STATE OF MICHIGAN MIKE COX, ATTORNEY GENERAL

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1 STATE OF MICHIGAN MIKE COX, ATTORNEY GENERAL CHARTER SCHOOLS: PUBLIC SCHOOL ACADEMIES: State school aid "per pupil funding" paid to charter schools upon expiration of authorizing contract REVISED SCHOOL CODE: STATE SCHOOL AID ACT: A public school academy may continue to receive its current fiscal year allotment of state school aid "per-pupil funding" after the contract issued by the authorizing body expires if the public school academy has provided the required minimum hours of pupil instruction prior to the expiration of the contract. Eligibility to receive funding is to be determined in accordance with the facts existing at the time the contract expires and consistent with section 101 of the State School Aid Act, MCL Opinion No August 12, 2008 Honorable Lisa Wojno State Representative The Capitol Lansing, MI You have asked whether a public school academy may continue to receive state school aid "per-pupil funding" after the contract issued by its authorizing body expires. The Revised School Code, 1976 PA 451, MCL et seq, provides for the organization, regulation, and maintenance of schools, school districts, public school academies, and intermediate school districts. In 1993 PA 362, the Legislature enacted Part 6A of the Revised School Code, MCL , governing public school academies. Public school academies are commonly referred to as "charter schools."

2 Section 501(1) of the Revised School Code, MCL (1), defines a public school academy as a "public school" and a "school district" for purposes of state school aid. In order to organize and operate a public school academy, section 502(3) of the Revised School Code, MCL (3), requires a person or entity to obtain a contract from an authorizing body. 1 Section 501(2)(d) of the Revised School Code, MCL (2)(d), defines "contract" to mean "the executive act taken by an authorizing body that evidences the authorization of a public school academy" and that "confirm[s] the status of a public school academy as a public school in this state." This contract is often referred to as a "charter." 2 The State School Aid Act, 1979 PA 94, MCL et seq, governs the appropriation, allocation, and distribution of state funds to local school districts and public school academies. Each year, the Legislature and the Governor approve the school aid budget for the next state fiscal year. Section 3(6) of the State School Aid Act, MCL (6), includes public school academies in the definition of "district." Under section 20(6) of the State School Aid Act, MCL (6), a public school 1 The term "authorizing body" means any of the following that issues a contract as provided in Part 6A: (i) the board of a school district that operates grades K to 12; (ii) an intermediate school board; (iii) the board of a community college; and (iv) the governing board of a state public university. MCL (2)(a). 2 MCL (6) provides: An authorizing body shall not charge a fee, or require reimbursement of expenses, for considering an application for a contract, for issuing a contract, or for providing oversight of a contract for a public school academy in an amount that exceeds a combined total of 3% of the total state school aid received by the public school academy in the school year in which the fees or expenses are charged. An authorizing body may provide other services for a public school academy and charge a fee for those services, but shall not require such an arrangement as a condition to issuing the contract authorizing the public school academy. 2

3 academy is eligible to receive state education money such as the foundation allowance that is calculated on a per-pupil basis. You ask whether a public school academy may continue to receive state school aid "per-pupil funding" after the contract issued by the authorizing body expires. Public school academy contracts or charters that are not renewed often expire on June 30, the end of the "school fiscal year." Reading all the above provisions together, if a public school academy's charter expires, it would not be entitled to receive state school aid money for the next state fiscal year because it would no longer be a public school or school district under the Act or the Revised School Code. Whether a public school academy may continue to receive state school aid attributable to the fiscal year in which its contract expires presents a different question. Appropriations under the State School Aid Act are made on a "fiscal year" basis. Section 4(3) of the State School Aid Act, MCL (3), defines "fiscal year" to mean "the state fiscal year that commences October 1 and continues through September 30." But public schools operate on a "school fiscal year." Section 6(11) of the State School Aid Act, MCL (11), defines the "school fiscal year" as "a fiscal year that commences July 1 and continues through June 30." In accordance with section 17b of the State School Aid Act, MCL b, a public school academy's total allotment of the fiscal year school aid payments are distributed in 11 installments on the 20th of each month commencing in October and ending in August. Although the school fiscal year ends June 3

4 30, section 17b(1) of the State School Aid Act, MCL b(1), directs that payments received in July and August are for the preceding school fiscal year ending June 30. The total amount of a public school academy's foundation allowance for a given year is based on the number of pupils in "membership." Section 6(4) of the State School Aid Act, MCL (4), defines membership for a public school academy as 75% of the full-time students in regular attendance on the membership count day for the current school year plus 25% of the count from the previous supplemental count day. Section 101(3)(a) of the State School Aid Act, MCL (3)(a), requires that each district provide at least 1,098 hours of pupil instruction to be entitled to its total state aid allocation. Section 101(6) of the State School Aid Act, MCL (6), provides that the district forfeits from its remaining installments in the current fiscal year a proportion of the funds due to the district if it fails to comply with the required minimum hours of pupil instruction. The language used by the Legislature in all these statutes is plain and unambiguous. Accordingly, construction is neither necessary nor permitted, and the provisions must be enforced as written. Lash v Traverse City, 479 Mich 180, 187; 735 NW2d 628 (2007). Thus, a public school academy's eligibility to continue to receive current fiscal year state school aid "per-pupil funding" after the contract issued by the authorizing body expires is to be determined in accordance with the facts existing at the time the contract 4

5 expires and consistent with section 101 of the State School Aid Act, MCL A public school academy that has provided the required minimum hours of pupil instruction prior to expiration of the contract is entitled to receive its total state aid allocation for the fiscal year under MCL (3). This includes any installments distributed after the expiration of the contract. A public school academy that has not provided the required minimum hours of pupil instruction prior to expiration of the contract is not entitled to receive its total state aid allocation. It may still be eligible to receive state school aid payments, however, if the amount it has received when the contract expires is less than its current fiscal year state aid allocation as adjusted for the amount forfeited under section 101(6) of the State School Aid Act, MCL (6). As a charter school winds down its operations, it is instructive to note that any school aid payments received after the public school academy's contract expires must be applied to pay the reasonable debts incurred in the operation of the public school academy. Section 18(1) of the State School Aid Act, MCL (1), requires money received under the act to be applied to salaries and other compensation of teachers and other employees, supplies, and school operating expenditures. The Michigan Department of Education may also withhold funds in accordance with sections 7 and 18(1) of the State School Aid Act, MCL and MCL (1), if it determines expenditures are not reasonable. Finally, under section 18b(1) of the State School Aid Act, MCL b(1), the public school academy is required to transfer the remaining funds and property "acquired substantially" with school aid funds to the State. MCL b directs the State Treasurer to deposit in the State School Aid Fund the money 5

6 transferred to the State and the net proceeds from the sale of any property transferred to the State. It is my opinion, therefore, that a public school academy may continue to receive its current fiscal year allotment of state school aid "per-pupil funding" after the contract issued by the authorizing body expires if the public school academy has provided the required minimum hours of pupil instruction prior to the expiration of the contract. Eligibility to receive funding is to be determined in accordance with the facts existing at the time the contract expires and consistent with section 101 of the State School Aid Act, MCL MIKE COX Attorney General 6