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ARIZONA STATE LEGISLATURE

Fiftieth Legislature – Second Regular Session

JOINT LEGISLATIVE STUDY COMMITTEE ON CHARTER SCHOOL

FUNDING OPTIONS FOR SCHOOL DISTRICTS

Minutes of Interim Meeting

Monday, January 7, 2013

House Hearing Room 3 -- 2:00 p.m.

Representative Carter called the meeting to order at 2:04 p.m. and attendance was noted by the secretary.

Members Present

Senator Nancy Barto                                                              Representative Heather Carter

Senator Leah Landrum Taylor                                                Representative Eric Meyer

Calvin Baker                                                                           David Schaefer

Lyle Friesen                                                                            Roberta “Sissie” Shank

Jim Migliorino                                                             Cynthia Weiss

Ted Ryan

Members Absent

None

INTRODUCTION OF MEMBERS

The Members introduced themselves and explained their background and interest in this issue.

Representative Carter stated that the breadth of experience and knowledge of the Members should be helpful in delving into this topic to find solutions and innovations for school finance.

SELECTION OF CHAIRMAN OF THE COMMITTEE

Mr. Schaefer moved, seconded by Ms. Shank, that Representative Carter be nominated as Chairman of the Committee.  The motion carried unanimously.

EXPLANATION OF COMMITTEE CHARGE

Chairman Carter explained that she introduced HB2810, school districts; charter school funding (Laws 2012, Chapter 78), during the Fiftieth Legislature, Second Regular Session to allow school districts to opt into charter school formula funding, which is different than converting a traditional school district into a charter school.  This is a new and innovative idea so rather than attempting to advance comprehensive legislation in the short time the Legislature was in session, she decided that it was necessary to delve further into the issue through a study committee.  She pointed out that it is not possible to convert an entire school district into a charter school because the statute requires that one school at each grade level must be retained in a traditional school district format, which is not always possible in some school districts.  The intent of the Committee is to determine the benefits of schools operating in a charter school fashion and to “push the envelope” on education innovation from a financial and curriculum standpoint. 

Mr. Baker suggested that the Committee review the purpose of charter schools to see how that fits into what the Committee is attempting to accomplish.  Chairman Carter indicated that will be discussed in a future meeting, if not during this meeting.  In response to Representative Meyer’s request for elaboration on the intent of the Committee, Chairman Carter read the purpose as cited in HB2810:

• Evaluate methods to give school districts the option to transfer to a funding model that is similar to the funding currently provided to charter schools in this state.
• Recommend statutory changes that will be necessary to allow school districts to transfer to a funding model that is similar to the funding currently provided to charter schools in this state.
• Submit a report regarding the Committee’s activities and recommendations for legislative action on or before December 31, 2013 to the Governor, the President of the Senate, the Speaker of the House of Representatives and the Secretary of State.

Chairman Carter added that she envisions the Committee identifying agenda items for future meetings and continuing to meet until the Members decide whether or not to advance legislation in the next few weeks, but no matter the outcome, a report must be submitted by the end of 2013.  Some incremental work could also be done by updating current statutory language.  She added that the Governor’s Office is engaged in discussions related to education finance reform.  Perhaps individuals working on this issue can be invited to relate support or opposition to the concept so everyone can look for areas in which to work together on legislation for next session.  

Mr. Baker pointed out that the Governor’s budget last year included language to eliminate the right of school districts to convert to charter schools and asked if that is anticipated for next session or whether related bills may be introduced.  Chairman Carter agreed that last year the Governor’s budget included a policy statement not to allow school districts to charter schools.  She indicated that she was able to work through the legislative process, outside of the budget, to advance HB2810; however, if similar opposition occurs during the upcoming session, this Committee is in place to work on the issue.  She suggested that someone from the Governor’s Office could be asked to testify as to the basis for that policy recommendation.

PRESENTATION ON ARIZONA SCHOOL FUNDING MODELS – JOINT LEGISLATIVE BUDGET COMMITTEE

Steve Schimpp, Joint Legislative Budget Committee (JLBC), reviewed a chart showing the contrast in Basic State Aid Calculations for Fiscal Year (FY) 2013 between the Cave Creek Unified School District (K-8 only) for non-charter and charter students and the Valley Academy Charter School (K-8 only) for charter students (Attachment 1).  The major contrast is that charter schools generally receive about $1,000 more per pupil than school districts.  If other funding is included, such as bonds, overrides, etc., school districts receive about $1,600 more per pupil than charter schools.  He responded to questions posed by the Members concerning local taxpayer funding, the percentage of funding the state provides for different pieces of the funding formula, federal and Title 1 funding, bonds and overrides, the small school weight and whether there is a benefit to receiving funding from two sources rather than four as indicated in the handout (Attachment 1).

Chairman Carter said many of the challenges related to the education funding formula are in statute or based on court cases or historical events that occurred in Arizona, which the Committee could probably delve into.

