[Senate Report 105-301]
[From the U.S. Government Publishing Office]



                                                       Calendar No. 540
105th Congress                                                   Report
                                 SENATE

 2d Session                                                     105-301
_______________________________________________________________________


 
                  CHARTER SCHOOL EXPANSION ACT OF 1997

                                _______
                                

 September 8 (legislative day, August 31), 1998.--Ordered to be printed

_______________________________________________________________________


    Mr. Jeffords, from the Committee on Labor and Human Resources, 
                        submitted the following

                              R E P O R T

                         [To accompany S. 1380]

    The Committee on Labor and Human Resources, to which was 
referred the bill (S. 1380) to amend the Elementary and 
Secondary Education Act of 1965 regarding charter schools, 
having considered the same, reports favorably thereon with an 
amendment and recommends that the bill (as amended) do pass.


                                Contents
                                                                   Page
  I. Purpose and summary..............................................1
 II. Background and need for the legislation..........................1
III. History of the legislation and votes in committee................4
 IV. Explanation of the bill and committee views......................6
  V. Cost estimate....................................................8
 VI. Regulatory impact statement......................................9
VII. Application of the law to the legislative branch.................9
VIII.Section-by-section analysis......................................9

 IX. Changes in existing law.........................................12

                         I. Purpose and Summary

    The purpose of the Charter School Expansion Act of 1998 is 
to provide financial assistance for the planning and initial 
implementation of new charter schools. This legislation also 
provides for the dissemination of information regarding the 
eligibility of charter schools for Federal funds and 
participation in Federal programs.

              II. Background and Need for the Legislation

    Federal involvement in the charter schools movement began 
in 1994 when Congress approved legislation creating the Charter 
School Grant Program, which was cosponsored by Senators 
Durenberger and Lieberman. This program was included as Title 
X, Part C of the Improving America's Schools Act of 1994 which 
reauthorized programs under the Elementary and Secondary 
Education Act of 1965. This program is applicable to those 
States that have charter school laws. The Charter School Grant 
Program provides funds to State educational agencies for 
planning and other start-up costs associated with new charter 
schools. If a State educational agency chooses not to 
participate in the programs, the Secretary of Education may 
award a grant to an eligible applicant within the State.
    Over the last 3 years, the Charter School Grant Program has 
provided charter school operators with $65 million in grants 
for some of the start-up costs such as hiring staff, designing 
curriculum, and purchasing books. This initiative has played a 
modest, but important role in tripling the number of charter 
schools in operation since 1994--there are now 787 charter 
schools in 23 States and the District of Columbia serving more 
than 150,000 students.
    The charter schools movement is one of the most promising 
engines of education reform in the country. Charter schools 
give educators autonomy from most rules and regulations in 
exchange for a commitment to meet specific academic goals. 
Public charter schools also expand the educational choices 
available to parents.
    The charter school approach, with its emphasis on higher 
standards and greater accountability, is an education reform 
effort that has generated broad bipartisan support at the State 
and national level. In his 1997 State of the Union address, 
President Clinton expressed his strong support for the charter 
school movement and challenged Congress to increase funding to 
help meet the goal of developing 3,000 charters by the year 
2000. Congress responded by approving $80 million for the 1998 
fiscal year.
    Although the charter school movement has seen significant 
growth over the last 3 years, more than three quarters of the 
Nation's charters are concentrated in 7 States--Arizona, 
California, Colorado, Massachusetts, Michigan, Minnesota, and 
North Carolina. In addition to changes in various State laws, 
it also appears that the Federal Charter School Grant Program 
needs to be restructured so that other States would be able to 
participate in the program.
    To reach the President's goal of creating more than 3,000 
schools over the next 2 years, the Charter School Grant Program 
must be revised. The Charter School Expansion Act, S. 1380, 
which was introduced by Senators Coats, Lieberman, D'Amato, 
Kerrey, and Landrieu, includes the necessary revisions that 
will allow for charter school growth.
    The Charter School Expansion Act would increase funding for 
charter school development. The current law originally 
authorized funding for the Federal grant program at $15 
million. The Charter School Expansion Act increases the 
authorization to $100 million.
    To give States incentives to expand their charter efforts, 
the Charter School Expansion Act sets clear priorities for 
awarding grants. Preference will be given to those States that 
are able to demonstrate real progress in creating high-quality, 
high flexibility charter schools combined with the demand for 
strong accountability measures which must be met by charter 
school operators. Also, the size of the grant will be required 
to be proportional to the number of schools being created. 
These changes will not punish States who do not meet the 
priority criteria, but instead will reward those States that 
are embracing the charter movement and will encourage others to 
do so.
    The Charter School Expansion Act requires States to pass a 
specific charter school law in order to participate in the 
program. Requiring States to pass a specific charter law 
ensures that information regarding the establishment and 
operation of charter schools is available to all interested 
individuals.
    The Charter School Expansion Act expands the accountability 
provisions in the charter school program by rewarding States 
for developing high quality charter schools which are held 
accountable in their charter for meeting clear and measurable 
objectives for educational progress. This legislation also 
requires charter schools to have a written, performance-based 
contract with clear academic objectives and holds the charters 
to the same statewide assessments and reporting provisions 
required of other public schools.
    According to many charter school advocates, one of the 
biggest impediments new charter schools encounter in getting 
off the ground is obtaining funding from major Federal 
education programs for which they are eligible, such as Title I 
and IDEA. The Charter School Expansion Act begins to address 
this problem by directing the Secretary of Education and 
participating States to make the necessary policy changes to 
ensure that charter schools receive their fair share of funding 
for Title I, IDEA, and other formula-based Federal education 
programs.
    The Federal charter program cannot reach every new school. 
Therefore, the Charter School Expansion Act attempts to expand 
the financing options to charter schools still struggling to 
achieve stability. First, it allows States to use funding from 
the broad-based Title VI block grant program, contained in the 
Improving America's Schools Act, to aid new charter schools in 
opening their doors. Second, it directs the Department of 
Education and the States to work with charter operators to 
improve access to private capital.
    Part of the appeal of charter schools is their ability to 
serve as laboratories for testing reform initiatives that 
potentially could be used throughout our public education 
system. The Charter School Expansion Act directs the Secretary 
of Education and each State to disseminate information on the 
successful reform efforts with every local school in the 
country. It is hoped that this innovative pipeline will lead 
every school system to adopt the best aspects of the charter 
school model and bring higher standards, greater flexibility 
and greater accountability to all of our public schools.
    A survey conducted last fall by the National School Boards 
Association (NSBA) found that the charter movement is already 
having a positive ripple effect that is being felt in many 
local public school districts. The NSBA report cites evidence 
that traditional public schools are working harder to please 
local families. The report states that central administrators 
often see charters as ``a powerful tool'' to develop new ideas 
and programs without fearing regulatory roadblocks.
    Parents and educators have, in turn, given these programs 
overwhelmingly high marks. Broad-based studies conducted by the 
Hudson Institute and the Department of Education show that 
charters are effectively serving diverse populations, 
particularly disadvantaged and at-risk children that 
traditional public schools have struggled to educate. Earlier 
this year, Lisa Graham Keegan, the Superintendent of Public 
Instruction for the State of Arizona, testified before this 
committee. Ms. Keegan reported that in Arizona, charter schools 
are not only serving higher numbers of certain minority groups 
than traditional public schools, but they are also serving 
higher numbers of students with disabilities.
    The Charter School Expansion Act builds on, and contributes 
to, the success of the Federal Charter School Grant Program.

