HF 1372

as introduced - 87th Legislature (2011 - 2012) Posted on 04/05/2011 10:14am

A bill for an act
relating to education; clarifying charter school law; amending Minnesota Statutes
2010, sections 124D.10, subdivisions 3, 4, 6, 6a, 23; 124D.11, subdivision 9.

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

Section 1.

Minnesota Statutes 2010, section 124D.10, subdivision 3, is amended to
read:

Subd. 3.

Authorizer.

(a) For purposes of this section, the terms defined in this
subdivision have the meanings given them.

"Application" to receive approval as an authorizer means the proposal an eligible
authorizer submits to the commissioner under paragraph (c) before that authorizer is able
to submit any affidavit to charter to a school.

"Application" under subdivision 4 means the charter school business plan a
school developer submits to an authorizer for approval to establish a charter school that
documents the school developer's mission statement, school purposes, program design,
financial plan, governance and management structure, and background and experience,
plus any other information the authorizer requests. The application also shall include a
"statement of assurances" of legal compliance prescribed by the commissioner.

"Affidavit" means a written statement the authorizer submits to the commissioner
for approval to establish a charter school under subdivision 4 attesting to its review and
approval process before chartering a school.

"Affidavit" means the form an authorizer submits to the commissioner that is a
precondition to a charter school organizing an affiliated nonprofit building corporation
under subdivision 17a.

(b) The following organizations may authorize one or more charter schools:

(1) a school board; intermediate school district school board; education district
organized under sections 123A.15 to 123A.19;

(2) a charitable organization under section 501(c)(3) of the Internal Revenue Code of
1986, excluding a nonpublic sectarian or religious institution new text begin without an approved affidavit
by the commissioner before July 1, 2009 new text end , new text begin and new text end any person other than a natural person that
directly or indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with the nonpublic sectarian or religious institution, and any
other charitable organization under this clause that in the federal IRS Form 1023, Part
IV, describes activities indicating a religious purpose, that:

(i) is a member of the Minnesota Council of Nonprofits or the Minnesota Council on
Foundations;

(ii) is registered with the attorney general's office;

(iii) reports an end-of-year fund balance of at least $2,000,000; and

(iv) is incorporated in the state of Minnesota;

(3) a Minnesota private college, notwithstanding clause (2), that grants two- or
four-year degrees and is registered with the Minnesota Office of Higher Education under
chapter 136A; community college, state university, or technical college governed by the
Board of Trustees of the Minnesota State Colleges and Universities; or the University of
Minnesota; or

(4) a nonprofit corporation subject to chapter 317A, described in section 317A.905,
and exempt from federal income tax under section 501(c)(6) of the Internal Revenue Code
of 1986, may authorize one or more charter schools if the charter school has operated
for at least three years under a different authorizer and if the nonprofit corporation has
existed for at least 25 years.

(5) no more than three single-purpose authorizers that are charitable, nonsectarian
organizations formed under section 501(c)(3) of the Internal Revenue Code of 1986 and
incorporated in the state of Minnesota whose sole purpose is to charter schools. Eligible
organizations interested in being approved as an authorizer under this paragraph must
submit a proposal to the commissioner that includes the provisions of paragraph (c) and
a five-year financial plan. Such authorizers shall consider and approve applications
using the criteria provided in subdivision 4 and shall not limit the applications it solicits,
considers, or approves to any single curriculum, learning program, or method.

(c) An eligible authorizer under this subdivision must apply to the commissioner for
approval as an authorizer before submitting any affidavit to the commissioner to charter
a school. The application for approval as a charter school authorizer must demonstrate
the applicant's ability to implement the procedures and satisfy the criteria for chartering a
school under this section. The commissioner must approve or disapprove an application
within 60 business days of the application deadline. If the commissioner disapproves
the application, the commissioner must notify the applicant of the deficiencies and the
applicant then has 20 business days to address the deficiencies to the commissioner's
satisfaction. Failing to address the deficiencies to the commissioner's satisfaction makes
an applicant ineligible to be an authorizer. The commissioner, in establishing criteria for
approval, must consider the applicant's:

(1) capacity and infrastructure;

(2) application criteria and process;

(3) contracting process;

(4) ongoing oversight and evaluation processes; and

(5) renewal criteria and processes.

