Charter schools are a new and increasingly popular entrant in the debate on restructuring and improving U.S. public education. The model offered by charter schools differs substantially from the traditional model for governing and funding public schools. Charter schools operate under a charter or contract that specifies the terms under which the schools may operate and the student outcomes they are expected to achieve. Charter schools may be exempt from most local and state rules, hire their own staff, determine their own curriculum, receive funding directly from the state, and control their own budgets. In contrast, traditional public schools are subject to substantial external controls, such as local, state, and federal requirements, which limit their authority over curriculum and personnel decisions. Federal, state, and local funding for traditional public schools usually flows through the district, and individual schools often have little control over their budgets. Between 1991 and 1994, 11 states enacted legislation authorizing charter schools to achieve a variety of purposes, including encouraging innovative teaching, promoting performance-based accountability, expanding choices in the types of public schools available, creating new professional opportunities for teachers, improving student learning, and promoting community involvement. The federal government has also acted on behalf of charter schools. Two major pieces of federal education legislation passed in 1994 include provisions on charter schools. The Improving America's Schools Act, which reauthorized and amended the ESEA of 1965, includes a new federal grant program to support the design and implementation of charter schools (see app. II for a description of this program). The Improving America's Schools Act also specifies the conversion of a school to charter school status as a possible corrective action that a school district can require of a school that has been identified for school improvement. The Goals 2000: Educate America Act allows states to use federal funds provided under the act to promote charter schools. As of January 1995, nine states had approved 134 charter schools with diverse instructional and operating characteristics. Another two states--Georgia and Kansas--had adopted laws authorizing charter schools but had not yet approved any. (See table 1.) As many as 14 more states may consider legislation in 1995. Approved charter schools include 85 new schools and 49 conversions of existing schools (see fig. 1), with some states only allowing such conversions (see table 2). Charter schools' diverse instructional programs include approaches such as instructing children of multiple ages in the same classroom, known as multiage grouping; teaching subjects in the context of a certain theme, known as thematic instruction; and using the Internet as an instructional tool. Some charter schools specialize in certain subject areas, such as the arts, sciences, or technology; others emphasize work experience through internships or apprenticeships. Some charter schools target specific student populations, including students at risk of school failure, dropouts, limited English proficient students, noncollege-bound students, or home-schooled students. Under the state laws in California, Colorado, Kansas, and Wisconsin, charter schools that target students at risk of school failure receive preference for approval. As some advocates envision them, charter schools would operate with far greater autonomy than traditional schools. They would operate independently from the school districts where they are located and unconstrained by government regulations; they would control their own budgets, personnel, curriculum, and instructional approaches. While this is the case for charter schools in some states, other states have laws that authorize charter schools with more limited autonomy. State laws influence charter schools' autonomy by how they provide for their (1) legal status, (2) approval, (3) funding, and (4) exemption from rules. Charter schools under four states' laws are legally independent from the school districts where they are located; that is, the charter schools are legally responsible for their operations (see table 3). Charter schools in Minnesota, for example, operate as nonprofit corporations or cooperatives. In five states, charter schools must be part of a school district that is legally responsible for the school's operations (see table 3). In one state, California, a charter school's legal status is determined through negotiation with the local school board that approves its charter. Some charter schools in California have organized as legally independent nonprofit corporations; others are legally part of a district; and some schools' legal status remains to be determined. In one state, Hawaii, the legal status of charter schools remains uncertain and awaits a decision by the State Attorney General. The legal status of a charter school may influence its authority over budgeting and personnel decisions. Legally independent charter schools generally control their own budgets and make their own hiring and firing decisions. Charter schools