         III. History of the Legislation and Votes in Committee

                         FULL COMMITTEE HEARING

    On March 31, 1998, the Labor and Human Resources Committee 
held a hearing entitled ``Overview of Charter Schools.'' The 
hearing examined how the federal charter school program is 
working, how the federal law could be reformed, how federal 
funds are being distributed to charter schools, and how charter 
schools are handling the issue of special education services. 
The hearing also focused on H.R. 2616, The Charter School 
Amendments Act of 1997, and S. 1380, The Charter Schools 
Expansion Act.
    The first panel of witnesses focused on legislation before 
the committee to reform and expand charter schools. This panel 
included the Honorable Joseph I. Lieberman, U.S. Senator from 
Connecticut, and the Honorable Tim Roemer, U.S. Representative 
from Indiana. Senator Lieberman is an original cosponsor of S. 
1380, the Charter Schools Expansion Act and was a sponsor of 
the first charter schools authorization grant program. Senator 
Lieberman briefly discussed the legislative history of the 
Federal charter schools grant program and summarized the 
provisions of the Charter Schools Expansion Act. Senator 
Lieberman noted the positive ripple effect that the charter 
school movement has had on public schools.
    Congressman Roemer is a cosponsor of H.R. 2616, the Charter 
Schools Amendments Act of 1997, which passed in the House on 
November 7, 1997. Congressman Roemer highlighted several 
successful charter school programs and stressed that charter 
schools are not private schools. They do not ``cream'' only the 
best and brightest students, and are very inclusive, serving 
minority and special needs students.
    The hearing's second panel consisted of Cornelia 
Blanchette, the Associate Director for Education and Employment 
Issues at the U.S. General Accounting Office (GAO). The GAO 
recently completed a report entitled ``Charter Schools: Federal 
Funding Available But Barriers Exist'' which assessed the 
challenges faced by charter schools in getting their public 
school funding. The GAO report concluded that there does not 
seem to be anything that is systematically denying charter 
schools access to Title I and IDEA funds. Barriers that 
affected charter schools' ability to access Federal funds were 
related more to information and assistance. These barriers 
included State systems that based funding allocations on the 
prior year's enrollment and student eligibility data, the costs 
of accessing funds compared with the amounts that the schools 
would receive, and the timeconstraints that prevent charter 
school operators from pursing funds.
    Lisa Graham Keegan, State Superintendent of Public 
Instruction for the State of Arizona, provided the committee 
with a State perspective on charter schools. Ms. Keegan is an 
advocate of charter schools and has worked to make Arizona one 
of the Nation's leaders in the number and quality of charter 
schools. Ms. Keegan outlined the Arizona charter school model, 
which includes a State Board for Charter Schools and no caps on 
the number of charter schools within the State. Ms. Keegan 
highlighted three critical achievements of charter schools 
within Arizona. First, students in charter schools display 
consistently higher academic achievement than in their previous 
school performance. Secondly, interest in charter schools has 
grown every year. Finally, traditional public schools have had 
to respond to the presence of charter schools. Ms. Keegan also 
noted that children with disabilities comprise 25-30 percent of 
the current student body in charter schools compared with 11-12 
percent in the traditional public school system.
    The final panel reviewed the charter school movement from a 
local level perspective. Joan Heffernan serves as director of 
the Integrated Day Charter School in Norwich, Connecticut and 
also as a teacher at the school. Ms. Heffernan emphasized the 
unique facets of the Integrated Day Charter School, 
particularly teacher input in staffing and budget matters and 
parental involvement. Ms. Heffernan noted that the task of 
establishing a new school is not easy and that funds provided 
for the start-up of charter schools are not sufficient.
    Raymond Jackson, President and Chief Executive Officer of 
the ATOP Academy in Phoenix, Arizona also testified. ATOP 
Academy is a charter school in south Phoenix which serves 
primarily low-income children, many of whom were in special 
education in public schools and are excelling in this charter 
school. Mr. Jackson pointed out how the ATOP Academy differed 
from traditional public schools, particularly stressing the 
structured manner in which children are taught and the constant 
interaction between teachers and parents. Mr. Jackson noted 
that charter schools are not receiving adequate funding from 
the Federal level, particularly with regard to special 
education funds. Tim Sindelar, a senior attorney at the 
Disability Law Center in Boston, expressed concern that 
children with disabilities are underrepresented in charter 
schools and that when children with disabilities are enrolled 
in charter schools, they frequently withdraw. Mr. Sindelar 
stressed that during the initial stages of opening a charter 
school the provision of an appropriate education to children 
with disabilities must be considered.
    Finally, Eric Rofes, a researcher from the University of 
California at Berkeley, testified. Mr. Rofes has studied the 
charter school movement for the past 4 years. Mr. Rofes 
provided information on his report entitled, ``How are School 
Districts Responding to Charter Laws and Charter Schools?'' Mr. 
Rofes' report found that 24 percent of school districts are 
making substantial changes as a result of charter schools. The 
report also revealed five principal impacts of charter 
schools--first, the loss of students and often an accompanying 
loss of financing; second, the loss of particular kinds of 
students to niche-focused charter schools; third, the departure 
of significant numbers of disgruntled parents from the 
traditional public schools; fourth, shifts in staff morale; and 
fifth, the redistribution of some central administrative time 
as they worked on charter schools.

