CALIFORNIA — Charter schools have been a fixture on California’s educational landscape and the subject of continuing debate in the Sacramento halls of government for nearly 30 years.
Since 1992, when California became the second state to approve the creation of charter schools and the San Carlos Charter Learning Center in San Mateo County became the first to open in 1993, charter schools have proliferated to the point where today they provide instruction to nearly 700,000 students — about 11 percent of all students enrolled in public schools. Most of this growth has occurred during the past 12 years.
Charter schools come in two flavors: On-site schools where all instruction is conducted in brick and mortar classrooms and the “independent study” or Non-Classroom Based (NCB) charter schools utilizing a hybrid form of instruction offering a combination of in-classroom and distance (or online) learning tailored to the needs of students. NCB charters are generally considered to be any school where less than 80 percent of the total instruction is provided by teachers in classrooms.
Unlike private schools which operate independently of school districts and charge tuition, all California charter schools are part of the public education system, receiving funding from both the state and federal government.
A major source of charter school revenue is the per-student state payments based on Average Daily Attendance, a funding baseline for every public school district and charter school in California. Annual payments range up to $10,000 per student depending upon grade level — revenue crucial for all schools, but charters in particular because they cannot charge tuition and have few supplemental sources of income.
But NCB charters saw substantial amounts of this revenue evaporate when the state legislature, as part of the annual budget process last year, approved two bills reducing funding for the 2020-21 school year, limiting state payments to attendance levels on Feb. 29, 2020, just weeks before California schools were closed and many parents rushed to find alternative sources of education for their children.
Under the terms of the legislation, no NCB charter would receive state aid for any students enrolled after the February deadline.
Schools and Parents Sue
This one-year reduction in funding prompted five nonprofit organizations operating 10 NCB charters in Southern California, along with the parents of 10 students enrolled or waitlisted at the schools, to sue the state and its education department last September alleging, among other things, the action was not only unconstitutional but discriminatory because enrollment growth at classroom-based charter schools continued to be funded, while NCB charter enrollment was not.
The plaintiffs sought a permanent injunction against defunding that would have resulted in the withheld funds being returned to NCB charter schools.
This month Sacramento Superior Court Judge James Arguelles ruled NCB charters had no such contractual right to receive public funding based upon current-year average daily attendance and dismissed all other claims, refusing to issue an injunction.
In a case argued almost entirely through the filing of legal briefs with just one hearing before the judge, the plaintiffs’ argued education was a “fundamental right” under the state constitution and state law dictated all charter schools were entitled to “full and fair funding,” equal to that which would be available to public school districts under the state’s Local Control Funding Formula, which is based upon the annual average number of students in daily attendance.
The plaintiffs’ attorneys contended that approval of an NCB charter by a school district or other educational authority created a contract because it required charter schools to provide a service for which they were entitled to compensation.
Any reduction in funding, even for a year, would harm the 195,000 students attending more than 300 NCB charters, the attorneys claimed, because these schools must both educate the unfunded students and incur significant costs to continue operating despite the substantial loss of revenue, giving NCB charters “no choice but to spend less on student education going forward, money that would normally be spent on hiring teachers and resource specialists, buying laptops and textbooks, professional development for teachers, and student support services.”
Attorneys for the state maintained the projected budgetary crisis created by the pandemic required legislative action to ensure “funding stability regardless of distance learning or in-classroom instruction,” recognizing that local school districts and charter schools would experience some enrollment growth during the 2020-21 school year and most likely seek additional funding. At the same time, the legislature had to provide funding for school districts that experienced declines in enrollment caused by the pandemic.
State law, they claimed, does not create a contract with charter schools and charters granted by local education officials do not contain any “express promise” to fund those institutions in any set manner. Since no contract existed, the legislature was justified in determining NCB charter schools were not eligible for additional funds based upon enrollment growth, the attorneys argued.
This limitation on additional NCB charter funding, the state attorneys argued, was consistent with previous legislation “freezing the growth of such schools due to their history of fraud and concerns about academic and instructional quality.”
Besides, the state claimed, NCB charters had alternative sources of funding not available to traditional schools such as Paycheck Protection Program and other federal stimulus assistance.
The state Department of Education did not have an immediate comment on the ruling.
A spokesman for the Sacramento law firm of Young, Minney & Corr, who represented the plaintiffs, told Patch that two of its charter school clients had approved an appeal of Arguelles’ decision and discussions were under way with the others.
Increased Attention
Charter schools in general, and NCB charters in particular, have drawn increased legislative attention over the past several years, much of it encouraged by the lobbying efforts of public school districts which believe they are losing state funding diverted to charters and both teachers and school employees unions who have largely been unsuccessful in organizing charter school employees
In 2019, Gov. Gavin Newsom signed a series of bills revising procedures for creating charter schools, establishing teacher qualifications and increasing charter school oversight and transparency along with imposing a moratorium on approval of new NCB charters.
