Title: In the Matter of New York Charter Schools Association, Inc. v. Thomas P. DiNapoli, as Comptroller of the State of New York

State: new-york

Issuer: New York Appellate Court

Document:

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This opinion is uncorrected and subject to revision before
publication in the New York Reports.
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No. 108  
In the Matter of New York Charter 
Schools Association, Inc., et al.
            Appellants,
        v.
Thomas P. DiNapoli, as 
Comptroller of the State of New 
York, et al.,
            Respondents.
Joseph F. Wayland, for appellants.
Andrew D. Bing, for respondents.
New York State United Teachers, amicus curiae.
CIPARICK, J.:
In this appeal, we are called upon to determine whether
the Legislature violated article V, § 1 of the New York State
Constitution when it assigned and directed the State Comptroller
to audit charter schools.  We hold that the Legislature exceeded
its constitutional authority by delegating and directing the
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No. 108
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Comptroller to conduct audits of charter schools.  Therefore, the
order of the Appellate Division should be reversed.
Background
In 1998, the Legislature enacted the New York Charter
Schools Act (Act) thereby authorizing a system of charter schools
to be created in New York State to provide  
"opportunities for teachers, parents, and
community members to establish and
maintain schools that operate
independently of existing schools and
school districts" (1998 NY Senate-Assembly
Bill Memorandum S-7881, A11466).
The Legislature found that creating a charter schools system
would have no fiscal impact on the State because the "[f]unds are
provided for within [the] annual appropriation for school aid"
(id.).  
Charter schools are "within the public school system"
(Education Law § 2850 [2] [e]).  Any child who is eligible for
admission to a public school is qualified for admission to a
charter school, and the charter school "shall enroll each
eligible student who submits a timely application . . . unless
the number of applications exceeds the capacity of the grade
level or building" (Education Law § 2854 [2] [b]).  A charter
school cannot charge tuition or fees, except to the extent that
fees are charged by other public schools, and shall be
nonsectarian in its programs, admission policies, employment
practices and is forbidden from engaging in any form of
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1  However, this section does allow for a "single-sex
charter school or a charter school designed to provide expanded
learning opportunities for students at-risk of academic failure
(id.)."
2  An existing private school is not eligible to convert to
a charter school (see Education Law § 2852 [3]).
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discrimination (see Education Law § 2854 [2] [a]).1  Further, the
Legislature has stated that "[t]he powers granted to a charter
school under [the Act] constitute the performance of essential
public purposes and governmental purposes of this state"
(Education Law § 2853 [1] [d]).
Under this Act, teachers, parents, school
administrators, community residents or any combination thereof
may submit an application to establish a charter school (see
Education Law § 2581 [1]).2  A charter school application may be
filed in conjunction with a college, university, museum,
educational institution, or a not-for-profit corporation exempt
from taxation under paragraph 3 of subsection (c) of § 501 of the
internal revenue code or for-profit business or corporate entity
authorized to do business in New York (id.).  A charter school
application must be submitted to, and receive approval from, a
"charter entity" (see Education Law § 2851 [3]).  The Act defines
a "charter entity" as (1) the State Board of Regents; (2) the
Board of Trustees of the State University of New York; (3) the
board of education of a school district that encompasses the
geographical boundary in which the charter school will operate;
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or (4) if the charter school is to be located within the City of
New York, the Chancellor of the city school district (id.).  
Education Law § 2851 (2) states that the application
must specify information, such as its mission statement, a
description of an educational program and a description of
student achievement goals that meet or exceed the student
performance standards adopted by the Board of Regents for other
public schools.  Further, the application must provide a proposed
budget and fiscal plan for the school, including supporting
evidence that the fiscal plan is sound and that sufficient
start-up funds will be available to the charter school (id.). 
Education Law § 2851 (2) also provides that the charter school
application disclose its requirements and procedures for
conducting at a minimum annual programmatic and independent
fiscal audits, that are comparable in scope to audits of other
public schools.  
