SF 2773

Introduction - 94th Legislature (2025 - 2026)

Posted on 03/21/2025 10:12 a.m.

A bill for an act
relating to education; requiring a trustee to oversee all charter school closures;
amending Minnesota Statutes 2024, sections 124E.05, subdivision 7; 124E.25,
subdivision 1a; proposing coding for new law in Minnesota Statutes, chapter 124E.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

Minnesota Statutes 2024, section 124E.05, subdivision 7, is amended to read:

Subd. 7.

Withdrawal.

If the governing board of an approved authorizer votes to withdraw
as an approved authorizer for a reason unrelated to any cause under subdivision 6, the
authorizer must notify all its chartered schools and the commissioner in writing by March
1 of its intent to withdraw as an authorizer on June 30 in the next calendar year. Upon
notification of the schools and commissioner, the authorizer must provide a letter to the
school for distribution to families of students enrolled in the school that explains the decision
to withdraw as an authorizer. The commissioner may approve the transfer of a charter school
to a new authorizer under section 124E.10, subdivision 5. new text begin When an authorizer withdraws,
the authorizer must transfer to the commissioner as of the effective date of withdrawal any
unexpended authorizer fees collected in accordance with section 124E.10, subdivision 3,
paragraph (c). The commissioner must transfer the unexpended fees collected to the charter
school closure fund established under section 124E.065, subdivision 4. If the charter school
closure fund has reached its cap, the commissioner must transfer the unexpended fees
collected to the state general fund.
new text end

Sec. 2.

new text begin [124E.065] CHARTER SCHOOL CLOSURES AND CLOSURE TRUSTEES.
new text end

new text begin Subdivision 1. new text end

new text begin School closures. new text end

new text begin Upon the final decision to close a charter school, whether
by voluntary action of the charter school's board of directors, nonrenewal or termination of
the charter contract by the authorizer, or termination of the charter contract by the
commissioner, the authorizer must appoint a charter school closure trustee within five
business days of the final decision. Before appointment of the trustee, the authorizer must
negotiate the trustee's fee, must obtain state and federal background checks on the trustee,
and may require the trustee to post a bond or maintain appropriate insurance in an amount
reflective of the school's condition and situation.
new text end

new text begin Subd. 2. new text end

new text begin Charter school closure trustee. new text end

new text begin (a) A charter school closure trustee:
new text end

new text begin (1) must be a resident of the state of Minnesota;
new text end

new text begin (2) must possess a bachelor's or postgraduate degree in accounting, law, nonprofit
management, educational administration, or other appropriate field, and have at least five
years of work experience in the degree field;
new text end

new text begin (3) must not have been convicted of a felony or other crime involving moral turpitude,
and must not have been found liable in a civil court for fraud, breach of fiduciary duty, civil
theft, or similar misconduct;
new text end

new text begin (4) must not be under investigation or pending criminal prosecution for any crime;
new text end

new text begin (5) must not have a history of wage garnishment by the Internal Revenue Service or any
state;
new text end

new text begin (6) must not have filed for bankruptcy;
new text end

new text begin (7) must not have been an employee, parent or legal guardian, board member, or
contractor of the charter school or the charter school's authorizer during the previous three
years;
new text end

new text begin (8) must not have an immediate family member who is, at the time of or subsequent to
the final decision, an employee or contractor of the charter school or its authorizer or who
serves on the charter school's board of directors at the time of or subsequent to the final
decision to close the school; and
new text end

new text begin (9) must be independent and have no material interest adverse to the charter school or
its authorizer.
new text end

new text begin (b) Paragraph (a) does not apply to a trustee who is a lawyer subject to the Minnesota
Rules of Professional Conduct.
new text end

new text begin (c) Within five business days of appointment of the trustee by the authorizer, the charter
school board of directors must issue a contract with the trustee for the services in subdivision
3 and provide a power of attorney to the trustee to act on behalf of the charter school in all
matters related to the charter school.
new text end

new text begin Subd. 3. new text end

new text begin Trustee power, duties, and responsibilities. new text end

new text begin (a) The charter school closure
trustee must:
new text end

new text begin (1) ensure that parents of enrolled students are provided with information and assistance
to enable a student to enroll in another school;
new text end

new text begin (2) facilitate the timely transfer of student records as required by section 124E.10,
subdivision 6, and maintain a database of essential data including the transferred location
and record of receipt for each student's record that is transferred;
new text end

new text begin (3) submit reporting of financial data, student data, and other reports requested by the
department in the form and manner specified by the commissioner;
new text end

new text begin (4) ensure the charter school obtains all external audits necessary for the school closure
process;
new text end

new text begin (5) ensure liability insurance for the school corporation is maintained during the closure
process;
new text end

new text begin (6) facilitate the statutory requirements of dissolution in accordance with sections
317A.701 to 317A.791, including but not limited to filing the notices of intent to dissolve
with the secretary of state and attorney general, providing notice to creditors and claimants,
evaluating claims against the charter school, collecting debts due or owed to the charter
school, and filing articles of dissolution;
new text end

new text begin (7) ensure essential financial dissolution-related services are maintained during the
closure process; and
new text end

new text begin (8) ensure school property is adequately managed in accordance with requirements of
this section.
new text end

