accs-jun17item02

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California Department of Education
Charter Schools Division
REV. 11/2011
accs-jun17item02 / ITEM #02
ADVISORY COMMISSION ON CHARTER SCHOOLS
An advisory body to the State Board of Education
JUNE 2017 AGENDA

SUBJECT

Consideration of Requests for Determination of Funding with “Reasonable Basis”/Mitigating Circumstances as Required for Nonclassroom-based Charter Schools Pursuant to CaliforniaEducation Code Sections 47612.5 and 47634.2, and Associated California Code of Regulations, Title 5. / Action
Information

SUMMARY OF THE ISSUE

CaliforniaEducation Code sections 47612.5 and 47634.2 established the eligibility requirements for apportionment funding for charter schools that offer nonclassroom-based instruction. The statutes specify that a charter school may receive apportionment funding for nonclassroom-based instruction only if a determination of funding is made by the State Board of Education (SBE). The California Department of Education (CDE)reviews a charter school’s determination of funding request and presents it for consideration by the Advisory Commission on Charter Schools (ACCS), pursuant to relevant California Code of Regulations, Title 5 (5 CCR). The ACCS may include the consideration of mitigating circumstances in conjunction with a recommendation to the SBE.

PROPOSED RECOMMENDATION

The CDE proposes to recommend that the SBE approve the mitigating circumstances request for 11 charter schools, deny the mitigating circumstances request for one charter school, and approve the determination of funding and period specified for the charter schools offering nonclassroom-based instruction, as provided in Attachment 1.

BRIEF ANALYSIS OF THE ISSUE

The 12 charter schools listed in Attachment 1 each submitted a request to obtain a determination of funding by the SBE with the consideration of mitigating circumstances to establish eligibility to receive apportionment funding.

Pursuant to 5 CCR Section 11963.4(a), a nonclassroom-based charter school may qualify for 70 percent, 85 percent, or 100 percent funding, or may be denied. To qualify for a proposed recommendation of100 percent funding, a nonclassroom-based charter school must meetthe following criteria:

  • At least 40 percent of the school’s public revenues are to be spent on salaries and benefits for all employees who possess a valid teaching certificate.
  • At least 80 percent of all revenues are to be spent on instruction and instruction- related services.
  • The ratio of average daily attendance for independent study pupils to full-time certificated employees does not exceed a pupil-teacher ratioof 25:1 or the pupil-teacher ratio of the largest unified school district in the county or counties in which the charter school operates.

However, 5 CCR Section 11963.4(e) states that the ACCS may find a “reasonable basis” (also referred to as mitigating circumstances) by which to make a recommendation other than one that results from the criteria specified in the regulations.

5 CCR Section 11963.4(e) provides specific examples of the types of mitigating circumstances for the ACCS to consider well documented “one-time or unique or exceptional circumstances.” Mitigating circumstances described by a charter school in the funding determination process clarify and provide guidance as to whether or not a specific charter school meets the percentage requirements for a funding determination as expressed in 5 CCR Section 11963.4(a).

Pursuant to 5 CCR Section 11963.4(e):

A reasonable basis for the Advisory Commission on Charter Schools to make a recommendation other than one that results from the criteria specified in subdivision (a) may include, but not be limited to, the following: the information provided by the charter school pursuant to paragraphs (2) through (8), inclusive, of subdivision (b) of section 11963.3, documented data regarding individual circumstances of the charter school (e.g., one-time or unique or exceptional expenses for facilities, acquisition of a school bus, acquisition and installation of computer hardware not related to the instructional program, special education charges levied on the charter school by a local educational agency, restricted state, federal, or private grants of funds awarded to the charter school that cannot be expended for teacher salaries, or contracted instructional services other than those for special education), the size of the charter school, and how many years the charter school has been in operation. The Advisory Commission on Charter Schools shall give charter schools with less than a total of one hundred(100) units of prior year second period average daily attendance or that are in their first year of operation serious consideration of full funding.

5 CCR Section 11963.6(c) specifies that a determination of funding approved by the SBE shall be prospective (not for the current year) and shall be in increments of a minimum of two years and a maximum of five years in length.

