New York Law Review

Tag: Charter Schools

  • New York Charter School Assn. v. Smith, 16 N.Y.3d 73 (2010): Determining if Charter Schools Are Subject to Prevailing Wage Laws

    New York Charter School Assn. v. Smith, 16 N.Y.3d 73 (2010)

    Charter schools are generally not considered public entities subject to New York’s prevailing wage laws under Labor Law § 220, unless they are acting directly on behalf of a public entity in a contractual capacity for public work.

    Summary

    This case addresses whether New York’s prevailing wage laws apply to charter schools. The New York State Department of Labor reversed its prior position and declared that these laws applied to all charter school projects. Charter schools and supporting foundations challenged this determination. The Court of Appeals held that charter schools are generally not public entities under Labor Law § 220 and are therefore not subject to prevailing wage laws unless they act directly on behalf of a public entity in a contractual capacity. The Court emphasized that charter schools typically contract for their own benefit, not for the benefit of the state.

    Facts

    In 2007, the New York State Department of Labor (DOL) issued an opinion letter stating that prevailing wage laws applied to all charter school projects, reversing its prior 2000 opinion that charter schools were generally not public entities and therefore not subject to these laws. The Commissioner of Labor notified the Charter Schools Institute and the Commissioner of the State Education Department that it would begin enforcing prevailing wage laws on charter school projects for which bids were advertised on or after September 20, 2007. Foundations supporting charter schools and individual charter schools then commenced legal proceedings challenging the DOL’s new position.

    Procedural History

    The Supreme Court denied the petitions, holding that the charter agreement was a contract between a public entity and a third party, thus subjecting charter school construction to prevailing wage laws. The Appellate Division reversed, granting the petitions and declaring that charter schools are not subject to prevailing wage laws. The New York Court of Appeals granted leave to appeal and affirmed the Appellate Division’s decision.

    Issue(s)

    Whether charter schools are considered public entities or third parties acting on behalf of public entities, thus subjecting them to the prevailing wage requirements of Labor Law § 220 for construction and renovation projects.

    Holding

    No, because charter schools are not explicitly identified as public entities under Labor Law § 220 and typically contract for construction and renovation projects on their own behalf, not on behalf of a public entity.

    Court’s Reasoning

    The Court applied the two-pronged test from Matter of Erie County Indus. Dev. Agency v Roberts, which requires (1) a contract involving the employment of laborers, workmen, or mechanics to which a public agency is a party, and (2) that the contract concern a public works project. The Court found that charter agreements themselves are not contracts for public work. While charter schools possess some characteristics similar to public entities, they are governed by self-selecting boards of trustees and are exempt from many state and local laws governing public schools. The Court noted that the legislature knows how to subject charter schools to laws governing public entities when it intends to do so. Referencing Education Law § 2853 (1)(g), the court also noted that neither the local school district, the charter entity nor the state is liable for the debts or financial obligations of a charter school. The Court distinguished this situation from Matter of Pyramid Co. of Onondaga v New York State Dept. of Labor, where a private entity was acting to benefit the State. Here, a renovation contract by a charter school is primarily for the benefit of the school itself. The court emphasized that its holding should not be interpreted to mean that every contract involving a charter school is exempt from prevailing wage laws, as there may be situations where the school is acting directly on behalf of a public entity. The Court stated, “[w]hen an education corporation enters into a facilities contract for a charter school, it typically does so on its own behalf, in its own name, and at its own risk.”

  • New York Charter Schools Assn. v. DiNapoli, 16 N.Y.3d 73 (2010): Limits on Comptroller’s Audit Authority over Charter Schools

    New York Charter Schools Assn. v. DiNapoli, 16 N.Y.3d 73 (2010)

    The Legislature violates Article V, § 1 of the New York State Constitution when it assigns and directs the State Comptroller to audit charter schools, as charter schools are not political subdivisions of the State, and auditing them is not an administrative duty incidental to the Comptroller’s constitutionally prescribed functions.

    Summary

    This case addresses whether the New York State Legislature violated the state constitution by directing the State Comptroller to audit charter schools. The Court of Appeals held that the Legislature exceeded its constitutional authority. The Court reasoned that charter schools are not political subdivisions of the state, and auditing them is not an administrative duty incidental to the Comptroller’s constitutionally prescribed functions. The decision emphasizes the limits on the Legislature’s power to assign duties to the Comptroller and underscores the independent character of the Comptroller’s audit function. It clarifies that the Comptroller’s authority is primarily tied to auditing political subdivisions of the state and administrative duties directly related to those audits, rather than extending to any entity receiving state funds.

    Facts

    In 1998, the New York Legislature enacted the Charter Schools Act, creating a system of charter schools. Charter schools are considered part of the public school system but operate independently. They are funded primarily with public monies, with school districts paying tuition for resident students attending charter schools. In 2005, the Legislature amended the law to direct the State Comptroller to audit all school districts, BOCES, and charter schools by March 31, 2010. The State Comptroller then notified several charter schools of scheduled performance audits to assess academic achievement and compliance with student selection procedures.

    Procedural History

    Several charter schools challenged the Comptroller’s authority to conduct these audits. The Supreme Court denied the respondents’ motion for summary judgment and permanently enjoined the Comptroller from conducting further charter audits. The Appellate Division reversed, finding the Legislature did not violate the state constitution. The Court of Appeals then reversed the Appellate Division, reinstating the Supreme Court’s order and judgment.