(d) The deleted text begin affidavit deleted text end new text begin application for approval new text end to be submitted to and evaluated by the
commissioner must include at least the following:

(1) how chartering schools is a way for the organization to carry out its mission;

(2) a description of the capacity of the organization to serve as an authorizer,
including the personnel who will perform the authorizing duties, their qualifications, the
amount of time they will be assigned to this responsibility, and the financial resources
allocated by the organization to this responsibility;

(3) a description of the application and review process the authorizer will use to make
decisions regarding the granting of charters, which will include at least the following:

(i) how the statutory purposes defined in subdivision 1 are addressed;

(ii) the mission, goals, program model, and student performance expectations;

(iii) an evaluation plan for the school that includes criteria for evaluating educational,
organizational, and fiscal plans;

(iv) the school's governance plan;

(v) the financial management plan; and

(vi) the administration and operations plan;

(4) a description of the type of contract it will arrange with the schools it charters
that meets the provisions of subdivision 6 and defines the rights and responsibilities of the
charter school for governing its educational program, controlling its funds, and making
school management decisions;

(5) the process to be used for providing ongoing oversight of the school consistent
with the contract expectations specified in clause (4) that assures that the schools chartered
are complying with both the provisions of applicable law and rules, and with the contract;

(6) the process for making decisions regarding the renewal or termination of
the school's charter based on evidence that demonstrates the academic, organizational,
and financial competency of the school, including its success in increasing student
achievement and meeting the goals of the charter school agreement; and

(7) an assurance specifying that the organization is committed to serving as an
authorizer for the full five-year term.

A disapproved applicant under this paragraph may resubmit an application during a
future application period.

(e) The authorizer must participate in department-approved training.

(f) An authorizer that chartered a school before August 1, 2009, must apply by deleted text begin June
30 deleted text end new text begin August 3 new text end , 2011, to the commissioner for approval, under paragraph (c), to continue
as an authorizer under this section. For purposes of this paragraph, an authorizer that
fails to submit a timely application new text begin for commissioner approval new text end is ineligible to deleted text begin charter deleted text end
new text begin authorize new text end a school.

(g) The commissioner shall review an authorizer's performance every five years in
a manner and form determined by the commissioner and may review an authorizer's
performance more frequently at the commissioner's own initiative or at the request of a
charter school operator, charter school board member, or other interested party. The
commissioner, after completing the review, shall transmit a report with findings to the
authorizer. If, consistent with this section, the commissioner finds that an authorizer
has not fulfilled the requirements of this section, the commissioner may subject the
authorizer to corrective action, which may include terminating the contract with the
charter school board of directors of a school it chartered. The commissioner must notify
the authorizer in writing of any findings that may subject the authorizer to corrective
action and the authorizer then has 15 business days to request an informal hearing before
the commissioner takes corrective action.

(h) The commissioner may at any time take corrective action against an authorizer,
including terminating an authorizer's ability to charter a school for:

(1) failing to demonstrate the criteria under paragraph (c) under which the
commissioner approved the authorizer;

(2) violating a term of the chartering contract between the authorizer and the charter
school board of directors; deleted text begin or
deleted text end

(3) unsatisfactory performance as an approved authorizer new text begin ; or
new text end

new text begin (4) any good cause shown new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 2.

Minnesota Statutes 2010, section 124D.10, subdivision 4, is amended to read:

Subd. 4.

Formation of school.

(a) An authorizer, after receiving an application from
a school developer, may charter a licensed teacher under section 122A.18, subdivision
1, or a group of individuals that includes one or more licensed teachers under section
122A.18, subdivision 1, to operate a school subject to the commissioner's approval of the
authorizer's affidavit under paragraph (b). The school must be organized and operated
as a cooperative under chapter 308A or nonprofit corporation under chapter 317A and
the provisions under the applicable chapter shall apply to the school except as provided
in this section.

