THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL

INTRODUCED BY ROEBUCK, PASHINSKI, THOMAS, DERMODY, HANNA, FRANKEL, STURLA, BRIGGS, BROWNLEE, CALTAGIRONE, CARROLL, CONKLIN, CURRY, DEAN, DONATUCCI, FREEMAN, GEORGE, HALUSKA, HARHAI, HARKINS, HESS, HORNAMAN, JAMES, JOSEPHS, M. K. KELLER, LONGIETTI, MAHONEY, McGEEHAN, MUNDY, M. O'BRIEN, READSHAW, SABATINA, SAMUELSON, SANTARSIERO, SANTONI, K. SMITH, WATERS AND WILLIAMS, OCTOBER 1, 2012

REFERRED TO COMMITTEE ON EDUCATION, OCTOBER 1, 2012  

AN ACT

Amending the act of March 10, 1949 (P.L.30, No.14), entitled "An

act relating to the public school system, including certain

provisions applicable as well to private and parochial

schools; amending, revising, consolidating and changing the

laws relating thereto," in charter schools, further providing

for powers of charter schools, for charter school

requirements, for contents of application to establish a

charter school and for funding for charter schools; providing

for actual costs of education services, for annual reports

and assessments of charter schools and for charter school

fund balance limit; further providing for assessment and

evaluation of cyber charter schools; and providing for cyber

charter school fund balance limit.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1.  Section 1714-A(a)(5) of the act of March 10, 1949

(P.L.30, No.14), known as the Public School Code of 1949,

amended July 4, 2004 (P.L.536, No.70), is amended to read:

Section 1714-A.  Powers of Charter Schools.--(a)  A charter

school established under this act is a body corporate and shall

have all powers necessary or desirable for carrying out its

charter, including, but not limited to, the power to:

* * * 

(5)  Make contracts and leases for the procurement of

services, equipment and supplies[.], subject to the following

provisions:

(i)  No contract or lease entered into by a charter school or

cyber charter school for an amount greater than one hundred

dollars ($100) may provide for a payment in excess of the fair

market value of the services, equipment, supplies or other

property being acquired or leased.

(ii)  A charter school or cyber charter school may not enter

into or continue operating under a contract for management,

operations or educational services which involve the charter

school or cyber charter school providing a percentage of the

charter or cyber charter school's revenues to the contractor.

(iii)  No contract entered into by a charter school or cyber

charter school shall have a term that extends beyond the charter

or cyber charter school's existing charter agreement with a

local school board.

* * * 

Section 2.  Section 1715-A of the act is amended by adding

paragraphs to read:

Section 1715-A.  Charter School Requirements.--Charter

schools shall be required to comply with the following

provisions:

* * * 

(13)  The board of trustees of a charter school or cyber

charter school shall record in written format the minutes of

each meeting of the board at which any business of the charter

school or cyber charter school is considered or transacted. All

meeting minutes shall be maintained by a charter school or cyber

charter school for at least seven (7) years.

(14)  The board minutes of the trustees of a charter school

or cyber charter school shall reflect the board's approval or

disapproval of all contracts, agreements and obligations in

excess of one hundred dollars ($100), including how each member

voted on the contract, agreement or obligation.

(15)  The board minutes of the trustees of a charter school

or cyber charter school shall reflect the board's approval of an

annual budget, including how each member voted on the budget.

(16)  An individual who is a trustee of a charter school or

cyber charter school shall not have a financial relationship

with an entity with which the charter school or cyber charter

school transacts any business.

(17)  All payments made by a charter school or cyber charter

school shall be cosigned by the treasurer of the board of

trustees and the chief administrator of the charter school or

cyber charter school.

(18)  Within ten (10) days of the execution of an agreement

between a charter school or cyber charter school and any

education service provider, the board of trustees shall publish

on the charter or cyber charter school's publicly available

Internet website all of the following:

(i)  a copy of the executed agreement;

(ii)  a plain language explanation of all costs and fees

associated with the agreement;

(iii)  a description of all financial relationships between

the charter school or cyber charter school and the education

service provider or any of its board members or employes;

(iv)  the education service provider's status as a for-profit

or nonprofit organization; and

(v)  if the education service provider is a for-profit

organization, a plain language explanation of how any profit

will be determined and distributed between the charter school

and the education service provider.