Circle of Independent Learning – #0152

Circle of Independent Learning (COIL) does not meet the requirement to qualify for a proposed recommendation of 100 percent funding based on reported fiscal year (FY) 2015–16 data. Therefore, COIL submitted a request to consider mitigating circumstances. A summary of the request from COIL is provided below and in Attachment 3.

COIL is requesting a 100 percent determination of funding for four years with the consideration of the charter school’s mitigating circumstances. COIL reported expenditures of 56.38 percent on certificated staff costs; however, it reported expenditures of 74.69 percent on instruction and instruction-related services costs, which qualifies the charter school for an 85 percent determination of funding.

COIL’s mitigating circumstances request includes the consideration of reserve set-asides for facilities expansion; future union staff costs increases; and restricted state funding not expended in FY 2015–16. As a locally-funded charter school, COIL has a dependent relationship with its chartering authority, Freemont Unified School District (FUSD). FUSD required COIL to set-aside $126,376 of funds to cover future union staff costs increases including pay, retirement, and benefit costs. These costs were expended in FY 2016–17. COIL also received Clean Energy Jobs Act funding, which $50,270 was remained unspent in FY 2015–16. By considering the reserve set-aside for staff cost increases and omitting the unspent Clean Energy Jobs Act funding, the charter school’s instruction and instruction-related services spending ratio would be 81.07 percent. The CDE finds thatsince the Clean Energy Jobs Act funding is restricted, it limited the charter school’s ability to meet the full funding threshold, since the expenditures do not qualify for instruction and instruction-related services. Additionally, due to the inability for COIL to expend the funds set-aside for staff costs increases, it limited the charter school’s ability to meet the full funding threshold. The CDE recommends a funding determination of 100 percent for two years (2017–18 through 2018–19) instead of the five years requested by the charter school, as provided in Attachment 1.

Sierra Charter – #0898

Sierra Charter does not meet the requirement to qualify for a proposed recommendation of 100 percent funding based on reported FY 2015–16 data. Therefore, Sierra Charter submitted a request to consider mitigating circumstances. A summary of the request from Sierra Charter is provided below and in Attachment 5.

Sierra Charter is requesting a 100 percent determination of funding for five years with the consideration of the charter school’s mitigating circumstances. Sierra Charter reported expenditures of 61.40 percent on certificated staff costs; however, it reported expenditures of 78.12 percent on instruction and instruction-related services costs, which qualifies the charter school for an 85 percent determination of funding.

Sierra Charter’s mitigating circumstances request includes the consideration of excluding unspent Clean Energy Jobs Act funding due to some uncertainty on the timing when the funds were received,and excluding unspent Educator Effectiveness funding which was received mid-year. By omitting the $22,508 unspent Clean Energy Jobs Act funding, the charter school’s instruction and instruction-related services spending ratio would be 81.96 percent. The CDE finds that since the Clean Energy Jobs Act funding is restricted, it limited the charter school’s ability to meet the full funding threshold, since the expenditures do not qualify for instruction and instruction-related services.The CDE recommends a funding determination of 100 percent for two years (2017–18 through 2018–19) instead of the five years requested by the charter school, as provided in Attachment 1.

Plumas Charter – #0146

Plumas Charter does not meet the requirement to qualify for a proposed recommendation of 100 percent funding based on reported FY 2015–16 data. Therefore, Plumas Charter submitted a request to consider mitigating circumstances. A summary of the request from Plumas Charter is provided below and in Attachment 7.

Plumas Charter is requesting a 100 percent determination of funding for five years with the consideration of the charter school’s mitigating circumstances. Plumas Charter reported expenditures of 38.54 percent on certificated staff costs and 78.67 percent on instruction and instruction-related services costs, which make the charter school ineligible for a determination of funding. Based on Plumas Charter’s reported expenditure percentages, the charter school’s nonclassroom-based instruction is not substantially dedicated to the instructional benefit of the students pursuant to 5 CCR Section 11963.4(a)(4). Under these conditions, the regulation requires the ACCS to recommend that the SBE deny the request unless there is a reasonable basis to recommend otherwise.