that remain legally part of a school district may have little control over budgeting or personnel, although this varies. All charter schools must be approved by some public institution. Most have been approved by a school district or state board of education, although some states involve neither. State laws vary considerably in the options they give to charter schools seeking approval. State laws also vary in allowing applicants to appeal a decision to reject a charter school application. (See table 4.) Required school district approval could result in less autonomous charter schools if districts use their leverage with the schools to maintain more traditional relationships with them. The availability of multiple approval options could result in more autonomous charter schools because applicants could seek the least restrictive situation. As a condition for approving a charter, for example, one district required charter schools' terms of employment--for teacher tenure, salary, and schedule for advancement--to be the same as those for other schools in the district. Evidence from California indicates that districts were least supportive of charter schools seeking the most independence. Charter schools' funding arrangements vary in (1) the extent to which the funding amounts are negotiable and (2) how funds flow to the schools. Charter schools' autonomy could be limited when funding amounts are subject to negotiation with the school district that approves the charter. Districts may seek to retain control over some funds as a condition for approval. In six states, the amount of state or local funding for charter schools is subject to negotiation with the school districts that approve the charters. In four states, funding for charter schools is set by the state, and the amount is not subject to negotiation with school districts. In one state, Arizona, funding is subject to negotiation when charter schools are approved by school districts, but not when they are approved by the state. In states in which funding is not subject to negotiation, funds flow from the state directly to the charter school, with the exception of Massachusetts and Michigan. In states in which funding is subject to negotiation, funds flow from the state to the district to the charter school. (See table 5.) Charter schools' autonomy from state and district rules varies considerably across states. Some state laws exempt charter schools from most state education rules; that is, charter schools receive a blanket exemption. Other states require charter schools to request exemption from specific rules (rule-by-rule exemption), requests that are subject to district or state approval or both. (See table 6.) Legally independent charter schools are not subject to district rules unless agreed to as part of negotiations leading to charter approval. In contrast, charter schools that are legally part of a district are subject to district rules unless waivers are negotiated. Some districts have denied waivers from local rules requested by charter schools. The extent to which charter schools can be held accountable depends on how the schools assess student performance and report results to the public institutions responsible for their oversight and contract renewal. The schools' charters indicate plans to use a wide variety of assessment methods to measure a wide variety of student outcomes. Some of these assessments and outcomes were subject to negotiation with the charter-granting institution; others are mandated under law in some states (see table 7). Some charter schools state their plans for assessment in great detail, have their assessment systems in place, and have begun collecting data. Others--including some schools already open--state their plans in more general terms and are still developing their assessment systems. Student assessments used by charter schools include portfolios, exhibitions, demonstrations of students' work, and often standardized achievement tests. Student outcomes include objective outcomes--such as specific achievement levels or gains on standardized tests, attendance and graduation rates--and subjective outcomes, such as becoming an independent learner, understanding how science is applied to the real world, participating in community service, and understanding the responsibilities of citizenship. Because charter schools' efforts to assess and report student performance are fairly recent, several important questions about accountability are unanswered. First, are charter schools collecting adequate baseline data to judge changes in student performance? Accurate judgments may be difficult in schools that opened before their assessment methods were developed. Second, will charter schools report data by race, sex, or socioeconomic status so that the performance of specific student groups can be assessed? No state laws require charter schools to do so; some include no reporting requirements; and most leave the type of reporting to local discretion (see table 7). Third, what are the implications of requiring charter schools to meet state performance standards and to use standardized, norm-referenced tests? Will it discourage charter