Report

of the

Legislative Commission on Pensions and Retirement

on

 

The Appropriate Mechanism For
Recovering Unpaid Retirement Contributions From
Closed Charter Schools

 

 

An Interim Study

Mandated By

Special Session Laws 2001,

Chapter 10, Article 13, Section 1

 

February 15, 2002


Table of Contents

Executive Summary

Introduction

Background Information On Minnesota Charter Schools

  1. Origin Of Charter Schools.
  2. Intent Of And Requirements For A Minnesota Charter School.
  3. The Charter School Contract.
  4. Charter School Funding.
  5. Charter School Accountability.

Retirement Coverage For Minnesota Charter School Employers

  1. Statutory Requirements For Public Retirement Plan Coverage.
  2. Currently Closed Charter Schools And Pension Plan Membership.
  3. Currently Open Charter Schools and Pension Plan Membership.

Unpaid Retirement Contributions from Closed Charter Schools

  1. Identification Of Closed Charter Schools.
  2. Unpaid Closed Charter School Retirement Plan Contributions.

Potential Retirement Contribution Collection Difficulties From Open Charter Schools

Omitted Retirement Contributions From Closed Charter Schools

Potential Future Unpaid Or Omitted Charter School Retirement Plan Contributions

  1. Identification Of Open Charter Schools.
  2. Potential For Future Omitted Or Unpaid Charter School Retirement Contributions.

Alternative Recovery Solutions

  1. Alternative Approaches To Viewing The Problem
  2. Potential Alternative Approaches To Solving The Current Unpaid Closed Charter School Retirement Contribution Problem.
  3. Potential Alternative Approaches to Solving the Potential Future Unpaid Charter School Retirement Contribution Problem.

Commission-Recommended Recovery Solutions

Conclusion


Executive Summary

The Legislative Commission on Pensions and Retirement was directed by the 2001 Legislature to recommend a resolution for a problem related to unpaid retirement contributions by closed charter schools in a report to the 2002 Legislature.

The Commission considered the problem during the 2001-2002 Interim in four hearings and took testimony from several interested parties.

Charter schools originated in Minnesota in 1991. Public retirement plan coverage is required to be provided to charter school employees by Minnesota Statutes, Section 124D.10, Subdivision 22, with the requirement added for teachers in 1995 and added for support personnel in 1997. At least 68 charter schools currently exist in Minnesota, and 14 charter schools have closed, with three charter schools (Central Minnesota Deaf School, Dakota Open Charter School, and Frederick Douglass Charter School) having closed leaving unpaid retirement plan contributions and with one charter school (Right Step Academy) having closed leaving omitted retirement contributions for charter school employees who were inappropriately excluded from public pension plan membership. The unpaid closed charter school retirement contributions totaled $24,180.67 (principal amount) and the recognized omitted closed charter school retirement contributions have been estimated to total $195,680.27. Three public retirement plans, the Minneapolis Teachers Retirement Fund Association (MTRFA), the Teachers Retirement Association (TRA), and the Public Employees Retirement Association (PERA), have unpaid closed retirement plan contributions, with MTRFA having the largest contribution amount due. Of the recognized omitted closed charter school retirement contributions, only PERA was involved.

With 17 percent of charter schools in Minnesota having already closed, more closures of charter schools can be expected in the future. Many current charter schools indicate no retirement coverage for some or all of their employees, so the extent of omitted charter school retirement contributions is undoubtedly much greater than the Right Step Academy, but currently undetermined.

Focusing on the problem broadly, the Commission considered 21 different potential remedies to the unpaid closed charter school retirement plan contribution situation. The Commission recommends that the Legislature enact legislation that would provide for the following:

  1. State Payment of Closed Charter School Unpaid Retirement Contributions. The Department of Children, Families and Learning, based on retirement plan certifications, will pay charter school retirement contributions remaining unpaid from charter schools that closed before April 1, 2002, from the charter school lease aid program;

  2. Future Retirement Coverage for Charter School Teacher by the Teachers Retirement Association. The Teachers Retirement Association is required to provide retirement coverage for all charter school teachers, including teachers in charter schools located in one of the cities of the first class.

The Commission believes that prompt legislative attention to its recommendations will resolve the unpaid closed charter school retirement contribution problem.


Introduction

The 2001 Special Session of the Legislature, in Special Session Laws 2001, Chapter 10, Article 13, Section 1, mandated an interim study by the Legislative Commission on Pensions and Retirement of the appropriate mechanism for the recovery of unpaid member and employer public retirement plan contributions from charter schools that have ceased operations.

Specifically, the 2001 legislation provided the following:

(a) The legislative commission on pensions and retirement shall study and recommend the appropriate mechanism for recovering unpaid member and employer retirement plan contributions from charter schools that cease operations.

(b) The report must include the draft proposed legislation that would be required to implement the mechanism recommended by the commission.

(c) The report must be filed by February 15, 2002, with the chairs of the senate committees on state and local government operations and education and with the chairs of the house committees on governmental operations and veterans affairs policy and education.

The Commission held four hearings during which it considered the topic of unpaid closed charter school retirement plan contributions. The Commission meetings were held on October 9, 2001, December 11, 2001, January 22, 2002, and February 7, 2002. Public testimony was taken at each Commission meeting, predominantly from the administrators of the various affected pension plans, but also including representatives of the Department of Children, Families and Learning and of Minnesota charter schools.

During the course of the four hearings, the Commission considered three Commission staff issue memoranda. The meeting materials were available generally, including posting on the Internet.


Background Information On Minnesota Charter Schools

  1. Origin Of Charter Schools.

Charter schools are nonsectarian public schools of choice that operate with freedom from many of the regulations that apply to traditional public schools. The "charter" establishing each school is a performance contract detailing the school’s mission, program, goals, students served, methods of assessment, and ways to measure success. The length of time for which charters are granted varies, depending on state law. At the end of the term, the entity granting the charter may renew the school’s contract. Charter schools are accountable to their sponsor to produce positive academic results and adhere to the charter contract. The basic concept of charter schools is that they exercise increased autonomy in return for this accountability.

The charter school movement has roots in a number of other reform ideas, from alternative schools, to site-based management, to magnet schools, to public school choice, to school privatization, and to community-parental empowerment. The term "charter" may have originated in the 1970s when New England educator Ray Budde suggested that small groups of teachers be given contracts or "charters" by their local school boards to explore new approaches. Albert Shanker, the former president of the American Federation of Teachers (AFT), then publicized the idea, suggesting that local boards could charter an entire school with union and teacher approval. In the late 1980s, Philadelphia started a number of schools-within-schools and called them "charters." Some of these schools were schools of choice. The idea was further refined in Minnesota and is based on the achievement of three basic values: opportunity, choice, and responsibility for results.

In 1991, Minnesota became the first state in the nation to authorize charter schools (first called outcome-based schools). The law, Minnesota Statutes, Sections 124D.10 and 124D.11, permits teachers, parents and other community members to form and operate independent charter schools. To promote innovation, charter schools are exempt from many statutes and rules governing school districts but are held accountable for results. A Minnesota charter school is a public school and is part of the state’s public education system.

California followed suit by authorizing charter schools in 1992. By 1995, 19 states had enacted laws that allowed for the creation of charter schools, and by 1999 that number increased to include 36 states, Puerto Rico, and the District of Columbia. The Center for Educational Reform’s 1998-1999 National Charter School Directory reports that 1,205 charter schools served every grade from pre-K to adult. Of these, 58 percent were elementary schools, 20 percent were secondary schools, and 22 percent included grades at both levels. Arizona leads the nation in the number of charter schools, with nearly 350 schools currently in operation, followed by California (234), Michigan (over 175), Texas (over 150), and Florida (112). As of April 2001, the Department of Children, Families and Learning reported that there are 63 operating charter schools in Minnesota. In the 1999-2000 school year, approximately 6500 students attended charter schools, with 66 percent in elementary grades and with 34 percent in secondary grades.

      Estimated Number of Charter Schools in Operation as of September 1999, by State

      Source: U.S. Department of Education, The State of Charter Schools 2000 – Fourth-Year Report, January 2000

  1. Intent Of And Requirements For A Minnesota Charter School.

Minnesota Statutes, Sections 124D.10 and 124D.11, require that a charter school must meet one or more of the following purposes:

Under Minnesota law, the organizers of a charter school must obtain a sponsorship from an eligible sponsor. Eligible charter school sponsors are:

  1. A school board;
  2. An intermediate school district school board;
  3. A federal Internal Revenue Code Section 501(c)(3) charitable organization that is a member of the Minnesota Council on Foundations, that registers with the Attorney General’s office, and that reports an end-of-year fund balance of at least $2 million;
  4. A Minnesota private college that grants two- or four-year degrees and that registers with the Minnesota Higher Education Services Office;
  5. A community college, state university, or technical college that is part of the Minnesota State Colleges and Universities system (MnSCU); and
  6. The University of Minnesota.

Before acting on a potential charter school charter, the sponsor must inform the public, including low-income families and communities and students of color, and how to form and operate a charter school and how to use a charter school’s offerings. A sponsor must obtain approval from the Commissioner of the Department of Children, Families and Learning (CFL) to authorize a charter school. If a school board elects not to sponsor a proposed charter school, the applicant may appeal this decision to the CFL Commissioner.

A charter school must be formed either as a cooperative corporation under Minnesota Statutes, Chapter 308A or a non-profit corporation under Minnesota Statutes, Chapter 317A. The parents of students enrolled in the school and staff employed at the school elect a board of directors in a timely manner after the school begins operation. Licensed teachers employed by the school must constitute a majority of the board unless the CFL Commissioner waives that requirement. The charter school board determines all aspects of the school’s education program, management and administration. The charter school board determines what responsibilities are maintained by the board and what responsibilities are delegated to staff or contracted to service providers. The charter school contract must include explicit pupil performance statements in the form of academic and non-academic goals and an outline of the sponsor evaluation and intervention plan (schedule of visits, services/assistance to be provided or expected, interventions to be administered if the school struggles, and criteria for not renewing the contract after it expires or revoking the contract). A charter school may be located in any school district unless the school board of the district in which the location is proposed adopts a written resolution disapproving the location. A charter school that is the only school in a town serving pupils within a particular grade level must give preference to enrolling pupils residing in the town or within two miles of the school if the next closest public school is more than five miles away before accepting pupils by lot. A charter school also must give preference to the siblings of an enrolled pupil and to a foster child of that pupil’s parents before accepting other pupils by lot.

  1. The Charter School Contract.

Within 90 days of the date when the Commissioner of Children, Families and Learning approves a sponsor's proposed authorization of a charter school, the sponsor and the board of directors of the charter school must enter into a signed written contract. The contract must include the following:

    1. The purpose of the program;
    2. Pupil outcome requirements that meet or exceed the educational outcomes required of other public school students;
    3. Admission policies and procedures;
    4. School management and administration structure;
    5. Requirements and procedures for program and financial audits;
    6. Compliance with state and local requirements applicable to charter schools, the required number of days of student instruction, the provision of transportation to pupils enrolled in the charter school, and the causes for not renewing or terminating the contract;
    7. The liability of the charter school;
    8. The types and amounts of insurance the charter school will obtain;
    9. The contract term, which must not exceed three years; and
    10. The financial parameters for providing special education instruction and services, if applicable.

The charter school board of directors must obtain at least the amount and types of insurance specified in the contract and may sue and be sued.

  1. Charter School Funding.

Charter school funding from or through the State of Minnesota consists of four components:

    1. General Education Revenue. General education revenue is paid to a charter school as though it was a school district. General education revenue is the primary source of general operating funds for school districts and charter schools. It is composed of basic general education revenue, basic skills revenue (including compensatory revenue), training and experience revenue, elementary and secondary sparsity revenue, transportation sparsity revenue, operating capital, equity revenue, transition revenue, and supplemental revenue. The Department of Children, Families and Learning makes 23 equal aid payments to a charter school during a fiscal year, except in the first year of the school’s operation when the first payment is 10 percent of the cumulative aid amount for that fiscal year followed by 22 equal payments that total 90 percent of the cumulative aid amount.

    2. Referendum Revenue. A charter school receives the aid portion of each enrolling student’s referendum revenue based on the student’s resident district referendum amount.

    3. Special Education Revenue. A charter school receives special education revenue as though it were a school district. In addition, a charter school may bill back to a disabled student’s resident school district any eligible unreimbursed special education costs.