Once the application of the proposed charter school has
been approved by the charter entity, the Act requires that the
organizers of the proposed charter school and the charter entity
enter into a proposed written agreement -- the "charter."  The
charter allows an applicant to organize and operate a charter
school (see Education Law § 2852 [5]).  Further, the charter must
"include the specific commitments of the charter entity relating
to its obligations to oversee and supervise the charter school"
(id.).  The Board of Regents, if not the charter entity, is
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3   Education Law § 216-a (1) (a) states the term
"'education corporation' . . . means a corporation (a) chartered
or incorporated by the regents or otherwise formed under this
chapter, or (b) formed by a special act of this state with its
principal purpose an education purpose and which is a member of
the university of the state of New York, or (c) formed under laws
other than the statutes of this state which, if it were to be
formed currently under the laws of this state, might be chartered
by the regents, and which has been authorized to conduct its
activities in this state by the regents or as an authorized
foreign education corporation with the consent of the
commissioner." 
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required to give its final approval to all proposed charters
before issuance (see Education Law §§ 2851 [3]; 2852 [5], [5-a],
[5-b]).  
Once approved, the Board of Regents incorporates the
charter school as an "education corporation"3 (see Education Law
§§ 216-a [1] [a]; 2853 [1]), governed by the Not-For-Profit
Corporation Law (see Education Law § 216-a [4]) and its
incorporation as an education corporation is "for a term not to
exceed five years" (Education Law § 2853 [1] [a]).  After the
five year term has expired, a charter school must apply for
renewal of its charter by submitting a report detailing the
progress of the charter school in achieving the educational
objectives as set forth in it's charter (Education Law § 2851
[4]).  A charter school must provide a "detailed financial
statement that discloses the cost of administration, instruction
and other spending categories for the charter school that will
allow a comparison of such costs to other schools, both public
and private" (Education Law § 2851 [4] [b]), as well as copies of
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4  There are certain instances in Education Law § 2853, in
which the Legislature has determined a charter school should be
considered a private school such as:  (1) the power to designate
text-books, to purchase text-books, to loan text-books and to
purchase supplies; (2) the designation of school library
materials; (3) the designation of software programs to be used in
conjunction with its computers; (4) local zoning, land use
regulation, and building code compliance; and (5) student
transportation.       
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each of the annual reports of the charter school which includes
charter school report cards and certified financial statements
(see Education Law § 2851 [4] [c]).
Indeed, a charter school has been deemed by the
Legislature to be "an independent and autonomous public school"
(Education Law § 2853 [1] [c])4 and that the charter entity and
the Board of Regents are "the public agents authorized to
supervise and oversee the charter school" (id.).  Further, a
charter school is governed by a self-selecting board of trustees
that has "final authority for policy and operational decisions of
the school" (Education Law § 2853 [1] [f]).  However, it falls
both to the Board of Regents and charter entity to oversee each
school approved pursuant to the Act "and may visit, examine into
and inspect any charter school, including the records of such
school, under its oversight" (Education Law § 2853 [2]). 
Further, "[o]versight by a charter entity and the board of
regents shall be sufficient to ensure that the charter school is
in compliance with all applicable laws, regulations and charter
provisions" (id.).  
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The Act imposes additional layers of oversight designed
to ensure the charter school meets its educational
responsibilities by giving the school district in which the
charter school is located the right to visit, examine and inspect
the charter school for the purpose of ensuring that the school is
in compliance with all applicable laws, regulations and charter
provisions (see Education Law § 2853 [2-a]).  Any evidence of
non-compliance uncovered by the school district during its
inspection of the charter school may be forwarded to the Board of
Regents and the charter entity for action, which can include
revocation of the school's charter (see id.; see also Education
Law § 2855).  
In addition to being subject to inspection by the Board
of Regents, the charter entity and the local school district,
charter schools must submit an annual report to both the Board of
Regents and to its charter entity.  These reports include a
charter school report card that outlines the measures of the
comparative academic and fiscal performance of the school (see
Education Law §§ 2857 [2]; [2] [a]).  These   
"measures shall include, but not be
limited to, graduation rates, dropout
rates, performance of students on
standardized tests, college entry rates,
total spending per pupil and
administrative spending per pupil.  Such
measures shall be presented in a format
that is easily comparable to similar
public schools" (Education Law § 2857 [2]
[a]). 
A charter school's annual report also must include "a certified
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5   Respondents assert that petitioners received the
majority of their revenue, between 63% and 96%, from the New York
City School District, with the average being approximately 82%.