schools with specialized purposes or that target low-achieving student populations? Will it encourage charter schools to have more traditional instructional programs? Charter schools pose new challenges for federal programs in allocating funds, providing services, and assigning legal responsibility. These challenges stem from the lack of connection of some charter schools to school districts--the usual local point of federal program administration. School districts are considered LEAs for the purposes of federal program administration; they receive allocations of federal funds from their states and are held legally responsible for meeting program requirements. However, an important issue is whether some charter schools--those with legal independence--can be considered LEAs. While legally independent charter schools appear to meet the definition of an LEA, states are uncertain about this and have approached the issue differently. Title I and special education programs illustrate challenges posed by charter schools to federal education program administration. As an LEA, a charter school would be eligible to receive Title I funds directly from its state education agency (SEA) and held legally responsible for its Title I program. As a school considered part of a traditional school district, a charter school would be eligible for Title I funds just as any other school in a district and would not be eligible to receive funds directly from its SEA. Current law provides SEAs flexibility in allocating grants to LEAs that could apply to charter schools considered LEAs. However, SEAs using census data to calculate LEA allocations face a complication because census data do not exist for charter schools, and SEAs must use the same measure of low income throughout the state. It is uncertain, for example, whether an SEA could use other data adjusted to be equivalent to census data for this purpose. An SEA might be able to apply for a waiver under the new charter schools grant program to permit use of such adjusted data; however, language in different waiver provisions makes this unclear. In commenting on a draft of this report, the Department of Education stated that it intends to use the broader authority to grant waivers under the charter schools provision to promote flexibility in charter schools (see app. III). Of those states that authorized legally independent charter schools, Arizona and Massachusetts have not yet decided on how to treat them concerning Title I. California, Minnesota, and Michigan have decided on contrasting approaches. The California Department of Education has not decided whether its legally independent charter schools are LEAs for Title I purposes. To avoid creating a new funding structure, it treats all charter schools as regular schools within a district for Title I funding. If a charter school is eligible for Title I funding, then the district must determine the charter school's share the same way it does for other eligible schools. While state officials in Minnesota consider charter schools LEAs, the state Title I office has delegated responsibility for Title I to districts and given them two options for serving charter schools. Under the first option, the district employs the Title I staff and provides services at the charter school. Under the second option, the district allocates part of its Title I funds to the charter school, and the charter school employs the Title I staff. Under either option, the state considers the district legally responsible for the charter school's Title I program. The state adopted this arrangement because it lacked census data on charter schools but was required to use census data as part of its statewide distribution approach to allocating Title I funds to LEAs. The state Title I office in Michigan considers charter schools LEAs and plans to allocate Title I funds directly to them; it considers the schools legally responsible for administering their own Title I programs. To ensure that charter schools get a fair share of Title I funding, the state Title I office devised a way to divide a traditional LEA's Title I allocation with a charter school within its boundaries. As of September 1994, Michigan had used this method in one charter school, the charter school at Wayne State University in Detroit. The state Title I office, with the consent of the district and the charter school, allocated part of Detroit's Title I allocation to the charter school on the basis of the number of students eligible for free or reduced-price lunch at the school. The state expects to use the same method for other charter schools, although this may be more difficult when students from more than one district attend a charter school, the state coordinator said. Whether charter schools are LEAs or part of a traditional school district has implications for (1) which institution--the school or the district--is legally responsible for meeting federal special education requirements and (2) how states and districts fund special education services. Under the IDEA, LEAs must provide a "free appropriate public education" to disabled children. Regulations implementing the act specify requirements that