mathematics test, or did not achieve at least a score of novice on the most recent MEAP science test;

d) if enrolled in grades K to 3, the student was at risk of not meeting the state model core academic curriculum content standards in English language, communication skills or mathematics; or,

e) the student was eligible for special education programs and services.

Regulated growth of special purpose academies. The bill specifies that all of the following would apply to the number of contracts that could be issued for special purpose public school academies by governing boards of institutions of higher education with statewide jurisdiction:

i) for 2003 to 2007, the combined total number of contracts that could be issued could not exceed 15 per calendar year;

ii) for 2008 to 2017, the combined total that could be issued could not exceed 10 per calendar year;

iii) if the total number on contracts issued between 2003 and 2007, and also for 2008 was less than the maximum, those contracts could be issued after 2008; and

iv) for 2004 to 2008, the combined total number of contracts that could be issued could not exceed two times the combined total number of contracts issued during the preceding year (except this restriction could not reduce the maximum allowed to less than two each year).

Special purpose academy; modified random selection. Under the bill, a special purpose academy could use a modified random selection process to ensure that it continued to maintain a student body that was at least 50 percent enrollment priority students. Under a modified random selection process, the academy could divide its pool of applicants into two groups, one group consisting of priority enrollment students and the other consisting of other students, and then select applicants for enrollment from each group on a random basis in a proportion designed to ensure that its student body was at least 50 percent enrollment priority students.

Special purpose academy; re-designation as regular academy. Under the bill, an authorizing body that issued a contract for a special purpose academy would be required to work with the academy to maintain a student body that was at least 50 percent enrollment priority students. If the authorizer determined the academy did not meet this requirement and it failed to do so for a two-year period, then the authorizing body would be required to issue a contract that did not require the academy to be a special purpose academy. If it could not do so, it would be required to reconstitute the academy, or to revoke its contract.

Special purpose academy; special mission. The bill specifies that to the extent permitted by the state constitution of 1963 and federal law, a special purpose public school academy could have a special mission or focus, or target a specific student population to the same extent as any other public school academy, as long as the special purpose academy continued to meet the requirements of the legislation. The bill also specifies that this provision could not infringe upon the rights of students under section 2 of Article VIII of the state constitution of 1963 (which provides for a system of free public education without discrimination as to religion, creed, race, color or national origin; and prohibits public aid to nonpublic schools).

Temporary combined limit for higher education institutions; per school district. The bill specifies that for 2002 to 2007, the combined total number of contracts that could be issued (both regular and special purpose contracts) to be located in any one school district could not exceed two per calendar year.

Temporary combined limit for higher education institutions; Detroit. The bill specifies that for 2002 to 2004, the combined total number of contracts that could be issued (both regular and special purpose contracts) to be located in the Detroit public school district could not exceed one each calendar year. However, during this two-year period, a contract could not be issued without the prior approval of the mayor of the city.

Higher education institution authorizers; superintendent oversight; contract limits. The bill specifies that the superintendent of public instruction would monitor the issuance of contracts under this subsection of the law. The bill also specifies that from 2005 to 2008, a higher education governing board could issue only one contract for a public school academy that is not a special purpose academy for each contract it issues that would create a special purpose public school academy. However, under the bill these limitations would not apply to a reissued or reconstituted contract for a public school academy, or a new contract that was issued by an authorizing body within six months after revocation of an existing contract.

Collective bargaining agreements. Currently the law specifies that an entity that wishes to obtain a contract to organize a charter school must apply to an authorizing body, and the application must include, among other things, the identification of the applicant; a list of the proposed members of the board of directors; the proposed articles of incorporation; a copy of the bylaws; documentation about governance; educational goals (including curricular and assessment opportunities, admission policies, school calendar and school day schedule, and the age or grade range of the students); descriptions of staff responsibilities and of the academy's governance structure; identification of the local and intermediate school districts in which the academy will be located; an agreement that the academy will comply with state and federal law applicable to public bodies or school districts; for academies authorized by school districts, an assurance that employees will be covered by the collective bargaining agreements that apply to other employees of the school district employed in similar classifications; and, a description of and address for the physical plant.