Mr. Baker stated that it may be of interest to know the total amount of small school weights being paid to charter schools; Mr. Schimpp agreed to calculate that number for the Members. 

DISCUSSION OF EXISTING SCHOOL DISTRICTS WITH CHARTER SCHOOL SITES

Mr. Baker, Superintendent, Vail Unified School District (VUSD), one of the first school districts to charter, said the intent of chartering was to give parents another quality choice and provide public accountability.  For example, when a parent in one of the charter schools becomes upset and receives no satisfaction from the teacher or principal, the parent can attend a public board meeting to air the complaint, which is not possible in a private charter school.  Also, the school district’s Business Services Office processes payroll, etc., for the charter schools so they can focus on their education mission.  Special education services are also provided at the charter schools.

He said the Vail Unified School District formed its first charter school 16 years ago when the University of Arizona opened a science and technology park in the district and bought International Business Machines (IBM), which destroyed the tax base.  The school district was offered space in the park as consolation where its first charter school was started, and it has done very well.  Three years ago, the charter school had to move from the park because it was in the flight pattern and it was expanded to a K-12 model.  Parental response has been phenomenal and there is a waiting list.

Mr. Baker continued that about 13 years ago, a development called Civano was established in the district where a one-room schoolhouse was opened as a charter school.  There is now a three-room elementary school and a two-room middle school, both of which have waiting lists and are performing well academically.  Because the state has made it clear that choice is something that should be promoted, two years ago the school district “flipped” two elementary schools to charter schools.  All of the charter schools are A schools; the two that were flipped are A+ schools.  The parents and school board are thrilled and it is working well.  In response to questions, he provided the following information: 

• Some parents are interested in curriculum, but many want their children to attend the same school.  A lottery system is conducted for kindergarten students with preference given to those with siblings in the charter school.   


• Charter schools have the same governing board; however, the school district has a very aggressive site council model, which requires that a quorum of people on the council must be parents, as well as the chairman.  The site councils at the charter schools have significant influence on what the school is like. 
• Sixteen years ago when the school district was an elementary district, there was much parental demand to open a high school.  When the tax base collapsed, the charter school was formed as a way to solve the problem.

Chairman Carter noted that the Phoenix Elementary School District is also looking at this option.  The Vail Unified School District would have been prohibited from moving to a high school model without this “tool in the toolbox” because it was a K-8 school district. 

In response to further questions, Mr. Baker provided the following information: 

• The Vail Unified School District later became K-12 and is now a unified school district, but because the charter school model was working well in terms of parent satisfaction and financially, the school district continued on that path.  The decision to expand to K-12 was done by a vote of the people.
• The governing board is the actual legal entity but it establishes, through policy, parent-dominated site councils, which are given much latitude by the governing board in determining the nature of the school.
• The site councils are not authorized to spend money, but are involved in designing the budget for the charter schools.  Site councils for the other traditional schools receive authority by the governing board in the same manner.
• The base level funding for charter students is about $1,000 more per student than the base level funding for non-charter school students.  The school district has been rewarded in terms of parent satisfaction, curricular and academic achievement success and the state funding formula.

Chairman Carter said there are many discussions going on about performance-based funding.

Senator Landrum Taylor asked if it is the desire of the Members to encourage school districts to convert to charter schools to provide a more supportive mechanism with accountability. 
Chairman Carter answered that will be discussed by the Committee.  HB2810 originally allowed a regular school district to be funded and operated like a charter school.  The Committee will not dictate, but will make a recommendation by the due date as outlined in statute; however, this will be a local decision.

Mr. Schaefer, Cave Creek Unified School District, stated that the school district is an A district with high performance compared to its peers and state averages.  It is the first school district to require all middle school students to enroll in a World Language class and is a pioneer in English Immersion with the elementary program.  Adopting a district-sponsored charter school is acknowledgement that the school district has a market-driven model.  Parents are very active in choosing schools, and since adopting the district-sponsored charter school at four of the elementary schools, it has been possible to do the following:

• Suspend further cuts to programs and increases in class size.
• Consider expanding the language program to include Chinese Immersion.
• Attempt to restore all-day kindergarten.
• Invest in technology.
• Prepare for Partnership for Assessment of Readiness for College and Careers (PARCC), 21^st Century Learning, College and Career Readiness and expansion of on-line learning opportunities.
• Consider pay raises for teachers for the first time in four years and opportunities for performance-based pay.

In response to questions, Mr. Schaefer provided the following information:

• The decision to charter was similar to the Vail Unified School District “flipping” two schools.  As a member of the governing board, he and administrators worked closely with Vail personnel to understand the dynamics of the process.
• Of the four charter schools, two are Core Knowledge schools, one is a Science, Technology, Engineering and Math (STEM) school and one has an Equine program.  One charter school has Spanish Immersion and another is considering adding
  Chinese Immersion.  World language is offered in K-12, which the school district was able to keep because of this decision.
• Most of the programs were in place prior to the decision to transfer the schools to charter schools.  World Language was offered just before the decision, knowing it was risky.  Chinese Immersion and all-day kindergarten are new, and the principals and site councils probably have ideas they would like to implement.