    4. Transportation Aid. Annually, a charter school must notify the Department of Children, Families and Learning if it will provide transportation for its pupils in that fiscal year. A charter school that elects to provide transportation for its pupils receives state transportation aid. If the charter school elects not to provide transportation, the school district in which the charter school is located must provide transportation within the district and may provide transportation to nonresident pupils within the pupils' resident district. A charter school is not required to provide or pay for transportation between a nonresident pupil's home and the border of the district in which the charter school is located. The school may reimburse a parent for the costs of transporting a nonresident pupil to the border of the district if the pupil's family income is at or below the federal poverty level.

    5. Building Lease Aid. Building lease aid may be granted by the Department of Children, Families and Learning based on an application from charter schools. Building lease aid funds must be used to lease space for instructional purposes. The amount of building lease aid is now up to 90 percent of approved costs or the number of pupil units served multiplied by $1,500.

    6. Charter School Start-Up Aid. During the first two years of a charter school’s operation, the charter school is eligible for start-up aid equal to the greater of $50,000 per charter school or the number of pupil units served multiplied by $500.

    7. Integration Revenue. A charter school is eligible for the aid portion of integration revenue for enrolled students who are residents of a district that is eligible for integration revenue if the enrollment of the pupil in the charter school contributes to integration or desegregation purposes.

    8. Federal Planning And Start-Up Grant Funds. Federal planning and start-up grant funds may be awarded by the Department of Children, Families and Learning, based on an application from charter schools. These funds must be used for planning or startup purposes. Charter schools are eligible to apply for up to three years of federal startup aid from the date of the approval of the charter school by the Department of Children, Families and Learning Commissioner. The aid is currently up to $140,000, $150,000, and $120,000, respectively, in the three eligible years.

    9. Other Aid, Grants, Revenue. A charter school is eligible to receive other aids, grants, and revenue according to the school funding formulas as though it were a school district unless the receipt of the revenue would require a local property tax levy. A charter school may receive money from any source for capital facilities needs. Any unexpended capital facilities revenue must be reserved and may be expended only for future capital facilities purposes.

A charter school board of directors may not levy taxes or issue bonds.

  1. Charter School Accountability.

Minnesota law requires that the sponsor of a charter school must monitor the fiscal and student pupil performance of the charter school. If at any time the charter school is not meeting expected outcomes, the sponsor must work with the charter school to implement an improvement plan. The charter school must submit an annual report to the sponsor and to the Department of Children, Families and Learning (CFL), which must include all sponsor and CFL required components. After the term of the contract or during the term, if the charter school is not meeting pupil performance expectations, fails to meet generally accepted standards of fiscal management, or is in violation of the law and the sponsor intervention is not showing results, the charter school sponsor may act to terminate the contract. If the charter school has a history of financial mismanagement or of repeated violations of the law, the Department of Children, Families and Learning may act to terminate the contract.

A sponsor and the sponsor’s employees, as well as the members of a charter school’s board of directors operating in their official capacity and the Commissioner, are immune from civil and criminal liability for sponsoring a charter school or approving charter school activities.


Retirement Coverage For Minnesota Charter School Employers

  1. Statutory Requirements For Public Retirement Plan Coverage.

Minnesota Statutes, Section 124D.10, Subdivision 22, governs the retirement coverage for charter school employees. Minnesota Statutes, Section 124D.10, Subdivision 22, Paragraph (a), requires that teachers in a charter school be members of the Teachers Retirement Association (TRA) or of one of the first class city teacher retirement fund associations (Duluth (DTRFA), Minneapolis (MTRFA), or St. Paul (StPTRFA)). Minnesota Statutes, Section 124D.10, Subdivision 22, Paragraph (b), requires that charter school employees who are not teachers be members of the General Employees Retirement Plan of the Public Employees Retirement Association (PERA-General).

The requirement for charter school teachers to be members of a Minnesota teachers retirement plan was added in 1995 (First Special Session Laws 1995, Chapter 3, Article 9, Section 2, Subdivision 20a). The requirement for non-teaching charter school employees to be members of the Public Employees Retirement Association (PERA) was enacted in 1997 (First Special Session Laws 1997, Chapter 4, Article 5, Section 9). Neither the 1995 or the 1997 provision was considered by or recommended by the Legislative Commission on Pensions and Retirement, but appear to be policy initiatives either of the education community or of the Senate and House Education Committees.

The 1995 requirement that charter school teachers be members of a Minnesota teacher retirement plan did not specify the particular teacher retirement plan to provide coverage. The actual allocation of charter school teachers between teacher retirement plans apparently depends upon a non-statutory agreement between the four teacher pension plans, with the teachers employed by any charter school located in the city of Duluth covered by the Duluth Teachers Retirement Fund Association (DTRFA), the teachers employed by any charter school located in the city of Minneapolis covered by the Minneapolis Teachers Retirement Fund Association (MTRFA), the teachers employed by any charter school located in the city of St. Paul covered by the St. Paul Teachers Retirement Fund Association (StPTRFA), and all other charter school teachers covered by the Teachers Retirement Association (TRA).

  1. Currently Closed Charter Schools And Pension Plan Membership.

From information provided by the Department of Children, Families and Learning (CFL), the Duluth Teachers Retirement Fund Association (DTRFA), the Minneapolis Teachers Retirement Fund Association (MTRFA), the St. Paul Teachers Retirement Fund Association (StPTRFA), and the Teachers Retirement Association (TRA), prompted by a Commission staff request, 14 charter schools have closed. The following summarizes the public retirement plan membership data for the 14 closed charter schools:

       

      Teachers

      Support Staff

       

      Covered by:

       

       

       

      Closed Charter School

      TRA

      DTRFA

      MTRFA

      StPTRFA

      Average Salary

      Covered by PERA

      Average Salary

      Central Minnesota Deaf School

      3

       

       

       

      $6,785.42

      6

      $ 5,161.51

      Dakota Open Charter School

      6

       

       

       

      15,157.85

      1

      --

      Fort Snelling Academy

       

       

      19

       

      32,845.41

      4

      23,238.00

      Frederick Douglass Charter School

       

       

      11

       

      23,750.00

      0

      4,783.36

      Learning Adventures Middle School

      --

       

       

       

      --

       

      --

      Peaks-Faribault

      --

       

       

       

      --

       

      --

      Peaks-Pillager

      --

       

       

       

      --

       

      --

      Prairie Island Community School

      --

       

       

       

      --

       

      --

      Right Step Academy

       

       

       

      30

      30,534.00

      3

      --

      Skills For Tomorrow

      10

       

       

       

      32,193.40

      18

      8,582.31

      Strategies For Success

       

       

       

      6

      53,181.10

      --

      --

      Success Academy

       

       

       

      72

      19,350.83

      103

      11,267.04

      Summit School

      5

       

       

       

      4,209.93

      26

      4,641.53

      Toivola-Meadowlands School

      1

       

       

       

      20,278.00

      18

      10,232.13

      Total

      25

      0

      30

      108

      $24,467.75

      179

      $9,964.38

  1. Currently Open Charter Schools and Pension Plan Membership.

Also from the information provided by CFL, DTRFA, MTRFA, StPTRFA, and TRA, there were 68 charter schools which were open during the 2000-2001 school year. The following summarizes the public retirement plan membership data for the 68 open charter schools:

       

      Teachers

      Support Staff

       

      Covered by:

      Average

      Covered

      Average

      Open Charter School

      TRA

      DTRFA

      MTRFA

      StPTRFA

      Salary

      by PERA

      Salary

      Academia Cesar Chavez Chtr. School

              

      --

       

      --

      ACORN Dual Lang. Comm. School

           

      24

      $33,322.20

      21

      $14,060.39

      Agric. & Food Sciences Academy

             

      --

       

      --

      Aurora Charter School

         

      3

       

      20,738.39

      5

      13,757.71

      Bluffview Montessori Chtr. School

      25

           

      13,891.13

       

      --

      Cedar-Riverside Community School

         

      9

       

      26,111.84

       

      --

      City Academy

           

      10

      40,368.71

      12

      21,063.36

      Community of Peace

           

      47

      35,279.42

      36

      13,909.17

      Concordia Creative Learning Acad.

           

      11

      34,895.45

      31

      7,125.71

      Coon Rapids Leaning Center

      11

           

      29,969.82

      6

      23,570.24

      Cross Lake Community School

      8

           

      12,223.55

       

      --

      Cyber Village Academy

           

      11

      39,568.90

      12

      13,841.82

      Duluth Edison Academies

       

      88

         

      24,633.00

       

      --

      E.C.H.O. Charter School

      12

           

      12,585.15

       

      --

      Eci’ Nompa Woonspe’ Chtr. School

      4

           

      40,549.29

      12

      8,906.56

      El Colegio Charter School

         

      3

       

      33,333.30

       

      --

      Emily Charter School

      17

           

      11,647.87

      13

      9,530.55

      Excell Academy

             

      --

       

      --

      Face to Face Academy

           

      6

      30,298.25

       

      --

      Family Academy

      14

           

      19,903.06

      10

      5,648.45

      Fort Snelling Academy

         

      19

       

      32,845.41

      4

      23,310.22

      Four Directions Charter

         

      4

       

      43,479.31

      5

      12,677.38

      Hanska Community School

      12

           

      8,240.80

       

      --

      Harvest Preparatory Academy

         

      18

       

      20,561.69

       

      --

      Heart of the Earth Ctr for Am. Indians

         

      41

       

      23,317.67

      46

      18,567.80

      High School for the Recording Arts

           

      4

      35,310.48

      2

      29,873.26

      Higher Ground Academy

           

      25

      34,825.80

      78

      8,697.76

      HOPE Community Academy

           

      24

      29,607.25

       

      --

      La Crescent Montessori Academy

      6

           

      16,975.02

      5

      12,913.78

      Lafayette Public Charter School

      10

           

      16,194.30

       

      --

      Lakes Area Charter School

      8

           

      17,696.31

      7

      7,279.03

      Learning Adventures Middle School

           

      5

      38,893.46

      7

      11,714.61

      Martin Hughes Charter 4040

      20

           

      29,780.48

      27

      13,776.83

      Math and Science Academy

      22

           

      22,205.51

      7

      26,392.03

      Metro Deaf School

           

      25

      34,560.92

      26

      9,628.73

      Mexica Multicultural Education

           

      4

      27,507.30

      10

      7,564.01

      Minnesota Business Academy

           

      32

      34,234.47

      25

      13,592.89

      Minnesota Institute of Tech. #9130

           

      30

      30,336.62

       

      --

      Minnesota Institute of Tech. #9210

             

      --

       

      --

      Minnesota New Country School

      10

           

      35,633.34

       

      --

      Minnesota Technology High School

           

      5

      38,725.11

      13

      13,268.82

      Minnesota Transitions Chtr. School

         

      32

       

      18,763.27

      39

      6,721.58

      Native Arts High School

         

      5

       

      31,429.64

       

      --

      Nerstrand Charter School

      14

           

      28,466.50

       

      --

      New Heights School

      17

           

      22,426.26

      11

      14,770.12

      New Spirit School

           

      30

      29,736.60

      13

      18,856.99

      New Visions School

         

      42

       

      25,246.92

      58

      10,677.34

      North Lakes Academy

      18

           

      26,816.14

      8

      15,563.20

      Odyssey Charter School

      20

           

      22,443.33

      26

      9,677.75

      PACT Charter School

      40

           

      21,359.49

      34

      9,514.39

      Peak’s Charter School, Duluth

       

      7

         

      21,621.00

      5

      10,730.19

      Peak’s Charter School, Faribault

      9

           

      9,292.09

       

      --

      Peak’s Charter School, Pillager

      7

           

      13,372.91

       

      --

      Peak’s Charter School, St. Cloud

      4

           

      28,771.09

      3

      9,614.39

      Pillager Area Charter School

             

      --

       

      --

      RiverBend Academy

      12

           

      33,634.56

         

      Riverway Learning Community

      17

           

      9,457.64

      4

      9,974.83

      Rochester Off Campus

      19

           

      19,902.35

      1

      32,873.48

      St. Paul Family Learning Center

           

      13

      37,691.02

      47

      8,910.32

      Schoolcraft Learning Community

      12

           

      27,189.25

      9

      7,447.78

      Skills for Tomorrow Sr. High Sch.