One of the most significant changes involved the process by which charter schools are authorized and factors that must be considered by local school districts, county offices of education and the state department of education, who have responsibility for approving new charter school applications and charter renewals. Many of these changes mirrored recommendations made in a June 2019 report by the education department’s Charter School Policy Task Force.
The legislation was also prompted, in part, by the indictment of 11 individuals involved with A3 Charter Schools and affiliated companies which operated or managed some 19 online schools across California that defrauded the state out of more than $50 million in educational funding. Several of the individuals charged in a 235-page San Diego County indictment have since pleaded guilty to various charges of conspiracy, fraud, misappropriation of public funds, grand theft and conflicts of interest.
This year another bill targeting NCB charters and citing the A3 scandal was introduced by Los Angeles Assemblyman Patrick O’Donnell, a former public school teacher and chairman of the Assembly Education Committee. Besides establishing additional auditing requirements the bill would have established more stringent funding requirements for NCB charters. Although the legislation was supported by the state’s teachers and school employees unions, it was tabled in June when Newsom agreed to extend the existing moratorium on approval of any new NCB charters from 2022 to 2025.
Little Outright Fraud
While the A3 scandal, the most egregious case of online charter school fraud in California history, has been used to support legislation curtailing NCB charters, over the past 15 years there appear to have been few charter school audits and only a handful of those uncovered sufficient evidence of fraud or other illegal practices.
The bulk of these audits were conducted by the Financial Crisis & Management Assistance Team, a state service created by the legislature to provide school districts with financial and management advice. FCMAT conducts “extraordinary audits — comprehensive forensic investigations — at the request of county school superintendents, the state Board of Education, the state Department of Finance and other state agencies.
During this period, FCMAT released 21 charter school audits, with only two involving NCB charters and both of those finding insufficient evidence of fraud. Its other audits involved classroom-based charters and in seven cases auditors found enough evidence that FCMAT recommended local school and law enforcement officials be notified.
Although less than half the FCMAT audits uncovered preliminary evidence of fraud, virtually all of them, including those of the NCB charters, discovered various management and operational deficiencies, such as errors in accounting for state funds, and made recommendations for corrective action.
The State Controller’s Office, which also has charter school audit authority, has issued just one audit report, in October 2017, summarizing its findings after examining 14 online charter schools — 11 operated by California Virtual Academies and three by Insight Schools of California — between 2014 and 2016.
While the Controller’s audits found instances of non-compliance with some charter requirements, a lack of sufficient documentation supporting student attendance and accounting irregularities involving nearly $2 million in state funding that were later corrected, auditors reported no findings of fraud or misappropriation.
A spokesperson for the state Department of Education told Patch its Audits & Investigations Division does not maintain statistics reflecting the number of charter school audits conducted during the past five years, nor does it have statistics reflecting the number of charters suspended or revoked during the past decade identified by classroom-based and non-classroom based charter schools.
“Instances of fraud are rare,” said Jeffrey Macedo, a spokesman for the California Charter School Association, which represents more than 850 of the state’s charter schools. While CCSA is not a regulatory authority, he said the organization has clear accountability policies and “when applicable we take action and alert the appropriate entities overseeing the schools.”
NCB Charters Diverse
According to statistics compiled by the CCSA during a charter school survey last year, NCB charter schools comprise about 24 percent of the 1,300 charter schools operating in the state and serve approximately 29 percent of all charter school students. About one-third of the NCB’s are classified as Alternative Schools and approximately 70 percent are located outside urban areas.
The hybrid form of education offered by NCB charters has resulted in diverse systems of providing instruction. In many cases this diversity has been the catalyst for development of sophisticated technology for distance learning. This advanced technology was apparent following the closure of schools at the outset of the pandemic last year when many public school districts struggled to implement internet-based methods for teaching homebound students that NCB charters had been using for years.
The CCSA found marked diversity in NCB student enrollment of the schools surveyed. Latino and white students each accounted for 40 percent of the students while enrolled Black students comprised 6 percent of the enrollment and Asians accounted for 3 percent. Some 485 of the NCB students were low-income and 6 percent were English-learners.
However, the survey did find academic performance of NCB charter students is lower than that of students at site-based charter schools, and noted some studies have found many NCB students “progress academically at higher rates through a well-established personalized learning program,” but noted some researchers believe “it may make sense to evaluate NCB student progress over short periods, across a single term.”
Summarizing the survey findings, the CCSA concluded that “rather than a monolithic educational format, NCBs have innovated and adapted a variety of program specialties designed to effectively serve students with particular life experiences. For many California students the traditional model of education simply does not work, and NCBs offer an alternative.”
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