The bill would retain these provisions, and also require for a contract issued by an intermediate school district (ISD) that is a conversion of an existing program of the ISD, is a substantially similar program to an existing program of the ISD, or is a program or class managed by the ISD, an assurance that employees of the public school academy will be covered by the collective bargaining agreements that applied to other employees of the ISD employed in similar classifications in schools or programs that are not public school academies.

Authorizing fees. Under the law an authorizing body can charge a fee of up to three percent of the total state school aid received by the public school academy in the school year in which the fees or expenses are charged. Under the bill this provision would be retained. In addition, the bill specifies that all of the following would apply to the fee: a) as set forth in the contract, an authorizing body could use a portion of the fee to provide technical assistance to the public school academy; b) an authorizing body would be required to use a portion of the fee to pay costs associated with the acquisition and scoring of assessments required under the law (however, this subdivision would not apply after the state implemented the state assessment requirements under the federal No Child Left Behind Act of 2001); and, c) an authorizing body would be prohibited from using any portion of the fee for any purpose other than considering applications and issuing contracts, or for oversight of and technical assistance to the public school academy.

Public school academy contract. Currently the law specifies the components that must be included in the contract that is issued by an authorizing body, in order that a public school academy be organized. Generally, the provisions address the new academy's educational goals, contract compliance procedures, and a statement that the employees be covered by the collective bargaining agreement. The bill would retain these provisions and add more than a dozen others.

More specifically and under the bill, the contract would be required to address:

1) assurances that employees of public school academies will be covered by the collective bargaining agreements that apply to intermediate school districts under certain conditions,

2) a requirement that the board ensure compliance with conflict of interest laws applicable to public bodies,

3) a requirement that the board prohibit specifically identified family relationships between board members, people who have various interests in an educational management company involved in the operation of the academy, and employees of the academy (with the contract identifying the specific prohibited relationships),

4) a requirement that the board make information concerning its operation and management available to the public and to the authorizing body in the same manner as is required by state law for school districts,

5) a requirement that the board collect, maintain, and provide to the authorizing body at least all of the following information concerning the operation and management of the academy: i) a copy of the contract; ii) a list of the board members including name, address, and term of office; copies of policies approved by the board; board meeting agendas and minutes; the budget and any amendments; copies of bills paid; iii) quarterly financial reports; iv) a current list of teachers, their salaries, copies of their teaching certificates or permits, evidence of criminal background and records checks for all teachers and administrators; v) curriculum documents and materials given to the authorizing body; vi) proof of insurance; vii) copies of facility leases or deeds, or both, and of any equipment leases; viii) copies of any management contract or services contract approved by the board; ix) all health and safety reports and certificates, including those relating to fire safety, environmental matters, asbestos inspection, boiler inspection, and food service; x) if required, a letter of continuous use issued by the superintendent of public instruction for any school building occupied by the academy; and, xi) any other information specifically required under the school code to be maintained by and available from school districts,

6) a requirement that if the board entered into an agreement with an educational management company for operation or management of the academy, that agreement would have to comply (with section 1320 of the bill (which concerns education management companies, described below),

7) a requirement that the authorizing body review and if necessary disapprove any agreement between the board and an educational management company before the agreement was final and valid,

8) a requirement that the board of directors demonstrate all of the following to the satisfaction of the authorizing body with regard to its student admission process: i) that the public school academy had made the following additional efforts to recruit students who were eligible for special education programs and services to apply for admission: a) reasonable efforts to advertise to pertinent organizations and media that regularly serve and advocate for students with disabilities within the boundaries of the ISD; b) inclusion in all student recruitment materials of a statement that appropriate special education services would be made available to students attending the school as required by law; iii) that the open enrollment period for the public school academy would be for a duration of at least four weeks, and

9) a requirement that the board prohibit any individual from being employed by the academy in more than one full-time position and simultaneously being compensated at a full-time rate for each of those positions (and if requested, that the board report to the authorizing body the total compensation for each individual employee of the academy.