           

      4

      35,541.45

      16

      15,297.94

      Sojourner Truth Academy

         

      20

       

      25,975.50

      23

      14,081.61

      Strategies for Success

                   

      Studio Academy

      9

           

      31,800.00

         

      Twin Cities Academy

           

      24

      34,462.61

      9

      9,767.22

      Village School of Northfield

      6

           

      28,421.94

      6

      14,592.33

      World Learner of Chaska

      5

           

      34,714.33

      8

      16,112.41

      Yankton Country School

      4

           

      22,766.76

         

      Total

      392

      95

      196

      323

      $26,365.42

      740

      $11,667.52


Unpaid Retirement Contributions from Closed Charter Schools

  1. Identification Of Closed Charter Schools.

The Commission staff contacted the five affected retirement plans, the Teachers Retirement Association (TRA), the General Employee Retirement Plan of the Public Employees Retirement Association (PERA-General), the Duluth Teachers Retirement Fund Association (DTRFA), the Minneapolis Teachers Retirement Fund Association (MTRFA), and the St. Paul Teachers Retirement Fund Association (StPTRFA), and the State Department of Children, Families and Learning to gain information on closed charter schools and the magnitude of any unpaid retirement plan contributions.

The five retirement plans and the Department of Children, Families and Learning were not wholly consistent in their identification of the closed charter schools and in providing other relevant information. The following compares the reported information on which charter schools have closed before September 2001, and the reported date of closure:

      CFL

      TRA

      PERA

      Central Minnesota Deaf School (1/12/00)

      Central Minnesota Deaf School (7/00)

      Central Minnesota Deaf School (4/00)

      Dakota Open Charter School (12/18/97)

      Dakota Open School (12/97)

       

      Fort Snelling Academy (6/1/01)

         

      Frederick Douglass (4/7/99)

       

      Frederick Douglass (4/99)

      Learning Adventures Middle School (6/01)

         

      Peak’s-Faribault

       

      Peak’s Charter School, Faribault (3/01)

      Peak’s-Pillager

       

      Peak’s Charter School, Pillager (6/01)

      Prairie Island Community School (8/96)

      Prairie Island Charter School (8/96)

       

      Right Step Academy (8/1/00)

       

      Right Step Academy (6/00)

      Skills for Tomorrow Junior High

       

      Skills for Tomorrow Junior High School (6/01)

      Strategies for Success (5/4/01)

         

      Success Academy (5/12/00)

       

      Success Academy (9/00)

      Summit School for the Arts (1/00)

      Summit School for the Arts (1/00)

      Summit School for the Arts (1/00)

      Toivola-Meadowlands (7/1/00)

      Toivola-Meadowlands Charter School (9/00)

      Toivola-Meadowlands Charter School (7/00)

      CFL

      DTRFA

      MTRFA

      StPTRFA

      Central Minnesota Deaf School (1/12/00)

      No

         

      Dakota Open Charter School (12/18/97)

      reported

         

      Fort Snelling Academy (6/1/01)

      closed

      Fort Snelling Academy (7/01)

       

      Frederick Douglass (4/7/99)

      charter

      Frederick Douglass (4/99)

       

      Learning Adventures Middle School (6/01)

      schools

         

      Peak’s-Faribault

           

      Peak’s-Pillager

           

      Prairie Island Community School (8/96)

           

      Right Step Academy (8/1/00)

         

      Right Step Academy (8/00)

      Skills for Tomorrow Junior High

         

      Skills for Tomorrow Junior High School (7/01)

      Strategies for Success (5/4/01)

         

      Strategies for Success (5/01)

      Success Academy (5/12/00)

         

      Success Academy (6/00)

      Summit School for the Arts (1/00)

           

      Toivola-Meadowlands (7/1/00)

           

There are problems with the identification of closed charter schools, with particular reference to four charter schools. The four charter schools which raise questions about their appropriate classification are:

(1) the Fort Snelling Academy;

(2) the Learning Adventures Middle School;

(3) the Peak’s Charter School, Faribault; and

(4) the Peak’s Charter School, Pillager.

Although the Department of Children, Families and Learning and the Minneapolis Teachers Retirement Fund Association (MTRFA) identified the Fort Snelling Academy as a closed charter school, both MTRFA and the Public Employees Retirement Association (PERA) identify it as an open charter school. Although CFL identified the Learning Adventures Middle School as a closed charter school, both PERA and the St. Paul Teachers Retirement Fund Association (StPTRFA) identified it as an open charter school. Additionally, although both CFL and PERA identified the Peak’s Charter School, Faribault, and the Peak’s Charter School, Pillager, as closed charter schools, TRA identified these two as open charter schools.

  1. Unpaid Closed Charter School Retirement Plan Contributions.

The five affected Minnesota retirement plans, the Duluth Teachers Retirement Fund Association (DTRFA), the Minneapolis Teachers Retirement Fund Association (MTRFA), the St. Paul Teachers Retirement Fund Association (StPTRFA), the Teachers Retirement Association (TRA), and the Public Employees Retirement Association (PERA) report that there are unpaid retirement contributions owed by closed charter schools. Three closed charter schools currently have unpaid retirement plan contributions due and owing. The principal amount of those unpaid contributions and the retirement plan or plans involved are as follows:

Closed Charter School

Principal Amount of
Unpaid Retirement Plan Contributions

Total

MTRFA

PERA

TRA

Central Minnesota Deaf School

$ 148.47

$ 148.47

Dakota Open Charter School

411.14

411.14

Frederick Douglass Charter School

$ 22,831.86

$ 789.20

23,621.06

Total Contributions Due

$ 22,831.86

$ 937.67

$ 411.14

$ 24,180.67

There are several observations that can be made relative to the current unpaid closed charter school retirement plan contributions, as follows:

    1. Unpaid Contributions Occurred In A Minority Of Closed Charter Schools. Only 28.6 percent of the indicated closed charter schools had unpaid retirement plan contributions. However, if the number of closed charter schools is reduced to the number of charter schools where there is no controversy or counterindication, or 10 charter schools, the percentage increases to forty percent.

    2. Unpaid Contributions In Half The Cases Were Essentially Nominal. In two of the three total cases of closed charter schools with unpaid or omitted retirement plan contributions, the principal amount of the unpaid retirement plan contributions was essentially nominal. For the Central Minnesota Deaf School and the Dakota Open School, involving the General Employee Retirement Plan of the Public Employees Retirement Association (PERA-General) and the Teachers Retirement Association (TRA), the amount of the unpaid retirement plan contributions totaled less than $560 and appears to be no more than one payroll period amount of retirement plan contributions.

    3. Unpaid Contributions Essentially Had A De Minimis Financial Impact. The reported unpaid member and employer contributions, without interest, have a de minimis impact on the total support of the affected retirement plans, as follows:

    Pension Plan

    Total Unpaid 
    Contribution Amount

    Percentage of 7/1/1999 -
    6/30/2000 Contributions

    Percentage of 7/1/1999 -
    6/30/2000 Covered Payroll

    DTRFA

    --

    --

    --

    MTRFA

    $22,831.86

    0.04%

    0.009%

    TRA

    411.14

    0.0002

    0.00002

    PERA

    937.67

    0.0002

    0.00002

  1. Amount Of Unpaid Contributions Predominantly Involved MTRFA. When assessed by the amount of the unpaid retirement plan contributions, their occurrence predominated in the Minneapolis Teachers Retirement Fund Association (MTRFA) and not in the statewide teacher retirement plan involved, the Teachers Retirement Association (TRA). The following compares the percentage of the total unpaid retirement plan contribution amount attributable to each affected retirement plan:

    Plan

    Amount

    Percentage

    MTRFA

    $22,831.86

    94.42%

    PERA-Unpaid

    937.67

    3.88

    TRA

    411.14

    1.70

    Total

    $24,180.67

    100.00%

  1. Only One Closed Charter Involved More Than One Retirement Plan. In only one case, the Frederick Douglass Charter School, were there unpaid retirement plan contributions to two pension plans. The amount of retirement contributions from the Frederick Douglass Charter School that were not paid to PERA was significantly smaller ($789.20 compared to $22,831.86) than the amount not paid to MTRFA.

  2. Current Unpaid Contributions By Closed Charter Schools Indicate An MTRFA Contribution Collection Problem. The unpaid contributions from the closed charter school with significant unpaid contribution amounts, the Frederick Douglass Charter School, were likely unpaid for a significant period of time, indicating that the affected retirement plan, the Minneapolis Teachers Retirement Fund Association (MTRFA), either was inattentive to its own contribution collection procedures or was unsuccessful in pursuing existing collection options. For the Frederick Douglass Charter School and MTRFA, from the information on the number of teachers and average teaching salaries reported, the unpaid contributions approach two-thirds of a year of contributions.

  3. Reported Information Is Incomplete Or Conflicting. In some cases with the affected charter schools, the information reported by the Department of Children, Families and Learning and by the affected pension plan(s), the information is incomplete or conflicting. For instance, for the Frederick Douglass Charter School, there is insufficient data on support staff personnel to fully evaluate the unpaid PERA contributions.


Potential Retirement Contribution Collection Difficulties From Open Charter Schools

For the 2000-2001 school year, 1,018 teachers and 773 support staff in open charter schools were covered by Minnesota public pension plans, involving $4.5 million in annual contributions. The following sets forth the breakdown of those numbers, organized by retirement plan:

Public
Retirement
Plan

Number of
Charter
Schools
Reporting

Number of
Teachers/
Support
Employees

Total
Employee
Contributions

Total
Employer
Contributions

Total
Contributions

DTRFA

2

95

$ 127,547.80

$ 134,273.05

$ 261,820.85

MTRFA

11

196

267,233.45

395,505.50

622,738.95

StPTRFA

20

334

621,720.40

942,754.20

1,564,474.60

TRA

32

393

417,907.43

417,907.43

835,814.86

PERA

44

773

428,402.25

467,183.93

895,586.18

Total

 

1,791

$2,162,811.33

$2,357,624.11

$4,520,435.44

Specific information on the five public retirement plans and the open charter schools to which they provide retirement coverage is available in five attachment items (Attachment G, Duluth Teachers Retirement Fund Association (DTRFA); Attachment H, Minneapolis Teachers Retirement Fund Association (MTRFA); Attachment I, St. Paul Teachers Retirement Fund Association (StPTRFA); Attachment J, Teachers Retirement Association (TRA), and Attachment K, Public Employees Retirement Association (PERA)).

The open charter school member and employer retirement plan contributions constitute various proportions of total retirement plan member and employer contributions, as indicated in the following:

Retirement Plan

No. of
Charter
School
Members

Charter
School
Average
Salary

Retirement
Plan
Average
Salary1

Ret. Plan
Average
Salary
<5 Years1

Ret. Plan
Average
Salary
>24 Years2

Total Charter
School
Member
Contr.

% Total
Plan
Member
Contr.2

Total Charter
School
Employer
Contr.

% Total
Plan
Employer
Contr.2

DTRFA

95

$24,411.06

$38,785.68

$19,128.66

$57,041.35

$127,547.80

4.15%

$134,273.05

4.15%

MTRFA

196

24,789.75

46,436.25

28,520.24

71,558.56

267,233.45

1.63

395,505.50

1.65

StPTRFA

334

33,844.33

44,502.86

28,399.03

69,019.10

621,720.40

4.91

942,754.20

4.97

TRA

393

21,267.55

41,901.30

23,808.22

57,302.16

417,907.43

0.28

417,907.43

0.28

PERA

773

11,667.52

27,905.85

17,533.91

43,831.37

428,402.25

0.24

467,183.93

0.24

1 Salary figures have been projected for the 2000-2001 school year from the July 1, 2000 actuarial valuation figures by 5.25% for DTRFA, 5.00% for MTRFA, 5.25% for StPTRFA, 5.00% for TRA, and 5.00% for PERA, which are the bottom end of the range of assumed salary increases for the plans.