Section 3.  Section 1719-A of the act, added June 19, 1997

(P.L.225, No.22), is amended to read:

Section 1719-A.  Contents of Application.--[An] (a)  The

department shall develop and issue a standard application form

that shall be used by all applicants to establish a charter

school or cyber charter school. The application to establish a

charter school or cyber charter school shall include all of the

following information:

(1)  The identification of the charter school or cyber

charter school applicant.

(2)  The name of the proposed charter school or cyber charter

school.

(3)  The grade or age levels served by the school.

(4)  [The proposed governance structure of the charter

school, including a description and method for the appointment

or election of members of the board of trustees.] An

organization chart clearly presenting the proposed governance

structure of the charter school or cyber charter school,

including lines of authority and reporting among the board of

trustees, administrators, staff and any educational service

provider that will play a role in providing management services

to the charter school or cyber charter school.

(4.1)  A clear description of the roles and responsibilities

for the board of trustees, administrators and any other

entities, including a charter school or cyber charter school

foundation, shown in the organization chart.

(4.2)  A clear description and method for the appointment or

election of members of the board of trustees.

(4.3)  Standards for board performance and stewardship,

including compliance with all applicable laws, regulations and

terms of the charter.

(4.4)  If the charter school or cyber charter school intends

to contract with an educational service provider for services,

the charter or cyber charter school applicant shall:

(i)  Provide evidence of the education service provider's

record in serving student populations, including demonstrated

academic achievement and demonstrated management of nonacademic

school functions, including proficiency with public school-based

accounting, if applicable.

(ii)  Provide a copy of the finalized management agreement,

which shall include all of the following:

(A)  The proposed duration of the service contract.

(B)  Roles and responsibilities of the governing board, the

school staff and the educational management service provider.

(C)  The scope of services and resources to be provided by

the educational management service provider.

(D)  Performance evaluation measures and timelines.

(E)  The compensation structure, including clear

identification of all fees to be paid to the educational

management service provider.

(F)  Methods of contract oversight and enforcement.

(G)  Investment disclosure or the advance of moneys by the

educational management service provider on behalf of the charter

school or cyber charter school.

(H)  Conditions for renewal and termination of the contract.

(iii)  Disclose and explain any existing or potential

conflicts of interest between the board of trustees and proposed

educational service provider and any affiliated business

entities, including a charter school or cyber charter school

foundation.

(5)  The mission and education goals of the charter school or

cyber charter school, the curriculum to be offered and the

methods of assessing whether students are meeting educational

goals.

(6)  The admission policy and criteria for evaluating the

admission of students, including the maximum number of students

the school will enroll during each year of its charter, which

shall comply with the requirements of section 1723-A.

(7)  Procedures which will be used regarding the suspension

or expulsion of pupils. Said procedures shall comply with

section 1318.

(8)  Information on the manner in which community groups will

be involved in the charter school or cyber charter school 

planning process.

(9)  The financial plan for the charter school or cyber

charter school based on the projected range of the number of

students enrolled in the school during each year of the proposed

charter period and the provisions which will be made for

auditing the school under section 437, including the role of any

charter school or cyber charter school foundation.

(10)  Procedures which shall be established to review

complaints of parents regarding the operation of the charter

school or cyber charter school.

(11)  A description of and address of the physical facility

in which the charter school will be located and the ownership

thereof and any lease arrangements.

(12)  Information on the proposed school calendar for the

charter school or cyber charter school, including the length of

the school day and school year consistent with the provisions of

section 1502.

(13)  The proposed faculty and a professional development

plan for the faculty and staff of a charter school or cyber

charter school.

(14)  Whether any agreements have been entered into or plans

developed with the local school district regarding participation

of the charter school or cyber charter school students in

extracurricular activities within the school district.