Representative Meyer said his school district has all-day kindergarten because an override was passed.  There is a need to fund education for charter schools and school districts.  When that is not done, the innovative programs mentioned by Mr. Schaefer are not possible.  Chairman Carter replied that there is adequacy funding, which is never agreed upon, and equity funding, which has been addressed by the courts, but some of the inequity is the result of bonds and overrides.

Senator Landrum Taylor indicated that some school districts have chartered but were not satisfied.  She cautioned the Committee in moving forward, stating that she understands families should have options, but at the same time, there should be parity in funding.  Chairman Carter responded that the Committee will be able to discuss parity.  Language in HB2810 can be used by the Committee as a starting point during the next meeting to determine the possibility of school districts funding all of their schools like a charter school, statutory requirements and the impact to the General Fund and local tax base.

Mr. Baker stated that in talking to administrators and governing board members in other school districts, most school districts are considering chartering some schools, but it is not typical for school districts to consider converting the entire school district.  Mr. Migliorino said there is an interest in some school districts to fund school districts as charter schools, mainly those that do not enjoy the benefits of Additional Funding through overrides, the Teacher Experience Index (TEI), etc.

Chairman Carter remarked that she knows some school districts are entertaining this idea whose personnel helped draft the language in HB2810, which is basically driven by equity funding.  If school districts do not have bonds or overrides, this option could protect innovative curriculums that are in place or that the school district would like to put in place.  She related that the Governor’s Arizona Ready Education Council has a subcommittee reviewing overall school funding and potential changes in statute, etc.  She believes a representative from the Department of Education is on the subcommittee.  Other local groups are also talking about this on a regular basis, so perhaps someone from those groups could testify as to what they are doing.  She offered the following items for future agendas:

• Bring the statutory language from HB2810 for other people to review and testify as to their opinions.
• Presentation from the Arizona Ready Education Council on its progress and concerns.
• Transportation.

Chairman Carter said she would like to meet in two or three weeks, probably on a Friday, because there may be other bills that will be introduced that could impact what the Committee is doing and the Governor will have put forth her projections for the budget. 

Senator Barto asked if bonding authority or overrides present an equity issue for school districts and indicated that she would like to know the latest legal issues surrounding that.

Mr. Baker indicated that in relation to equity, when a school district charters a school it becomes market-driven, which is not only a change in the funding model, but a change in operation.  If things go bad at that school and parents vacate, the school district is stuck.  Mr. Ryan asked how the concept is marketed.  Mr. Baker replied that every school district is different, but marketing is necessary because it is different from a regular school district.

Mr. Schaefer related that the process used by the Cave Creek Unified School District entailed a public relations campaign to parents and the community about the intent to stop cuts, preserve programs and make sure the school remains as great as parents expect and as it has always been.  Meetings were held at multiple sites with different constituent groups, parent-teacher organizations, site councils, parents, etc.  The concept has to be marketed, which is difficult without marketing staff.

Mr. Ryan stated that his company individually underwrites and evaluate schools that come on board and much time is spent on enrollment, teacher retention, academic progress and whether the school can meet its bond obligation in 30 years.  As students are moved from one school to another, many risk factors are involved.

Chairman Carter asked the Members to review the language in HB2810, which will be used as a starting point.  As a taxpayer, parent and community member in a school district that has done this, a public relations effort is necessary to explain what is occurring and the benefits. 

Mr. Migliorino requested a comparison of the requirements of a traditional school compared to a charter school.

PUBLIC TESTIMONY

Bryan McCleney, Superintendent, Toltec School District, testified that the school district has two schools, one is rated B and one is rated D, so it is a C school district.  There will not be an override for at least the next four years because four school board members will not even entertain placing the item on the agenda.  The school district has a 90 percent poverty rate and is struggling to make ends meet with no resources for all-day kindergarten or to pay teachers over $30,000.  Neighboring districts are failing and they are receiving money to address the issue.  Students in his area have a choice of the Toltec School District, home schooling or online education.  The school district is currently $90,000 short and decisions must be made on what must be cut this year.  If it were possible to convert one of the two schools to a charter school, discussions may be about what to do with $500,000, which he would prefer rather than the discussions that have been occurring for the last three years.

Chairman Carter thanked Superintendent McCleney for traveling to attend the meeting and providing input.  She added that staff will follow up with the Members on possible dates for the next meeting.

Without objection, the meeting adjourned at 4:01 p.m.

                                                                        _______________________________

                                                                        Linda Taylor, Committee Secretary

                                                                        January 17, 2013

(Original minutes, attachments and audio on file in the Chief Clerk’s Office; video archives available at http://www.azleg.gov)

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JLSC ON CHARTER SCHOOL FUNDING

                        OPTIONS FOR SCHOOL DISTRICTS

2

                        January 7, 2013

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