6   The Act also encourages "[p]rivate persons and
organizations . . . to provide funding and other assistance to
the establishment or operation of charter schools" (Education Law
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financial statement setting forth . . . the revenues and
expenditures for the preceding school year, including a copy of
the most recent independent fiscal audit of the school" 
(Education Law § 2857 [c]). 
Charter schools are funded primarily with public
monies.5  The Act requires that the "[s]chool district of
residence shall pay directly to the charter school for each
student enrolled in the charter school who resides in the school
district the charter school basic tuition" (Education Law § 2856
[1] [a]).  Further, a school district that has a charter school
operating within its geographical area must "pay directly to the
charter school any federal or state aid attributable to a student
with a disability attending charter school in proportion to the
level of services for such student with a disability that the
charter school provides directly or indirectly" (Education Law
2856 [1] [b]).  
Should a school district fail to make the mandatory
payments outlined in Education Law § 2856, the Comptroller must
deduct from any state funds that become due to such school
district an amount equal to the unpaid obligation to the charter
school (see Education Law § 2856 [2]).6  Upon closure or
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§ 2853 [4] [d]).
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dissolution of a charter school, its students and student records
must be transferred to the school district wherein the charter
school is located (see Education Law § 2851 [2] [t]), while its
assets must be remitted back to the school district or to another
charter school operating within the same school district (id.). 
The Act, however, makes clear that a charter school
does "not have the power to levy taxes or to acquire property by
eminent domain" (Education Law § 2853 [1] [e]).  The Act also
makes it clear that no civil liability may attach to a charter
entity, the Board of Regents, or to any of their members or
employees, individually or collectively, for any acts or
omissions of the charter school (see Education Law § 2853 [1]
[g]).  Also, it exempts the local school district, the charter
entity and the state from liability for any debts or financial
obligations of a charter school or any person and/or corporate
entity that operates a charter school (id.).
The 2005 Legislation and This Lawsuit
In 2005, the Legislature adopted the school audit bill
which directs the State Comptroller to audit all school
districts, board of cooperative educational services (BOCES) and
charter schools operating within this State by March 31, 2010
(see L 2005, ch 267; see also Education Law § 2854 [1] [c];
General Municipal Law § 33 [2]).  The Legislature determined that
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additional audits should be conducted by the State Comptroller
because  
"[s]chool districts, BOCES and charter
schools are all public entities that use
taxpayer funds.  As such, the taxpayers
who support these enterprises have a right
to know that they are managed effectively
and that proper measures are in place to
protect against fraud and waste.  The
recent school district financial scandals
and the failure of the independent auditor
in those districts have made it clear that
these additional safeguards are not merely
appropriate; they are a good investment
that will protect State and local
taxpayers from financial practices that do
not meet State standards" (Budget Report
on Bills, Bill Jacket, L 2005, Ch 267, at
5).
As amended, Education Law § 2854 (1) (c) requires that charter
schools be subject to the State Comptroller's audit just like
other public schools.  The Legislature also amended General
Municipal Law § 33 to require that the Comptroller "cause the
accounts of every school district, BOCES and charter school in
the state to be examined" no later than March 31, 2010.  
As a result of the 2005 amendments, respondents, by
letter dated July 1, 2007, notified 31 charter schools located in
New York City that the Office of the State Comptroller had
scheduled a performance audit of charter schools authorized by
the New York City Department of Education.  The State Comptroller
cited Education Law § 2854 and General Municipal Law § 33 as his
authority to conduct the performance audits of the charter
schools pursuant to article V, § 1 of the New York State
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7  The caption indicates that there are 15 charter schools
petitioners:  The Opportunity Charter School, New Heights Academy
Charter School, The Renaissance Charter School, International
Leadership Charter School, Hellenic Classical Charter School,
Harlem Children's Zone Promise Academy Charter School, Harlem
Children's Zone Promise Academy II Charter School, John V.
Lindsay Wildcat Academy Charter School, Hyde Leadership Academy
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Constitution.  The audits were to include an assessment as to the
extent that New York City charter schools met quantitative
academic achievement goals and complied with student selection
procedures and criteria, as set forth in their charters. 