Plumas Charter’s mitigating circumstances request cites an unexpected increase in revenues due to increases in student enrollment late in the FY, and increasing its reserves to prepare for increases in facilities expenses. Plumas Charter’s enrollment data reflects a significant increase in FY 2015–16. As a result, higher average daily attendance increased the charter school’s Local Control Funding Formula revenues at the Second Principal apportionment. By omitting approximately $423,543 of unanticipated revenues that were not expended, the charter school’s certificated staff costs ratio would be 44.48 percent and the instruction and instruction-related services cost ratio would be 90.60 percent. The CDE finds that due to the unanticipated increase in enrollment, Plumas Charter was unable to meet the funding determination criteria for full funding. The CDE recommends a funding determination of 100 percent for two years (2017–18 through 2018–19) instead of the five years requested by the charter school, as provided in Attachment 1.

Community Collaborative Charter – #0699

Community Collaborative Charter (CCC) does not meet the requirement to qualify for a proposed recommendation of 100 percent funding based on reported FY 2015–16 data. Therefore, CCC submitted a request to consider mitigating circumstances. A summary of the request from CCC is provided below and in Attachment 9.

CCC is requesting a 100 percent determination of funding for five years with the consideration of the charter school’s mitigating circumstances. CCC reported expenditures of 42.79 percent on certificated staff costs; however, it reported expenditures of 78.49 percent on instruction and instruction-related services costs, which qualifies the charter school for an 85 percent determination of funding.

CCC’s mitigating circumstances request includes the consideration of including the full cost of equipment purchased in FY 2015–16. The equipment purchases consist of multiple multifunction printers, two vehicles, and theatre lighting. CCC budgeted for the total cost of the equipment purchases; however, financial accounting requirements limit the expenditure to depreciation expenses which are amortized over the useful life of the equipment. By allowing the total cost of the multifunction printers and theatre lighting, the charter school’s instruction and instruction-related services spending ratio would be 83.06 percent. The CDE finds that the information submitted supports a consideration for mitigating circumstances and recommends a funding determination of 100 percent for two years (2017–18 through 2018–19) instead of the five years requested by the charter school, as provided in Attachment 1.

Excelsior Charter – #0074

Excelsior Charter does not meet the requirement to qualify for a proposed recommendation of 100 percent funding based on reported FY 2015–16 data. Therefore, Excelsior Charter submitted a request to consider mitigating circumstances. A summary of the request from Excelsior Charter is provided below and in Attachment 11.

Excelsior Charter is requesting a 100 percent determination of funding for five years with the consideration of the charter school’s mitigating circumstances. Excelsior Charter reported expenditures of 49.39 percent on certificated staff costs; however, it reported expenditures of 75.69 percent on instruction and instruction-related services costs, which qualifies the charter school for an 85 percent determination of funding.

Excelsior Charter’s mitigating circumstances request includes the consideration of excluding funds totaling $1,362,330, received in FY 2015–16 for the following programs: One-Time Funds for Outstanding Mandate Claims, Educator Effectiveness, and Ramp Up. Excelsior Charter cites that if these funds were not received, the instruction and instruction-related services ratio would have exceeded the minimum requirement to qualify for full funding. The CDE finds that the charter school spent $548,199 of the funds on instructional expenses in FY 2015–16 and that the information submitted supports a consideration for mitigating circumstances, limited to the unspent funds for the programs. Omitting the unspent fundsincreases the charter school’s instruction and instruction-related services spending ratio to 78.94 percent, which remains at an 85 percent determination of funding. The CDE recommends a funding determination of 85 percent for two years (2017–18 through 2018–19) instead of the five years requested by the charter school, as provided in Attachment 1.

Heritage K-8 Charter – #0556

Heritage K-8 Charter (HKC) does not meet the requirement to qualify for a proposed recommendation of 100 percent funding based on reported FY 2015–16 data. Therefore, HKC submitted a request to consider mitigating circumstances. A summary of the request from HKC is provided below and in Attachment 13.