new text begin (b) To the extent the school has available funds and to the extent any actions are not
otherwise completed under paragraph (a), the trustee must execute the closure plans as
required by the charter contract and the commissioner, including ensuring that the charter
school sells, transfers, or otherwise liquidates all or substantially all of the property and
assets of the charter school in a commercially reasonable manner and in compliance with
applicable laws and regulations.
new text end

new text begin (c) The trustee must approve all charter school expenditures before payment and must
be a required signatory on all charter school financial accounts. The trustee may void and
seek reimbursement of any and all extraordinary payments, as determined by the trustee,
made by the charter school to individuals, contractors, or corporations made within 90
business days before the final decision to close.
new text end

new text begin (d) The trustee may maintain a trust account on behalf of the charter school to execute
the trustee's powers, duties, and responsibilities under this section.
new text end

new text begin (e) If during the closure process the charter school's board of directors or the authorizer
determines that the trustee is not performing the closure duties in an efficient and effective
manner, the authorizer may terminate the trustee's appointment and appoint a new trustee.
new text end

new text begin (f) A trustee acting within the scope of the trustee's appointment may not be liable for
acts for omissions under this section. A trustee is not exempt from liability stemming from
a trustee's illegal or criminal act, or any trustee action that constitutes willful or reckless
misconduct. The commissioner, an authorizer, members of the board of an authorizer acting
in the authorizer's official capacity, and employees of an authorizer are immune from civil
or criminal liability with respect to all activities of a trustee authorizer and employees of
the authorizer approve or appoint under this section.
new text end

new text begin Subd. 4. new text end

new text begin Charter school closure fund. new text end

new text begin (a) A charter school closure fund must be
established and managed by the department. The department may charge the charter school
closure fund a management fee, commensurate with the fund's annual activity. The
department must issue an annual report on the income and expenditures of the fund by
September 30 to all authorizers and charter schools and publish the report on its website.
The charter school closure fund must be financed by an annual appropriation of $350,000
from the legislature until the fund reaches a cap of $1,000,000.
new text end

new text begin (b) Money expended from the charter school closure fund must be authorized by the
department and must be used only for the following purposes:
new text end

new text begin (1) the certification of the reporting of financial and student data to the department
necessary for the release of final aid payments under section 124E.25, subdivision 1a;
new text end

new text begin (2) the cost of the external audits necessary for the school closure process;
new text end

new text begin (3) the cost of liability insurance for the school corporation during the closure process;
new text end

new text begin (4) legal costs for the dissolution of the school corporation;
new text end

new text begin (5) the cost of essential financial dissolution-related services;
new text end

new text begin (6) costs to manage school property;
new text end

new text begin (7) costs for the timely transfer of student records; and
new text end

new text begin (8) the trustee's fee.
new text end

new text begin (c) No more than ten times the formula allowance set forth in section 126C.10,
subdivision 2, in effect when the final decision to close the charter school is made, may be
expended from the fund for an individual school closure process. The trustee must request
funding on behalf of the school from the department to pay the expenditures authorized by
this paragraph, except for the trustee's fee, which must be requested by the authorizer.
new text end

new text begin Subd. 5. new text end

new text begin Bankruptcy. new text end

new text begin If a charter school files for bankruptcy concurrent with or
subsequent to the final decision to close the charter school, the bankruptcy trustee appointed
by the bankruptcy court may assume the powers and duties as applicable for a charter school
closure trustee as provided in this section.
new text end

new text begin Subd. 6. new text end

new text begin Mergers. new text end

new text begin This section does not apply to charter school mergers under section
124E.06, subdivision 7.
new text end

Sec. 3.

Minnesota Statutes 2024, section 124E.25, subdivision 1a, is amended to read:

Subd. 1a.

School closures; payments.

(a) Notwithstanding subdivision 1 and section
127A.45, for a charter school ceasing operation on or before June 30, for the payment periods
occurring after the school ceases serving students, the commissioner shall withhold the
estimated state aid owed the school. The charter school board of directors and authorizer
must submit to the commissioner a closure plan under chapter 317A, and financial
information about the school's liabilities and assets. After receiving the closure plan, financial
information, an audit of pupil counts, and documented lease expenditures from the charter
school and monitoring special education expenditures, the commissioner may release cash
withheld and may continue regular payments up to the current year payment percentages
if further amounts are owed. If, based on audits and monitoring, the school received state
aid in excess of the amount owed, the commissioner shall retain aid withheld sufficient to
eliminate the aid overpayment.

(b) For a charter school ceasing operations before or at the end of a school year,
notwithstanding section 127A.45, subdivision 3, the commissioner may make preliminary
final payments after the school submits the closure plan, an audit of pupil counts, documented
lease expenditures, and Uniform Financial Accounting and Reporting Standards (UFARS)
financial data and the commissioner monitors special education expenditures for the final
year of operation. The commissioner may make the final payment after receiving audited
financial statements under section 123B.77, subdivision 3.

(c) Notwithstanding sections 317A.701 to 317A.791, after closing a charter school and
satisfying creditors, remaining cash and investment balances shall be returned by the
commissioner to the new text begin charter school closure fund established under section 124E.065,
subdivision 4. If the charter school closure fund has reached its cap, the commissioner must
return the surplus cash and investment balances to the new text end state general fund.