Upon receiving notice of the State Comptroller's intent
to audit them, several charter schools, by letter dated August 3,
2007, questioned whether the Comptroller had the authority to
conduct academic performance audits.  The Comptroller responded
by letter dated September 27, 2007, reiterating that his
authority derived from the 2005 amendments to General Municipal
Law § 33, and that this Court's decision in Matter of McCall v
Barrios-Paoli (93 NY2d 99 [1999]) had clarified that the State
Comptroller's audit authority includes the power to conduct both
financial and performance audits.  The Comptroller concluded that
the audits were proper because the matters to be examined "have
clear fiscal implications for the public as well as the
governmental entities that fund the charter schools and have
programmatic and oversight responsibilities with respect to them"
(Letter from the Office of the State Comptroller, Sept 27, 2007,
record at 254).  
In December 2007, petitioners7 commenced this combined
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Charter School, New York Center for Autism Charter School,
Brooklyn Charter School, Manhattan Charter School, South Bronx
Charter School for International Cultures and the Arts, Community
Roots Charter School and Ross Global Academy Charter School. 
However, respondents assert that there are 16 charter school
petitioners because the list did not include the Future Leaders
Institute Charter School.  Petitioners also include two not-for-
profit organizations, The Charter Schools Association, Inc., and
The New York City Center for Charter Excellence, Inc.  The
charter school petitioners are members of The Charter Schools
Association, Inc.
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CPLR article 78 proceeding and an action for declaratory and
injunctive relief against respondents Thomas P. DiNapoli, as
Comptroller of the State of New York, the Office of the State
Comptroller and the State of New York.  In particular, 
petitioners seek a declaratory judgment that the Comptroller
lacks the authority to conduct audits of charter schools because
article V, § 1 of the New York State Constitution prohibits the
Legislature from assigning to the Comptroller the power or duty
of auditing charter schools since they are not political
subdivisions of the State, nor is the task of auditing of charter
schools an administrative duty incidental to the Comptroller's
constitutionally prescribed functions.  Further, petitioners seek
a judgment declaring that the grant of the Comptroller's audit
authority over charter schools contained in General Municipal Law
§ 33 (2) and Education Law § 2854 (1) (c) is unconstitutional and
seek a permanent injunction prohibiting the Comptroller from
conducting audits of charter schools.  Respondents answered and
moved for summary judgment. 
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8  As an initial matter, Supreme Court also rejected
respondents' argument that charter schools lack the legal
capacity to assert a constitutional challenge against the State,
finding that petitioners have standing.
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Supreme Court denied respondents' motion for summary
judgment, holding that insofar as General Municipal Law § 33 (2)
and Education Law § 2851 (1) (c) authorize or direct the
Comptroller to audit charter schools, they violate article V, § 1
of the New York State Constitution.  The court permanently
enjoined the Comptroller from conducting any further charter
audits.8  
A divided Appellate Division reversed, holding that the
Legislature did not violate NY Constitution, article V, § 1, when
it directed audits of charter schools by the Comptroller.  The
majority found that given the Legislature's broad delegatory
authority regarding the Comptroller's authority and the
significant public funding involved, the Comptroller's
fundamental duty to supervise state fiscal matters was
implicated.  Therefore, the task of auditing charter schools was
an administrative duty incidental to the Comptroller's
constitutionally prescribed functions.  Petitioners appeal as of
right, pursuant to CPLR 5601 (b) (1), and we now reverse. 
Analysis
It is well settled that "[l]egislative enactments enjoy
a strong presumption of constitutionality" (LaValle v Hayden, 98
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NY2d 155, 161 [2002]).  A party contesting the constitutionality
of a statute must overcome a very heavy initial burden by proving
that the invalidity of the law is beyond a reasonable doubt (see
People v Tichenor, 89 NY2d 769, 773 [1997] citing People v
Pagnotta, 25 NY2d 333, 337 [1969]).  Here, petitioners assert
that the Legislature violated article V, § 1 of the New York
State Constitution which provides in pertinent part that   
"[t]he comptroller shall be required: (1)
to audit all vouchers before payment and
all official accounts; (2) to audit the
accrual and collection of all revenues and
receipts; and (3) to prescribe such
methods of accounting as are necessary for
the performance of the foregoing duties. 
The payment of any money of the state, or
of any money under its control, or the
refund of any money paid to the state,
except upon audit by the comptroller,
shall be void . . . In such respect the
legislature shall define the powers and
duties and may also assign to him or her:
. . . supervision of the accounts of any
political subdivision of the state . . .