Notwithstanding any provision to the contrary, no school

district of residence shall prohibit a student of a charter

school or cyber charter school from participating in any

extracurricular activity of that school district of residence:

Provided, That the student is able to fulfill all of the

requirements of participation in such activity and the charter

school or cyber charter school does not provide the same

extracurricular activity.

(15)  A report of criminal history record, pursuant to

section 111, for all individuals who shall have direct contact

with students.

(16)  An official clearance statement regarding child injury

or abuse from the Department of Public Welfare as required by 23

Pa.C.S. Ch. 63 Subch. C.2 (relating to background checks for

employment in schools) for all individuals who shall have direct

contact with students.

(17)  How the charter school or cyber charter school will

provide adequate liability and other appropriate insurance for

the charter school or cyber charter school, its employes and the

board of trustees of the charter school or cyber charter school.

(b)  A local school board may not impose additional terms or

require additional information outside the standard application

required under subsection (a).

Section 4.  Section 1725-A(a) of the act, amended June 29,

2002 (P.L.524, No.88), is amended to read:

Section 1725-A.  Funding for Charter Schools.--(a)  Funding

for a charter school shall be provided in the following manner:

(1)  There shall be no tuition charge for a resident or

nonresident student attending a charter school.

(2)  For non-special education students, the charter school

shall receive for each student enrolled no less than the

[budgeted] actual total expenditure per average daily membership

of the prior school year, as defined in section 2501(20), minus

the [budgeted] actual expenditures at the end of the most recent

fiscal year of the district of residence for nonpublic school

programs; adult education programs; community/junior college

programs and services; student transportation services; for

special education programs; facilities acquisition, construction

and improvement services; athletic funds and school sponsored

extracurricular activities set up in accordance with section

511; the full employer's share of retirement contributions paid

to the Public School Employees' Retirement System; tuition to

Pennsylvania charter schools for educational services provided

to students attending the charter school; and other financing

uses, including debt service and fund transfers as provided in

the Manual of Accounting and Related Financial Procedures for

Pennsylvania School Systems established by the department. This

amount shall be paid by the district of residence of each

student.

(3)  The following shall apply to special education:

(i)  For special education students, the charter school shall

receive for each student enrolled the same funding as for each

non-special education student as provided in clause (2), plus an

additional amount determined by dividing the district of

residence's total special education expenditure by the product

of multiplying the combined percentage of section 2509.5(k)

times the district of residence's total average daily membership

for the prior school year. This amount shall be paid by the

district of residence of each student[.], but shall not exceed

the actual cost of the educational services provided for special

education students.

(ii)  If a nonspecial education student is identified by the

charter school in which the student is enrolled as a student

with a disability in need of special education services, the

district of residence shall have the power to administer and

deliver the educational services required to address the

specific needs of the exceptional student in lieu of payments by

the district of residence for such student.

(iii)  A resident school district may not pay out to charter

schools or cyber charter schools an amount greater than it

receives for special education in a school year.

(4)  A charter school may request the intermediate unit in

which the charter school is located to provide services to

assist the charter school to address the specific needs of

exceptional students. The intermediate unit shall assist the

charter school and bill the charter school for the services. The

intermediate unit may not charge the charter school more for any

service than it charges the constituent districts of the

intermediate unit. If the service is provided by the

intermediate unit or school district, the charter school shall

provide a copy of the contract and invoice for the services to

the student's school district of residence.

(5)  Payments shall be made to the charter school in twelve

(12) equal monthly payments, by the fifth day of each month,

within the operating school year. A student enrolled in a

charter school shall be included in the average daily membership

of the student's district of residence for the purpose of

providing basic education funding payments and special education

funding pursuant to Article XXV. If a school district fails to

make a payment to a charter school as prescribed in this clause,

the secretary shall deduct the estimated amount, as documented

by the charter school, from any and all State payments made to

the district after receipt of documentation from the charter

school.