                           EXECUTIVE SESSION

    On July 22, 1998, the Committee on Labor and Human 
Resources met in executive session to consider S. 1380, the 
Charter School Expansion Act of 1998. Following opening 
statements, two amendments were offered.
    Senator Collins expressed her concern that Maine's only 
charter school, the Maine School of Science and Mathematics, 
was ineligible for funding as a charter school because it used 
selection criteria related to its academic program in 
conjunction with a lottery to select applicants. Senator 
Collins introduced an amendment that would have corrected this 
problem, but withdrew the amendment because she recognized the 
importance of a lottery-based admissions policy to the charter 
school movement. In discussing the problem faced by the Maine 
School of Science and Mathematics and other innovative public 
schools, the committee expressed a commitment to assure that 
these schools were eligible for funding under the various 
programs of the Elementary and Secondary Education Act other 
than the Charter School Program. Following the executive 
session, the committee received an assurance from the 
Department of Education that the Maine School of Science and 
Mathematics was eligible for any program authorized by the 
Elementary and Secondary Education Act for which a local 
educational agency is eligible.
    Following discussion of Senator Collins' amendment, Senator 
Reed offered an amendment to provide for the study of the 
existence and roles of school libraries in charter schools. 
Senator Jeffords underscored the importance of libraries in all 
public schools and then requested that language be included in 
this Committee report requesting the Department of Education to 
conduct this study in a timely fashion. Following this 
discussion, Senator Reed withdrew his amendment.
    The executive session continued on July 29, 1998. Following 
opening statements, S. 1380, the Charter School Expansion Act, 
was unanimously agreed to by a voice vote.

            IV. Explanation of the Bill and Committee Views

    On November 5, 1997, a bill to amend the Elementary and 
Secondary Education Act of 1965 regarding charter schools was 
introduced by Senators Coats, Lieberman, D'Amato, Kerrey, and 
Landrieu. The bill, S. 1380, was referred to the Committee on 
Labor and Human Resources.
    The Charter School Expansion Act increases funding for 
charter school development. To give States incentives to expand 
their charter efforts, this legislation sets clear priorities 
for awarding grants. Preference will be given to those States 
that can show real progress in creating high-quality, high-
flexibility charter schools and show that they have strong 
safeguards in place to demand accountability from charter 
school operators. In addition, the size of the grant will be 
required to be proportional to the number of schools being 
created. These changes will not punish States that do not meet 
the priority criteria, but instead will reward those States 
that are embracing the charter school movement and encourage 
others to do so.
    The Charter School Expansion Act also directs the Secretary 
of Education and each State to do what they can to share the 
success stories of charter schools with every local school 
district in the country. Through this effort, the best aspects 
of the charter school model will bring higher standards, 
greater flexibility and greater accountability to all public 
schools.

