Opinion ID: 2540054
Heading Depth: 2
Heading Rank: 4

Heading: Arguments Against Governmental Unit Status Fall Short.

Text: C2 suggests that Universal Academy is not a governmental unit because it is a private institution and can engage in for-profit activities. This is unpersuasive. It is true that open-enrollment charter schools can be operated by private institutions or private entities. [45] However, Universal Academy cannot earn profits and direct those profits to shareholders as do private for-profit corporations, as the statute does not permit private for-profit corporations to operate open-enrollment charter schools. In this case, Universal Academy is run by a non-profit corporation organized under Texas law and qualifying under Section 501(c)(3) of the Internal Revenue Code. As Section 12.101(a) provides, this non-profit organization is eligible to operate an open-enrollment charter school. [46] The open-enrollment charter granted to Universal Academy specifically states that the charter holder shall take and refrain from all acts necessary to be and remain in good standing as an organization exempt from taxation under Section 501(c)(3). Though C2 points out that Universal Academy subleased a portion of its facilities to a private prekindergarten school that charges tuition, nothing in the record suggests the proceeds went to anywhere but the operations of Universal Academy. [47] Further, even though Universal Academy is in some sense a nonpublic entity, its activities are narrowly circumscribed by statute. Universal Academy has no authority to operate outside of the educational mandate contained in its governing statutory framework, its articles of incorporation, and its charter. A charter may be granted only if Universal meets any financial, governing, and operational standards adopted by the commissioner under Subchapter D of Chapter 12, [48] the subchapter governing open-enrollment charter schools. The Commissioner of Education may audit Universal Academy [49] and may revoke its charter for failure to satisfy generally accepted accounting standards of fiscal management or for failure to comply with its charter or Subchapter D. [50] Like all other open-enrollment charter schools, Universal Academy is required by law to provide instruction to students at one or more elementary or secondary grade levels as provided by the charter. [51] Further, Universal Academy's articles of incorporation state that [t]he corporation is organized exclusively for the following purpose: the non profit operation of an open-enrollment charter school which shall be operated for educational purposes. Universal Academy's use of state-funded property and state funds is also carefully circumscribed. Property purchased or leased with state public fundsthe source of more than 93% of Universal Academy's fundingis held in trust for the benefit of the students [52] and may be used only for a purpose for which a school district may use school district property. [53] In other words, if traditional public schools can rent their facilities to private groupslike to churches for Sunday services or to dance studios for ballet recitalsthen so can charter schools. [54] Likewise, open-enrollment charter schools may spend state funds only in the manner that public schools may spend such funds, [55] and such funds are also held in trust for the benefit of the students. [56] The dissent, however, maintains that Universal Academy lacks governmental unit status because, while the overall charter-school regime is set forth by statute, it is the State Board of Education (SBOE) that issues charters and the Commissioner of Education who revokes or denies renewal. [57] That is, the dissent views open-enrollment charter schools as creatures of a state agency, not the state legislature. [58] Because specific charter schools are not mentionedone by one in statute, they therefore do not derive status as governmental units under Section 101.001(3)(D) of the Tort Claims Act. [59] In other words, unless and until our biennial Legislature passes statutes that identify each open-enrollment charter school by name, a school can never achieve governmental unit status under Subsection (3)(D). [60] This argument is textually untenable. True enough, a charter school cannot operate without a charter. And charters are granted by the SBOE, not by 181 legislators sifting through mounds of applications. [61] But that does not mean a charter school's status and authority derive from administrative as opposed to legislative action. The dispositive issue is not who grants a charter but who grants a charter meaning. Who bestows the status and authority that a charter brings; what does having a charter mean, and who says so? The wellspring of open-enrollment charter schools' existence and legitimacy is the Education Code and its multiplicity of provisions that both detail and delimit what these public schools can and cannot do. The SBOE can issue no charters absent the Education Code, [62] which dictates the requirements for charter eligibility [63] and details with precision what powers are conferred. [64] The powers of an open-enrollment charter school derive from statute; [65] likewise its authority to operate under the charter [66] (along with limitations upon that authority [67] ); same for its [s]tatus. [68] All emanate from legislative command. The Legislature has tasked the SBOE and the Texas Education Agency with certain day-to-day duties, but the fact that non-legislators have been delegated such tasks does not obscure the all-encompassing legislative regime that called charter schools into existence and that defines their role in our public-education system. [69] The Legislature's own pronouncements declare the status and authority of open-enrollment charter schools. Other state entities and officials may exercise a measure of oversight pursuant to those statutory commands, but the commands themselves, and that they are legislative, are what matter most.