(6)  Within thirty (30) days after the secretary makes the

deduction described in clause (5), a school district may notify

the secretary that the deduction made from State payments to the

district under this subsection is inaccurate. The secretary

shall provide the school district with an opportunity to be

heard concerning whether the charter school documented that its

students were enrolled in the charter school, the period of time

during which each student was enrolled, the school district of

residence of each student and whether the amounts deducted from

the school district were accurate.

* * * 

Section 5.  The act is amended by adding a section to read:

Section 1725.1-A.  Actual Costs of Education Services.--(a)

Within one hundred eighty (180) days of the effective date of

this section, the department shall promulgate audit standards

under this article which shall be used in determining the year-

end actual costs of educational services per non-special

education student and special education student provided by a

charter school or a cyber charter school to any child who is a

resident of a school district, which are subject to payment in

accordance with section 1725-A. The department shall follow the

procedures provided in the act of July 31, 1968 (P.L.769,

No.240), referred to as the "Commonwealth Documents Law," and

the act of June 25, 1982 (P.L.633, No.181), known as the

"Regulatory Review Act," for promulgation and review of final-

omitted regulations. Subsequent audit standards promulgated

under this section or amendments to the initial audit standards

may not be in final-omitted form. The audit standards shall take

effect at the beginning of the first school year after which

such audit standards have been promulgated.

(b)  In order for the year-end actual costs of educational

services per non-special education student and special education

student to be thoroughly and properly determined, the audit

standards promulgated by the department shall:

(1)  Specify reasonable costs associated with the operation

of the educational program offered by a charter school and a

cyber charter school. The following may not be considered

reasonable costs associated with the operation of the

educational program offered by a charter school and a cyber

charter school:

(i)  Any paid media advertisement, including television,

radio, movie theater, billboard, bus poster, newspaper,

magazine, the Internet or any other commercial method that may

promote enrollment of a charter school and a cyber charter

school.

(ii)  Any lobbying, legislative advocacy, consulting or any

effort to influence Federal or State legislation or policy

affecting either that charter school or cyber charter school

specifically or charter schools in general.

(iii)  Any bonuses or additional compensation beyond the

annual or termed contractual compensation for all faculty,

administration and staff, including salary, benefits and any

additional compensation not specifically enumerated in the

contract.

(2)  Allow a closely related business entity to charge up to

one hundred and seven per centum of the actual educational

costs.

(3)  Require information as necessary for a full-scope review

of a finalized management agreement entered into between a

charter school or cyber charter school and a closely related

business entity, including:

(i)  All payments received from school districts of

residence.

(ii)  Expenditures of the closely related business entity

related to the delivery of educational and administrative

services pursuant to the management agreement.

(4)  List and show all receipts and expenditures for an

educational service provider that provides any service to a

charter school or cyber charter school.

(5)  Provide reasonable penalties for failure to comply.

(c)  The following shall apply:

(1)  The department shall effectuate an annual year-end final

reconciliation process of tuition payments against actual costs

of educational services per non-special education student and

special education student providing any necessary procedures for

the transfer of funds from the charter school or cyber charter

school to the school district of residence. The final

reconciliation process shall include one of the following:

(i)  Allowing a school district of residence to withhold its

last monthly payment from a charter school or cyber charter

school to account for any overpayments as identified by the

year-end audit. If the school district of residence has sent

overpayments, the district may adjust its last monthly payment

accordingly.

(ii)  Requiring a charter school or cyber charter school at

the end of each school year to return any overpayments to a

school district of residence owed a refund. A charter school or

cyber charter school may not return any overpayments on a pro-

rata basis.

(2)  Procedures for the transfer of funds may not permit the

department to deduct from a school district of residence's basic

education subsidy any amount in excess of the selected

expenditure per average daily membership amount calculated in

accordance with section 1725-A.

(d)  Charter schools, cyber charter schools, educational

service providers and closely related business entities shall

provide to the department, unless already retained by the

department, any information necessary to carry out the

provisions of this section.

(e)  Except as provided under subsection (c), nothing

contained under this section shall permit a school district of

residence to provide funding for charter schools or cyber

charter schools in a manner other than that which is specified

in section 1725-A.