HKC is requesting a 100 percent determination of funding for five years with the consideration of the charter school’s mitigating circumstances. HKC reported expenditures of 37.08 percent on certificated staff costs and 58.66 percent on instruction and instruction-related services costs, which make the charter school ineligible for a determination of funding. Based on HKC’s reported expenditure percentages, the charter school’s nonclassroom-based instruction is not substantially dedicated to the instructional benefit of the students pursuant to 5 CCR Section 11963.4(a)(4). Under these conditions, the regulation requires the ACCS to recommend that the SBE deny the request unless there is a reasonable basis to recommend otherwise.

HKC’s mitigating circumstances request cites not meeting the criteria because it added the nonclassroom-based program beginning in 2016–17. The funding determination spending ratios are based on HKC’s FY 2015–16 data, when the charter school operated a classroom-based program. The CDE finds that since the charter school did not contemplate meeting the nonclassroom-based expenditure requirements while it operated a classroom-based program in the prior FY, the information supports a consideration for mitigating circumstances. The CDE recommends a funding determination of 100 percent for two years (2017–18 through 2018–19) instead of the five years requested by the charter school, as provided in Attachment 1.

Classical Academy High – #0759

Classical Academy High (CAH) does not meet the requirement to qualify for a proposed recommendation of 100 percent funding based on reported FY 2015–16 data. Therefore, CAH submitted a request to consider mitigating circumstances. A summary of the request from CAH is provided below and in Attachment 15.

CAH is requesting a 100 percent determination of funding for five years with the consideration of the charter school’s mitigating circumstances. CAH reported expenditures of 40.65 percent on certificated staff costs; however, it reported expenditures of 77.12 percent on instruction and instruction-related services costs, which qualifies the charter school for an 85 percent determination of funding.

CAH’s mitigating circumstances request includes the consideration of including additional facilities costs, reserves, and late apportionment payments. CAH opened a new facility in FY 2013–14, which was funded with a 30-year bond, and subsequently opened another facility to accommodate its independent study program. In FY 2015–16, CAH’s costs included bond payments; costs for the new facility;and former leases during the transition to the new facilities.By considering the former lease costs, the charter school’s instruction and instruction-related services spending ratio would be 83.58 percent. The CDE finds that the information submitted supports a consideration for mitigating circumstances in that the exceptional expenses limited the charter school’s spending ability to meet the full-funding thresholds, and recommends a funding determination of 100 percent for two years (2017–18 through 2018–19) instead of the five years requested by the charter school, as provided in Attachment 1.

Escondido Charter High – #0109

Escondido Charter High (ECH) does not meet the requirement to qualify for a proposed recommendation of 100 percent funding based on reported FY 2015–16 data. Therefore, ECH submitted a request to consider mitigating circumstances. A summary of the request from ECH is provided below and in Attachment 17.

ECH is requesting a 100 percent determination of funding for five years with the consideration of the charter school’s mitigating circumstances. ECH reported expenditures of 51.81 percent on certificated staff costs; however, it reported expenditures of 65.60 percent on instruction and instruction-related services costs, which qualifies the charter school for an 85 percent determination of funding.

ECH’s mitigating circumstances request includes the consideration of its combined academic programs, success in measurable outcomes, and new facility expenses. ECH purchased a building to serve the charter school’s growing nonclassroom-based program. ECH refinanced its private bonds at a lower interest rate which lowered the charter school’s facilities payments and allowed for the purchase of the new facility. To maintain good standing with the private bond lenders, ECH had to maintain a minimum level of unrestricted cash reserves. The private bond funding did not close until close to the end of the FY, which did not provide sufficient time for the charter school to expend the reserved funds. By considering some of the reserves set-aside for purposes of acquiring the bond funding, the charter school’s instruction and instruction-related services spending ratio would exceed 80 percent. The CDE finds that the information submitted supports a consideration for mitigating circumstances in that the exceptional circumstance limited the charter school’s spending ability to meet the full-funding thresholds, and recommends a funding determination of 100 percent for two years (2017–18 through 2018–19) instead of the five years requested by the charter school, as provided in Attachment 1.