The legislature shall assign to him or her
no administrative duties, excepting such
as may be incidental to the performance of
these functions, any other provision of
this constitution to the contrary
notwithstanding."
Petitioners contend that assignment to the Comptroller
of the power and duty to audit charter schools violates the
constitutional provision because charter schools are not
political subdivisions of the State, nor is the task of auditing
charter schools an administrative duty that is incidental to the
Comptroller's constitutionally prescribed functions.  We agree.
Although vigorously contested below, respondents do not
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now press the argument that a charter school is a "political
subdivision" of the State.  They maintain, however, that the
Legislature's assignment to the Comptroller of the duty to audit
charter schools is permitted by the broad authority conferred by
article V, §1.  They further contend that the Legislature's
assignment of auditing duties to the Comptroller is
constitutional because charter schools have a significant fiscal
impact on both the State and school districts and should fall
under the Comptroller's incidental power to audit school
districts.  
In 1925, the Legislature determined that a major
restructuring of government departments and their
responsibilities was necessary.  Article V, § 1 was adopted in
order to establish parameters of the Comptroller's duties.  We
noted this legislative history in Blue Cross & Blue Shield of
Cent. N.Y. v McCall (89 NY2d 160 [1996]) as support for our
determination that the Legislature did not have the
constitutional authority to assign to the Comptroller the power
to conduct audits of private health insurance companies.
There, we rejected the State Comptroller's arguments,
which had been based upon practical concerns and public policy. 
Here, as in Blue Cross, the policy concerns appear to be
substantial.  However, the legislative enactments of General
Municipal Law § 33 (2) and Education Law § 2854 (1) (c), to the
extent they grant the Comptroller the power to audit charter
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schools, violate article V, § 1.  Indeed, in Blue Cross, we
observed that it was important that the administrative duties
conferred upon the Insurance Department had long since been
established and empowered to conduct audits and examinations of
the insurance business (see 89 NY2d at 168-169).  
Here, the Legislature has designated the Board of
Regents and the chartering entities as the public agents
authorized to supervise and oversee charter schools. 
Respondents' proposed audits include an assessment as to the
extent to which New York City charter schools meet quantitative
academic achievement goals and comply with student selection
procedures and criteria, as set forth in their charters.  Audits
of charter schools -- not political subdivisions -- cannot be
construed as incidental to the audits of school districts.  The
"plainly expressed constitutional prohibition" of article V, § 1
simply does not support respondents' expansive reading of the
term "incidental" (Blue Cross, 89 NY2d at 170).
Indeed, "[a]rticle V, § 1 of the State Constitution is
a wellspring of the Comptroller's authority [which] broadly
empowers the Legislature to delegate to the Comptroller both
supervision of the accounts of any political subdivision of the
State and administrative duties incidental thereto" (Matter of
McCall v Barrios-Paoli, 93 NY2d 99, 105 [1999]).  However, we
have noted that "the objective behind article V, § 1 was to
protect the 'independent character of the Comptroller's audit
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function,' a goal that was accomplished by prohibiting the
Legislature from assigning to the Comptroller unrelated duties"
(Matter of Worth Constr. Co., Inc. v Hevesi, 8 NY3d 548, 552
[2007], citing McCall v Barrios-Paoli, 93 NY2d 99 at 107), and is
fulfilled by our holding today. 
Respondents maintain that our decision in Barrios-Paoli
supports their contention that school districts, as recipients of
billions of dollars in annual State aid, some passed along to
support charter schools, are subject to the Comptroller's audit
because the State's interest in monies appropriated to these
school districts does not cease upon the district's receipt of
the funds.  Respondents further contend that the authority to
supervise the accounts of the State's political subdivision --
the school district -- leaves ample room for a wider inquiry into
the efficiency and effectiveness of the district's expenditures
of State funds for charter schools.  In other words, respondents
believe that the Comptroller has the authority to "follow the
money."
Respondents' reliance on Barrios-Paoli, however, is
misplaced.  The question presented in Barrios-Paoli was whether
the Comptroller had the authority to inquire into the management
and operations of city agencies that are political subdivisions. 
