Rep. Norm Thurston — Voting Record

Bill

Number

H.B. 134 (2023GS)

Sponsor

Rep. Pulsipher, S.

Final action

Governor Signed 3/13/2023

Outcome

Became law — signed by Gov. Spencer J. Cox

Summary

What it does

• This bill:
• addresses when payments may be made from the Charter School Closure Reserve Account;
• modifies language related to a charter school authorizer and the closure of a charter school;
• amends provisions related to how charter school assets are treated when a charter school is closed; and
• makes technical changes.

Every vote on this bill

Bill text

CHARTER SCHOOL CLOSING REQUIREMENTS
GENERAL SESSION
STATE OF UTAH
Chief Sponsor: Susan Pulsipher
Senate Sponsor: 
Lincoln Fillmore
LONG TITLE
General Description:
This bill addresses treatment of assets of a charter school.
Highlighted Provisions:
This bill:
▸ addresses when payments may be made from the Charter School Closure Reserve
Account;
▸ modifies language related to a charter school authorizer and the closure of a charter
school;
▸ amends provisions related to how charter school assets are treated when a charter
school is closed; and
▸ makes technical changes.
Money Appropriated in this Bill:
None
Other Special Clauses:
None
Utah Code Sections Affected:
AMENDS:
53F-9-307
, as last amended by Laws of Utah 2022, Chapter 456
53G-5-501
, as last amended by Laws of Utah 2020, Chapters 192, 408
53G-5-504
, as last amended by Laws of Utah 2021, Chapters 84, 345
Be it enacted by the Legislature of the state of Utah:
Section 1. Section 
53F-9-307
 is amended to read:
53F-9-307.
Charter School Closure Reserve Account.
(1) As used in this section:
(a) "Account" means the Charter School Closure Reserve Account created in this
section.
(b) "Charter school authorizer" or "authorizer" means an entity listed in Section
53G-5-205
 that authorizes a charter school.
(2) There is created within the Income Tax Fund a special revenue fund known as the
"Charter School Closure Reserve Account."
(3) The account consists of:
(a) appropriations of the Legislature;
(b) amounts deposited into the account in accordance with this section; and
(c) interest earned on money in the account.
(4) (a) The account shall earn interest.
(b) Interest earned on the account shall be deposited into the account.
(5) (a) In a fiscal year that begins on or after July 1, 2021, a charter school shall
annually contribute to the account $2 per student enrolled in the charter school until the
account balance reaches $3,000,000.
(b) (i) Beginning with the fiscal year following the first fiscal year in which the account
balance reaches $3,000,000, except as provided in Subsections (5)(b)(ii) and (iii), in any fiscal
year in which the account balance is less than $3,000,000, a charter school shall contribute to
the account a prorated amount, not to exceed $2 per student enrolled in a charter school, in
accordance with Subsection (6).
(ii) Except as provided in Subsection (5)(b)(iii), if no funds have been withdrawn from
the account due to a charter school closure, in a fiscal year that begins on or after July 1, 2024,
in which the account balance is less than $2,500,000, a charter school shall contribute to the
account a prorated amount, not to exceed $2 per student enrolled in a charter school, in
accordance with Subsection (6).
(iii) If no funds have been withdrawn from the account due to a charter school closure,
in a fiscal year that begins on or after July 1, 2026, in which the account balance is less than
$2,000,000, a charter school shall contribute to the account a prorated amount, not to exceed $2
per student enrolled in a charter school, in accordance with Subsection (6).
(c) The state board shall ensure that the total contribution from charter schools
described in Subsection (5)(b) equals the lesser of:
(i) (A) in a fiscal year after the first fiscal year in which the account balance reaches
$3,000,000, an amount sufficient to maintain an account balance of $3,000,000;
(B) in a fiscal year that begins on or after July 1, 2024, if no funds have been
withdrawn from the account due to charter school closure, an amount sufficient to maintain an
account balance of $2,500,000; or
(C) in a fiscal year that begins on or after July 1, 2026, if no funds have been
withdrawn from the account due to charter school closure, an amount sufficient to maintain an
account balance of $2,000,000; and
(ii) $2 per student enrolled in a charter school.
(6) The state board of education shall make rules in accordance with Title 63G,
Chapter 3, Utah Administrative Rulemaking Act, for:
(a) calculating the amounts described in Subsections (5)(b) and (c);