LEAs must follow in identifying children with disabilities and selecting their special education services. While the IDEA provides some federal funding for special education, most funding comes from state and local sources. Charter schools pose a particular challenge to funding special education when local revenues are used for this purpose. Since charter schools do not levy taxes, another institution must provide the revenue. Minnesota, which treats its charter schools as individual LEAs, resolved issues of legal responsibility and funding after some uncertainty and may serve as a useful example for other states. The SEA in Minnesota decided that legal responsibility for meeting federal special education requirements for children in charter schools depends on whether the district or the parent places the child in the charter school. If the district where the student lives places the child in a charter school, then the district remains legally responsible. If the parent places the student in a charter school, then this is "akin to the child moving to another district," and the charter school becomes legally responsible. These decisions were established in rulings on complaint investigations. In one case, the complainant alleged that the district where the student lived failed to implement the student's individualized education plan (IEP) at the Metro School for the Deaf. The Minnesota Department of Education ruled that the district was in violation and was responsible for ensuring service provision because it had placed the student in the charter school.In another case, the complainant also alleged that the district had failed to implement the student's IEP at a charter school, specifically, that the student had received no speech services during the school year. The Minnesota Department of Education ruled that, because the student was placed at the Cedar Riverside Charter School by parental choice, the district of residence was not responsible for providing the student a free appropriate public education and that the charter school was now responsible for doing so. In Minnesota, the SEA allocates state funds directly to charter schools as a partial reimbursement for special education costs. Charter schools, in turn, bill unreimbursed costs to the districts where the students live. The districts are expected to use revenues from property taxes or federal special education funds to fund the unreimbursed amount. In the future, the SEA may allocate federal special education funds directly to charter schools. Officials in several districts said they were unhappy with the state's expectation that they use local property taxes for unreimbursed costs for charter schools' special education programs because the charter schools are legally independent. Charter schools offer a new model for autonomous public schools that provides opportunities for diverse and innovative approaches to education. A great deal, however, remains to be learned about these schools, for example, whether limits on their autonomy will stifle innovation. Furthermore, this autonomy poses challenges for holding charter schools accountable for student performance and administering federal programs. Accountability for student performance is a critical aspect of the charter schools model, given the schools' autonomy from external controls that govern traditional public schools. Whether charter schools can be held accountable for student performance depends in part on how well student performance is assessed and reported. Important issues for future evaluations of these schools include whether charter schools (1) collect adequate baseline data to judge changes in student performance and (2) report data by race, sex, or socioeconomic status to assess the performance of specific student groups. The challenges charter schools pose for federal program administration concern their status as single schools operating as LEAs. Current law and regulations did not anticipate such an arrangement. Unless the Department of Education clarifies (1) whether charter schools may be considered LEAs and (2) how these schools can be treated for purposes of administering Title I and special education programs, uncertainty will persist that could impede charter schools' implementation. We recommend that the Secretary of Education determine whether states may consider charter schools LEAs for federal program administration. In addition, if charter schools may be LEAs, the Secretary should provide guidance that specifies how states may allocate Title I funds to charter schools, particularly in states that use census data to count low-income children, and how states may determine charter schools' legal responsibility for providing special education services. The Department of Education provided written comments on a draft of this report (see app. III). The Department said our report raised thoughtful issues about the challenges facing charter schools and presented an informative survey of their development nationally. The Department also commented on our recommendations to the Secretary and questions we raised about the applicability of different waiver provisions. In its comments