(f)  For the purposes of this section, the following terms

shall have the following meanings:

"Closely related business entity" shall mean any organization

with a management or operational relationship with a charter

school involving either shared or overlapping aspects of

corporate identity such as ownership, board of directors or

trustees membership, capital or profits.

"Educational and administrative services" shall mean any

direct expenditures for any instruction and the administration

of the instructional program. The term shall not include any

expenditures not pertaining directly to the instruction and the

administration of the instructional program.

"Educational service provider" shall mean a for-profit

education management organization, nonprofit charter management

organization, school design provider, business manager or any

other partner entity with which a charter school or cyber

charter school intends to contract or presently contracts to

provide educational services, operational services or management

services to the charter school. The term shall not include a

charter school or cyber charter school foundation.

"Management agreement" shall mean any contract establishing a

management or operational relationship between a charter school

or cyber charter school and closely related business entity for

the provision of professional or nonprofessional services to the

charter school or cyber charter school.

Section 6.  Section 1728-A(a), added June 19, 1997 (P.L.225,

No.22), is amended and the section is amended by adding

subsections to read:

Section 1728-A.  Annual Reports and Assessments.--(a)  The

local board of school directors shall annually assess whether

each charter school is meeting the goals of its charter and

shall conduct a comprehensive review prior to granting a five

(5) year renewal of the charter. The local board of school

directors shall have ongoing access to the records and

facilities of the charter school to ensure that the charter

school is in compliance with its charter and this act and that

requirements for testing, civil rights and student health and

safety are being met. "Ongoing access" to a charter school's

records shall mean that the local school board shall have access

to records such as financial reports, financial audits,

aggregate standardized test scores without student identifying

information and teacher certification and personnel records.

Charter schools and local school boards shall comply fully with

the requirements of the Family Educational Rights and Privacy

Act of 1974 (Public Law 90-247, 20 U.S.C. § 1232g) and its

implementing regulations, and no personally identifiable

information from education records shall be provided by the

charter school to the local school board which authorized it

except in compliance with the Family Educational Rights and

Privacy Act of 1974 and subsequent regulations.

* * * 

(d)  Charter schools and cyber charter schools shall annually

provide a copy of the annual budget for the operation of the

school that identifies the following:

(1)  The source of funding for all expenditures as part of

its reporting under subsection (a).

(2)  Where funding is provided by a charter school

foundation, the amount of funds and a description of the use of

such funds.

(e)  All operations of a contractor that performs management,

operations or educational services for a charter school or a

cyber charter school pursuant to a contract or agreement with

the charter school or cyber charter school which relate to the

charter school or cyber charter school shall be subject to

public audit requirements under section 2553. In addition, funds

provided by a charter school or a cyber charter school to a

contractor that performs management, operations or educational

services for a charter school or cyber charter school pursuant

to a contract or agreement with the charter school or cyber

charter school and the use of such funds by such contractor

shall be subject to the audit provisions of section 403 of the

act of April 9, 1929 (P.L.343, No.176), known as "The Fiscal

Code."

(f)  The charter school or cyber charter school records

produced, obtained or maintained by a contractor that performs

management, operations or educational services for a charter

school or cyber charter school pursuant to a contract or

agreement with the charter school or the cyber charter school

shall be subject to disclosure under the act of February 14,

2008 (P.L.6, No.3), known as the "Right-to-Know Law."

Section 7.  The act is amended by adding a section to read:

Section 1733-A.  Charter School Fund Balance Limit.--(a)  For

the 2012-2013 school year and each school year thereafter, a

charter school that is not a cyber charter school shall not

accumulate an unassigned fund balance greater than the charter

school fund balance limit, which will be determined as follows:

(b)  Any unassigned fund balance in place on June 30, 2013,

that exceeds the charter school fund balance limit shall be

refunded on a per student pro rata basis within ninety (90) days

of the effective date of this subsection to all school districts

that made payments under section 1725-A in the 2011-2012 and

2012-2013 school years. The funds may not be used to pay bonuses

to any administrator, board of trustee member, employee, staff

or contractor or be transferred to a charter school foundation.