    Issue(s)

    Whether the Legislature violated Article V, § 1 of the New York State Constitution by assigning the State Comptroller the power and duty to audit charter schools.

    Holding

    No, because charter schools are not political subdivisions of the State, and the task of auditing charter schools is not an administrative duty incidental to the Comptroller’s constitutionally prescribed functions.

    Court’s Reasoning

    The Court of Appeals held that the Legislature’s assignment of auditing authority over charter schools to the Comptroller violated Article V, § 1 of the New York State Constitution. Article V, § 1 outlines the Comptroller’s duties, including auditing vouchers, official accounts, and revenue collection. It also allows the Legislature to assign the Comptroller supervision of the accounts of any political subdivision of the state and administrative duties incidental to those functions. The Court emphasized that the “plainly expressed constitutional prohibition” of Article V, § 1 does not support an expansive reading of the term “incidental.”

    The Court distinguished its holding from Matter of McCall v. Barrios-Paoli, 93 N.Y.2d 99 (1999), stating that while the Comptroller has the authority to inquire into the management and operations of city agencies (political subdivisions), this does not extend to entities that are not political subdivisions simply because they receive state funds and perform a governmental function.

    The Court also rejected the argument that the Comptroller’s authority to audit all vouchers before payment implies a “post-audit” authority to confirm that funds have been correctly disbursed. It stated that the Comptroller’s authority to audit monies paid by a school district to a charter school, acting as a conduit, does not extend to questioning the wisdom of how charter schools provide instruction. Once the funds are transferred, they are no longer under the State’s control.

    The Court noted that charter schools are still subject to fiscal oversight by the Board of Regents, their charter entity, the school’s board of trustees, and mandatory independent annual audits. Further, a school may lose its charter if it fails to meet educational standards.

    The Court concluded that the provisions of General Municipal Law § 33 (2) and Education Law § 2854 (1) (c), to the extent they direct the Comptroller to conduct audits of charter schools, are unconstitutional.

  • New York Charter Schools Assn. v. DiNapoli, 13 N.Y.3d 120 (2009): Limits on Legislative Power to Assign Audits to Comptroller

    13 N.Y.3d 120 (2009)

    The New York State Constitution prohibits the Legislature from assigning the State Comptroller the power to audit entities that are not political subdivisions of the state, nor can the Legislature assign tasks that are not incidental to the Comptroller’s constitutionally prescribed functions.

    Summary

    This case addresses the scope of the New York State Comptroller’s auditing authority, specifically whether the state legislature can compel the Comptroller to audit charter schools. The Court of Appeals held that the legislature exceeded its constitutional authority by directing the Comptroller to audit charter schools because charter schools are not political subdivisions of the state, and auditing them is not incidental to the Comptroller’s other duties. This decision reinforces the separation of powers and protects the Comptroller’s independence.

    Facts

    In 2005, the New York State Legislature passed a bill directing the State Comptroller to audit all school districts, Boards of Cooperative Educational Services (BOCES), and charter schools by March 31, 2010. This was motivated by financial scandals in some school districts. The State Comptroller notified several New York City charter schools that the Office of the State Comptroller had scheduled performance audits to assess academic achievement and compliance with student selection procedures. The charter schools questioned the Comptroller’s authority to conduct these audits.

    Procedural History

    Several charter schools and related organizations sued the State Comptroller, seeking a declaratory judgment that the Comptroller lacked the authority to audit charter schools and an injunction prohibiting such audits. Supreme Court initially ruled in favor of the charter schools. The Appellate Division reversed, finding the Comptroller’s audits permissible. The charter schools appealed to the Court of Appeals.

    Issue(s)

    Whether the Legislature violated Article V, Section 1 of the New York State Constitution by assigning and directing the State Comptroller to audit charter schools.

    Holding

    No, because the Legislature exceeded its constitutional authority by delegating and directing the Comptroller to conduct audits of charter schools.

    Court’s Reasoning

    The Court of Appeals reasoned that Article V, Section 1 of the New York Constitution defines the Comptroller’s duties, which include auditing vouchers, official accounts, and the collection of revenues. The Legislature can assign the Comptroller supervision of the accounts of any political subdivision of the state and administrative duties incidental to those functions. However, the Constitution prohibits assigning the Comptroller unrelated administrative duties. The court found that charter schools are not political subdivisions of the state. Auditing charter schools is not considered an administrative duty incidental to auditing school districts, even though charter schools receive public funds through school districts. The court emphasized that the Board of Regents and charter entities are designated to supervise and oversee charter schools. The court distinguished this case from McCall v. Barrios-Paoli, where the Comptroller’s authority to audit city agencies (political subdivisions) was upheld. Here, the court stated, “the objective behind article V, § 1 was to protect the `independent character of the Comptroller’s audit function,’ a goal that was accomplished by prohibiting the Legislature from assigning to the Comptroller unrelated duties”. The Court stated that once funds have been transferred by a school district to a charter school, the money is no longer under the State’s control. The Court noted the ultimate check against a school is that the school may lose its charter if it is not meeting educational standards, as charters are renewed every five years. Therefore, the legislation directing the Comptroller to audit charter schools was unconstitutional.