on our recommendations, the Department stated that it (1) encourages states to develop legal arrangements that best support state and local strategies and (2) intends to work with states on a case-by-case basis to address issues raised in our report concerning federal program administration in charter schools. We support the Department's intention to work with states to resolve these issues. However, the Department's response does not fully clarify whether, and under what conditions, charter schools can be considered LEAs and we believe the Department should do so. In the draft reviewed by the Department, we also noted that the applicability of different waiver provisions in the Improving America's Schools Act was uncertain in regard to charter schools. In its comments, the Department stated that it intends to use the broader authority to grant waivers under the charter schools provision of the act to promote flexibility in charter schools. We revised the report to incorporate the Department's comments on this matter. We are sending copies of this report to congressional committees, the Secretary of Education, and other interested parties. Please call Richard Wenning, Evaluator-in-Charge, at (202) 512-7048, or Beatrice Birman, Assistant Director, at (202) 512-7008 if you or your staff have any questions about this report. Other staff who contributed to this report are named in appendix V. Vistas-Bear Valley Charter School P. O. Box 6057 Big Bear Lake, CA 92315 El Dorado Charter Community 6767 Green Valley Road Placerville, CA 95667 Early Intervention- Healthy Start Charter School Folsom Middle School 500 Blue Ravine Road Folsom, CA 95630 Grass Valley Alternative 10840 Gilmore Way Grass Valley, CA 95945 Accelerated School P. O. Box 341105 Los Angeles, CA 90034 Canyon School 421 Entrada Drive Santa Monica, CA 90402 Edutrain 1100 S. Grand Avenue Los Angeles, CA 90015 Fenton Avenue School 11828 Gain Street Lake View Terrace, CA 91342 Marquez School 16821 Marquez Avenue Pacific Palisades, CA 90272 The Open School 1034 Steams Drive Los Angeles, CA 90035 Palisades Elementary Charter School 800 Via De La Paz Pacific Palisades, CA 90272 Palisades High School 15777 Bowdoin Street Pacific Palisades, CA 90272 210 in charter school component 9-10 in charter school component (continued) Vaughn Next Century Learning Center 13330 Vaughn Street San Fernando, CA 91340 Westwood School Los Angeles Unified School District, CA 2050 Selby Avenue Los Angeles, CA 90025 Natomas Charter School 3700 Del Paso Road Sacramento, CA 95834 Jingletown Middle School 2506 Truman Avenue Oakland, CA 94605 Linscott Charter School 220 Elm Street Watsonville, CA 95076 Sonoma County Charter 1825 Willowside Road Santa Rosa, CA 95401 Pioneer Primary/Pioneer Middle 8810 14th Avenue Stanford, CA 93230 Schnell 2871 Schnell School Road Placerville, CA 95667 Ready Springs Home Study Ready Springs Union School District, CA 10862 Spenceville Road Penn Valley, CA 95946 The Eel River School P. O. Box 218 Covelo, CA 95428 (continued) July 1993 (Two charter schools housed together but working independently) 150 (90 in Homeschool and 60 in White Oak) Peabody Charter School 3018 Calle Noguera Santa Barbara, CA 93105 Santa Barbara Charter School 6100 Stow Canyon Road Goleta, CA 93117 (continued) Altimira P. O. Box 1546 Sonoma, CA 95476 Twin Ridges Alternative Charter School P. O. Box 529 North San Juan, CA 95960 Options for Youth 29 Foothill La Placenta, CA 91214 176 students in two centers (Victor Valley - 103 and Hesperia Unified District - 73) New school serving K-12 and adults. No adults presently enrolled. Lincoln High 1081 7th Street Lincoln, CA 95648 Sheridan Elementary 4730 H Street Sheridan, CA 95681 Mailing address: P.O. Box 268 Sheridan, CA 95681 Yucca Mesa P. O. Box 910 Yucca Valley, CA 92286 GAO was unable to get this information before publication. Planning to open in fall 1995 120 (expected) (Table notes on next page) GAO was unable to get this information before publication. Benjamin Franklin Classical 390 Oakland Parkway Franklin, MA 02038 270 (expected) Boston Renaissance 529 5th Avenue New York, NY 10017 700 (expected) Boston University 775 Commonwealth Avenue Boston, MA 02115 150 (expected) Cape Cod Lighthouse P. O. Box 968 South Orleans, MA 02662 100 (expected) City on a Hill Charter School 39 Jordan Road Brookline, MA 02146 60 (expected) Community Day 190 Hampshire Street Lawrence, MA 01840 140 (expected) Fenway II 250 Rutherford Avenue Charlestown, MA 02129 Francis W. Parker 234 Massachusetts Avenue Harvard, MA 01451 Lowell Charter School 529 5th Avenue New York, NY 10017 400 (expected) Lowell Middlesex Academy 33 Kearney Square Lowell, MA 01852 100 (expected) Neighborhood House 232 Centre Street Dorchester, MA 02124 45 (expected) South Shore 936 Nantasket Avenue Hull, MA 02045 60 (expected) (continued) Western Massachusetts Hilltown 3 Edward Street Haydenville, MA 01039 35 (expected) Worcester 529 5th Avenue New York, NY 10017 500 (expected) YouthBuild 173A Norfolk Avenue Roxbury, MA 02119 50 (expected) GAO was unable to get this information before publication. Toivola-Meadowlands 7705 Western Avenue P.O. Box 215 Meadowlands, MN 55765 City Academy St. Paul, MN School District 1109 Margaret Street St. Paul, MN 55106 New Heights Schools, Inc. 614 W. Mulberry Stillwater, MN 55082 (continued) Minnesota New Country School P. O. Box 423 Henderson, MN 56044 Parents Allied With Children and Teachers (PACT) 600 East Main Street Anoka, MN 55303 School site: 440 Pierce Street Anoka, MN GAO was unable to get this information before publication. The Improving America's Schools Act, which reauthorized the Elementary and Secondary Education Act of 1965, includes a provision establishing a new federal grant program to support the design and implementation of charter schools. The text of this provision appears here. SEC. 10301. FINDINGS AND PURPOSE. (a) FINDINGS.