2 The gross July 1, 2000, contributions were adjusted by the same percentage as applicable in note 1.

There are several observations that deserve to be presented relative to the situation of open charter school retirement plan coverage and retirement plan contributions. These observations are as follows:

  1. Potential For Omitted Coverage: Charter Schools Without PERA Coverage. Of the 68 open charter schools, 20 charter schools have teachers with retirement coverage by either the Teachers Retirement Association (TRA) or first class city teacher retirement fund associations, but lack any support staff with Public Employees Retirement Association (PERA) retirement coverage. This raises the question of whether or not all the public employees who are eligible for public retirement plan coverage have PERA coverage. If some individuals should be PERA members, but are not, as was the case with the closed Right Step Academy, this would understate the amount of ongoing retirement contributions and may give rise to omitted retirement coverage or service credit purchase problems in the future. The affected charter schools are:
  2. Bluffview Montessori Charter School (Winona School District)

    Cedar-Riverside Community School (Special School District No. 1 (Minneapolis))

    Cross Lake Community School (Minnesota State Board of Education)

    Duluth Edison Academies (Duluth School District)

    E.C.H.O. Charter School (Yellow Medicine East School District)

    El Colegio Charter School (Augsburg College)

    Face to Face Academy (Independent School District No. 625 (St. Paul))

    Hanska Community School (New Ulm School District)

    Harvest Preparatory Academy (Special School District No. 1 (Minneapolis))

    HOPE Community Academy (St. Thomas University)

    Minnesota Institute of Technology 9210 (University of St. Thomas)

    Minnesota Institute of Technology 9130 (University of St. Thomas)

    Minnesota New Country School (LeSueur/Henderson School District)

    Nerstrand Charter School (Faribault School District)

    Peak’s Charter School, Faribault (Central Lakes College)

    Peak’s Charter School, Pillager (Central Lakes College)

    RiverBend Academy (Minnesota State Board of Education)

    Studio Academy (College of Visual Arts)

    Yankton Country School (Balaton School District)

  3. Potential For Omitted Coverage; CFL List Differences. In checking the Department of Children, Families and Learning (CFL) website relating to charter schools, differences between the information provided before September 15, 2001, and the website information are apparent. The differences could indicate undercoverage of charter school teachers, charter school support personnel, or both. The differences are as follows:
  4. Charter Schools Omitted From CFL Website

    Charter Schools Newly Included in CFL Website

    Fort Snelling Academy

    Avalon School (St. Mary’s College)

    Learning Adventures Middle School

    Blue Sky Charter School (Brooklyn Center School Dist.)

    Peak’s Charter School, Faribault

    Friendship Academy of Fine Arts (Special School District No. 1 (Mpls.)) (N)

    Peak’s Charter School, Pillager

    Great River Educational Center (Central Lakes College)

    Peak’s Charter School, St. Cloud

    Harbor City International School (Volunteers of America) (N)

    Strategies for Success

    MN Academy of Software Technology (St. Paul Technical College) (N)

     

    MN International Middle School (Century College) (N)

     

    Twin City International Elementary School (Century College) (N)

     

    WISE Charter School (YMCA, Minneapolis) (N)

    (N) Indicates charter school opening Fall 2001 or Fall 2002

  5. Potential For Omitted Coverage; Inconsistent Or Unusual Data. In 22 of the 68 indicated open charter schools, an unusually large number of support personnel in comparison to the number of teachers was indicated. This raises a question about potential inaccuracies in the reported data, which could mean omitted pension plan members. The open charter schools involved in potential inconsistent or unusual data, with the sponsoring entity indicated in parentheses, are as follows:
  6. ACORN Dual Language Community Academy (Ind. School District No. 625 (St. Paul))

    City Academy (College of St. Catherine)

    Community of Peace (Independent School District No. 625 (St. Paul))

    Concordia Creative Learning Academy (Concordia University)

    Cyber Village Academy (Special School District No.1 (Minneapolis))

    Eci’ Nompa Woonspe’ Charter School (Redwood Falls School District)

    Emily Charter School (Minnesota State Board of Education)

    Heart of the Earth Center for the American Indian Education (Special School Dist. No.1 (Mpls.))

    Higher Ground (Independent School District No. 625 (St. Paul))

    Learning Adventures Middle School (Central Lakes College)

    Martin Hughes Charter 4040 (Mountain Iron-Buhl School Board)

    Metro Deaf School (Forest Lake School District)

    Minnesota Business Academy (Independent School District No. 625 (St. Paul))

    Minnesota Technology High School (Inver Hills Community College)

    Minnesota Transitions Charter School (Special School District No. 1 (Minneapolis))

    New Visions School (Special School District No. 1 (Minneapolis))

    Odyssey Charter School (Osseo School District)

    PACT Charter School (Anoka-Hennepin School District)

    Skills for Tomorrow Senior High School (Rockford School District)

    Sojourner Truth Academy (Special School District No. 1 (Minneapolis))

    St. Paul Family Learning Center (Independent School District No. 625 (St. Paul))

    World Learner of Chaska (Chaska School District)

    Additionally, six open charter school results indicate large support staff personnel average salaries in comparison with the average salaries paid to teachers employed by the same charter school. Since this differs from the general pattern, this raises questions about the accuracy of the data. The following indicates the six charter schools with unusually large support staff personnel average salaries, with the sponsoring entity indicated in parentheses:

    Coon Rapids Learning Center (Bethel College)

    Fort Snelling Academy (Normandale College)

    Heart of the Earth Center (Special School District No. 1. (Minneapolis))

    High School for the Recording Arts (Independent School District No. 625 (St. Paul))

    Math and Science Academy (Minnesota State Board of Education)

    Rochester Off Campus School (Rochester Community and Technical College)

  7. First Class City Teacher Retirement Plans At Greatest Charter School Retirement Contribution Default Risk. As a group, the first class city teacher retirement plans have the greatest number of charter school members proportionately, have the greatest amount of contributions potentially at risk, and are the least well funded of the various retirement plans.


Omitted Retirement Contributions From Closed Charter Schools

Additionally, one closed charter school has been identified as never having included its non-teaching employees in retirement coverage by the General Employees Retirement Plan of the Public Employees Retirement Association (PERA-General), although those employees were required by Minnesota Statutes, Chapter 353, to become PERA-General members. The following indicates the closed charter school and the estimated amount of the omitted retirement plan contributions that should have been made had the eligible employees been retirement plan members:

Closed Charter School

Estimated Retirement Contributions Involved 

PERA-General

Total

 

Member Contrib.

Employer Contrib.

 

Right Step Academy

$93,796.57

$101,883.70

$195,680.27

There are several observations that can be made relative to the current recognized omitted retirement plan contributions, as follows:

  1. Omitted Contributions Involved PERA, But Additional Omissions Are Likely. Only the General Employees Retirement Plan of the Public Employees Retirement Association (PERA-General) reported any omitted contribution amount, which was a significant amount ($195,680.27), but there are other gaps in indicated retirement plan coverage by closed charter schools which likely represent improperly excluded teachers and support employees and omitted contribution amounts. The apparent retirement coverage gaps are:
  2. No Indicated Teacher Plan

    No Indicated Support Personnel Plan

    Learning Adventures Middle School

    Dakota Open Charter School

    Peaks-Faribault

    Learning Adventures Middle School

    Peaks-Pillager

    Prairie Island Community School

     

    Strategies For Success

  3. Current Omitted Contributions By Closed Charter Schools Indicate A PERA Membership Exclusion Checking Problem. The omitted contributions from the closed charter school with significant omitted contribution amounts, the Right Step Academy, likely represent a very long period for which support personnel were not reported as members of the General Employees Retirement Plan of the Public Employees Retirement Association (PERA-General). The omitted contribution amounts were estimated by PERA from information provided by the St. Paul Teachers Retirement Fund Association (StPTRFA). PERA has substantial statutory requirements to check for public employees who are potentially inappropriately excluded from PERA membership and has the power to conduct field audits to gain or verify information. PERA indicated that the Right Step Academy never reported its support personnel for PERA membership, but has not explained why it was unable to obtain the necessary employment status information. The magnitude of the omitted contributions either indicates a large support personnel workforce, a very long period of omitted contributions, or a very significant support personnel average salary.

  4. Reported Information Is Incomplete Or Conflicting. In some cases with the affected charter schools, the information reported by the Department of Children, Families and Learning and by the affected pension plan(s), the information is incomplete or conflicting. For instance, for the Right Step Academy, there is no information provided by the Department of Children, Families and Learning on the number or average salary of support personnel to allow for an analysis of the reported omitted PERA contributions.

Potential Future Unpaid Or Omitted Charter School Retirement Plan Contributions

  1. Identification Of Open Charter Schools.

There are 68 charter schools which have been identified by either the Department of Children, Families and Learning and/or one or more Minnesota public retirement plan as being open charter schools. The following sets forth a list of the 68 schools, organized alphabetically, and indicates the charter school sponsor:

      Academia Cesar Chavez Charter School (University of St. Thomas)

      ACORN Dual Language Community Academy (Ind. School Dist. No. 625 (St. Paul))

      Agricultural and Food Sciences Academy (NE Metro Intermediate District No. 916)

      Aurora Charter School (St. Mary’s University)

      Bluffview Montessori Charter School (Winona School District)

      Cedar-Riverside Community School (Special School District No. 1 (Minneapolis))

      City Academy (College of St. Catherine)

      Community of Peace (Independent School District No. 625 (St. Paul))

      Concordia Creative Learning Academy (Concordia University)

      Coon Rapids Learning Center (Bethel College)

      Cross Lake Community School (Minnesota State Board of Education)

      Cyber Village Academy (Special School District No. 1 (Minneapolis))

      Duluth Edison Academies (Duluth School District)

      E.C.H.O. Charter School (Yellow Medicine East School District)

      Eci’ Nompa Woonspe’ Charter School (Redwood Falls School District)

      El Colegio Charter School (Augsburg College)

      Emily Charter School (Minnesota State Board of Education)

      Excell Academy (North Central University)

      Face to Face Academy (Independent School District No. 625 (St. Paul))

      Family Academy (NE Metro Intermediate School District 916)

      Fort Snelling Academy (Normandale College)

      Four Directions Charter (Metropolitan State University)

      Hanska Community School (New Ulm School District)

      Harvest Preparatory Academy (Special School District No. 1 (Minneapolis))

      Heart of the Earth Center for the American Indian Education (Special School Dist. No. 1 (Mpls.))

      High School for the Recording Arts (Independent School District No. 625 (St. Paul))

      Higher Ground (Independent School District No. 625 (St. Paul))

      Hope Community Academy (St. Thomas University)

      La Crescent Montessori Academy (Minnesota State Board of Education)

      Lafayette Public Charter School (New Ulm School Board)

      Lakes Area Charter School (Alexandria Technical College)

      Learning Adventures Middle School (Central Lakes College)

      Martin Hughes Charter 4040 (Mountain Iron-Buhl School Board)

      Math and Science Academy (Minnesota State Board of Education)

      Metro Deaf School (Forest Lake School District)

      Mexica Multicultural Education (Independent School District No. 625 (St. Paul))

      Minnesota Business Academy (Independent School District No. 625 (St. Paul))

      Minnesota Institute of Technology 9210 (University of St. Thomas)

      Minnesota Institute of Technology 9130 (University of St. Thomas)

      Minnesota New Country School (LeSueur/Henderson School District)

      Minnesota Technology High School (Inver Hills Community College)

      Minnesota Transitions Charter School (Special School District No. 1 (Minneapolis))

      Native Arts High School (Augsburg College)

      Nerstrand Charter School (Faribault School District)

      New Heights School (Stillwater School District)

      New Spirit School (Independent School District No. 625 (St. Paul))

      New Visions School (Special School District No. 1 (Minneapolis))

      North Lakes Academy (Minnesota State Board of Education)

      Odyssey Charter School (Osseo School District)

      PACT Charter School (Anoka-Hennepin School District)

      Peak’s Charter School, Duluth (Central Lakes Community College)

      Peak’s Charter School, Faribault (Central Lakes College)

      Peak’s Charter School, Pillager (Central Lakes College)

      Peak’s Charter School, St. Cloud (Central Lakes Community College)

      Pillager Area Charter School (Central Lakes Community College)

      RiverBend Academy (Minnesota State Board of Education)

      Riverway Learning Community (Rochester Community and Technical College)

      Rochester Off Campus (Rochester Community and Technical College)

      Schoolcraft Learning Community (Minnesota State Board of Education)

      Skills for Tomorrow Senior High School (Rockford School District)

      Sojourner Truth Academy (Special School District No. 1 (Minneapolis))

      St. Paul Family Learning Center (Independent School District No. 625 (St. Paul))

      Strategies for Success (Independent School District No. 625 (St. Paul))

      Studio Academy (College of Visual Arts)

      Twin Cities Academy (Independent School District No. 625 (St. Paul))

      Village School of Northfield (Northfield School District)

      World Learner of Chaska (Chaska School District)

      Yankton Country Schools (Balaton School District)

There are 34 sponsoring entities for the 68 open charter schools, involving 27 public sector entities and seven private institutions of higher education.

There are problems with the identification of open charter schools. The five retirement plans and the Department of Children, Families and Learning have identified a total of 68 open Minnesota charter schools, but no respondent identified all 68 schools.