Notwithstanding sections 465.717 and 465.719, a school district, subject to this
section and section 124D.11, may create a corporation for the purpose of establishing a
charter school.

(b) Before the operators may establish and operate a school, the authorizer must file
an affidavit with the commissioner stating its intent to charter a school. An authorizer
must file a separate affidavit for each school it intends to charter. The affidavit must
state the terms and conditions under which the authorizer would charter a school and
how the authorizer intends to oversee the fiscal and student performance of the charter
school and to comply with the terms of the written contract between the authorizer
and the charter school board of directors under subdivision 6. The commissioner must
approve or disapprove the authorizer's affidavit within 60 business days of receipt of the
affidavit. If the commissioner disapproves the affidavit, the commissioner shall notify
the authorizer of the deficiencies in the affidavit and the authorizer then has 20 business
days to address the deficiencies. If the authorizer does not address deficiencies to the
commissioner's satisfaction, the commissioner's disapproval is final. Failure to obtain
commissioner approval precludes an authorizer from chartering the school that is the
subject of this affidavit.

(c) The authorizer may prevent an approved charter school from opening for
operation if, among other grounds, the charter school violates this section or does not meet
the ready-to-open standards that are part of the authorizer's oversight and evaluation
process or are stipulated in the charter school contract.

(d) The operators authorized to organize and operate a school, before entering into a
contract or other agreement for professional or other services, goods, or facilities, must
incorporate as a cooperative under chapter 308A or as a nonprofit corporation under
chapter 317A and must establish a board of directors composed of at least five members
who are not related parties until a timely election for members of the ongoing charter
school board of directors is held according to the school's articles and bylaws under
paragraph (f). A charter school board of directors must be composed of at least five
members who are not related parties. Staff members employed at the school, including
teachers providing instruction under a contract with a cooperative, and all parents or legal
guardians of children enrolled in the school are the voters eligible to elect the members
of the school's board of directors. A charter school must notify eligible voters of the
school board election dates at least 30 days before the election. Board of director meetings
must comply with chapter 13D.

(e) Upon the request of an individual, the charter school must make available in
a timely fashion the minutes of meetings of the board of directors, and of members
and committees having any board-delegated authority; financial statements showing all
operations and transactions affecting income, surplus, and deficit during the school's last
annual accounting period; and a balance sheet summarizing assets and liabilities on the
closing date of the accounting period. A charter school also must post on its official Web
site information identifying its authorizer and indicate how to contact that authorizer and
include that same information about its authorizer in other school materials that it makes
available to the public.

(f) Every charter school board member shall attend department-approved training
on board governance, the board's role and responsibilities, employment policies and
practices, and financial management. A board member who does not begin the required
training within six months of being seated and complete the required training within 12
months of being seated on the board is ineligible to continue to serve as a board member.

(g) The ongoing board must be elected before the school completes its third year
of operation. Board elections must be held during a time when school is in session. The
charter school board of directors shall be composed of at least five nonrelated members
and include: (i) at least one licensed teacher employed new text begin and serving as a teacher new text end at the
school or a licensed teacher providing instruction under a deleted text begin contact deleted text end new text begin contract new text end between the
charter school and a cooperative; (ii) the parent or legal guardian of a student enrolled
in the charter school new text begin who is not employed by the charter school new text end ; and (iii) an interested
community member who is not employed by the charter school and does not have a child
enrolled in the school. The board may be a teacher majority board composed of teachers
described in this paragraph. The chief financial officer and the chief administrator deleted text begin are deleted text end new text begin may
only serve as new text end ex-officio nonvoting board members new text begin and shall not serve as a voting member
of the board. Charter school employees shall not serve on the board unless item (i) applies.
Contractors providing facilities, goods, or services to a charter school shall not serve on
the board of directors of the charter school new text end . Board bylaws shall outline the process and
procedures for changing the board's governance model, consistent with chapter 317A. A
board may change its governance model only:

(1) by a majority vote of the board of directors and the licensed teachers employed
by the school, including licensed teachers providing instruction under a contract between
the school and a cooperative; and

(2) with the authorizer's approval.

