May
23rd 2017
HB 1375: What Is It, and What Does It Mean for Charters?

Posted under Colorado General Assembly & Education Politics & Educational Choice & Legal Issues & Legislation & Public Charter Schools & School Finance & State Board of Education & State Legislature & Union

Last week, we talked about the sausage-making process behind House Billl 17-1375, which was originally Senate Bill 17-061, but on two separate occasions was part of Senate Bill 17-296.  Got it?

Tortured though its legislative journey was, HB 1375′s passage has been heralded by many who worked on it as a huge victory for public charter schools. The Colorado League of Charter Schools, which spearheaded the effort, has been celebrating the bill’s passage as it heads to the governor’s desk, as has much of the rest of Colorado’s education reform lobby. Even the Denver Post gave the bill it’s nod of approval just before final passage.

Certainly, some high-fiving and celebration is in order. Many people and organizations, including the Independence Institute, worked in support of Senate Bill 061′s original incarnation. Those folks, and the handful of Senate Democrats brave enough to vote for the bill in its near-original form, deserve a lot of praise for their efforts. But after all the backroom deals and last-minute compromises, I think it’s important to take a close look at what, exactly, we passed. Let’s do that today. Below is a rundown of the major changes to the final bill and what they might mean in practice for charters.

Districts ultimately still retain control over mill levy override revenue and how it’s used.

The original text of SB 061 included a small, buried clause allowing school districts to utilize mill levy override money for certain historically underserved subgroups of students—low income, English language learners, special education, etc. But the centerpiece of that bill was the requirement that all public charter school students be funded equitably by their school districts.

At the behest of Democrats in the house, HB 1375 presents a different vision of fair funding. Essentially, the bill offers school districts two choices. First, districts can choose to create a “plan” for sharing their mill levy override revenue. Whatever is left over after this plan is paid for, if anything, must be shared on a per-pupil basis among all public schools in the district. Second, if districts opt not to create such a plan, they must share 95 percent of their mill levy override revenue on a per-pupil basis with public charter school students.

That second option is (with the exception of the 95 percent part) where SB 061 was trying to go—but it only works if districts opt to go that route. If they don’t, and they instead opt to develop a sharing plan, things get complicated. According to the bill, these plans are supposed to route resources into programs or services for students in the district. That sounds alright, but digging a little deeper reveals some potentially serious problems with this approach.

Despite lofty political rhetoric about serving all students, the fact is that these sharing plans allow school districts to maintain control of their mill levy override revenue. They can decide which programs or services they want the revenue to support, as well which subgroups of students should benefit from those programs or services. There is nothing preventing a school district from choosing to route their money into programs or services not offered by charters—or from using that money as a lever to push charters toward adopting district programs that may not fit with their educational models. Given the relentless drive by anti-charter folks to make these unique public schools look just like the rest of the educational system, this could well lead to some uncomfortable situations.

The bill does allow charters to accept a “per-pupil program share” in lieu of participating in district programs, but that does little good if charters have only a small number of covered students. They will only receive a per-pupil amount for the students who would have been served by the designated program(s). And even if a charter has a substantial number of covered students, the school is required to use the extra revenue to “to provide a program or services, as selected by the charter school or innovation school, to benefit the students for whom it received the per-pupil program share.” In other words, districts still indirectly get to dictate how and on whom charters spend their equalization funding even if they opt out of district programming.

The original intent of SB 061 was not to shore up funding for underserved subgroups of students or to buttress appropriations for Colorado’s categorical or factor-related funding under the School Finance Act. Those changes are better left to debates over our state’s funding formula. SB 061 was about equitably funding all public charter school students under local tax increases approved for the purposes of supporting public schools and public school students. Yes, the need for fairness with public money exists even if some of the covered students happen to be high-income students who speak flawless English, don’t have any disabilities, and don’t attend an alternative school.