Section 2--Innovative Charter Schools

    Under the Charter School Expansion Act, States would be 
given the flexibility to use a portion of their Title VI 
(Innovative Education Program Strategies under the Improving 
America's Schools Act of 1994) funding to spur the development 
of charter schools, but would not require States to do so.

Section 3--Charter School Grants

    These grants would create incentives for States to expand 
the number of charter schools over the next 5 years. This would 
be accomplished by giving preference to States that: (1) 
demonstrate progress in increasing the number of high quality 
charter schools that are held accountable for meeting clear and 
measurable objectives for the educational progress of students; 
(2) provide a public chartering agency, such as a State 
chartering board, other than the local educational agency, for 
the purpose of an appeals process for charter applicants who 
have been rejected by a local educational agency to provide for 
an appeals process for charter applicants who have been 
rejected by a local school district; (3) provide for periodic 
review and evaluation of each charter school; or (4) require 
the charter schools within their State to participate in State 
assessments, and make the results available to the public.
    The Secretary of Education and the States would also be 
required to describe how they will ensure that charter schools 
are informed about their eligibility to receive Federal 
education funding for such programs as Title 1 and IDEA. In 
addition, each State would also be required to disseminate 
information about ``best practices'' in charter schools to each 
local school district in the State to help expand the 
application of successful innovations produced by charter 
schools. This would also be carried out at the national level 
by the Secretary of Education.

                            V. Cost Estimate

                                     U.S. Congress,
                               Congressional Budget Office,
                                 Washington, DC, September 4, 1998.
Hon. James M. Jeffords,
Chairman, Committee on Labor and Human Resources,
U.S. Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 1380, the Charter 
School Expansion Act of 1998.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Josh O'Harra.
            Sincerely,
                                         June E. O'Neill, Director.
    Enclosure.

               congressional budget office cost estimate

S. 1380--Charter School Expansion Act of 1998

    Summary: S. 1380 would amend title X of the Elementary and 
Secondary Education Act (ESEA) by increasing funding for 
charter schools. CBO estimates this bill would authorize 
appropriations of $100 million in 1999, $102 million in 2000, 
$105 million in 2001, $107 million in 2002, and $110 million in 
2003, with adjustments for inflation. Because S. 1380 would not 
affect direct spending or receipts, pay-as-you-go procedures 
would not apply.
    S. 1380 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act (UMRA). 
Any costs to state and local education agencies resulting from 
enactment of this bill would be incurred voluntarily.
    Estimated cost to the Federal Government: The estimated 
budgetary impact of S. 1380 is shown in the following tables.

                                 TABLE 1.--ESTIMATED BUDGETARY IMPACT OF S. 1380                                
                                    [By fiscal year, in millions of dollars]                                    
----------------------------------------------------------------------------------------------------------------
                                                        1998      1999      2000      2001      2002      2003  
----------------------------------------------------------------------------------------------------------------
                                        WITHOUT ADJUSTMENTS FOR INFLATION                                       
                                                                                                                
Spending Under Current Law:                                                                                     
    Estimated Authorization Level \1\...............        80         0         0         0         0         0
    Estimated Outlays...............................        42        66        23         4         0         0
Proposed Changes:                                                                                               
    Estimated Authorization Levels..................         0       100       100       100       100       100
    Estimated Outlays...............................         0         5        70        95       100       100
Total Spending Under S. 1380:                                                                                   
    Estimated Authorization Levels \1\..............        80       100       100       100       100       100
    Estimated Outlays...............................        42        71        93        99       100       100
                                                                                                                
                                         WITH ADJUSTMENTS FOR INFLATION                                         
                                                                                                                
Spending Under Current Law:                                                                                     
    Estimated Authorization Level \1\...............        80         0         0         0         0         0
    Estimated Outlays...............................        42        66        23         4         0         0
Proposed Changes:                                                                                               
    Estimated Authorization Levels..................         0       100       102       105       107       110
    Estimated Outlays...............................         0         5        70        97       104       106
Total Spending Under S. 1380:                                                                                   
    Estimated Authorization Levels \1\..............        80       100       102       105       107       110
    Estimated Outlays...............................        42        71        93       101       104       106
----------------------------------------------------------------------------------------------------------------
\1\ The 1998 level is the amount appropriated for that year.                                                    
                                                                                                                
Note.--Components may not sum to totals due to rounding.                                                        

    The costs of this legislation fall within budget function 
500 (education, training, employment, and social services).
    Basis of estimate: S. 1380 would extend the authorizations 
for charter schools under title X of the ESEA for the 1999-2003 
period. The bill authorizes $100 million for this activity in 
1999 and such sums as may be necessary for fiscal years 2000 
through 2003. Assuming that historical spending patterns 
prevail, outlays for the five-year period would increase by 
$370 million without adjustment for inflation. Authorizations 
would total $524 million over the 1999-2003 period and 
estimated outlays would increase by $382 million, assuming 
adjustments for inflation.
    Pay-as-you-go considerations: None.
    Intergovernmental and private-sector impact: S. 1380 
contains no intergovernmental or private-sector mandates as 
defined in UMRA. The bill would impose some new administrative 
requirements on state and local education agencies that 
participate in the charter school grant program. Any costs to 
state and local education agencies from these requirements 
would be the result of their voluntary participation in this 
program. CBO estimates that the costs of these new requirements 
would not be significant. The bill would also reduce the 
maximum amount of funds available for national activities from 
not more than 10 percent to the lesser of $5 million or 5 
percent of the amount appropriated. As a result, the bill would 
increase the percentage of funds available for grants to state 
and local education agencies, given the Department of 
Education's current practice of spending 10 percent on national 
activities.
    Estimate prepared by: Federal Cost: Josh O'Harra. Impact on 
State, Local, and Tribal Governments: Marc Nicole. Impact on 
the Private Sector: Nabeel Alsalam.
    Estimate approved by: Paul N. Van de Water, Assistant 
Director for Budget Analysis.