Any change in board governance must conform with the board structure established
under this paragraph.

(h) The granting or renewal of a charter by an authorizer must not be conditioned
upon the bargaining unit status of the employees of the school.

(i) The granting or renewal of a charter school by an authorizer must not be
contingent on the charter school being required to contract, lease, or purchase services
from the authorizer. Any potential contract, lease, or purchase of service from an
authorizer must be disclosed to the commissioner, accepted through an open bidding
process, and be a separate contract from the charter contract. The school must document
the open bidding process. An authorizer must not enter into a contract to provide
management and financial services for a school that it authorizes, unless the school
documents that it received at least two competitive bids.

(j) An authorizer may permit the board of directors of a charter school to expand
the operation of the charter school to additional sites or to add additional grades at the
school beyond those described in the authorizer's original affidavit as approved by
the commissioner only after submitting a supplemental affidavit for approval to the
commissioner in a form and manner prescribed by the commissioner. The supplemental
affidavit must show that:

(1) the expansion proposed by the charter school is supported by need and projected
enrollment;

(2) the charter school expansion is warranted, at a minimum, by longitudinal data
demonstrating students' improved academic performance and growth on statewide
assessments under chapter 120B;

(3) the charter school is fiscally sound and has the financial capacity to implement
the proposed expansion; and

(4) the authorizer finds that the charter school has the management capacity to
carry out its expansion.

(k) The commissioner shall have 30 business days to review and comment on the
supplemental affidavit. The commissioner shall notify the authorizer of any deficiencies in
the supplemental affidavit and the authorizer then has 30 business days to address, to the
commissioner's satisfaction, any deficiencies in the supplemental affidavit. The school
may not expand grades or add sites until the commissioner has approved the supplemental
affidavit. The commissioner's approval or disapproval of a supplemental affidavit is final.

Sec. 3.

Minnesota Statutes 2010, section 124D.10, subdivision 6, is amended to read:

Subd. 6.

Charter contract.

The authorization for a charter school must be in the
form of a written contract signed by the authorizer and the board of directors of the charter
school. The contract must be completed within 45 business days of the commissioner's
approval of the authorizer's affidavit. The authorizer shall submit to the commissioner a
copy of the signed charter contract within ten business days of its execution. The contract
for a charter school must be in writing and contain at least the following:

(1) a declaration of the purposes in subdivision 1 that the school intends to carry out
and how the school will report its implementation of those purposes;

(2) a description of the school program and the specific academic and nonacademic
outcomes that pupils must achieve;

(3) a statement of admission policies and procedures;

(4) a governance, management, and administration plan for the school;

(5) signed agreements from charter school board members to comply with all
federal and state laws governing organizational, programmatic, and financial requirements
applicable to charter schools;

(6) the criteria, processes, and procedures that the authorizer will use for ongoing
oversight of operational, financial, and academic performance;

(7) the performance evaluation that is a prerequisite for reviewing a charter contract
under subdivision 15;

(8) types and amounts of insurance liability coverage to be obtained by the charter
school;

(9) the term of the contract, which may be up to three years for an initial contract
plus an additional preoperational planning year, and up to five years for a renewed contract
if warranted by the school's academic, financial, and operational performance;

(10) how the board of directors or the operators of the charter school will provide
special instruction and services for children with a disability under sections 125A.03
to 125A.24, and 125A.65, a description of the financial parameters within which the
charter school will operate to provide the special instruction and services to children
with a disability;

(11) the process and criteria the authorizer intends to use to monitor and evaluate the
fiscal and student performance of the charter school, consistent with subdivision 15; deleted text begin and
deleted text end

(12) the plan for an orderly closing of the school under chapter 308A or 317A, if the
closure is a termination for cause, a voluntary termination, or a nonrenewal of the contract,
and that includes establishing the responsibilities of the school board of directors and the
authorizer and notifying the commissioner, authorizer, school district in which the charter
school is located, and parents of enrolled students about the closure, the transfer of student
records to students' resident districts, and procedures for closing financial operations new text begin ; and
new text end

new text begin (13) provisions indemnifying and holding harmless the commissioner and the
authorizer, their officers, agents, and employees from any suit, claim, or liability arising
under the contract or from the operation of the charter school new text end .