In answering that question in the affirmative, we did not
indicate that the State Comptroller, as the State's chief fiscal
officer, could therefore audit the management and operations of
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an entity -- not a political subdivision -- solely on the basis
that it receives State funds and performs a governmental
function. 
Neither does the language of article V, § 1 -- "[t]he
payment of any money of the state, or of any money under its
control, or the refund of any money paid to the state, except
upon audit by the comptroller, shall be void" -- support the
constitutionality of the Legislature's delegation to the
Comptroller of the duty to audit charter schools.  Respondents
argue that the Comptroller's authority to audit all vouchers
before payment and all accounts ("pre-audit") includes, by
implication, "post-audit" authority to confirm that funds have
been correctly disbursed and have been used in conformity with
the particular purpose or program.  However, respondents'
argument that the Comptroller is constitutionally entitled to
audit the performance of charter schools, and perhaps question
the wisdom of how charter schools provide instruction cannot be
considered to be within an audit of the monies paid by a school
district acting as a mere conduit by forwarding the funds
necessary to pay a student's tuition.  The money paid by a school
district to a charter school is no longer under the State's
control once the funds have been transferred.  
This does not leave charter schools without fiscal
oversight as the fiscal affairs of each charter school are indeed
subject to oversight by the Board of Regents, its chartering
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entity, the school's board of trustees and the mandatory
independent annual audit.  Accountability to the public is thus
secured.  The ultimate check, of course, is that a school may
lose its charter if it is not meeting educational standards, as
charters are renewed every five years.
Conclusion
Petitioners have shown, beyond a reasonable doubt, that
the Legislature's delegation of auditing authority over charter
schools to the Comptroller violates article V, § 1 of the New
York State Constitution.  The provisions of General Municipal Law
§ 33 (2) and Education Law § 2854 (1) (c), to the extent that
these provisions direct the Comptroller to conduct audits of
charter schools, are thus declared unconstitutional and the
declaratory and injunctive relief, as granted by Supreme Court is
proper.            
Accordingly, the order of the Appellate Division should
be reversed, with costs, and the order and judgment of Supreme
Court, should be reinstated.
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Matter of New York Charter Schools Assn. v DiNapoli
No. 108
LIPPMAN, Chief Judge (concurring) :
While I agree with the majority that the challenged
legislation directing fiscal and programmatic audits of all of
the State's charter schools by the end of March 2010 exceeds the
authority conferred upon the Legislature to shape the mission of
the State Comptroller pursuant to article V, §1 of New York's
Constitution, I write separately to underscore that the issue
before us has less to do with the power of the Comptroller than
it does with the power of the Legislature.  All we hold is that
the Legislature could not consistent with the express limitation
upon its authority to define the Comptroller's agenda contained
in article V, §1, direct the Comptroller to perform both fiscal
and programmatic audits of entities that are neither political
subdivisions of the State nor so intertwined with political
subdivisions that their audit would be reasonably incidental to a
political subdivision audit.   We do not hold that charter
schools may never be audited by the State Comptroller.  Judge
Graffeo has raised the possibility that a less plenary audit
confined to economic matters might be permissibly directed under
article V, §1.  It might also be borne in mind that while article
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V, §1 is an important wellspring of the Comptroller's power, it
is not its only source.  Under article X, §5 of the Constitution,
the Comptroller is expressly permitted to supervise the accounts
of a public corporation and it appears that charter schools,
which are indisputably corporate constituents of the public
education system and share many of the salient characteristics of
the public benefit corporations traditionally audited by the
Comptroller under the authority of article X, §5 (see 20 Misc 3d
235, 259-266 [2008] [same case]), may well be deemed public
corporations within the meaning of that provision.  If so, they
would clearly be auditable by the Comptroller -- but at his or
her discretion, not the direction of the Legislature (see
Patterson v Carey, 41 NY2d 714, 723-724 [1977]).   These
alternative theories pursuant to which the accounts of charter
schools might be brought under the Comptroller's supervision are
not now before us.  They are properly raised only to show that we
have not, by enforcing the constitutional limitation upon the
Legislature's prerogative to make use of the Comptroller's
office, thereby placed charter schools beyond the Comptroller's
power.  