                    VI. Regulatory Impact Statement

    The Committee has determined that S. 1380 may result in 
some additional paperwork, time, and costs to the Department of 
Education which would be entrusted with implementation and 
enforcement of the act. It is difficult to estimate the volume 
of additional paperwork necessary by the act, but the committee 
does not believe it will be significant.

         VII. Application of the Law to the Legislative Branch

    Section 102(b)(3) of Public Law 104-1, the Congressional 
Accountability Act (CAA), requires a description of the 
application of this bill to the legislative branch. S. 1380 
amends title X, Part C of the Improving America's Schools Act 
of 1994. Therefore, S. 1380 does not amend any act that applies 
to the legislative branch.

                   VIII. Section-By-Section Analysis

Section 2. Innovative Charter Schools

    The Title VI block grant program provides funding to the 
States to support a wide variety of efforts to stimulate 
innovations in public education. This section would give states 
the flexibility to use a portion of their Title VI funding to 
spur the development of charter schools, but would not require 
states to do so.

Section 3. Charter School Grants

    3(a): amends the ``purposes'' section of the existing 
statute to make clear that one of the primary goals of this 
program is to expand the number of high quality charter schools 
nationally.
    3(b): creates incentives for States to expand the number of 
charter schools over the next 5 years. It would do so by 
changing the way the Federal charter grants are distributed to 
give preference to states to the extent with which they: (1) 
demonstrate progress in increasing the number of high quality 
charter schools that are held accountable in the terms of the 
schools' charters for meeting clear and measurable objectives 
for the educational progress of the students attending the 
schools from year to year; (2) provide a public chartering 
agency, such as a State chartering board, other than the local 
educational agency to provide for an appeals process for 
charter applicants who have been rejected by a local school 
district; (3) provide for periodic review and evaluation of 
each charter school to ensure that they are being held 
accountable in meeting the terms of their charters and the 
academic performance requirements spelled out in their 
contracts; or (4) require the charter schools within their 
State to participate in State assessments, and make the results 
available to the public.
    These new ``priority'' criteria would be phased in to give 
states time to adjust and make changes in their charter 
programs as they see fit. For FY 1998, 1999, and 2000, the 
``priority'' criteria would be used only for distributing any 
funding above the FY 1997 level ($51 million), thereby 
creating, in essence a ``bonus'' fund to reward States that are 
moving immediately toward expanding or improving their charter 
programs. All funding up to the FY 1997 level would continue to 
be awarded as under current law. Starting in FY 2001, the 
``priority'' criteria would be used in the awarding of all 
grants. This would not preclude States with charter laws that 
do not meet these criteria from receiving Federal funding; the 
Secretary will retain some discretion in awarding grants. But 
it would make clear that the Department will give priority to 
those States that are committed to developing new charter 
schools, which is the purpose of this program.
    This subsection also establishes an ``amount criteria'' 
which is intended to ensure that the size of each State grant 
is proportional to the number of new charters to be opened. It 
directs the Secretary to take into consideration the number of 
subgrants to be awarded in determining the amount of grant 
funding the State is to receive.
    3(c): amends the State application provisions to require 
States to describe how they will A) ensure that States inform 
charter schools of their eligibility to receive Federal 
education funding; B) ensure that each charter school gets its 
commensurate share of Federal funds from formula grant programs 
such as Title I and IDEA each year, including the first year of 
operation of the charter school; C) disseminate information 
about ``best practices'' in charter schools to each local 
school district in the state to help broaden the application of 
successful innovations produced by charters.
    3(d): amends the ``National Activities'' section of the 
existing statute, which is Section 10305 of the Elementary and 
Secondary Education Act of 1965.
    Section 10305, ``National Activities,'' as amended, makes 
more funding available for grants to new charter schools. It 
does so by lowering the cap on national activities spending 
from 10 percent of the total appropriated down to the lesser of 
5 percent or $5 million. The amendment directs the Secretary to 
provide new charter schools with assistance in obtaining 
funding from other Federal education programs. The funding 
provided in this section is also to be used to complete the 4-
year national study of charter schools and other related 
studies. It also directs the Secretary to disseminate 
information about ``best practices'' in charter schools to 
traditional public schools throughout the country, again to 
help broaden the application of successful innovations produced 
by charters. And lastly, it calls on the Department to work 
with States to help local charter operators increase access to 
financial resources, including access to private capital to 
meet start-up costs and facility expenses.
    3(e): directs the Secretary, in section 10306, ``Federal 
Formula Allocation During First Year and For Successive 
Enrollment Expansions,'' to take such measures as necessary 
within 6 months of the bill's enactment to ensure that charter 
schools receive the commensurate share of funding from Federal 
formula grant programs for which they are eligible. In the case 
of schools in their first year of operation, it calls on the 
Secretary to take the necessary steps to ensure those new 
schools receive their requisite Federal funding not later than 
5 months after they open. Appropriate adjustments shall be 
made, through the recovery of funds or reduction of payments 
for the succeeding year, in cases where payments made to a 
charter school on the basis of estimated enrollment exceed the 
amounts which the school is eligible to receive on the basis of 
actual or final enrollment data.
    In addition, section 10307, ``Solicitation of Input from 
Charter Schools Operators,'' directs the Secretary to solicit 
input from charter operators throughout the country in 
developing regulations to implement the amendments in this 
bill.
    Section 10308, ``Records Transfers,'' requires States to 
take steps to ensure that student records are transferred 
appropriately under State law.
    Section 10309, ``Paperwork Reduction,'' directs the 
Secretary and the State chartering authorities to take 
reasonable steps to ensure that implementation of the grant 
program results in a minimum of paperwork for schools receiving 
subgrants.
    3(f): amends the ``Definitions'' section of the existing 
statute to make clear that a charter school must have a 
performance-based contract that includes performance objectives 
for student achievement and how those objectives will be 
measured by State and local assessments in order to be eligible 
to receive a subgrant under this program. It also requires that 
states pass a specific charter school authorizing law to 
qualify for the program.
    3(g): increases the authorization for the grant program 
from the original level of $15 million up to $100 million for 
FY 1998 and such sums as may be necessary through FY 2002.