Notice to schools in 30-mile radius. Under the bill, before issuing a contract for an academy, an authorizing body would be required to notify the board of the school district in which the proposed academy would be located, and the board of any school district located within a 30-mile radius of the proposed academy, that it intended to issue the contract, and further to give those school boards at least 30 days to submit comments on the proposed contract.

Property reversion to School Aid Fund; no state obligation for debt. Under the bill if an academy was no longer authorized to operate, title to all real personal property, interests in real or personal property, and other assets owned by the academy would revert to the state. Any money included in the assets and the net proceeds from the sale of the property or interests in the property, after payment of any debt, would be deposited in the School Aid Fund. Further and under the bill, an agreement, mortgage, loan, or other instrument of indebtedness entered into by a public school academy and a third party would not constitute an obligation, either general, special or moral, of this state or an authorizing body. In addition, the full faith and credit or the taxing power of the state or any agency of the state, or the full faith and credit of an authorizing body, could not be pledged for the payment of any academy agreement, mortgage, loan, or other instrument of indebtedness. Finally, the bill specifies that this part would not impose any liability on the state or on an authorizing body for any debt incurred by a public school academy.

Enrollment priority. Under the law, a public school academy cannot charge tuition and cannot discriminate in its pupil admissions policies or practices on the basis of intellectual or athletic ability, measures of achievement or aptitude, status as a handicapped person, or any other basis that would be illegal if used by a school district. However, an academy can limit admission to students who are within a particular range of age or grade level, or on any other basis that would be legal if used by a school district.

The bill would retain these provisions but specify that an academy could give enrollment priority to one or more of the following: a) a sibling of a student enrolled in the academy; b) if the academy is a high school created pursuant to a joint application by two or more other public school academies (as described in section 511 of the bill), a student who attended and had completed the grade levels offered by one of those other public school academies; and, c) if the academy was a special purpose public school academy, an enrollment priority applicant selected under section 510 of the bill.

Currently, an academy can include any grade up to grade 12, or any configuration of those grades, including kindergarten and early childhood education, as specified in its contract. The bill would retain this provision, but add these would be subject to the terms of the contract authorizing the public school academy.

Academies for drop-outs. Under the bill, authorizing bodies would be encouraged to issue contracts for academies for students who had dropped out of school, or otherwise had failed to complete high school.

Borrowing; issuing bonds. Under the law, a public school academy can take action to carry out its purposes, including, among other things, to enter into binding legal agreements with persons or entities as necessary for the operation, management, and maintenance of the academy. Under the bill, these specifications would be retained, and in addition, binding legal agreements for financing would be allowed. Further, the bill specifies that an academy could take action to borrow money and issue bonds in accordance with section 1351a of the code [which concerns the borrowing of money and issuing of bonds by school districts, as well as restrictions on bond proceeds], except that the borrowing of money and issuance of bonds by an academy would not be subject to section 1351a(5) [which says a resident of a school district has standing to bring suit against the school district to enforce these provisions in a court having jurisdiction] or section 1351(2) to (4) [which set restrictions on bond amounts and caps on bonded indebtedness tied to the equalized valuation of taxable property; require votes of the people when limits are exceeded; set the maximum term of bonds; provide for refunding; and, provide that the bonds or notes issued by a school district or intermediate school district be full faith and credit tax limited obligations that pledge available levies, but that do not allow the levying of additional debt millage without a vote of the electorate].

Authorizing body oversight and responsibilities. The bill would eliminate provisions in the existing law that provide for the accountability of authorizing bodies to the state board of education. Instead, the bill would require an authorizing body that issued a contract for a public school academy to do all of the following: a) ensure that the contract and the application for the contract comply with the requirements of this section of the law; b) comply with the notification and comment requirements before issuing a contract; c) within 10 days after issuing the contract, submit to the superintendent of public instruction a copy of the contract and of the application for the contract; d) adopt a resolution establishing the method of selection, length of term, and number of members of the board of each public school academy; e) oversee the operations of each public school academy operating under a contract issued by the authorizing body (however, an authorizing body could enter into an agreement with another authorizing body to oversee an academy operating under a contract issued by the authorizing body; f) develop and implement a process for holding a public school academy board accountable for meeting performance standards and for implementing corrective action when an academy failed to meet those standards; g) take necessary measures to ensure that a public school academy board operated independently of any educational management company involved in the operations of the academy; h) oversee and ensure that the student admission process used by the academy was operated in a fair and open manner, and was in compliance with the contract; i) ensure that the board of the academy maintained and released information as necessary to comply with applicable law; and, j) if the authorizing body was the governing board of an institution of higher education with statewide jurisdiction that is a federal tribally controlled community college, comply with section 1475 (which concerns federal tribally controlled community college boards and college level courses).