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Matter of New York Charter Schools Assn., Inc. v DiNapoli
No. 108
GRAFFEO, J. (concurring):
I agree with the majority that the 2005 legislation
directing the Comptroller to audit charter schools to the same
extent as public school districts violates article V, § 1 of the
New York Constitution.  I do not believe academic performance
audits fall within the administrative duties that are incidental
to the Comptroller's supervision of political subdivisions, which
include school districts.  But I do not subscribe to the majority
opinion to the extent it suggests that article V, § 1 prohibits
the Legislature from assigning any audit function to the
Comptroller.  I write separately to express my belief that
article V, § 1 grants the Legislature some flexibility in
authorizing the Comptroller to conduct more limited, purely
financial audits of the public funding provided to charter
schools.
Under article V, § 1 of the New York Constitution, the
Legislature may assign to the Comptroller the "supervision of the
accounts of any political subdivision of the state" as well as
"administrative duties" that are "incidental to the performance"
of the Comptroller's functions.  This constitutional provision
"designates the Comptroller as the independent auditing official
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for the affairs of the State" (Matter of Dinallo v DiNapoli, 9
NY3d 94, 101 [2007] [internal quotation marks and citation
omitted]), whose fundamental duty is "to [s]uperintend the fiscal
concerns of the state" (Blue Cross & Blue Shield of Cent. N.Y. v
McCall, 89 NY2d 160, 166 [1996] [internal quotation marks and
citation omitted]).  We have described article V, § 1 as the
"wellspring of the Comptroller's authority" and recognized the
authority of "the Legislature to delegate to the Comptroller both
supervision of the accounts of any political subdivision of the
State and administrative duties incidental thereto" (Matter of
McCall v Barrios-Paoli, 93 NY2d 99, 105 [1999]).
Although the Legislature has broad power to assign
tasks to the Comptroller, this authority is not without
limitation inasmuch as article V, § 1 prohibits the Legislature
from "assigning to the Comptroller administrative tasks that are
not incidental to his duty to superintend the fiscal concerns of
the State" (Dinallo, 9 NY3d at 103).  In Dinallo, for example, we
held that the Legislature could not direct the Comptroller to
audit the New York State Insurance Department Liquidation Bureau
because the rehabilitation or liquidation of distressed insurers
-- the sole purpose of the Liquidation Bureau, an arm of the
Superintendent of Insurance in his separate capacity as court-
appointed receiver on behalf of private businesses -- "has no
impact on the state fisc" (id. at 102).  Similarly, in Blue
Cross, we concluded that the Legislature could not require the
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1  The legislation also permits the Comptroller to conduct
further audits of these entities "based upon a risk assessment
process conducted by the comptroller which may include
investigations of alleged improprieties, previous audit findings
and recommendations, or other financial performance indicators"
(General Municipal Law § 33 [2] [a]).
2  According to respondents, although the Comptroller
previously possessed the authority to audit school districts and
BOCES (see General Municipal Law § 33 [1]), he discontinued the
practice of regularly auditing them in the 1970's due to budget
cutbacks and in reliance on the annual independent audits --
which are now still required in addition to the Comptroller's
audits.
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Comptroller to audit private not-for-profit health insurance
companies that were subject to state regulation.
The controversy before us focuses on legislative action
in 2005, when the Legislature directed the Comptroller to audit
each school district, board of cooperative educational services
(BOCES) and charter school at least once by 2010 (L 2005, ch 267;
see also General Municipal Law § 33 [2]; Education Law § 2854 [1]
[c]).1  The legislation was prompted by the misappropriation of
millions of dollars in several school districts in which the
independent auditor -- described as the "linchpin of the existing
system" -- failed to disclose "blatant and ongoing fraud" (see
Budget Rep on Bills, Bill Jacket, L 2005, ch 267).2  The
legislation granted the Comptroller the authority to audit
charter schools in the same manner as school districts (see
General Municipal Law § 33 [2] [b]).
There is no doubt that the Legislature's delegation of
comprehensive auditing functions to the Comptroller regarding
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school districts was constitutional.  The Comptroller is
empowered to conduct both fiscal and performance audits of
"political subdivisions" of the state under article V, § 1 (see
Barrios-Paoli, 93 NY2d at 108), which include school districts.
The question here is whether the Legislature could
require that the Comptroller undertake the very same
uncircumscribed audits of charter schools -- which the
Comptroller does not assert to be political subdivisions in their
own right -- as "incidental" to the audits of school districts. 