(b) a process for collecting charter school contributions to the account described in this
section; and
(c) a process for depositing charter school contributions to the account described in this
section into the account.
(7) Money in the account may only be used upon closure of a charter school that closes
on or after January 1, 2021:
(a) to pay debts that the charter school owes to:
(i) the state board; or
(ii) the state or federal government;
(b) after the charter school has made other reasonable attempts to resolve debts the
charter school owes to:
(i) the state board; or
(ii) the state or federal government; and
(c) after a charter school liquidates [
all of
] the charter school's assets 
remaining after:
(i) the charter school's liabilities and obligations are paid under Subsection
53G-5-504
(7); and
(ii) the charter school authorizer assigns assets to a public school under Subsection
53G-5-504
(7)(c)
.
(8) Money in the account may not be used to pay bond debt.
(9) The state board, in partnership with a charter school authorizer:
(a) may authorize the use of money in the account, subject to the restrictions described
in Subsections (7) and (8); and
(b) before authorizing the use of funds in the account as described in Subsection (9)(a),
shall investigate all reasonable alternatives for a charter school to pay debt that the charter
school owes to:
(i) the state board; and
(ii) the state or federal government.
Section 2. Section 
53G-5-501
 is amended to read:
53G-5-501.
Noncompliance -- Rulemaking.
(1) If a charter school is found to be out of compliance with the requirements of
Section 
53G-5-404
 or the school's charter agreement, the charter school authorizer shall notify
the following in writing that the charter school has a reasonable time to remedy the deficiency,
except as otherwise provided in Subsection 
53G-5-503
(4):
(a) the charter school governing board; and
(b) if the charter school is a qualifying charter school with outstanding bonds issued in
accordance with Part 6, Charter School Credit Enhancement Program, the Utah Charter School
Finance Authority.
(2) (a) If the charter school does not remedy the deficiency within the established
timeline, the authorizer may:
(i) subject to the requirements of Subsection (4), take one or more of the following
actions:
(A) remove a charter school director or finance officer;
(B) remove a charter school governing board member;
(C) appoint an interim director, mentor, or finance officer to work with the charter
school; or
(D) appoint a governing board member;
(ii) subject to the requirements of Section 
53G-5-503
, terminate the school's charter
agreement; or
(iii) transfer operation and control of the charter school to a high performing charter
school, as defined in Subsection 
53G-5-502
(1), including reconstituting the governing board to
effectuate the transfer.
(b) The authorizer may prohibit the charter school governing board from removing an
appointment made under Subsection (2)(a)(i), for a period of up to one year after the date of the
appointment.
(3) The costs of an interim director, mentor, or finance officer appointed under
Subsection (2)(a) shall be paid from the funds of the charter school for which the interim
director, mentor, or finance officer is working.
(4) The authorizer shall notify the Utah Charter School Finance Authority before the
authorizer takes an action described in Subsection (2)(a)(i) if the charter school is a qualifying
charter school with outstanding bonds issued in accordance with Part 6, Charter School Credit
Enhancement Program.
(5) In accordance with Title 63G, Chapter 3, Utah Administrative Rulemaking Act, the
state board shall make rules:
(a) specifying the timeline for remedying deficiencies under Subsection (1); and
(b) ensuring the compliance of a charter school with its approved charter agreement.
(6) (a) An authorizer may petition the district court where a charter school is located or
incorporated to appoint a receiver, and the district court may appoint a receiver if the authorizer
establishes that the charter school:
(i) is subject to closure under Section 
53G-5-503
; and
(ii) (A) has disposed, or there is a demonstrated risk that the charter school will
dispose, of the charter school's assets in violation of Subsection 
53G-5-403
(4); or
(B) cannot, or there is a demonstrated risk that the charter school will not, make
repayment of amounts owed to the federal government or the state.
(b) The court shall describe the powers and duties of the receiver in the court's
appointing order, and may amend the order from time to time.
(c) Among other duties ordered by the court, the receiver shall:
(i) ensure the protection of the charter school's assets;