Revocation of contract; reconstitution of academy. The bill specifies that before an authorizing body revoked a contract, it could take corrective measures to avoid revocation. If it were appropriate considering the overall circumstances, the authorizing body could reconstitute the academy to improve student educational performance, or to avoid interruption of the educational process. An authorizing body could include a reconstitution provision in the contract that identified corrective measures, including but not limited to appointing a new board of directors or a trustee to take over operation of the academy. If an authorizing body revoked a contract, then it would be required to work with a school district or another academy (or a combination of the two) to ensure a smooth transition for the affected students. If the revocation occurred during the school year, the authorizing body, as the fiscal agent for the academy, would be required to return any school aid funds received that were attributable to the affected students to the state treasurer for deposit into the School Aid Fund, and the treasurer would be required to distribute funds to the school district or academy in which the students enrolled after revocation, following a methodology that would be established by the Department of Education and the Center for Educational Performance and Information. If an authorizing body revoked a contract, it could issue a new contract within the six-month period following the revocation without certain limitations. However, if the contract that was revoked was for a special purpose public school academy, the new contract also would be required to be for a special purpose academy.

Superintendent of public instruction oversight and responsibility. Under the bill, the superintendent of public instruction has new oversight responsibilities for authorizing bodies that issue contracts to public school academies. The bill would require the superintendent to do all of the following:

a) establish a contract submission process;

b) establish a contract monitoring process;

c) establish academic standards to include at least the following: i) the minimum expected average achievement gain for each subject area assessed (aligned with the adequate yearly progress requirements of the federal No Child Left Behind Act of 2001); ii) in consultation with the Department of Treasury, the specific standardized assessment instruments to be used for testing (considering at least a nationally recognized non-referenced assessment that could include a computer adaptive testing method); iii) an opportunity for authorizing bodies to coordinate on the selection of standardized assessment instruments to ensure that the cost was reasonable; iv) the methods and procedures by which the assessment results would be reported to parents, the public, and the individual academies' authorizing bodies through an academy's annual education report; and v) procedures to require the authorizing body to track the academic progress of each public school academy it authorized;

d) promulgate rules to establish a process for the periodic certification of eligible governing boards to serve as authorizing bodies, including among other things i) a certification process that occurred on an advertised schedule with a periodic certification review once every five years; and ii) standards for certification based only on the performance of the governing board in the following matters: a) holding an academy board accountable for meeting academic performance standards; b) enforcing the terms of the contract; c) ensuring compliance with this section of the legislation; d) demonstrating fiscal responsibility; iii) a certification panel to assist in the process; iv) an opportunity for authorizing bodies to correct deficiencies cited by the panel; and, v) reinstatement of an authorizing body after deficiencies had been corrected.

Under the bill, the superintendent could revoke an authorizing body's authority to issue a contract only if he or she determined either of the following: a) the authorizing body had failed to establish high expectations for its academies and had failed to act effectively to correct the situation; or b) the authorizing body had failed to insist that an academy take appropriate action when it determined that the academy had engaged in significant or continuous violations of the law. Before initiating revocation, the superintendent would be required to provide written notice to the authorizing body, which would be given an opportunity to respond to the possible violation and take corrective action. If the violation was not corrected in accord with a plan and timetable, the superintendent could initiate a revocation hearing which would be conducted as a contested case proceeding under the Administrative Procedures Act.

If the superintendent revoked an authorizing body's authority to issue contracts, all of the following would apply: a) any existing contract issued by the authorizing body would remain valid; and, b) the authorizing body would enter into an agreement with another authorizing body to provide oversight.