The majority opinion, correctly in my view, finds that it could
not.  As the trial court below observed, characterizing "the
Legislature's grant of full fiscal and programmatic audit
authority over the 200 charter schools authorized by the [Charter
Schools] Act -- including evaluation of student educational
performance -- as 'incidental' puts far more weight on the term
than it reasonably can bear" (20 Misc 3d 235, 268 [Sup Ct, Albany
County 2008]).  Clearly, one of the purposes in creating charter
schools was to foster more innovative and experimental education
environments.  It is therefore a statutory responsibility of the
Board of Regents and charter entities to evaluate the
instructional objectives and academic achievements of charter
schools (see Education Law § 2853 [2]; § 2857 [2]). 
Nevertheless, based on the unique status of charter schools and
the manner in which they receive substantial public financing, I
believe that the Legislature could, within the parameters of the
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Constitution, direct the Comptroller to conduct limited fiscal
audits if it chose to do so.
As recognized by the Appellate Division majority, the
operation of charter schools implicates both the significant
governmental function of providing a public education and large
amounts of taxpayer funds.  First, by constitutional mandate, the
Legislature is required to provide children with a free education
(see NY Const, art XI, § 1).  Although the Legislature
historically discharged this responsibility through the creation
and maintenance of public schools, it now fulfills this duty in
part through the funding of charter schools.  Indeed, "[t]he
powers granted to a charter school . . . constitute the
performance of essential public purposes and governmental
purposes of this state" (Education Law § 2853 [1] [d]).  And
while charter schools operate apart from school districts, the
Charter Schools Act does not create a purely private status for
charter schools; rather, the Act makes clear that they are part
of the "public school system" (Education Law § 2850 [2] [e]). 
This distinguishes their status from private entities, as we
addressed in Blue Cross.
Second, charter schools are financially linked to
school districts in that public funds flow to charter schools
through school districts.  Specifically, the school district of
residence for each charter school student must pay that student's
"basic tuition" amount directly to the charter school (see
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3  The school district is further obliged to "pay directly
to the charter school any federal or state aid attributable to a
student with a disability attending charter school in proportion
to the level of services for such student with a disability that
the charter school provides directly or indirectly" (Education
Law § 2856 [1] [b]).
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Education Law § 2856 [1] [a]).3  Because payments to charter
schools are based on enrollment figures, any improper
documentation of such figures would negatively affect school
districts by reducing available revenues.  In more general terms,
any money a school district pays over to a charter school
diminishes the revenue available to the school district to fund
its own operations.  A vital financial nexus therefore exists
between charter schools and school districts.
Given the special character of charter schools and
their relationship to the public school system, in conjunction
with the broad authority envisioned by article V, § 1, I conclude
that the Legislature could constitutionally direct the
Comptroller to perform fiscal audits of the public funding that
charter schools receive as "incidental" to his comprehensive
oversight of school districts themselves.  Although financial
controls are already in place for both school districts and
charter schools, the legislative history underlying the 2005
amendments indicates that preexisting independent audits of
school districts were problematic, necessitating additional
oversight by the Comptroller.  Charter schools cannot be
considered immune from financial mismanagement problems nor are
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No. 108
4  In their brief, respondents state that charter school
audits (of non-petitioner schools) conducted before the
commencement of this litigation revealed fiscal problems "that
had not been previously discovered or disclosed by the
independent audits, including spending for a lavish retreat and
substantial unauthorized payments to staff and others."  They
further assert that, "in an audit of the New York City Department
of Education that preceded the audits involved here, the
Comptroller found that the Department was not fully monitoring
the 23 charter schools that it oversees."
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they unable to benefit from fiscal audit recommendations.4  I
therefore would not foreclose the Legislature from granting the
Comptroller appropriately limited auditing authority with respect
to charter schools.
*   *   *   *   *   *   *   *   *   *   *   *   *   *   *   *   *
Order reversed, with costs, and order and judgment of Supreme
Court, Albany County, reinstated.  Opinion by Judge Ciparick.
Judges Read, Smith and Jones concur. Chief Judge Lippman concurs
in result in an opinion. Judge Graffeo concurs in result in an
opinion in which Judge Pigott concurs.
Decided June 25, 2009