--The Congress finds that (1) enhancement of parent and student choices among public schools can assist in promoting comprehensive educational reform and give more students the opportunity to learn to challenging State content standards and challenging State student performance standards, if sufficiently diverse and high-quality choices, and genuine opportunities to take advantage of such choices, are available to all students; (2) useful examples of such choices can come from States and communities that experiment with methods of offering teachers and other educators, parents, and other members of the public the opportunity to design and implement new public schools and to transform existing public schools; (3) charter schools are a mechanism for testing a variety of educational approaches and should, therefore, be exempted from restrictive rules and regulations if the leadership of such schools commits to attaining specific and ambitious educational results for educationally disadvantaged students consistent with challenging State content standards and challenging State student performance standards for all students; (4) charter schools, as such schools have been implemented in a few States, can embody the necessary mixture of enhanced choice, exemption from restrictive regulations, and a focus on learning gains; (5) charter schools, including charter schools that are schools-within-schools, can help reduce school size, which reduction can have a significant effect on student achievement; (6) the Federal Government should test, evaluate, and disseminate information on a variety of charter schools models in order to help demonstrate the benefits of this promising education reform; and (7) there is a strong documented need for cash flow assistance to charter schools that are starting up, because State and local operating revenue streams are not immediately available. (b) PURPOSE.--It is the purpose of this part to increase national understanding of the charter schools model by-- (1) providing financial assistance for the design and initial implementation of charter schools; and (2) evaluating the effects of such schools, including the effects on students, student achievement, staff, and parents. SEC. 10302. PROGRAM AUTHORIZED. (a) IN GENERAL.--The Secretary may award grants to State educational agencies having applications approved pursuant to section 10303 to enable such agencies to conduct a charter school grant program in accordance with this part. (b) SPECIAL RULE.--If a State educational agency elects not to participate in the program authorized by this part or does not have an application approved under section 10303, the Secretary may award a grant to an eligible applicant that serve such State and has an application approved pursuant to section 10303(c). (c) PROGRAM PERIODS.-- (1) GRANTS TO STATES.--Grants awarded to State educational agencies under this part shall be awarded for a period of not more than 3 years. (2) GRANTS TO ELIGIBLE APPLICANTS.--Grants awarded by the Secretary to eligible applicants or subgrants awarded by State educational agencies to eligible applicants under this part shall be awarded for a period of not more than 3 years, of which the eligible applicant may use-- (A) not more than 18 months for planning and (B) not more than 2 years for the initial implementation of a charter school. (d) LIMITATION.--The Secretary shall not award more than one grant and State educational agencies shall not award more than one subgrant under this part to support a particular charter school. SEC. 10304. ADMINISTRATION. (a) SELECTION CRITERIA FOR STATE EDUCATIONAL AGENCIES.--The Secretary shall award grants to State educational agencies under this part on the basis of the quality of the applications submitted under section 10303(b), after taking into consideration such factors as (1) the contribution that the charter schools grant program will make to assisting educationally disadvantaged and other students to achieving State content standards and State student performance standards and, in general, a State's education improvement plan; (2) the degree of flexibility afforded by the State educational agency to charter schools under the State's charter schools law; (3) the ambitiousness of the objectives for the State charter school grant program; (4) the quality of the strategy for assessing achievement of those objectives; and (5) the likelihood that the charter school grant program will meet those objectives and improve educational results for students. (b) SELECTION CRITERIA FOR ELIGIBLE APPLICANTS.