Admittedly, HB 1375 allows districts to fund all students equitably should they so choose. But they can also choose not to fund every charter student equitably under the bill by using a “plan” to route the money away from charters or by dictating how it is to be used. Thus, districts hostile to charters seem unlikely to commit to full sharing with all charter students under the new legislation. On the bright side, however, districts that already share fairly will continue to do so. In fact, the bill prohibits districts currently sharing with charters from lowering the per-pupil amount they’re sharing in the next two budget years as a result of the plan system—a smart inclusion, though its presence does seem to imply that some charters could actually lose per-pupil MLO revenue under the new system.

All of this begs the question: Is the situation created by HB 1375 appreciably different from what we have today? Or have we simply tweaked the rules in a game already fundamentally rigged against public charter school students? We won’t be able to fairly answer that question until we see how it all plays out when the first full sharing plans roll out in 2019-2020.

There are some potential landmines and loopholes buried in the bill.

HB 1375 contains several dangerous legal nuggets, most of which were added to the bill during the “compromise” process in the Democratic house. Some these nuggets are simply helpful reminders or hints to charter opponents about ways they could make charters’ lives harder. Others seem designed to help unfriendly districts claw back money shared with charters. Here’s a look at some of the biggest points in my book:

The bill arbitrarily requires that any charter receiving MLO revenue ensure that its admissions policies are in compliance with existing law.

The referenced section of statute covers the requirement that charter schools not discriminate against students “on the basis of disability, race, creed, color, sex, sexual orientation, national origin, religion, ancestry, or need for special education services.”

Of course, we already know charters are bound by these laws, as are all public schools. So why include this condition? My guess is that it was designed to provide ammunition to those who love to shriek (incorrectly) about charters cherry-picking students. There’s a clear path here for hostile boards to implement burdensome admissions audits or other “checks” as a condition of receiving money rightly due to public charter schools.

Districts can renegotiate contractual arrangements covering fees for service.

The bill allows “an authorizing school district or [a] charter school” to “renegotiate contract provisions concerning services or fees for services.” That first “or” worries me. Charters and school districts are already free to mutually agree to revise a charter contract. But the “or” here appears to provide districts with an opportunity to forcibly reopen negotiations surrounding which district services charter schools must use and how much they must pay for those services. Given how much many districts charge charter schools for (often less than spectacular) services, this provision feels like an opportunity for hostile districts to saddle charters with burdensome costs and claw back some amount of the MLO revenue they share.

I suppose one could argue that the language also allows charters to renegotiate sections of their contracts they don’t like, thereby balancing the provision. But as nearly any district charter will attest, those negotiations are not conducted on a level playing field. School boards hold nearly all the power in negotiations thanks to their typical role as exclusive authorizers.

Districts may have some subtle ways out of sharing all MLO revenue.

Some of my lawyer friends tell me there are some potentially serious legal outs buried in the language of HB 1375—outs that untrained eyes like mine might not notice on first read. First, the bill allows districts to carve out mill levy override revenue from the sharing pool based on “statutory limits or requirements that apply to specific mill levy authorizations and any purposes specifically approved by voters in approving mill levy revenue.” That sounds okay on first read, but it leaves a door cracked for districts to argue that voters approved funds for specific purposes that exclude charter schools. For instance, a district could conceivably argue that a portion of a given mill levy override to attract and retain high-quality district teachers (a relatively common ask of voters) is being used for a specific purpose and is therefore not shareable with charter schools. In that scenario, charters would get only the leftovers—and even then only according to the school district’s programmatic decisions.