The charter schools which raise questions about their appropriate classification as an open charter school because they were reported by one or more of the retirement plans, but were not identified by the Department of Children, Families and Learning (CFL) are:

      (1) the Fort Snelling Academy;

      (2) the Learning Adventures Middle School;

      (3) the Peak’s Charter School-Faribault;

      (4) the Peak’s Charter School-Pillager; and

      (5) the Strategies for Success Charter.

Although the Department of Children, Families and Learning and the Minneapolis Teachers Retirement Fund Association (MTRFA) identified the Fort Snelling Academy as a closed charter school, MTRFA also identified it as an open charter school, as did the Public Employees Retirement Association (PERA). Additionally, although both CFL and PERA identified the Peak’s Charter School, Faribault, and the Peak’s Charter School, Pillager, as closed charter schools, Teachers Retirement Association (TRA) identified these two as open charter schools. The St. Paul Teachers Retirement Fund Association (StPTRFA) identified the Learning Adventures Middle School as an open charter school, while CFL did not. The Public Employees Retirement Association (PERA) indicated that the Strategies For Success School is an open charter school, with eligibility for PERA coverage pending, but CFL did not identify it as an open charter school.

  1. Potential For Future Omitted Or Unpaid Charter School Retirement Contributions

The five affected Minnesota retirement plans, the Duluth Teachers Retirement Fund Association (DTRFA), the Minneapolis Teachers Retirement Fund Association (MTRFA), the St. Paul Teachers Retirement Fund Association (StPTRFA), the Teachers Retirement Association (TRA), and the Public Employees Retirement Association (PERA) all receive member and employer contributions. The magnitude of those contributions vary, as follows:

Duluth Teachers Retirement Fund Association (DTRFA)

       

      2000 School Year

      2001 School Year

      Charter School

      Teacher Number

      Member Contrib.

      Employer Contrib.

      Teacher Number

      Member Contrib.

      Employer Contrib.

      Duluth Edison Academies

      82

      120,678.58

      127,041.63

      88

      119,223.72

      125,510.06

      Peak’s Charter School, Duluth

      6

      5,089.59

      5,357.95

      7

      8,324.08

      8,762.99

      Total

      88

      125,768.17

      132,399.58

      95

      127,547.80

      134,273.05

Minneapolis Teachers Retirement Fund Association (MTRFA)

       

      2000 School Year

      2001 School Year

      Charter School

      Teacher Number

      Member Contrib.

      Employer Contrib.

      Teacher Number

      Member Contrib.

      Employer Contrib.

      Aurora Charter School

      3

      0.00

      0.00

      3

      3,421.83

      5,064.31

      Cedar-Riverside Community School

      9

      15,325.47

      22,681.69

      9

      12,925.36

      19,129.53

      El Colegio Charter School

      6

      0.00

      0.00

      3

      5,499.99

      8,139.99

      Fort Snelling Academy

      0

      0.00

      0.00

      19

      34,323.45

      50,798.71

      Four Directions Charter School

      5

      6,981.54

      10,332.69

      4

      9,565.44

      14,156.86

      Harvest Preparatory Academy

      0

      15,087.74

      22,329.85

      18

      20,356.07

      30,126.98

      Heart of the Earth Ctr for Am. Indians

      0

      31,750.42

      46,990.62

      41

      52,581.34

      77,820.39

      Minnesota Transitions Charter

      0

      26,228.66

      38,818.42

      32

      33,023.35

      48,874.56

      Native Arts High School

      4

      0.00

      0.00

      5

      8,643.15

      12,791.86

      New Visions School

      0

      39,543.11

      58,523.81

      42

      58,320.38

      86,314.17

      Sojourner Truth Academy

      18

      14,557.28

      21,544.78

      20

      28,573.05

      42,288.11

      Total

        

       

       

       

       

       

      St. Paul Teachers Retirement Fund Association (StPTRFA)

       

      2000 School Year

      2001 School Year

      Charter School

      Teacher Number

      Member Contrib.

      Employer Contrib.

      Teacher Number

      Member Contrib.

      Employer Contrib.

      ACORN Dual Lang. Comm. Academy

      21

      35,477.48

      53,796.77

      24

      43,985.30

      66,697.71

      City Academy

      8

      17,160.89

      26,022.16

      10

      22,202.79

      33,667.50

      Community of Peace

      42

      81,610.03

      123,750.49

      47

      91,197.30

      138,288.27

      Concordia Creative Learning Acad.

      3

      4,718.27

      7,154.61

      11

      21,111.74

      32,013.08

      Concordia Early Learning School

      0

      0.00

      0.00

      0

      0.00

      0.00

      Cyber Village Academy

      6

      12,474.84

      18,916.39

      11

      23,939.18

      36,300.50

      Fact to Face Academy

      6

      8,523.11

      12,924.13

      6

      9,998.42

      15,161.24

      High School for Recording Arts

      3

      5,254.07

      7,967.08

      4

      7,768.30

      11,779.57

      Higher Ground

      22

      35,822.53

      54,319.98

      25

      47,885.47

      72,611.79

      HOPE Community Academy

      0

      0.00

      0.00

      24

      39,081.57

      59,261.87

      Learning Adventures Middle School

      3

      7,388.88

      11,204.23

      5

      10,695.70

      16,218.57

      Metro Deaf School

      19

      37,412.14

      56,730.42

      25

      47,521.26

      72,059.51

      Mexica Multicultural Education

      0

      0.00

      0.00

      4

      6,051.60

      9,176.43

      Minnesota Business Academy

      0

      0.00

      0.00

      32

      60,252.66

      91,364.95

      Minnesota Institute of Technology

      0

      0.00

      0.00

      30

      50,055.42

      75,902.22

      Minnesota Technology High School

      7

      18,260.88

      27,690.13

      5

      10,649.40

      16,148.37

      New Spirit School

      19

      27,369.17

      41,501.62

      30

      49,065.39

      74,400.97

      Skills for Tomorrow Senior High

      3

      6,418.36

      9,732.57

      4

      7,819.11

      11,856.62

      St. Paul Family Learning Center

      10

      19,636.73

      29,776.43

      13

      26,949.07

      40,864.60

      Twin Cities Academy

      16

      30,684.57

      46,528.96

      24

      45,490.64

      68,980.36

      Total

      Teachers Retirement Association (TRA)

       

      2000 School Year

      2001 School Year

      Charter School

      Teacher Number

      Member Contrib.

      Employer Contrib.

      Teacher Number

      Member Contrib.

      Employer Contrib.

      Agricul. & Food Sciences Academy

      0

      0.00

      0.00

      0

      0.00

      0.00

      Bluffview Montessori Charter School

      23

      15,812.47

      15,812.47

      25

      17,363.91

      17,363.91

      Coon Rapids Learning Center

      7

      9,864.44

      9,864.44

      11

      16,483.40

      16,483.40

      Cross Lake Community School

      0

      0.00

      0.00

      8

      4,889.42

      4,889.42

      E.C.H.O. Charter School

      9

      5,512.07

      5,512.07

      12

      7,551.09

      7,551.09

      Eci’ Nompa Woonspe’ Charter School

      4

      5,971.43

      5,971.43

      4

      8,109.85

      8,109.85

      Emily Charter School

      18

      12,780.48

      12,780.48

      17

      9,900.68

      9,900.68

      Family Academy

      0

      0.00

      0.00

      14

      13,932.14

      13,932.14

      Hanska Community School

      7

      4,759.75

      4,759.75

      12

      4,944.48

      4,944.48

      La Crescent Montessori Academy

      4

      2,400.36

      2,400.36

      6

      5,092.50

      5,092.50

      Lafayette Public Charter School

      8

      4,619.82

      4,619.82

      10

      8,097.15

      8,097.15

      Lakes Area Charter School

      5

      5,182.11

      5,182.11

      8

      7,078.52

      7,078.52

      Martin Hughes Charter School

      17

      16,438.35

      16,438.35

      20

      29,780.48

      29,780.49

      Math & Science Academy

      14

      18,062.17

      18,062.17

      22

      24,426.06

      24,426.06

      Nerstrand Charter School

      13

      16,468.50

      16,468.50

      14

      19,926.55

      19,926.55

      New Country School

      10

      17,197.08

      17,197.08

      10

      17,816.67

      17,816.67

      New Heights School

      22

      17,533.95

      17,533.95

      17

      19,062.32

      19,062.32

      North Lakes Academy

      15

      13,303.59

      13,303.59

      18

      24,134.52

      24,134.52

      Odyssey Charter School

      17

      18,180.81

      18,180.81

      20

      22,443.33

      22,443.33

      PACT Charter School

      39

      36,190.08

      36,190.08

      40

      42,718.98

      42,718.98

      Peak’s Charter School, Faribault

      5

      4,930.63

      4,930.63

      9

      4,181.44

      4,181.44

      Peak’s Charter School, Pillager

      8

      6,252.39

      6,252.39

      7

      4,680.51

      4,680.51

      Peak’s Charter School, St. Cloud

      1

      666.67

      666.67

      4

      5,754.21

      5,754.21

      RiverBend Academy

      1

      706.50

      706.50

      12

      20,180.73

      20,180.73

      Riverway Learning Community

      0

      0.00

      0.00

      17

      8,038.99

      8,038.99

      Rochester Off Campus

      11

      10,517.31

      10,517.31

      19

      18,907.23

      18,907.23

      Schoolcraft Learning Community

      0

      0.00

      0.00

      12

      16,313.55

      16,313.55

      Studio Academy

      0

      0.00

      0.00

      9

      14,310.00

      14,310.00

       

      2000 School Year

      2001 School Year

      Charter School

      Teacher Number

      Member Contrib.

      Employer Contrib.

      Teacher Number

      Member Contrib.

      Employer Contrib.

      Toivola-Meadowlands Charter School

      12

      9,183.09

      9,183.09

      1

      30.14

      30.14

      Village School of Northfield

      7

      5,777.22

      5,777.22

      6

      8,526.58

      8,526.58

      World Learner of Chaska

      7

      8,668.24

      8,668.24

      5

      8,678.58

      8,678.58

      Yankton Country School

      0

      0.00

      0.00

      4

      4,553.35

      4,553.35

      Total

      Public Employees Retirement Association (PERA)

       

      2000 School Year

      2001 School Year

      Charter School

      Support Staff No.

      Member Contrib.

      Employer Contrib.

      Support Staff No.

      Member Contrib.

      Employer Contrib.

      Academia Cesar Chavez Charter School

      0

      0.00

      0.00

      0

      0.00

      0.00

      ACORN Dual Language Comm. Acad.