--The Secretary shall award grants to eligible applicants under this part on the basis of the quality of the applications submitted under section 10303(c), after taking into consideration such factors as-- (1) the quality of the proposed curriculum and (2) the degree of flexibility afforded by the State educational agency and, if applicable, the local educational agency to the charter school; (3) the extent of community support for the application; (4) the ambitiousness of the objectives for the charter school; (5) the quality of the strategy for assessing achievement of those objectives; and (6) the likelihood that the charter school will meet those objectives and improve educational results for students. (c) PEER REVIEW.--The Secretary, and each State educational agency receiving a grant under this part, shall use a peer review process to review applications for assistance under this part. (d) DIVERSITY OF PROJECTS.--The Secretary and each State educational agency receiving a grant under this part, shall award subgrants under this part in a manner that, to the extent possible, ensures that such grants and subgrants-- (1) are distributed throughout different areas of the Nation and each State, including urban and rural areas; and (2) will assist charter schools representing a variety of educational approaches, such as approaches designed to reduce school size. (e) WAIVERS.--The Secretary may waive any statutory or regulatory requirement over which the Secretary exercises administrative authority except any such requirement relating to the elements of a charter school described in section 10306(1), if-- (1) the waiver is requested in an approved application under this part; and (2) the Secretary determines that granting such a waiver will promote the purpose of this part. (f) USE OF FUNDS.-- (1) STATE EDUCATIONAL AGENCIES.--Each State educational agency receiving a grant under this part shall use such grant funds to award subgrants to one or more eligible applicants in the State to enable such applicant to plan and implement a charter school in accordance with this part. (2) ELIGIBLE APPLICANTS.--Each eligible applicant receiving funds from the Secretary or a State educational agency shall use such funds to plan and implement a charter school in accordance with this part. (3) ALLOWABLE ACTIVITIES.--An eligible applicant receiving a grant or subgrant under this part may use the grant or subgrant funds only for-- (A) post-award planning and design of the educational program, which may include-- (i) refinement of the desired educational results and of the methods for measuring progress toward achieving those results; and (ii) professional development of teachers and other staff who will work in the charter school; and (B) initial implementation of the charter school, (i) informing the community about the school; (ii) acquiring necessary equipment and educational materials and supplies; (iii) acquiring or developing curriculum (iv) other initial operational costs that cannot be met from State or local sources. (4) ADMINISTRATIVE EXPENSES.--Each State educational agency receiving a grant pursuant to this part may reserve not more than 5 percent of such grant funds for administrative expenses associated with the charter school grant program assisted under this part. (5) REVOLVING LOAN FUNDS.--Each State educational agency receiving a grant pursuant to this part may reserve not more than 20 percent of the grant amount for the establishment of a revolving loan fund. Such fund may be used to make loans to eligible applicants that have received a subgrant under this part, under such terms as may be determined by the State educational agency, for the initial operation of the charter school grant program of such recipient until such time as the recipient begins receiving ongoing operational support from State or local financing sources. SEC. 10305. NATIONAL ACTIVITIES. The Secretary may reserve not more than ten percent of the funds available to carry out this part for any fiscal year for-- (1) peer review of applications under section 10304(c); (2) an evaluation of the impact of charter schools on student achievement, including those assisted under this part; and (3) other activities designed to enhance the success of the activities assisted under this part, such as-- (A) development and dissemination of model State charter school laws and model contracts or other means of authorizing and monitoring the performance of charter schools; and (B) collection and dissemination of information on successful charter schools. SEC. 10306. DEFINITIONS As used in this part: (1) The term 'charter school' means a public school (A) in accordance with an enabling State statute, is exempted from significant State or local rules that inhibit the flexible operation and management of public schools, but not from any rules relating to the other requirements of this paragraph; (B) is created by a developer as a public school, or is adapted by a developer from an existing public school, and is operated under public supervision and direction; (C) operates