Charter Schools Development Center

Home > Charter School Resources > Independent Study > Alternate Proposal

INDEPENDENT STUDY AND NONCLASSROOM-BASED REGULATIONS

Alternate Proposal by CSDC co-director Eric Premack

Problems with Other Proposals

Most, if not all of the current proposals to regulate non classroom-based schools under Senate Bill 740 suffer from major or severe problems. These include, but are not limited to the following:

Fail to address the "real" issue and contrary to Governor's signing message
The governor requested that SB 740 be administered "in a manner to affect only those charter schools which spend excessively on administration and profit" and "create no new requirements regarding charter schools' use of credentialed teachers." The current emergency regulations and proposals regarding permanent regulations seem to fail to address the central "profiteering" issue.

Subject to varying interpretation
The forms and definitions are subject to varying and "creative" interpretation by the schools as well as the State Board and Advisory Commission. They are especially vulnerable to abuse by those charter schools that function as a financial component of the district.

Needless micro-management and major mandated costs problems
The current emergency regulations and various proposals for permanent regulations contain all manner of restrictions on how schools operate that are unnecessary. Several would lead to potentially massive state-mandated local costs that would be reimbursable.

Alternate Proposal

To address the above-listed concerns, and to ensure that the oversight process focuses on the issues of "profiteering" and excessive administrative costs, the following process might be strongly preferred to the current one:

Each school would be required to send an itemized list of each entity that receives from the school funds in excess of a specified threshold (e.g., $50,000, or the bid limit threshold that applies to school districts and is adjusted for inflation each year) in a given fiscal year.
For each entity on the list, the school would briefly describe the nature of the goods or services rendered and a brief justification for the cost or price paid.
In most cases, the justifications would likely be self-explanatory (see sample below). In cases where it is not, the school could submit additional back-up justification that should make a reasonable case for the propriety and/or reasonable value of the goods/services provided. It is likely that management and support agreements would generate the most concern. To assist in this review, a survey of existing management support organizations and school districts providing management support could be conducted. The survey results could establish ranges of charges for a "market basket" of support services. These data could be used to establish ranges to guide the review process at a reasonable level of detail. These market data would also likely assist charter schools in leveraging better value for their funds in what is only recently starting to become a competitive environment.
The school would also be required to identify whether any of its staff or board members are interested parties in any of the transactions.
If the explanatory and back-up material does not reasonably justify the level or amount of funds expended, the school's funding would be cut by a commensurate amount.

To see what the substantive section of such a form from a hypothetical school might look like, click here. Most of the transactions would presumably require little review and the amount expended could be easily explained or justified on their face. Some transactions, especially management and operations support services, would be more difficult to analyze. They would require the development of some market cost guidelines, perhaps based on a simple survey of prevailing market conditions. This approach has several advantages over most existing proposals, including the following:

Addresses the problem. This approach focuses tightly on the real problem of "profiteering" by forcing a disclosure and examination of those transactions that could lead to substantial profits by individuals and entities.
Absence of micro-management and minimal mandated costs. This approach avoids mandating any particular level of expenditure or any specific operating practices. The cost to schools would be very low and would likely generate zero mandated cost claims.
Provides helpful market cost information. This approach will generate a substantial volume of information regarding the definition and cost of high-cost goods and services provided to charter schools. It will give charter schools a major information advantage that most currently lack in this immature marketplace.

Rough Draft of Regulatory Language

The following language could be combined with some basic definitions and procedural items to implement the concepts described above.

Section XXXXX (a) Each non classroom-based charter school shall annually report to the Advisory Commission on Charter Schools a list of all entities and individuals that provided goods or services to the charter school, whether through purchase, lease, or otherwise, for which the school paid, for all goods or services rendered during the prior fiscal year, in excess of the amount specified in Public Contract Code Section 20111 (a), as adjusted annually pursuant to Section 20111(d).

(b) The listing shall include all of the following:

(1) A description of the goods and services rendered and an explanation of the basis for the amounts paid.

(2) A listing of any individuals employed by the school or who are members of the school's governing body who have a financial interest in the goods or services rendered, and the specific steps taken to mitigate or eliminate any conflict-of-interest.

(c) For non classroom-based charter schools that operate financially as a component unit of a school district or county office of education, the listing specified in (a) shall include all expenditures by the district from funds of the school that are not spent on goods or services that are exclusively and directly in support of the school.

Note: For 2002, the amount specified by Public Contract Code Section 20111(a) is $58,900. It is adjusted each year by an inflation index that is designed to reflect growth in the cost of goods and services purchased by governmental entities.