      20

      13,358.04

      14,567.29

      21

      14,025.23

      15,294.89

      Agric. and Food Sciences Academy

      0

      0.00

      0.00

      0

      0.00

      0.00

      Aurora Charter School

      0

      0.00

      0.00

      5

      3,267.45

      3,563.24

      Bluffview Montessori Charter School

      0

      0.00

      0.00

      0

      0.00

      0.00

      Cedar-Riverside Community School

      0

      0.00

      0.00

      0

      0.00

      0.00

      Central Minnesota Deaf School

      0

      0.00

      0.00

      0

      0.00

      0.00

      City Academy

      12

      13,073.61

      14,257.12

      12

      12,006.11

      13,092.98

      Community of Peace

      31

      15,503.80

      16,907.30

      36

      23,784.68

      25,937.82

      Concordia Creative Learning Academy

      25

      10,941.16

      11,931.62

      31

      10,492.60

      11,442.46

      Concordia Early Learning School

      25

      10,941.16

      11,931.62

      31

      10,492.60

      11,442.46

      Coon Rapids Learning Center

      2

      3,645.45

      3,975.46

      6

      6,717.51

      7,325.63

      Cross Lake Community School

      0

      0.00

      0.00

      2

      981.56

      1,070.42

      Cyber Village Academy

      9

      5,071.42

      5,530.52

      12

      7,889.83

      8,604.07

      Duluth Edison Academies

      0

      0.00

      0.00

      0

      0.00

      0.00

      E.C.H.O. Charter School

      0

      0.00

      0.00

      0

      0.00

      0.00

      Eci’ Nompa Woonspe’ Charter School

      12

      4,316.85

      4,707.64

      12

      5,076.73

      5,536.31

      El Colegio Charter School

      0

      0.00

      0.00

      0

      0.00

      0.00

      Emily Charter School

      10

      4,367.58

      4,762.96

      13

      5,885.11

      6,417.87

      Excell Academy

      0

      0.00

      0.00

      0

      0.00

      0.00

      Face to Face Academy

      0

      0.00

      0.00

      0

      0.00

      0.00

      Family Academy

      0

      0.00

      0.00

      10

      2,683.01

      2,925.89

      Fort Snelling Academy

      0

      0.00

      0.00

      4

      4,428.94

      4,829.87

      Four Directions Charter

      2

      1,825.89

      1,991.18

      5

      3,010.87

      3,283.44

      Hanska Community School

      0

      0.00

      0.00

      0

      0.00

      0.00

      Harvest Preparatory Academy

      0

      0.00

      0.00

      0

      0.00

      0.00

      Heart of the Earth Ctr for Am. Indians

      26

      9,314.77

      10,158.01

      46

      40,570.64

      44,243.35

      High School for the Recording Arts

      0

      0.00

      1.11

      2

      2,837.95

      3,094.86

      Higher Ground

      33

      18,161.41

      19,805.50

      78

      32,225.20

      35,142.42

      Hope Community Academy

      0

      0.00

      0.00

      0

      0.00

      0.00

      Kenwood Primary/El. Academy

      0

      0.00

      0.00

      0

      0.00

      0.00

      La Crescent Montessori Academy

      3

      1,910.97

      2,083.96

      5

      3,067.02

      3,344.66

      Lafayette Public Charter School

      0

      0.00

      0.00

      0

      0.00

      0.00

      Lakes Area Charter School

      5

      3,066.59

      3,344.19

      7

      2,420.27

      2,639.37

      Learning Adventures Middle School

      8

      5,498.81

      5,996.60

      7

      3,895.10

      4,247.71

      Martin Hughes Charter 4040

      15

      7,311.17

      7,973.03

      27

      17,668.78

      19,268.27

      Math and Science Academy

      3

      2,530.20

      2,759.25

      7

      8,775.34

      9,569.75

      Metro Deaf School

      16

      9,381.21

      10,230.45

      26

      11,891.48

      12,967.97

      Mexica Multicultural Education

      0

      0.00

      0.00

      10

      3,592.90

      3,918.15

      Minnesota Business Academy

      0

      0.00

      0.00

      25

      16,141.55

      17,602.79

      Minnesota Institute of Technology

      0

      0.00

      0.00

      0

      0.00

      0.00

      Minnesota Technology High School

      13

      9,163.73

      9,993.29

      13

      8,193.49

      8,935.22

      Minnesota Transitions Charter School

      25

      15,676.54

      17,095.68

      39

      12,451.72

      13,578.93

      Minnesota Institute Targeted Services

      0

      0.00

      0.00

      0

      0.00

      0.00

      Native Arts High School

      0

      0.00

      0.00

      0

      0.00

      0.00

      Nerstrand Charter School

      0

      0.00

      0.00

      0

      0.00

      0.00

       

      2000 School Year

      2001 School Year

      Charter School

      Support Staff No.

      Member Contrib.

      Employer Contrib.

      Support Staff No.

      Member Contrib.

      Employer Contrib.

      New Country School

      0

      0.00

      0.00

      0

      0.00

      0.00

      New Heights School

      10

      5,213.99

      5,682.99

      11

      7,717.38

      8,416.01

      New Spirit School

      11

      9,762.28

      10,646.02

      13

      11,644.19

      12,698.29

      New Visions School

      53

      24,293.92

      26,493.16

      58

      29,416.07

      32,079.00

      North Lakes Academy

      6

      3,677.59

      4,010.51

      8

      5,914.01

      6,449.39

      Odyssey Charter School

      22

      8,269.70

      9,018.32

      26

      11,952.02

      13,033.99

      Opportunities for Learning

      0

      0.00

      0.00

      0

      0.00

      0.00

      PACT Charter School

      33

      10,620.92

      11,582.39

      34

      15,365.73

      16,756.74

      Peak’s Charter School, Alexandria

      0

      0.00

      0.00

      0

      0.00

      0.00

      Peak’s Charter School, Duluth

      5

      2,484.64

      2,709.56

      5

      2,548.42

      2,779.11

      Peak’s Charter School, Faribault

      0

      0.00

      0.00

      0

      0.00

      0.00

      Peak’s Charter School, Pillager

      0

      0.00

      0.00

      0

      0.00

      0.00

      Peak’s Charter School, St. Cloud

      0

      0.00

      0.00

      3

      1,370.05

      1,494.07

      Pillager Area Charter School

      0

      0.00

      0.00

      0

      0.00

      0.00

      Raleigh Primary/El. Academy

      0

      0.00

      0.00

      0

      0.00

      0.00

      Right Step Academy El.

      0

      0.00

      0.00

      0

      0.00

      0.00

      River Bend Academy

      0

      0.00

      0.00

      0

      0.00

      0.00

      Riverway Learning Community

      0

      0.00

      0.00

      4

      1,895.21

      2,066.78

      Rochester Off Campus

      0

      0.00

      0.00

      1

      1,561.49

      1,702.84

      Schoolcraft Learning Community

      0

      0.00

      0.00

      9

      3,183.92

      3,472.15

      Skills for Tomorrow Jr. High School

      0

      0.00

      0.00

      0

      0.00

      0.00

      Skills for Tomorrow Sr. High School

      9

      15,193.96

      16,569.42

      16

      11,626.43

      12,678.93

      Sojourner Truth Academy

      12

      7,782.26

      8,486.76

      23

      15,384.15

      16,776.83

      St. Paul Family Learning Center

      34

      16,822.88

      18,345.80

      47

      19,892.28

      21,693.06

      Strategies for Success

      0

      0.00

      0.00

      0

      0.00

      0.00

      Studio Academy

      0

      0.00

      0.00

      0

      0.00

      0.00

      Success Academy

      0

      0.00

      0.00

      0

      0.00

      0.00

      Summit School for the Arts

      0

      0.00

      0.00

      0

      0.00

      0.00

      Toivola-Meadowlands Charter School

      0

      0.00

      0.00

      0

      0.00

      0.00

      Twin Cities Academy

      9

      3,490.44

      3,806.42

      9

      4,175.48

      4,553.47

      Village School of Northfield

      7

      7,544.23

      8,227.18

      6

      4,158.81

      4,535.29

      Washburn Jr. Academy

      0

      0.00

      0.00

      0

      0.00

      0.00

      World Learner of Chaska

      7

      3,695.67

      4,030.23

      8

      6,122.71

      6,676.98

      Yankton Country Schools

      0

      0.00

      0.00

      0

      0.00

      0.00

      Total

      The following sets forth the magnitude of the charter school membership and contributions in proportion to the total membership and contributions of the respective retirement plans for the 2000 and 2001 fiscal years:

         

      Number of Members

      Member Contributions

      Employer Contributions

      Retirement Plan

      Fiscal Year

      Charter Schools

      Total

      %

      Charter Schools

      Total

      %

      Charter Schools

      Total

      %

      DTRFA

      2000

      88

      1,441

      6.1

      125,768

      3,152,000

      4.0

      132,400

      3,026,000

      4.4

       

      2001

      95

      1,420

      6.7

      127,548

      3,041,000

      4.1

      134,273

      3,011,000

      4.5

      MTRFA

      2000

      45

      5,777

      0.8

      149,474

      16,169,000

      0.9

      221,222

      21,938,000

      1.0

       

      2001

      196

      5,813

      3.4

      267,233

      16,321,000

      1.6

      395,506

      22,029,000

      1.8

      StPTRFA

      2000

      188

      4,445

      4.2

      348,212

      13,184,000

      2.6

      528,016

      19,049,000

      2.8

       

      2001

      334

      4,671

      7.2

      621,720

      13,170,000

      4.7

      942,754

      19,996,000

      4.7

      TRA

      2000

      284

      70,508

      0.4

      266,980

      138,696,000

      0.2

      266,980

      134,419,000

      0.2

       

      2001

      393

      71,097

      0.6

      417,907

      145,075,000

      0.3

      417,907

      139,799,000

      0.3

      PERA

      2000

      513

      135,560

      0.4

      283,913

      171,073,000

      0.2

      428,402

      186,637,000

      0.2

       

      2001

      773

      138,759

      0.6

      309,615

      173,380,000

      0.2

      467,184

      188,208,000

      0.2

      Alternative Recovery Solutions

    1. Alternative Approaches To Viewing The Problem.
    2. In considering the problem of the recovery of unpaid closed charter school contributions, the Commission attempted to sort through potential solutions by focusing on the available approaches to viewing the problem. The problem depends on the timeframe (past, for currently closed charter schools, and future, for current open charter schools which may eventually closed and for charter schools yet to be formed) and on the type of contribution (contributions due and owing, but unpaid, and contributions that are omitted because charter school teachers and support personnel have not properly been accorded public retirement plan coverage required by statute).

      The following chart summarizes the approaches considered by the Commission to view the unpaid closed charter school retirement contribution recovery problem:

       

      Timeframe

       

      Closed

      Open

      Contribution Type

      Accrued

      $24, 180.67 plus interest owed to MTRFA, PERA-General, and TRA from three closed charter schools (Central Minnesota Deaf, Dakota Open, and Frederick Douglass)

      Accruing

      Unknown and unestimable, but at least 16 charter schools have closed since the first Minnesota charter school was established in 1991

      Omitted

      At least $195,680.27 (amount estimated to be owed to PERA-General from Right Step Academy), but three closed charter schools reported no teacher retirement plan for their teachers and four closed charter schools reported no support employee pension plan

      Omitted

      Unknown and unestimable, but 20 open charter schools report providing teacher pension coverage and no support personnel pension coverage, three charter schools not otherwise reported, but on the CFL website indicate no teacher or support personnel pension coverage, 22 charter schools report a large support staff and only a few teachers, and six charter schools report a large average support staff salary, but a smaller average teacher salary

    3. Potential Alternative Approaches To Solving The Current Unpaid Closed Charter School Retirement Contribution Problem.

The Commission reviewed eight potential types of remedies to handle the situation of the current unpaid closed charter school retirement plan contributions, as follows:

    1. Undertake Better Charter School Collection Procedures. Testimony indicated that the affected retirement plans have currently taken a variety of steps to recover unpaid member and employer retirement plan contributions beyond simply notifying the charter school of its obligation at some point. The Minnesota Collection Enterprise Division of the Department of Revenue is the primary collection tool of the State of Minnesota, but it is unclear whether any of the unpaid amounts have been referred to the division. From the division, uncollectable debts are eventually referred to private collections agencies.
    2. Commence/Participate In Bankruptcy Proceedings. If any closed charter schools have sought bankruptcy protection under federal law, the affected retirement plan or plans could participate in future bankruptcy proceedings. If the closed charter schools have not initiated bankruptcy action, the affected retirement plans as creditors are empowered to compel bankruptcy activities and a liquidation of any closed charter school assets.
    3. Initiate Litigation Against The Charter School Operator. The affected retirement plans could initiate litigation against the operator of a closed charter school for the principal amount of any unpaid retirement plan contributions plus interest since the default date. While there may be numerous potential causes of action that could be the basis for the litigation, ultimately, a fraud likely was perpetrated against the retirement plans and a legal action could be pursued on that basis.
    4. Imposition Of Charter Sponsor Obligation. Either by litigation or by legislation, the entity sponsoring the closed charter school could be held liable for the debts of the closed charter school. Although a sponsor is immune from civil liability with respect to all activities related to a sponsored charter school under Minnesota Statutes, Section 124D.10, Subdivision 25, Paragraph (c), there may still be sponsor liability if the sponsor was derelict in undertaking its responsibilities under law or contract to monitor the financial activities of the charter school or if the sponsor was aware of or participated in any charter school operator fraud. If litigation cannot establish charter sponsor liability, future proposed legislation could provide a reduction or setoff or a succession of reductions or setoffs against any future State aid payable to a charter school sponsor.
    5. Retirement Fund Subsidization Of Obligation. If no other remedy is implemented administratively or legislatively, the pension fund applicable to the affected retirement plan would ultimately bear whatever net liability that results. With closed charter schools, the extent of liability to be borne by the pension plan depends on the past and future employment and plan membership of the relevant personnel. If the personnel was new to public service and ultimately will never qualify for a public pension benefit, the lack of contributions will shift part of the burden to the affected plan members in a reduced refund and will reduce the actuarial gain that the retirement plan would otherwise obtain. If the personnel had extensive prior public service or if the personnel ultimately renders significant future public service, the pension plan and fund will suffer an actual actuarial loss.
    6. Payment Obligation Spread Over Remaining Employing Units. Proposed legislation could be pursued that would spread the amount of the unpaid closed charter school member and employer contribution amounts, plus interest since the default, as a surcharge over a period of time against the universe of all remaining charter schools and charter school sponsors, or the universe of all other employing units. For the TRA and PERA unpaid charter school contribution amounts, these varying universes make a considerable difference, but for MTRFA or StPTRFA, there is perhaps little difference between all other charter school sponsors or all other employing units, since these plans are essentially single employer retirement plans.
    7. Payment Obligation Spread Over Retirement Plan Contributors. Proposed legislation could be pursued that would spread the amount of the unpaid closed charter school member and employer contribution amounts, plus interest since the default, as a surcharge in effect for a period of time over the members and employers covered by the retirement plan.
    8. State Payment. Proposed legislation could be pursued that would have the State of Minnesota pay the amount of the unpaid closed charter school contribution amounts, plus interest since the default date. The payment obligation could be charged against the Department of Children, Families and Learning, deducted from aid dedicated for charter schools, or paid from the State General Fund. The 2001 Session proposed legislation, S.F. 2038 (Pogemiller); H.F. 2215 (Mares), as introduced, would have paid the unpaid amounts from the State’s General Fund. The 2001 Session proposed legislation as recommended by the Legislative Commission on Pensions and Retirement and amended in the Senate (see Attachment A) would have deducted the unpaid amounts from the charter school building lease aid otherwise payable.
    1. Potential Alternative Approaches to Solving the Potential Future Unpaid Charter School Retirement Contribution Problem.

