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New York Charter Schools Association, Inc. v. DiNapoli

June 25, 2009


The opinion of the court was delivered by: Ciparick, J.

This opinion is uncorrected and subject to revision before publication in the New York Reports.

In this appeal, we are called upon to determine whether the Legislature violated article V, § 1 of the New York State Constitution when it assigned and directed the State Comptroller to audit charter schools. We hold that the Legislature exceeded its constitutional authority by delegating and directing the Comptroller to conduct audits of charter schools. Therefore, the order of the Appellate Division should be reversed.


In 1998, the Legislature enacted the New York Charter Schools Act (Act) thereby authorizing a system of charter schools to be created in New York State to provide "opportunities for teachers, parents, and community members to establish and maintain schools that operate independently of existing schools and school districts" (1998 NY Senate-Assembly Bill Memorandum S-7881, A11466).

The Legislature found that creating a charter schools system would have no fiscal impact on the State because the "[f]unds are provided for within [the] annual appropriation for school aid" (id.).

Charter schools are "within the public school system" (Education Law § 2850 [2] [e]). Any child who is eligible for admission to a public school is qualified for admission to a charter school, and the charter school "shall enroll each eligible student who submits a timely application . . . unless the number of applications exceeds the capacity of the grade level or building" (Education Law § 2854 [2] [b]). A charter school cannot charge tuition or fees, except to the extent that fees are charged by other public schools, and shall be nonsectarian in its programs, admission policies, employment practices and is forbidden from engaging in any form of discrimination (see Education Law § 2854 [2] [a]).*fn1 Further, the Legislature has stated that "[t]he powers granted to a charter school under [the Act] constitute the performance of essential public purposes and governmental purposes of this state" (Education Law § 2853 [1] [d]).

Under this Act, teachers, parents, school administrators, community residents or any combination thereof may submit an application to establish a charter school (see Education Law § 2581 [1]).*fn2 A charter school application may be filed in conjunction with a college, university, museum, educational institution, or a not-for-profit corporation exempt from taxation under paragraph 3 of subsection (c) of § 501 of the internal revenue code or for-profit business or corporate entity authorized to do business in New York (id.). A charter school application must be submitted to, and receive approval from, a "charter entity" (see Education Law § 2851 [3]). The Act defines a "charter entity" as (1) the State Board of Regents; (2) the Board of Trustees of the State University of New York; (3) the board of education of a school district that encompasses the geographical boundary in which the charter school will operate; or (4) if the charter school is to be located within the City of New York, the Chancellor of the city school district (id.).

Education Law § 2851 (2) states that the application must specify information, such as its mission statement, a description of an educational program and a description of student achievement goals that meet or exceed the student performance standards adopted by the Board of Regents for other public schools. Further, the application must provide a proposed budget and fiscal plan for the school, including supporting evidence that the fiscal plan is sound and that sufficient start-up funds will be available to the charter school (id.). Education Law § 2851 (2) also provides that the charter school application disclose its requirements and procedures for conducting at a minimum annual programmatic and independent fiscal audits, that are comparable in scope to audits of other public schools.

Once the application of the proposed charter school has been approved by the charter entity, the Act requires that the organizers of the proposed charter school and the charter entity enter into a proposed written agreement -- the "charter." The charter allows an applicant to organize and operate a charter school (see Education Law § 2852 [5]). Further, the charter must "include the specific commitments of the charter entity relating to its obligations to oversee and supervise the charter school" (id.). The Board of Regents, if not the charter entity, is required to give its final approval to all proposed charters before issuance (see Education Law §§ 2851 [3]; 2852 [5], [5-a], [5-b]).

Once approved, the Board of Regents incorporates the charter school as an "education corporation"*fn3 (see Education Law §§ 216-a [1] [a]; 2853 [1]), governed by the Not-For-Profit Corporation Law (see Education Law § 216-a [4]) and its incorporation as an education corporation is "for a term not to exceed five years" (Education Law § 2853 [1] [a]). After the five year term has expired, a charter school must apply for renewal of its charter by submitting a report detailing the progress of the charter school in achieving the educational objectives as set forth in it's charter (Education Law § 2851 [4]). A charter school must provide a "detailed financial statement that discloses the cost of administration, instruction and other spending categories for the charter school that will allow a comparison of such costs to other schools, both public and private" (Education Law § 2851 [4] [b]), as well as copies of each of the annual reports of the charter school which includes charter school report cards and certified financial statements (see Education Law § 2851 [4] [c]).

Indeed, a charter school has been deemed by the Legislature to be "an independent and autonomous public school" (Education Law § 2853 [1] [c])*fn4 and that the charter entity and the Board of Regents are "the public agents authorized to supervise and oversee the charter school" (id.). Further, a charter school is governed by a self-selecting board of trustees that has "final authority for policy and operational decisions of the school" (Education Law § 2853 [1] [f]). However, it falls both to the Board of Regents and charter entity to oversee each school approved pursuant to the Act "and may visit, examine into and inspect any charter school, including the records of such school, under its oversight" (Education Law § 2853 [2]). Further, "[o]versight by a charter entity and the board of regents shall be sufficient to ensure that the charter school is in compliance with all applicable laws, regulations and charter provisions" (id.).

The Act imposes additional layers of oversight designed to ensure the charter school meets its educational responsibilities by giving the school district in which the charter school is located the right to visit, examine and inspect the charter school for the purpose of ensuring that the school is in compliance with all applicable laws, regulations and charter provisions (see Education Law § 2853 [2-a]). Any evidence of non-compliance uncovered by the school district during its inspection of the charter school may be forwarded to the Board of Regents and the charter entity for action, which can include revocation of the school's charter (see id.; see also Education Law § 2855).

In addition to being subject to inspection by the Board of Regents, the charter entity and the local school district, charter schools must submit an annual report to both the Board of Regents and to its charter entity. These reports include a charter school report card that outlines the measures of the comparative academic and fiscal performance of the school (see Education Law §§ 2857 [2]; [2] [a]). These "measures shall include, but not be limited to, graduation rates, dropout rates, performance of students on standardized tests, college entry rates, total spending per pupil and administrative spending per pupil. Such measures shall be presented in a format that is easily comparable to similar public schools" (Education Law § 2857 [2] [a]).

A charter school's annual report also must include "a certified financial statement setting forth . . . the revenues and expenditures for the preceding school year, including a copy of the most recent independent fiscal audit of the school" (Education Law § 2857 [c]).

Charter schools are funded primarily with public monies.*fn5 The Act requires that the "[s]chool district of residence shall pay directly to the charter school for each student enrolled in the charter school who resides in the school district the charter school basic tuition" (Education Law § 2856 [1] [a]). Further, a school district that has a charter school operating within its geographical area must "pay directly to the charter school any federal or state aid attributable to a student with a disability attending charter school in proportion to the level of services for such student with a disability that the charter school provides directly or indirectly" (Education Law 2856 [1] [b]).

Should a school district fail to make the mandatory payments outlined in Education Law § 2856, the Comptroller must deduct from any state funds that become due to such school district an amount equal to the unpaid obligation to the charter school (see Education Law § 2856 [2]).*fn6 Upon closure or dissolution of a charter school, its students and student records must be transferred to the school district wherein the charter school is located (see Education Law ยง 2851 [2] [t]), while its ...

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