in pursuit of a specific set of educational objectives determined by the school's developer and agreed to by the authorized public chartering agency; (D) provides a program of elementary or secondary education, or both; (E) is nonsectarian in its programs, admissions policies, employment practices, and all other operations, and is not affiliated with a sectarian school or religious institution; (F) does not charge tuition; (G) complies with the Age Discrimination Act of 1975, title VI of the Civil Rights Act of 1964, title IX of the Education Amendments of 1972, section 504 of the Rehabilitation Act of 1973, and part B of the Individuals with Disabilities Education Act; (H) admits students on the basis of a lottery, if more students apply for admission than can be accommodated; (I) agrees to comply with the same Federal and State audit requirements as do other elementary and secondary schools in the State, unless such requirements are specifically waived for the purpose of this program; (J) meets all applicable Federal, State, and local health and safety requirements; and (K) operates in accordance with State law. (2) The term 'developer' means an individual or group of individuals (including a public or private nonprofit organization), which may include teachers, administrators and other school staff, parents, or other members of the local community in which a charter school project will be carried out. (3) The term 'eligible applicant' means an authorized public chartering agency participating in a partnership with a developer to establish a charter school in accordance with this part. (4) The term 'authorized public chartering agency' means a State educational agency, local educational agency, or other public entity that has the authority pursuant to State law and approved by the Secretary to authorize or approve a charter school. SEC. 10307. AUTHORIZATION OF APPROPRIATIONS. For the purpose of carrying out this part, there are authorized to be appropriated $15,000,000 for fiscal year 1995 and such sums as may be necessary for each of the four succeeding fiscal years. GAO would like to acknowledge the assistance of the following experts. These individuals provided valuable insights on the issues discussed in this report; however, they do not necessarily endorse the positions taken in the report. In addition to those named above, the following individuals made important contributions to this report: Patricia M. Bundy, Evaluator; Sarah Keith, Intern; Julian P. Klazkin, Senior Attorney; Sheila Nicholson, Evaluator; Diane E. Schilder, Senior Social Science Analyst. The first copy of each GAO report and testimony is free. Additional copies are $2 each. Orders should be sent to the following address, accompanied by a check or money order made out to the Superintendent of Documents, when necessary. Orders for 100 or more copies to be mailed to a single address are discounted 25 percent. U.S. General Accounting Office P.O. Box 6015 Gaithersburg, MD 20884-6015 Room 1100 700 4th St. NW (corner of 4th and G Sts. NW) U.S. General Accounting Office Washington, DC Orders may also be placed by calling (202) 512-6000 or by using fax number (301) 258-4066, or TDD (301) 413-0006. Each day, GAO issues a list of newly available reports and testimony. To receive facsimile copies of the daily list or any list from the past 30 days, please call (301) 258-4097 using a touchtone phone. A recorded menu will provide information on how to obtain these lists.

Summary:
Pursuant to a congressional request, GAO provided information on the growth of charter schools, focusing on: (1) the number of charter schools that have been approved under state laws; (2) the characteristics of charter schools' instructional programs; (3) whether charter schools operate autonomously and are held accountable for student performance; and (4) the challenges charter schools pose for federal education programs. GAO found that: (1) 9 states have approved 134 charter schools developed by teachers, school administrators, parents, and private corporations; (2) as charter schools increase in number, so do their diversity and innovation; (3) charter school instructional programs focus on multiage classes and often teach subjects within a common theme; (4) some charter schools specialize in certain subjects, while other charter schools target specific student populations; (5) charter schools' autonomy varies among the states based on their legal status, approval, funding, and exemption from rules; (6) charter schools vary in how they measure student performance and it is too soon to determine whether these schools will meet their student performance objectives; (7) the major challenge for federal program administration is determining whether those charter schools that are legally independent of their school districts can be considered local education agencies (LEA) for program administration purposes; and (8) although states have taken different approaches to address charter schools' status as LEA, further clarification is needed on how charter schools can be treated for federal program administration and whether these schools are eligible for educational funds.