Sec. 4.

Minnesota Statutes 2010, section 124D.10, subdivision 6a, is amended to read:

Subd. 6a.

Audit report.

(a) The charter school must submit an audit report to the
commissioner and its authorizer by December 31 each year.

(b) The charter school, with the assistance of the auditor conducting the audit, must
include with the report a copy of all charter school agreements for corporate management
services. If the entity that provides the professional services to the charter school is
exempt from taxation under section 501 of the Internal Revenue Code of 1986, that entity
must file with the commissioner by February 15 a copy of the annual return required under
section 6033 of the Internal Revenue Code of 1986.

(c) If the commissioner receives an audit report indicating that a material weakness
exists in the financial reporting systems of a charter school, the charter school must
submit a written report to the commissioner explaining how the material weakness will
be resolved. new text begin An entity, as a condition of providing financial services to a charter school,
must agree to make available information about a charter school's financial audit to the
commissioner upon request.
new text end

Sec. 5.

Minnesota Statutes 2010, section 124D.10, subdivision 23, is amended to read:

Subd. 23.

Causes for nonrenewal or termination of charter school contract.

(a)
The duration of the contract with an authorizer must be for the term contained in the
contract according to subdivision 6. The authorizer may or may not renew a contract at
the end of the term for any ground listed in paragraph (b). An authorizer may unilaterally
terminate a contract during the term of the contract for any ground listed in paragraph
(b). At least 60 days before not renewing or terminating a contract, the authorizer shall
notify the board of directors of the charter school of the proposed action in writing. The
notice shall state the grounds for the proposed action in reasonable detail and that the
charter school's board of directors may request in writing an informal hearing before the
authorizer within 15 business days of receiving notice of nonrenewal or termination of the
contract. Failure by the board of directors to make a written request for a hearing within
the 15-business-day period shall be treated as acquiescence to the proposed action. Upon
receiving a timely written request for a hearing, the authorizer shall give ten business days'
notice to the charter school's board of directors of the hearing date. The authorizer shall
conduct an informal hearing before taking final action. The authorizer shall take final
action to renew or not renew a contract no later than 20 business days before the proposed
date for terminating the contract or the end date of the contract.

(b) A contract may be terminated or not renewed upon any of the following grounds:

(1) failure to meet the requirements for pupil performance contained in the contract;

(2) failure to meet generally accepted standards of fiscal management;

(3) violations of law; or

(4) other good cause shown.

If a contract is terminated or not renewed under this paragraph, the school must be
dissolved according to the applicable provisions of chapter 308A or 317A.

(c) If the authorizer and the charter school board of directors mutually agree to
terminate or not renew the contract, a change in authorizers is allowed if the commissioner
approves the transfer to a different eligible authorizer to authorize the charter school.
Both parties must jointly submit their intent in writing to the commissioner to mutually
terminate the contract. The authorizer that is a party to the existing contract at least must
inform the approved different eligible authorizer about the fiscal and operational status
and student performance of the school. Before the commissioner determines whether
to approve a transfer of authorizer, the commissioner first must determine whether the
charter school and prospective new authorizer can identify and effectively resolve those
circumstances causing the previous authorizer and the charter school to mutually agree
to terminate the contract. If no transfer of authorizer is approved, the school must be
dissolved according to applicable law and the terms of the contract.