(c)  For the 2013-2014 school year and each school year

thereafter, any unassigned fund balance in excess of the charter

school fund balance limit shall be refunded on a per student pro

rata basis to all school districts that made payments under

section 1725-A in the prior school year.

(d)  By August 15, 2013, and August 15 of each year

thereafter, each charter school shall provide the department

with information certifying compliance with this section. The

information shall be provided in a form and manner prescribed by

the department and shall include information on the charter

school's estimated ending unassigned fund balance expressed as a

dollar amount and as a percentage of the charter school's total

budgeted expenditures for that school year.

(e)  As used in this section, "unassigned fund balance" shall

mean that portion of the fund balance which represents the part

of spendable fund balance that has not been categorized as

restricted, committed or assigned.

Section 8.  Section 1742-A of the act, added June 29, 2002

(P.L.524, No.88), is amended to read:

Section 1742-A.  Assessment and evaluation.

The department shall:

(1)  Annually assess, on a standard form developed by the

office, whether each cyber charter school is meeting the

goals of its charter and is in compliance with the provisions

of the charter and conduct a comprehensive review prior to

granting a five-year renewal of the charter.

(2)  Annually review each cyber charter school's

performance on the Pennsylvania System of School Assessment

test, standardized tests and other performance indicators to

ensure compliance with 22 Pa. Code Ch. 4 (relating to

academic standards and assessment) or subsequent regulations

promulgated to replace 22 Pa. Code Ch. 4.

(3)  Have ongoing access to all records, instructional

materials and student and staff records of each cyber charter

school [and], to every cyber charter school facility and to

any contractors of the cyber charter school that provide

management, operations or educational services to the cyber

charter school to ensure the cyber charter school is in

compliance with its charter and this subdivision. "Ongoing

access" to a cyber charter school's records shall mean that

the department shall have access to records, including, but

not limited to, financial records, financial audits,

standardized test scores, teacher certification and personnel

records. Cyber charter schools and the department shall

comply fully with the requirements of the Family Education

Rights and Privacy Act of 1974 (Public Law 90-247, 20 U.S.C.

§ 1232g) and its implementing regulations.

Section 9.  The act is amended by adding a section to read:

Section 1752-A.  Cyber charter school fund balance limit.

(a)  Limit.--For the 2012-2013 school year and each school

year thereafter, no cyber charter school shall accumulate an

unassigned fund balance greater than the cyber charter school

fund balance limit, which shall be determined as follows:

(b)  Distribution.--Any unassigned fund balance in place on

June 30, 2013, that exceeds the cyber charter school fund

balance limit shall be distributed by the cyber charter school

on a per student pro rata basis within 90 days of the effective

date of this paragraph to all school districts that made

payments under section 1725-A to the cyber charter school in the

2011-2012 and 2012-2013 school years. The funds may not be used

to pay bonuses to any administrator, board of trustee member,

employee, staff or contractor or be transferred to a cyber

charter school foundation.

(c)  Refunds.--For the 2013-2014 school year and each school

year thereafter, any unassigned fund balance in excess of the

cyber charter school fund balance limit shall be refunded on a

per student pro rata basis to all school districts that made

payments to the cyber charter school under section 1725-A in the

prior school year.

(d)  Certification of compliance.--By August 15, 2013, and

August 15 of each year thereafter, each cyber charter school

shall provide the department with information certifying

compliance with this section. The information shall be provided

in a form and manner prescribed by the department and shall

include information on the cyber charter school's estimated

ending unassigned fund balance expressed as a dollar amount and

as a percentage of the cyber charter school's total budgeted

expenditures for that school year.

(e)  Definitions.--As used in this section, "unassigned fund

balance" shall mean that portion of the fund balance which

represents the part of spendable fund balance that has not been

categorized as restricted, committed or assigned.

Section 10.  This act shall take effect in 60 days.