Second, the bill excludes from the sharing pool MLO revenue used to finance bonded indebtedness, pay installment sales agreements, or cover lease-purchase agreements. Again, this sounds like a small point. But MLO ballot language is often vague and general, and it frequently does not differentiate clearly between HB 1375’s specific exempt and non-exempt uses. Additionally, ballot language almost never outlines the specific amounts to be spent on certain things. To see why this might be a problem, consider this ballot language from Poudre School District’s 2016 MLO and see if you can work out exactly how much of the eventual $8 million a year should be excluded from the MLO sharing pool for charters:

SHALL POUDRE SCHOOL DISTRICT R-1 TAXES BE INCREASED BY UP TO $8 MILLION ANNUALLY (PHASED IN FROM INITIAL FISCAL YEAR (2017-18) AMOUNT OF $2.6 MILLION) FOR THE PAYMENT OF DISTRICT OPERATING COSTS, INCLUDING BUT NOT LIMITED TO: OPERATING COSTS FOR NEW BUILDINGS, NEW AND EXISTING SCHOOL STAFF AND SCHOOL SUPPORT STAFF (INCLUDING BUT NOT LIMITED TO TEACHERS, PRINCIPALS, PARAPROFESSIONALS, SPECIAL EDUCATION, ENGLISH LANGUAGE, MENTAL HEALTH, SCHOOL RESOURCE OFFICERS, CUSTODIAL, TRANSPORTATION, AND FACILITIES), NEW AND EXISTING SCHOOL MATERIALS, EQUIPMENT, AND TECHNOLOGY, FINANCIAL SUPPORT TO EXISTING SCHOOLS FOR GROWTH BY AN ADDITIONAL PROPERTY TAX LEVY AT A RATE SUFFICIENT TO PRODUCE THE AMOUNTS SPECIFIED ABOVE, WHICH TAXES SHALL BE DEPOSITED INTO THE GENERAL FUND OF THE DISTRICT AND SHALL BE IN ADDITION TO THE PROPERTY TAXES THAT OTHERWISE WOULD BE LEVIED FOR THE GENERAL FUND; AND SHALL ANY EARNINGS FROM THE INVESTMENT OF SUCH TAXES BE A VOTER-APPROVED REVENUE CHANGE THAT THE DISTRICT MAY COLLECT, RETAIN AND EXPEND WITHOUT LIMITATION UNDER ARTICLE X, SECTION 20 OF THE COLORADO CONSTITUTION (TABOR) OR ANY OTHER LAW?

The bill adds new requirements for charter schools.

The price of getting HB 1375 through the legislature was additional regulation for charter schools, particularly in the area of the waivers that provide them the flexibility to operate independently. Here’s a list of some of the new requirements:

  • Beginning over the next two years, charter schools must post online a list of all their waivers from state statute, their plans for fulfilling the intent of the statutes being waived, a standardized description of their waivers, and additional “rationales” for every automatic waiver it accepts from the Colorado State Board of Education. All of these requirements seem designed as a beachhead for the inevitable union assault on charter school autonomy.
  • In addition to the above, charter schools must post the name and contact information of one of their employees who will be available during business hours to “provide information concerning the charter school’s automatic waivers.” Yes, seriously. The bill actually says that.
  • Charter schools can no longer receive automatic waivers from statutes concerning competitive bidding in the purchase of goods and services or the power to accept gifts, grants, and donations. In other words, bidding for services and raising money will get significantly harder for charters unless they can clear the waivers with the newly Democratic Colorado State Board of Education.
  • Charters and other public schools must provide a wide variety of financial disclosure information. Many of these requirements already exist, so how burdensome this reporting will be remains to be seen. For now, I’ll file these requirements under “wait and see” in terms of their impact on the ground.

Overall,  I’m not thrilled with HB 1375 as a compromise. I suppose a fair argument could be made that some level of unhappiness on the part of all involved is a sign of a good compromise. But in this case, an honest read raises serious questions about whether HB 1375 truly addresses the issue SB 061 set out to correct, and the bill contains a host of problematic provisions that could actually harm charters in the hands of a hostile school board and a motivated attorney. I have a lot of respect for the charter advocates who worked hard on this bill, but I can’t help feeling disappointed that its original intent has been so muddied by the need for political “compromise” with folks who hate—and who always will hate—the educational freedom provided by charters. With the bill headed to the governor, however, there’s little to do but wait and see how it all plays out in the wild. Ed will be watching.

 

 

 

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