(d) The commissioner, after providing reasonable notice to the board of directors of
a charter school and the existing authorizer, and after providing an opportunity for a public
hearing, may terminate the existing contract between the authorizer and the charter school
board if the charter school has deleted text begin a history of deleted text end :

(1) deleted text begin failure deleted text end new text begin failed new text end to meet pupil performance requirements deleted text begin contained in the contract deleted text end new text begin
consistent with state law new text end ;

(2) new text begin displayed new text end financial mismanagement or failure to meet generally accepted
standards of fiscal management; deleted text begin or
deleted text end

(3) deleted text begin repeated or major deleted text end new text begin committed multiple new text end violations of the law new text begin ; or
new text end

new text begin (4) committed a major violation of the law, including a violation of the Minnesota or
United States Constitution new text end .

(e) If the commissioner terminates a charter school contract under subdivision 3,
paragraph (g), the commissioner shall provide the charter school with information about
other eligible authorizers.

Sec. 6.

Minnesota Statutes 2010, section 124D.11, subdivision 9, is amended to read:

Subd. 9.

Payment of aids to charter schools.

(a) Notwithstanding section 127A.45,
subdivision 3, aid payments for the current fiscal year to a charter school shall be of an
equal amount on each of the 24 payment dates.

(b) Notwithstanding paragraph (a) and section 127A.45, for a charter school ceasing
operation on or prior to June 30 of a school year, 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 308A or 317A, and financial information about
the school's liabilities and assets. After receiving the closure plan, financial information,
an audit of pupil counts, documentation of lease expenditures, and monitoring of 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. For a charter school ceasing operations prior to, or at the end of, a school
year, notwithstanding section 127A.45, subdivision 3, preliminary final payments may
be made after receiving the closure plan, audit of pupil counts, monitoring of special
education expenditures, documentation of lease expenditures, and school submission of
Uniform Financial Accounting and Reporting Standards (UFARS) financial data for the
final year of operation. Final payment may be made upon receipt of audited financial
statements under section 123B.77, subdivision 3.

(c) If a charter school fails to comply with the commissioner's directive to return,
for cause, federal or state funds administered by the department, the commissioner may
withhold an amount of state aid sufficient to satisfy the directive.

(d) If, within the timeline under section 471.425, a charter school fails to pay the state
of Minnesota, a school district, intermediate school district, or service cooperative after
receiving an undisputed invoice for goods and services, the commissioner may withhold
an amount of state aid sufficient to satisfy the claim and shall distribute the withheld
aid to the interested state agency, school district, intermediate school district, or service
cooperative. An interested state agency, school district, intermediate school district, or
education cooperative shall notify the commissioner when a charter school fails to pay an
undisputed invoice within 75 business days of when it received the original invoice.

(e) Notwithstanding section 127A.45, subdivision 3, and paragraph (a), 80 percent
of the start-up cost aid under subdivision 8 shall be paid within 45 days after the first day
of student attendance for that school year.

(f) In order to receive state aid payments under this subdivision, a charter school in
its first three years of operation must submit a school calendar in the form and manner
requested by the department and a quarterly report to the Department of Education. The
report must list each student by grade, show the student's start and end dates, if any,
with the charter school, and for any student participating in a learning year program,
the report must list the hours and times of learning year activities. The report must be
submitted not more than two weeks after the end of the calendar quarter to the department.
The department must develop a Web-based reporting form for charter schools to use
when submitting enrollment reports. A charter school in its fourth and subsequent year of
operation must submit a school calendar and enrollment information to the department in
the form and manner requested by the department.

(g) Notwithstanding sections 317A.701 to 317A.791, upon closure of a charter
school and satisfaction of creditors, cash and investment balances remaining shall be
returned to the state.

new text begin (h) A charter school must have a valid, signed contract under section 124D.10,
subdivision 6, on file at the Department of Education at least 15 days prior to the date of
first payment of state aid for the fiscal year.
new text end

Sec. 7. new text begin TRANSITIONAL AUTHORIZER.
new text end

new text begin Notwithstanding other law to the contrary, an authorizer ineligible to authorize a
charter school under paragraph (c) or Minnesota Statutes, section 124D.10, subdivision 3,
paragraph (f), may continue to authorize a charter school until June 30, 2012. A charter
school operating under a contract with an ineligible authorizer that expires after June 30,
2012, must enter into a contract with an eligible approved authorizer by June 30, 2012.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end