New law restricts real estate self-dealing at charters
Gov. Greg Abbott has signed legislation that restricts selfdealing in real estate transactions for the state’s 6,000 charter schools, prompted by a Hearst Newspaper investigation earlier this year that highlighted questionable land deals and rental agreements made by the publicly funded schools.
An analysis by Hearst Newspapers found cases in which administrators privately owned the school facilities and collected millions from charging rent to the same schools they run. In other cases, charter schools collected valuable real estate at great cost to taxpayers but with a tenuous connection to student learning.
The law, which is now in effect due to its widespread support, requires cities and towns across the state to treat charters as they do public schools by exempting them from certain zoning or city planning regulatory hurdles — but only if the schools agree to more transparency in their real estate transactions under the state’s public records law and pledge not to engage in real estate self-dealing.
A third requirement sets public notice rules for schools that are exempted from the local planning and zoning measures.
Rep. Gina Hinojosa, an Austin Democrat who offered the measure against self-dealing as an amendment to the legislation, credited Hearst’s report for shedding light on the issue.
“This was a great victory for us because we were able to leverage what a lot of House members had problems with, and that’s giving charter schools expanded rights, to get back some much-needed reforms in ex
change for those expanded rights,” she said. “Reforms that we’d been working on for many sessions.”
The Texas Public Charter Schools Association applauded Abbott’s signing of the bill, known as House Bill 1707, a version of which has been a top priority of the group for the past four sessions.
“We were pleased to support all of the amendments made to the bill. Public charter schools and their students deserve basic fairness — and Texans deserve transparency and accountability,” said Brian Whitley, the group’s vice president of communications. Hearst “uncovered some inappropriate practices related to real estate transactions. We’re glad that reporting brought those issues to light and got the ball rolling on cleaning up the law.”
It’s unclear how widespread the issue of charter school self-dealing is, although supporters of charter schools say they are rare. Earlier this year, Hinojosa asked the Texas Education Agency whether it had conducted any audits of such deals, also known as “related party transactions” involving charter schools, part of the agency’s legal authority.
A TEA staffer told Hinojosa’s office in late April that the agency has not performed any audits, instead focusing on enforcing the proper disclosure paperwork from charter schools.
In Texas, public schools receive funding based on their attendance, so districts and charters are in direct competition.
Whitley said before the new law was signed, some cities were attempting to block charter schools from expanding, despite the campuses already receiving TEA approval. In the Dallas-Fort Worth area, for instance, a charter school had been required to pay $700,000 for a planning study as a condition of starting a new campus.
“What we were seeing was that the zoning and permitting process was being used essentially as this backdoor method of
“By no means does this solve the problem, but it’s a giant leap forward.”
Rep. Terry Canales, D-Edinburg
opposing expansion by charter schools that had already been approved and had already gone through the process,” he said. “Now, charter schools won’t have to divert funding from classrooms to dealing with the bureaucracy and the extra hurdles that cities are putting in front of them.”
There were about 400,000 students enrolled in charter schools in the most recent school year, while there are more than 5 million total students in Texas public schools. The wait list for charter schools in the state is about 66,000 students.
Because there are more supporters of traditional school districts in the Texas House than in the more conservative Texas Senate, it came as a surprise that the House amendments adding transparency made it into law.
One of the transparency amendments was offered by Rep. Terry Canales, D-Edinburg, whose district includes a large number of charter schools and has long pushed for increased accountability.
On the phone Tuesday, Canales laughed, saying he never thought the amendments would make it through the Senate or be signed by Abbott. He described the changes as a “monumental victory when it comes to the public’s right to know.”
“By no means does this solve the problem, but it’s a giant leap forward. And the fact that it made it through, it leads me to believe that perhaps there was a lack of attention paid to it,” he said.
Kelsey Kling, a lobbyist for the Texas American Federation of Teachers, which opposes charter schools, said it’s unfair for charters to be exempted from city zoning or planning policies. She described the signing of the bill as a net loss for her organization, but she applauded the extra transparency and accountability requirements.
When school districts build or acquire new facilities, they nearly always do so by borrowing money with bonds, she said. When districts take out bonds, they hold elections over the question, which gives the local community a say.
Charter school approvals are handled at the state level. When a charter is first approved, it must be OK’d by both the Texas Education Agency and the State Board of Education. But after it has won initial approval, it can expand on the authority of the TEA commissioner alone — who is appointed by Abbott.
Kling described this charter school bill as part of a broader “preemption” movement from the Legislature this year to claim enhanced powers over cities, school districts, counties and other local governments — the most prominent example being the so-called “Death Star Bill.”