The Commission reviewed twelve potential remedies for any future default in charter school retirement plan member and employer contributions, as follows:

    1. Require Better Retirement Plan Contribution Monitoring. The potential for retirement contribution defaults by charter schools will be reduced if the retirement plan engages in more frequent and more regular monitoring of the retirement plan contributions from charter schools. As indicated in the case of unpaid charter school retirement contributions to the Minneapolis Teachers Retirement Fund Association (MTRFA), where the retirement contributions are several months in default, a failure to pursue remedies for any defaulted amounts increases the likelihood that the contributions would become unpaid and unredeemable and that the charter school would close without settling these debts.
    2. Require School Charter Document To Include Monitoring And Collection Procedures. Contribution defaults by charter schools can be prevented or minimized if the charter document under which a charter school operates is required to contain specific procedures relating to retirement plan contribution payment monitoring and collection and those procedures are binding both on the charter school and the charter sponsor. Because each charter school is likely to argue that it has unique or special circumstances, establishing uniform comprehensive statutory monitoring and collection procedures may not be possible, but each charter school could be mandated to design appropriate and applicable procedures and included in the charter contract.
    3. Require The Prepayment Of Charter School Contributions. The potential for charter schools to default in making their retirement contributions would be reduced or eliminated if charter schools were required by statute to be prepaid. The statutory prepayment obligation, akin to the payment of estimated federal or state income taxes, could be quarterly, monthly, or annually.
    4. Require The Deduction Of Charter School Contributions From Charter School State Aid. An alternative procedure for preventing a default by charter schools in their retirement plan contributions would be to require the Department of Children, Families and Learning (CFL) to deduct an amount for retirement plan contributions from school aid amounts payable and to transmit the deductions to the applicable retirement plan. Currently, teacher retirement plan charter school contributions range from 0.66 percent of charter school revenue to 4.47 percent of charter school revenue, with an average of 1.78 percent. For support staff, charter school contributions to the Public Employees Retirement Association (PERA) range from 0.20 percent of charter school revenue to 1.97 percent of charter school revenue, with an average of 0.77 percent. On average, State aid to charter schools accounts for 80.88 percent of total charter school revenue, so deducting 3.15 percent (2.20 percent for teachers and 0.95 percent for support staff) of any State aid payment to a charter school would largely cover the average charter school contribution requirements.
    5. Define A Retirement Contribution Default As Financial Mismanagement; Impose Moratorium On Charter Sponsors Of Mismanaged Charter Schools. One means of indicating the importance of avoiding retirement plan contribution defaults by charter schools and the need for charter school sponsors to vigorously monitor charter school activity is to define financial mismanagement by a charter school, to include in that definition a default in the payment of retirement plan contributions or a significant delay in their payment, and to place a moratorium on the granting of new charters by a sponsor of a charter school which was involved in financial mismanagement. Minnesota Statutes, Section 124D.10, Subdivision 23, does not define financial mismanagement, but provides for charter non-renewal or termination if the charter school fails to meet generally accepted standards of fiscal management. There are no current statutory restrictions on the number of charters that a sponsor may undertake, even if prior charter schools close or engage in financial mismanagement.
    6. Require The Posting Of Performance Bonds By Charter Schools Or Charter Sponsors. To provide a remedy of making available assets to tap in the event of a charter school retirement plan contribution default, the charter school or the charter school sponsor could be required by statute to post a performance bond. Akin to many circumstances when the financial solvency of an entity in making a future stream of payments is uncertain, the posting of a bond would provide security through the creation of an access point to financial resources to cover the retirement plan contribution payment upon a default.
    7. Establish A Charter School Contribution Surcharge For Future Unpaid Retirement Plan Contributions. To help insure that retirement plans will not be left with no financial resources to access when a charter school defaults on retirement plan contributions, a reserve could be established by statute and funded by a surcharge on charter school employer contributions. The reserve would be administered by the Department of Finance or by the Department of Children, Families and Learning. The surcharge amount should be seven tenths of one percent of covered salary of charter schools in order to raise an annual reserve of $25,000, the amount of current unpaid charter school retirement plan contributions. The surcharge could blink on and blink off depending on the size of the total reserve. At the end of each plan year, retirement plans could apply to have any unpaid retirement plan contributions covered from the reserve.
    8. Establish A Retirement Plan Employer Contribution Surcharge To Defray Future Unpaid Retirement Plan Contributions. Akin to the prior potential remedy, a statutory reserve could be established and a surcharge could be imposed on the employers covered by the five affected retirement plans. The reserve would be administered by a centralized administrative structure, probably the Department of Children, Families and Learning or the Department of Finance, and invested by the State Board of Investment. In order to produce an annual reserve amount of $25,000, the amount of the current unpaid retirement plan contribution, the surcharge would need to be approximately $0.12 per active member per year. After a sizable reserve is established, the surcharge could blink on and blink off to maintain the reserve at a minimum level. The reserve would be drawn upon by retirement plans with unpaid charter school contributions or an annual basis, after the retirement plan had exhausted all other means for recovering the unpaid amounts.
    9. Establish A Retirement Plan Employer And Membership Contribution Surcharge To Cover Future Unpaid Retirement Plan Contributions. The alternative is identical to the prior two potential remedies, except that the surcharge would be imposed on both members and employers. With a broadening financial base, the surcharge amount would be smaller to produce the same total revenue. To raise an annual amount of $25,000, the current unpaid closed charter school retirement plan contribution amount, the surcharge would need to be approximately $0.06 per active member per year.
    10. Cover All Charter School Teachers By TRA. In order to minimize the potential for future charter school retirement plan contribution defaults, retirement coverage for charter school teachers could be provided through the statewide Teachers Retirement Association (TRA) rather than four teacher retirement plans. In addition to imposing a smaller employer retirement contribution on the affected charter schools, centralizing charter school teacher retirement coverage in TRA will utilize TRA’s existing system for collecting retirement plan contributions from disparate employing units.
    11. State Payment. Proposed legislation could be pursued that would have the State of Minnesota pay the amount of charter school retirement plan contributions that remain unpaid upon any future closure. The State payment could be from a General Fund standing appropriation or as an ongoing subtraction from the State lease aid available to charter schools.
    12. Improve The Process For Checking Retirement Plan Membership Inclusions. While known unpaid charter school retirement plan contributions prompted this mandated interim project, there is a large likely problem of omitted charter school retirement plan contributions and retirement plan service credit gaps arising from charter school employees who are eligible for retirement plan coverage, but are not provided concurrent coverage and service credit. Some open charter schools reported by the Department of Children, Families and Learning were not reported as participating employing units by any retirement plan and a number of open charter schools were reported as participating employing units by a teacher retirement plan but were not reported by the General Employees Retirement Plan of the Public Employees Retirement Association (PERA-General). If the charter school closes before the period for correcting omitted contributions runs, which is three years in PERA-General, no maximum period in the Teachers Retirement Association (TRA), and three years for the first class city teacher retirement plans, the affected charter school employee will have no resource other than special legislation to permit a service credit purchase, with potentially no remaining charter school upon which to impose the retirement plan contribution liability.

Commission-Recommended Recovery Solutions

The Commission recommends that the Legislature enact legislation that would provide for the following related to charter school employee retirement coverage and the recovery of unpaid closed charter school retirement contributions:

  1. State Payment of Closed Charter School Unpaid Retirement Contributions. The Department of Children, Families and Learning, based on retirement plan certifications, will pay charter school retirement contributions remaining unpaid from charter schools that closed before April 1, 2002, from the charter school lease aid program;
  2. Future Retirement Coverage for Charter School Teacher by the Teachers Retirement Association. The Teachers Retirement Association is required to provide retirement coverage for all charter school teachers, including teachers in charter schools located in one of the cities of the first class, effective for all teaching employment after June 30, 2002.

Conclusion

The Commission requests prompt attention by the Legislature to its recommendation (recommendations) to resolve the problem of recovering unpaid closed charter school retirement plan contributions.

Minnesota Session Laws 2001, 1st Special Session, Chapter 10

 

 

ARTICLE 13

CLOSED CHARTER SCHOOL RETIREMENT CONTRIBUTIONS

Section 1. [STUDY BY THE LEGISLATIVE COMMISSION ON PENSIONS AND RETIREMENT.]

(a) The legislative commission on pensions and retirement shall study and recommend the appropriate mechanism for recovering unpaid member and employer retirement plan contributions from charter schools that cease operations.

(b) The report must include the draft proposed legislation that would be required to implement the mechanism recommended by the commission.

(c) The report must be filed by February 15, 2002, with the chairs of the senate committees on state and local government operations and education and with the chairs of the house committees on governmental operations and veterans affairs policy and education.

Sec. 2. [EFFECTIVE DATE.]

Section 1 is effective the day following final enactment.

 

Closed Charter Schools

  1. Per CFL:
    1. Central Minnesota Deaf School (St. Cloud School District)
    2. Dakota Open Charter School (Minnesota State Board of Education)
    3. Fort Snelling Academy (Normandale College)
    4. Frederick Douglass (Special School District No. 1 (Minneapolis))
    5. Learning Adventures Middle School (Central Lakes College)
    6. Peak’s-Faribault (Central Lakes College)
    7. Peak’s-Pillager (Central Lakes College)
    8. Prairie Island Community School (Red Wing School District)
    9. Right Step Academy (St. Paul School District)
    10. Skills for Tomorrow Junior High (Goodwill Industries/Easter Seal)
    11. Strategies for Success (St. Paul School District)
    12. Success Academy (St. Paul School District)
    13. Summit School for the Arts (Chisago School District)
    14. Toivola-Meadowlands (St. Louis County School District)
  2. Per TRA:
    1. Central Minnesota Deaf School (St. Cloud School District)
    2. Dakota Open School (Minnesota State Board of Education/Morton School District)
    3. Martin Hughes School (Mountain Iron-Buhl School Board)
    4. Peak’s Charter School, Duluth (Central Lakes College)
    5. Prairie Island Charter School (Red Wing School District)
    6. Summit School for the Arts (Chisago Lake School District)
    7. Toivola-Meadowlands Charter School (St. Louis County School District)
  3. Per PERA:
    1. Central Minnesota Deaf School (St. Cloud School Board)
    2. Frederick Douglass Academy (Special School District No. 1 (Minneapolis))
    3. Peak’s Charter School, Faribault (Central Lakes College)
    4. Peak’s Charter School, Pillager (Central Lakes College)
    5. Right Step Academy (Independent School District No. 625 (St. Paul))
    6. Skills for Tomorrow Junior High School 4037 (Rockford School Board)
    7. Success Academy (Independent School District No. 625 (St. Paul))
    8. Summit School for the Arts (Chisago Lake School District)
    9. Toivola-Meadowlands Charter School 4002 (St. Louis County School District)
  4. Per DTRFA:
    None
  5. Per MTRFA:
    1. Fort Snelling Academy (Normandale College)
    2. Frederick Douglass (Special School District No. 1 (Minneapolis))