(ii) preserve money owed to creditors; and
(iii) if requested by the authorizer, carry out charter school closure procedures
described in Section 
53G-5-504
, and state board rules, as directed by the authorizer.
(d) If the authorizer does not request, or the court does not appoint, a receiver:
(i) the authorizer may reconstitute the governing board of a charter school; or
(ii) if a new governing board cannot be reconstituted, the authorizer shall complete the
closure procedures described in Section 
53G-5-504
, including liquidation and assignment of
assets, and payment of [
debt
] 
liabilities and obligations
 in accordance with [
state board rule, as
described in Section
] 
Subsection
53G-5-504
(7) and state board rule
.
(e) For a qualifying charter school with outstanding bonds issued in accordance with
Part 6, Charter School Credit Enhancement Program, an authorizer shall obtain the consent of
the Utah Charter School Finance Authority before the authorizer takes the following actions:
(i) petitions a district court to appoint a receiver, as described in Subsection (6)(a);
(ii) reconstitutes the governing board, as described in Subsection (6)(d)(i); or
(iii) carries out closure procedures, as described in Subsection (6)(d)(ii).
Section 3. Section 
53G-5-504
 is amended to read:
53G-5-504.
Charter school closure.
(1) As used in this section, "receiving charter school" means a charter school that an
authorizer permits under Subsection [
(13)(a)
] 
(12)(a)
, to accept enrollment applications from
students of a closing charter school.
(2) If a charter school is closed for any reason, including the termination of a charter
agreement in accordance with Section 
53G-5-503
 or the conversion of a charter school to a
private school, the provisions of this section apply.
(3) A decision to close a charter school is made:
(a) when a charter school authorizer approves a motion to terminate described in
Subsection 
53G-5-503
(2)(c);
(b) when the state board takes final action described in Subsection 
53G-5-503
(2)(d)(ii);
or
(c) when a charter school provides notice to the charter school's authorizer that the
charter school is relinquishing the charter school's charter.
(4) (a) No later than 10 days after the day on which a decision to close a charter school
is made, the charter school shall:
(i) provide notice to the following, in writing, of the decision:
(A) if the charter school made the decision to close, the charter school's authorizer;
(B) the State Charter School Board;
(C) if the state board did not make the decision to close, the state board;
(D) parents of students enrolled at the charter school;
(E) the charter school's creditors;
(F) the charter school's lease holders;
(G) the charter school's bond issuers;
(H) other entities that may have a claim to the charter school's assets;
(I) the school district in which the charter school is located and other charter schools
located in that school district; and
(J) any other person that the charter school determines to be appropriate; and
(ii) post notice of the decision on the Utah Public Notice Website, created in Section
63A-16-601
.
(b) The notice described in Subsection (4)(a) shall include:
(i) the proposed date of the charter school closure;
(ii) the charter school's plans to help students identify and transition into a new school;
and
(iii) contact information for the charter school during the transition.
(5) No later than 10 days after the day on which a decision to close a charter school is
made, the closing charter school shall:
(a) designate a custodian for the protection of student files and school business records;
(b) designate a base of operation that will be maintained throughout the charter school
closing, including:
(i) an office;
(ii) hours of operation;
(iii) operational telephone service with voice messaging stating the hours of operation;
and
(iv) a designated individual to respond to questions or requests during the hours of
operation;
(c) assure that the charter school will maintain private insurance coverage or risk
management coverage for covered claims that arise before closure, throughout the transition to
closure and for a period following closure of the charter school as specified by the charter
school's authorizer;
(d) assure that the charter school will complete by the set deadlines for all fiscal years
in which funds are received or expended by the charter school a financial audit and any other
procedure required by state board rule;
(e) inventory all assets of the charter school; and
(f) list all creditors of the charter school and specifically identify secured creditors and