The bill specifies that this section of the legislation would not infringe on the constitutional autonomy of an institution of higher education with statewide jurisdiction that is a state public university described in section 4, 5, or 6 of Article VIII of the state constitution of 1963.

Annual assessments in grades 3 through 8. Beginning in the next school year commencing after the effective date of the bill, the board of directors of a public school academy would be required to ensure that all students enrolled in grades three through eight in the academy be administered annual assessments covering the core academic curriculum content standards in mathematics and reading, as required under the federal No Child Left Behind Act of 2001. To the extent that they were available and appropriate for a subject area and grade level, Michigan Education Assessment Program (MEAP) assessments could be used for the purposes of this provision. The bill specifies that an academy would be required to measure and report progress on the assessment scores in the manner prescribed by the superintendent of public instruction. Further, the bill specifies that this provision would not apply after the state implemented the state assessment requirements under the federal No Child Left Behind Act of 2001.

Jointly sponsored high school. The bill specifies that two or more public school academies that did not operate grades 9 to 12 could jointly apply for a contract to establish a public school academy for some or all of those grades. This would not prohibit an academy that did not operate grades 9 to 12 (or any combination) from offering some or all of those grades under an existing contract with an authorizing body.

Notice of new school opening or closing. Under the bill, if the board of a school district or the board of an academy determined that it would open a new school building, or close an existing school building, then the board would be required to provide adequate public notification of the proposed opening or closing to the general public, and to other school districts and school academies located within a 30-mile radius of the proposed new school or school closing.

Educational management companies. Beginning with contracts after the effective date of this legislation, if the governing board of a public school enters into a contract with an educational management company to carry out the operations of a public school, the governing board would be required to ensure all of the following:

a) that the board had conducted sufficient due diligence to conclude that the management company had sufficient educational expertise and management experience to provide the agreed services;

b) that the governing board would obtain independent legal counsel in all negotiations with the educational management company; and,

c) if the governing board were the board of directors of an academy, that, under the contract between the board of directors and the educational management company, the company would provide to the board all financial and other information required to comply with the requirements concerning reporting that were contained in the contract between the board and its authorizing body under section 503 of the legislation.

The bill also specifies that beginning with contracts that were entered into after the effective date of this legislation, if the governing board of a public school entered into a contract with an educational management company to carry out the operations of a public school, the contract between the governing board and the company would be required to contain at least all of the following:

a) a provision requiring the management company to provide the governing board with information regarding any teachers, administrators, and support staff employed by the management company, including at least all of the following personal information: i) name; ii) education, including highest degree attained; iii) salary; iv) copy of teaching certificate or other required permit or credential, if required for the position; v) description of relevant experience; and, vi) employment record;

b) a provision requiring the management company to provide to the governing board information regarding the business operations of the public school, including at least all of the following: i) financial records and information concerning the operation of the school, including, but not limited to, budgets and detailed records of funds received from the state and other entities, expenditure of those funds, investment of those funds, carryover, and contractual arrangements or agreements entered into by the management company as an agent of the governing board; ii) financial records and information concerning leases to which the governing board was a party, including, but not limited to, leases for equipment, physical facility space, or institutional and educational materials; and iii) financial records and information concerning mortgages and loans to which the governing board was a party; and,

c) if the governing board was the board of directors of a public school academy, a provision requiring the management company to make information available to the board of directors concerning the operation and management of the public school academy, including at least all of the information necessary to comply with the requirements concerning reporting that were contained in the contract between the board of directors and its authorizing body under section 503 of this legislation.

Definitions. The bill would define "educational management company" to mean an entity that enters into an agreement with the governing board of a public school to provide comprehensive educational, administrative, management, or instructional services or staff to the public school. Further, the bill would define "entity" to mean a partnership, nonprofit or business corporation, labor organization, or any other association, corporation, trust, or other legal entity.

MCL 380.501 et al.

Analyst: J. Hunault

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This analysis was prepared by nonpartisan House staff for use by House members in their deliberations, and does not constitute an official statement of legislative intent.