                       X. Changes in Existing Law

    In compliance with rule XXVI paragraph 12 of the Standing 
Rules of the Senate, the following provides a print of the 
statute or the part or section thereof to be amended or 
replaced (existing law proposed to be omitted is enclosed in 
black brackets, new matter is printed in italic, existing law 
in which no change is proposed is shown in roman):

ELEMENTARY AND SECONDARY EDUCATION ACT OF 1965

           *       *       *       *       *       *       *


           TITLE VI--INNOVATIVE EDUCATION PROGRAM STRATEGIES

SEC. 6001. [20 U.S.C. 7301] FINDINGS AND STATEMENT OF PURPOSE.

    (a) Findings.--* * *

           *       *       *       *       *       *       *


                         PART B--STATE PROGRAMS

SEC. 6201. [20 U.S.C. 7331] STATE USES OF FUNDS.

    (a) Authorized Activities.--* * *

           *       *       *       *       *       *       *

                  (C) monitoring and evaluation of programs and 
                activities under this title; [and]
    (2) support for planning, designing, and initial 
implementation of charter schools as described in part C of 
title X; and
    [(2)] (3) technical assistance and direct grants to local 
educational agencies and statewide education reform activities 
including effective schools programs which assist local 
educational agencies to provide targeted assistance.

           *       *       *       *       *       *       *


              PART C--LOCAL INNOVATIVE EDUCATION PROGRAMS

SEC. 6301. [20 U.S.C. 7351] TARGETED USE OF FUNDS.

    (a) General Rule.--* * *

           *       *       *       *       *       *       *

          (7) school reform activities that are consistent with 
        the Goals 2000: Educate America Act; [and]
           (8) planning, designing, and initial implementation 
        of charter schools as described in part C of title X; 
        and
          [(8)] (9) school improvement programs or activities 
        under sections 1116 and 1117.

           *       *       *       *       *       *       *


                     PART C--PUBLIC CHARTER SCHOOLS

SEC. 10301. [20 U.S.C. 8061] FINDINGS AND PURPOSE.

    (a) Findings.--The Congress finds that--

           *       *       *       *       *       *       *

    (b) Purpose.--It is the purpose of this part to increase 
national understanding of the charter schools model by--
          (1) providing financial assistance for the design and 
        initial implementation of charter schools; [and]
          (2) evaluating the effects of such schools, including 
        the effects on students, student achievement, staff, 
        and parents; and.
          (3) expanding the number of high-quality charter 
        schools available to students across the Nation.

SEC. 10302. [20 U.S.C. 8062] PROGRAM AUTHORIZED.