assets that are security interests.
(6) The closing charter school's authorizer shall oversee the closing charter school's
compliance with Subsection (5).
(7) (a) 
Unless a different order is determined by a bankruptcy court under 11 U.S.C.
Sec. 1001 et seq., a closing charter school shall distribute the assets of the closing charter
school in the following order:
(i) return assets donated by a private donor to the private donor if:
(A) the assets were donated for a specific purpose;
(B) the private donor restricted use of the assets to only that specific purpose; and
(C) the closing charter school has assets that have not been used for the specific
purpose;
(ii) distribute assets to satisfy outstanding payroll obligations for employees of the
closing charter school;
(iii) distribute assets to creditors of the closing charter school; and
(iv) distribute assets to satisfy any outstanding liability or obligation to the state board,
state, or federal government.
(b)
 A closing charter school shall return any assets remaining, after all liabilities and
obligations of the closing charter school are paid or discharged 
consistent with Subsection
(7)(a)
, to the closing charter school's authorizer.
[
(b)
] 
(c)
 [
The
] 
Upon receipt of the assets under Subsection (7)(b), the
 closing charter
school's authorizer shall
:
(i)
 liquidate assets at fair market value
;
 or
(ii)
 assign the assets to another public school.
[
(8)
] 
(d)
 The closing charter school's authorizer shall oversee liquidation of assets and
payment of [
debt
] 
liabilities and obligations
 in accordance with 
this section, Sections
53F-9-307
 and 
53G-5-501
, and
 state board rule.
[
(9)
] 
(8)
 The closing charter school shall:
(a) comply with all state and federal reporting requirements; and
(b) submit all documentation and complete all state and federal reports required by the
closing charter school's authorizer or the state board, including documents to verify the closing
charter school's compliance with procedural requirements and satisfaction of all financial
issues.
[
(10)
] 
(9)
 When the closing charter school's financial affairs are closed out and
dissolution is complete, the authorizer shall ensure that a final audit of the charter school is
completed.
[
(11)
] 
(10)
 On or before January 1, 2017, the state board shall, in accordance with Title
63G, Chapter 3, Utah Administrative Rulemaking Act, and after considering suggestions from
charter school authorizers, make rules that:
(a) provide additional closure procedures for charter schools; and
(b) establish a charter school closure process.
[
(12)
] 
(11)
 (a) Upon termination of the charter school's charter agreement:
(i) notwithstanding provisions to the contrary in Title 16, Chapter 6a, Part 14,
Dissolution, the nonprofit corporation under which the charter school is organized and
managed may be unilaterally dissolved by the authorizer; and
(ii) the net assets of the charter school shall revert to the authorizer as described in
Subsection (7).
(b) The charter school and the authorizer shall mutually agree in writing on the
effective date and time of the dissolution described in Subsection [
(12)(a)
] 
(11)(a)
.
(c) The effective date and time of dissolution described in Subsection [
(12)(b)
] 
(11)(b)
may not exceed five years after the date of the termination of the charter agreement.
[
(13)
] 
(12)
 Notwithstanding the provisions of Chapter 6, Part 5, Charter School
Enrollment:
(a) an authorizer may permit a specified number of students from a closing charter
school to be enrolled in another charter school, if the receiving charter school:
(i) (A) is authorized by the same authorizer as the closing charter school; or
(B) is authorized by a different authorizer and the authorizer of the receiving charter
school approves the increase in enrollment; and
(ii) agrees to accept enrollment applications from students of the closing charter
school;
(b) a receiving charter school shall give new enrollment preference to applications
from students of the closing charter school in the first school year in which the closing charter
school is not operational; and
(c) a receiving charter school's enrollment capacity is increased by the number of
students enrolled in the receiving charter school from the closing charter school under this
Subsection [
(13)
] 
(12)
.
[
(14)
] 
(13)
 A member of the governing board or staff of the receiving charter school
that is also a member of the governing board of the receiving charter school's authorizer, shall
recuse himself or herself from a decision regarding the enrollment of students from a closing
charter school as described in Subsection [
(13)
] 
(12)
.