Yesterday evening, I testified on behalf of the Texas Charter Schools Association (TCSA) before the Senate Education Committee in support of SB 1658, the bill proposed by Chairman Larry Taylor (District 11) to address the disposition of charter property when a charter school is revoked, expired, or otherwise ceases to operate as a public school. SB 1658 and its companion HB 3615 by Chairman Dan Huberty (District 127) are key TCSA legislative priorities for this session.
SB 1658 is the result of several months of effort by a working group comprised of charter leaders, the Texas Education Agency (TEA), TCSA, charter attorneys, and other stakeholders spearheaded by the Senate Education Committee to arrive at a solution that would work for all interests involved. TCSA has been actively involved in this issue since SB 2 passed, and we are pleased to support an agreed upon bill before the Senate Education Committee.
Chairman Taylor laid out the need for the bill which stems from the passage of Senate Bill 2 in 2013 when Texas enacted one of the strictest charter closure laws in the country. The “three strikes” law requires the revocation of a charter if it fails to meet academic or financial accountability for three years in a row, which has been successful in closing poor performing schools. Since the enactment of SB 2, 27 charters have been closed which exceeds the total number of closures in the 10 previous years combined. Chairman Taylor noted that with these statistics, it is hard to argue that charters are not being held accountable. Under this “high stakes” accountability of SB 2, Texas charters are truly living up to the charter “bargain” of greater accountability for Texas students.
These closures, however, have brought to light the lack of clarity in the procedures for disposing of public property once a charter ceases to operate. The ambiguity has resulted in multiple lawsuits and impeded the ability for TEA to dispose of the property, including the transfer to another public school, an opportunity TCSA has advocated for at the Legislature and TEA since the first year of SB 2 closures.
SB 1658 addresses this lack of clarity in a number of ways. First, the bill authorizes the Commissioner to direct the charter holder to dispose of the property through a variety of ways:
(1) The charter may retain the property and reimburse the state for the current value of the asset multiplied by the percentage of state funds used to purchase or improve the property;
(2) The charter may sell the property at fair market value and reimburse the state based on the sell price multiplied by the percentage of state funds used to purchase or improve the property;
(3) The charter may transfer the property to an ISD or charter; or
(4) The charter returns the property to TEA who either sells the property or transfers it to another public school.
SB 1658 also addresses title to the property. While in operation, the bill states the charter holds title to the property and has all the incidents of property ownership. However, upon notice of commissioner action to revoke, non-renew, or reconstitute the board of the charter school, the charter school may not dispose of the property in any manner without Commissioner approval. Once a charter ceases to operate, the charter must comply with one or a combination of the directives described above. If the charter fails to do so, SB 1658 provides for the Attorney General to take legal action to compel the charter to comply with the Commissioner’s directives upon closure, including transfer of title to the TEA. The bill also provides the authority in Chapter 39 of the Education Code for TEA to appoint a board of managers to transfer title of the property and to access and control the closed school’s bank accounts.
Notably, SB 1658 ensures that creditors are able to retain full control of any secured collateral in connection with the property. This is an essential component of the bill for TCSA, as it ensures a vital and viable charter school lending market.
Finally, the bill requires that any remaining funds or funds from the reimbursement of public property be transferred to Charter School Liquidation Fund (CSLF). Funds transferred into the CSLF are to be used to cover the expenses of TEA in managing and closing the charter school, and then any excess over $2 million are to be transferred to a high quality educational grant program to be established by the Commissioner or to the Charter District Bond Guarantee Reserve Fund.
Importantly, especially for TCSA member schools that have been involved in taking over the education of students from closed charters, the bill allows for the Commissioner to approve a transfer of remaining funds to another charter holder serving the students of the closed school.
TCSA supports SB 1658, as a key legislative priority that presents a solution on this issue that works for all involved. I look forward to testifying and supporting HB 3615, the companion bill, in the House.