    (a) In General.--* * *

           *       *       *       *       *       *       *

    (e) Priority Treatment.--
          (1) In general.--
                  (A) Fiscal years 1999, 2000, and 2001.--In 
                awarding grants under this part for any of the 
                fiscal years 1999, 2000, and 2001 from funds 
                appropriated under section 10311 that are in 
                excess of $51,000,000 for the fiscal year, the 
                Secretary shall give priority to States to the 
                extent that the States meet 1 or more of the 
                criteria described in paragraph (2).
                  (B) Succeeding fiscal years.--In awarding 
                grants under this part for fiscal year 2002 or 
                any succeeding fiscal year from any funds 
                appropriated under section 10311, the Secretary 
                shall give priority to States to the extent 
                that the States meet 1 or more of the criteria 
                described in paragraph (2).
          (2) Priority criteria.--The criteria referred to in 
        paragraph (12) are as follows:
                  (A) The State has demonstrated progress, in 
                increasing the number of high quality charter 
                schools that are held accountable in the terms 
                of the schools' charters for meeting clear and 
                measurable objectives for the educational 
                progress of the students attending the schools, 
                in the period prior to the period for which a 
                State educational agency or eligible applicant 
                applies for a grant under this part.
                  (B) The State--
                          (i) provides for 1 authorized public 
                        chartering agency that is not a local 
                        educational agency, such as a State 
                        chartering board, for each individual 
                        or entity seeking to operate a charter 
                        school pursuant to such State law; or
                          (ii) in the case of a State in which 
                        local educational agencies are the only 
                        authorized public chartering agencies, 
                        allows for an appeals process for the 
                        denial of an application for a charter 
                        school.
                  (C) The State provides for periodic review 
                and evaluation by the authorized public 
                chartering agency of each charter school, at 
                least once every 5 years unless required more 
                frequently by State law, to determine whether 
                the charter school is meeting the terms of the 
                school's charter, and is meeting or exceeding 
                the academic performance requirements and goals 
                for charter schools as set forth under State 
                law or the school's charter.
                  (D)(i) In the case of a charter school for 
                which the authorized public chartering agency 
                is a State entity, the State requires the 
                school to participate in State assessments, and 
                makes the results available to the public as 
                required by State law or regulation.
                  (ii) In the case of a charter school for 
                which the authorized public chartering agency 
                is a local educational agency, the State 
                requires the school to participate in the local 
                assessments required of other public schools in 
                the school district served by the local 
                educational agency, and makes the results 
                available to the public as required by local 
                law or regulation that is applicable to all 
                public schools in the school district.
    (f) Amount Criteria.--In determining the amount of a grant 
to be awarded under this part to a State educational agency, 
the Secretary shall take into consideration the number of 
charter schools that will be created under this part in the 
State.

           *       *       *       *       *       *       *


SEC. 10303. [20 U.S.C. 8063] APPLICATIONS.

    (a) Applications From State Agencies.--* * *

           *       *       *       *       *       *       *

          (2) describe how the State educational agency--
                  (A) will inform each charter school in the 
                State regarding--
                          (i) Federal funds that the charter 
                        school is eligible to receive; and
                          (ii) Federal programs in which the 
                        charter school may participate;
                  (B) will ensure that each charter school in 
                the State receives the charter school's 
                commensurate share of Federal education funds 
                that are allocated by formula each year, 
                including during the first year of operation of 
                the charter school; and
                  (C) will disseminate best or promising 
                practices of charter schools to each local 
                educational agency in the State; and
          [(2)] (3) contain assurances that the State 
        educational agency will require each eligible applicant 
        desiring to receive a subgrant to submit an application 
        to the State educational agency containing--

           *       *       *       *       *       *       *


[SEC. 10305. [20 U.S.C. 8065] NATIONAL ACTIVITIES.

    [The Secretary may reserve not more than ten percent of the 
funds available to carry out this part for any fiscal year 
for--
          [(1) peer review of applications under section 
        10304(c);
          [(2) an evaluation of the impact of charter schools 
        on student achievement, including those assisted under 
        this part; and
          [(3) other activities designed to enhance the success 
        of the activities assisted under this part, such as--
                  [(A) development and dissemination of model 
                State charter school laws and model contracts 
                or other means of authorizing and monitoring 
                the performance of charter schools; and
                  [(B) collection and dissemination of 
                information on successful charter schools.]

SEC. 10305. NATIONAL ACTIVITIES.

    The Secretary shall reserve for each fiscal year the lesser 
of 5 percent of the amount appropriated to carry out this part 
for the fiscal year or $5,000,000 to carry out the following 
activities;
          (1) To provide charter schools, either directly or 
        through State educational agencies, with--
                  (A) information regarding--
                          (i) Federal funds that charter 
                        schools are eligible to receive; and
                          (ii) other Federal programs in which 
                        charter schools may participate; and
                  (B) assistance in applying for Federal 
                education funds that are allocated by formula, 
                including assistance with filing deadlines and 
                submission of applications.
          (2) To provide for the completion of the 4-year 
        national study (which began in 1996) of charter 
        schools, and to provide for related studies with 
        respect to enhancing parent and student educational 
        choices, strengthening accountability and autonomy for 
        schools, ensuring access to charter schools, and 
        increasing student achievement.
          (3) To provide--
                  (A) information to applicants for assistance 
                under this part;
                  (B) assistance to applicants for assistance 
                under this part with the preparation of 
                applications under section 10303;
                  (C) assistance in the planning and startup of 
                charter schools;
                  (D) training and technical assistance to 
                existing charter schools;
                  (E) information to applicants and charter 
                schools regarding financial resources available 
                to charter schools, including access to private 
                capital; and
                  (F) for the dissemination of best or 
                promising practices in charter schools to other 
                public schools.

SEC. 10306. FEDERAL FORMULA ALLOCATION DURING FIRST YEAR AND FOR 
                    SUCCESSIVE ENROLLMENT EXPANSIONS.