  6. Per StPTRFA:
    1. Right Step Academy (Independent School District No. 625 (St. Paul))
    2. Skills for Tomorrow Junior High School (Rockford School Board)
    3. Strategies for Success (Independent School District No. 625 (St. Paul))
    4. Success Academy (Independent School District No. 625 (St. Paul))

 

Open Charter Schools

  1. Per CFL:
    1. ACORN Dual Language Community Academy (Ind. School Dist. No. 625 (St. Paul))
    2. Aurora Charter School (St. Mary’s University)
    3. Bluffview Montessori Charter School (Winona School District)
    4. Cedar-Riverside Community School (Special School District No. 1 (Minneapolis))
    5. City Academy (College of St. Catherine)
    6. Community of Peace (Independent School District No. 625 (St. Paul))
    7. Concordia Creative Learning Academy (Concordia University)
    8. Coon Rapids Learning Center (Bethel College)
    9. Cross Lake Community School (Minnesota State Board of Education)
    10. Cyber Village Academy (Special School District No. 1 (Minneapolis))
    11. Duluth Edison Academies (Duluth School District)
    12. E.C.H.O. Charter School (Yellow Medicine East School District)
    13. Eci’ Nompa Woonspe’ Charter School (Redwood Falls School District)
    14. El Colegio Charter School (Augsburg College)
    15. Emily Charter School (Minnesota State Board of Education)
    16. Face to Face Academy (Independent School District No. 625 (St. Paul))
    17. Family Academy (NE Metro Intermediate School District 916)
    18. Four Directions Charter (Metropolitan State University)
    19. Hanska Community School (New Ulm School District)
    20. Harvest Preparatory Academy (Special School District No. 1 (Minneapolis))
    21. Heart of the Earth Center for the American Indian Education (Special School Dist. No. 1 (Minneapolis))
    22. High School for the Recording Arts (Independent School District No. 625 (St. Paul))
    23. Higher Ground (Independent School District No. 625 (St. Paul))
    24. Hope Community Academy (St. Thomas University)
    25. La Crescent Montessori Academy (Minnesota State Board of Education)
    26. Lafayette Public Charter School (New Ulm School Board)
    27. Lakes Area Charter School (Alexandria Technical College)
    28. Martin Hughes Charter 4040 (Mountain Iron-Buhl School Board)
    29. Math and Science Academy (Minnesota State Board of Education)
    30. Metro Deaf School (Forest Lake School District)
    31. Mexica Multicultural Education (Independent School District No. 625 (St. Paul))
    32. Minnesota Business Academy (Independent School District No. 625 (St. Paul))
    33. Minnesota Institute of Technology (University of St. Thomas)
    34. Minnesota New Country School (LeSueur/Henderson School District)
    35. Minnesota Technology High School (Inver Hills Community College)
    36. Minnesota Transitions Charter School (Special School District No. 1 (Minneapolis))
    37. Native Arts High School (Augsburg College)
    38. Nerstrand Charter School (Faribault School District)
    39. New Heights School (Stillwater School District)
    40. New Spirit School (Independent School District No. 625 (St. Paul))
    41. New Visions School (Special School District No. 1 (Minneapolis))
    42. North Lakes Academy (Minnesota State Board of Education)
    43. Odyssey Charter School (Osseo School District)
    44. PACT Charter School (Anoka-Hennepin School District)
    45. Peak’s Charter School, Duluth (Central Lakes Community College)
    46. Peak’s Charter School, St. Cloud (Central Lakes Community College)
    47. Pillager Area Charter School (Central Lakes Community College)
    48. RiverBend Academy (Minnesota State Board of Education)
    49. Riverway Learning Community (Rochester Community and Technical College)
    50. Rochester Off Campus (Rochester Community and Technical College)
    51. Schoolcraft Learning Community (Minnesota State Board of Education)
    52. Skills for Tomorrow Senior High School (Rockford School District)
    53. Sojourner Truth Academy (Special School District No. 1 (Minneapolis))
    54. St. Paul Family Learning Center (Independent School District No. 625 (St. Paul))
    55. Studio Academy (College of Visual Arts)
    56. Twin Cities Academy (Independent School District No. 625 (St. Paul))
    57. Village School of Northfield (Northfield School District)
    58. World Learner of Chaska (Chaska School District)
    59. Yankton Country Schools (Balaton School District)
  2. Per TRA:
    1. Agricultural and Food Sciences Academy (NE Metro Intermediate District No. 916)
    2. Bluffview Montessori Charter School (Winona School District)
    3. Coon Rapids Learning Center (Bethel College)
    4. Cross Lake Community School (Minnesota State Board of Education)
    5. E.C.H.O. Charter School (Yellow Medicine East School District)
    6. Eci’ Nompa Woonspe’ Charter School (Redwood Falls School District)
    7. Emily Charter School (Minnesota State Board of Education)
    8. Family Academy (NE Metro Intermediate School District 916)
    9. Hanska Community School (New Ulm School District)
    10. La Crescent Montessori Academy (Minnesota State Board of Education)
    11. Lafayette Public Charter School (New Ulm School Board)
    12. Lakes Area Charter School (Alexandria Technical College)
    13. Martin Hughes Charter 4040 (Mountain Iron-Buhl School Board)
    14. Math and Science Academy (Minnesota Department of Children, Families and Learning)
    15. Nerstrand Charter School (Faribault School District)
    16. New Coiuntry Charter School (LeSueur-Henerson School Board)
    17. New Heights School (Stillwater School District)
    18. North Lakes Academy (Minnesota State Board of Education)
    19. Odyssey Charter School (Osseo School District)
    20. PACT Charter School (Anoka-Hennepin School District)
    21. Peak’s Charter School, Faribault (Central Lakes College)
    22. Peak’s Charter School, Pillager (Central Lakes College)
    23. Peak’s Charter School, St. Cloud (Central Lakes Community College)
    24. RiverBend Academy (Minnesota State Board of Education)
    25. Riverway Learning Community (Rochester Community and Technical College)
    26. Rochester Off Campus (Rochester Community and Technical College)
    27. Schoolcraft Learning Community (Minnesota State Board of Education)
    28. Studio Academy (College of Visual Arts)
    29. Village School of Northfield (Northfield School District)
    30. World Learner of Chaska (Chaska School District)
    31. Yankton Country Schools (Balaton School District)
  3. Per PERA:
    1. ACORN Dual Language Community Academy 4018 (Ind. School Dist. No. 625 (St. Paul))
    2. Agricultural and Food Sciences Academy (NE Metro Intermediate District No. 916)
    3. Aurora Charter School (St. Mary’s University)
    4. City Academy (College of St. Catherine)
    5. Community of Peace (Independent School District No. 625 (St. Paul))
    6. Concordia Early Learning School (Concordia University)
    7. Coon Rapids Learning Center (Bethel College)
    8. Cross Lake Community School (Minnesota State Board of Education)
    9. Cyber Village Academy (Special School District No. 1 (Minneapolis))
    10. E.C.H.O. Charter School (Yellow Medicine East School District)
    11. Eci’ Nompa Woonspe’ Charter School (Redwood Falls School District)
    12. Emily Charter 4012 (Minnesota Department of Children, Families and Learning)
    13. Family Academy (NE Metro Intermediate School District 916)
    14. Fort Snelling Academy (Normandale College)
    15. Four Directions Charter (Metropolitan State University)
    16. Heart of the Earth Center for the American Indian Education (Special School Dist. No. 1 (Minneapolis))
    17. High School for the Recording Arts 4039-07 (Independent School District No. 625 (St. Paul))
    18. Higher Ground Academy (Independent School District No. 625 (St. Paul))
    19. La Crescent Montessori Academy (Minnesota State Board of Education)
    20. Lakes Area Charter School (Alexandria Technical College)
    21. Learning Adventures Middle School (Central Lakes College)
    22. Martin Hughes Charter 4040 (Mountain Iron-Buhl School Board)
    23. Math and Science Academy (Minnesota Department of Children, Families and Learning)
    24. Metro Deaf Charter 4005 (Forest Lake School Board)
    25. Mexica Multicultural Education (Independent School District No. 625 (St. Paul))
    26. Minnesota Business Academy (Independent School District No. 625 (St. Paul))
    27. Minnesota Technology Charter 4031 (Inver Hills Community College)
    28. Minnesota Transitions 4017 (Special School District No. 1 (Minneapolis))
    29. New Heights Charter 4003 (Stillwater School District)
    30. New Spirit Charter 4029 (Independent School District No. 625 (St. Paul))
    31. New Visions Charter 4011 (Special School District No. 1 (Minneapolis))
    32. North Lakes Academy (Minnesota State Board of Education)
    33. Odyssey Charter 4030 (Osseo Public Schools)
    34. PACT Charter 4008 (Anoka-Hennepin School Board)
    35. Peak’s Charter School, Duluth (Central Lakes College)
    36. Peak’s Charter School, St. Cloud (Central Lakes Community College)
    37. Riverway Learning Community (Rochester Community and Technical College)
    38. Rochester Charter High School (Rochester Community and Technical College)
    39. Schoolcraft Learning Community (Minnesota State Board of Education)
    40. Skills for Tomorrow Senior High School 4006 (Rockford School District)
    41. Sojourner Truth Academy Charter (Special School District No. 1 (Minneapolis))
    42. St. Paul Family Learning Center (Independent School District No. 625 (St. Paul))
    43. Twin Cities Academy (Independent School District No. 625 (St. Paul))
    44. Village School of Northfield 4021 (Northfield School District)
    45. World Learner Charter 4016 (Chaska School District)
  4. Per DTRFA:
    1. Kenwood Edison School, Duluth (Duluth School Board)
    2. Peak’s Charter School, Duluth (Central Lakes Community College)
    3. Raleigh Edison Elementary School, Duluth (Duluth School Board)
    4. Washburn Edison Junior Academy, Duluth (Duluth School Board)
  5. Per MTRFA:
    1. Aurora (St. Mary’s University)
    2. Cedar-Riverside (Special School District No. 1 (Minneapolis))
    3. El Colegio (Augsburg College)
    4. Fort Snelling Academy (Normandale College)
    5. Four Directions (Metropolitan State University)
    6. Harvest Preparatory (Special School District No. 1 (Minneapolis))
    7. Heart of the Earth (Special School Dist. No. 1 (Minneapolis))
    8. Minnesota Transitions (Special School District No. 1 (Minneapolis))
    9. Native Arts (Augsburg College)
    10. New Visions (Special School District No. 1 (Minneapolis))
    11. Sojourner Truth (Special School District No. 1 (Minneapolis))
  6. Per StPTRFA :
    1. ACORN Dual Language Community Academy (Ind. School Dist. No. 625 (St. Paul))
    2. City Academy (College of St. Catherine)
    3. Community of Peace (Independent School District No. 625 (St. Paul))
    4. Concordia Creative Learning Academy (Concordia University)
    5. Cyber Village Academy (Special School District No. 1 (Minneapolis))
    6. Face to Face Academy (Independent School District No. 625 (St. Paul))
    7. High School for the Recording Arts (Independent School District No. 625 (St. Paul))
    8. Higher Ground (Independent School District No. 625 (St. Paul))
    9. Hope Community Academy (St. Thomas University)
    10. Learning Adventures Middle School (Central Lakes College)
    11. Metro Deaf School (Forest Lake School District)
    12. Mexica Multicultural Education (Independent School District No. 625 (St. Paul))
    13. Minnesota Business Academy (Independent School District No. 625 (St. Paul))
    14. Minnesota Institute of Technology (University of St. Thomas)
    15. Minnesota Technology High School (Inver Hills Community College)
    16. New Spirit School (Independent School District No. 625 (St. Paul))
    17. Skills for Tomorrow Senior High School (Rockford School District)
    18. St. Paul Family Learning Center (Independent School District No. 625 (St. Paul))
    19. Twin Cities Academy (Independent School District No. 625 (St. Paul))

Eligibility Pending

  1. Per PERA:
    1. Academia Cesar Chavez Charter School (University of St. Thomas)
    2. Excell Academy (North Central University)
    3. HOPE Academy (St. Thomas University)
    4. Minnesota Institute of Technology 9210 (University of St. Thomas)
    5. Minnesota Institute of Tech. #9130
    6. Native Arts High School (Augsburg College)
    7. Pillager Area Charter School (Central Lakes College)
    8. Strategies for Success (Independent School District No. 625 (St. Paul))