    For purposes of the allocation to schools by the States or 
their agencies of funds under part A of title I, and any other 
Federal funds which the Secretary allocates to States on a 
formula basis, the Secretary and each State educational agency 
shall take such measures not later than 6 months after the date 
of enactment of the Charter School Expansion Act of 1998 as are 
necessary to ensure that every charter school receives the 
Federal funding for which the charter school is eligible not 
later than 5 months after the charter school first opens, 
notwithstanding the fact that the identity and characteristics 
of the students enrolling in that charter school are not fully 
and completely determined until that charter school actually 
opens. The measures similarly shall ensure that every charter 
school expanding its enrollment in any subsequent year of 
operation receives the Federal funding for which the charter 
school is eligible not later than 5 months after such 
expansion. The measures shall include provision for appropriate 
adjustments, through recovery of funds or reduction of payments 
for the succeeding year, in cases where payments made to a 
charter school on the basis of estimated or projected 
enrollment data exceed the amounts which the school is eligible 
to receive on the basis of actual or final enrollment data.

SEC. 10307. SOLICITATION OF INPUT FROM CHARTER SCHOOL OPERATORS.

    To the extent practicable, the Secretary shall ensure that 
administrators, teachers, and other individuals directly 
involved in the operation of charter schools are consulted in 
the development of any rules or regulations required to 
implement this part, as well as in the development of any rules 
or regulations relevant to charter schools that are required to 
implement part A of title I, the Individuals with Disabilities 
Education Act (20 U.S.C. 1400 et seq.), or any other program 
administered by the Secretary that provides education funds to 
charter schools or regulates the activities of charter schools.

SEC. 10308. RECORDS TRANSFER.

    State educational agencies and local educational agencies, 
to the extent practicable, shall ensure that a student's 
records and, if applicable, a student's individualized 
education program as defined in section 602(11) of the 
Individuals with Disabilities Education Act (20 U.S.C. 
1401(11)), are transferred to a charter school upon the 
transfer of the student to the charter school, and to a 
traditional public school upon the transfer of the student from 
a charter school to a traditional public school, in accordance 
with applicable State law.

SEC. 10309. PAPERWORK REDUCTION.

    To the extent practicable, the Secretary and each 
authorized public chartering agency shall ensure that 
implementation of this part results in a minimum of paperwork 
for any eligible application or charter school.

SEC. [10306.] 10310. [20 U.S.C. 8066] DEFINITIONS.

    As used in this part:
          (1) The term ``charter school'' means a public school 
        that--
                  (A) in accordance with [an enabling State 
                statute] a specific State statute authorizing 
                the granting of charters to schools, is 
                exempted from significant State or local rules 
                that inhibit the flexible operation and 
                management of public schools, but not from any 
                rules relating to the other requirements of 
                this paragraph;

           *       *       *       *       *       *       *

                  (H) is a school to which parents choose to 
                send their children, and that admits students 
                on the basis of a lottery, if more students 
                apply for admission than can be accommodated;

           *       *       *       *       *       *       *

                  (J) meets all applicable Federal, State, and 
                local health and safety requirements; [and]
                  (K) operates in accordance with State law.
          (2) The term ``developer'' means an individual or 
        group of individuals (including a public or private 
        nonprofit organization), which may include teachers, 
        administrators and other school staff, parents, or 
        other members of the local community in which a charter 
        school project will be carried out.
          (3) The term ``eligible applicant'' means an 
        authorized public chartering agency participating in a 
        partnership with a developer to establish a charter 
        school in accordance with this part.
          (4) The term ``authorized public chartering agency'' 
        means a State educational agency, local educational 
        agency, or other public entity that has the authority 
        pursuant to State law and approved by the Secretary to 
        authorize or approve a charter school[.]; and
                  (L) has a written performance contract with 
                the authorized public chartering agency in the 
                State that includes performance objectives for 
                student achievement and how the objectives will 
                be measured by State assessments, or in the 
                case of a charter school for which the 
                authorized public chartering agency is a local 
                educational agency, by the local assessments 
                required of other public schools in the school 
                district served by the local educational 
                agency.

SEC. [10307.] 10311. [20 U.S.C. 8067] AUTHORIZATION OF APPROPRIATIONS.

    For the purpose of carrying out this part, there are 
authorized to be appropriated [$15,000,000 for fiscal year 
1995] $100,000,000 for fiscal year 1999 and such sums as may be 
necessary for each of the four succeeding fiscal years.

SEC. 10304. [20 U.S.C. 8064] ADMINISTRATION.

    (a) Selection Criteria for State Educational Agencies.--

           *       *       *       *       *       *       *

    (e) Waivers.--The Secretary may waive any statutory or 
regulatory requirement over which the Secretary exercises 
administrative authority except any such requirement relating 
to the elements of a charter school described in section 
[10306(1)] 10310(1), if--

           *       *       *       *       *       *       *


                     TITLE XIV--GENERAL PROVISIONS

                          PART A--DEFINITIONS

SEC. 14101. [20 U.S.C. 8801] DEFINITIONS.

    Except as otherwise provided, for the purposes of this Act, 
the following terms have the following meanings:
          (1) Average daily attendance.--* * *

           *       *       *       *       *       *       *

          (14) Elementary school.--The term ``elementary 
        school'' means a nonprofit institutional day or 
        residential school, including a public elementary 
        charter school, that provides elementary education, as 
        determined under State law.

           *       *       *       *       *       *       *

          (25) Secondary school.--The term ``secondary school'' 
        means a nonprofit institutional day or residential 
        school, including a public secondary charter school, 
        that provides secondary education, as determined under 
        State law, except that such term does not include any 
        education beyond grade 12.

           *       *       *       *       *       *       *


                                
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