the Texas Education Agency and Mike Morath, Commissioner of Education, in His Official Capacity v. Academy of Careers and Technologies, Inc. D/B/A Academy of Careers and Technologies Charter School

ACCEPTED 03-15-00528-CV 7458584 THIRD COURT OF APPEALS AUSTIN, TEXAS 10/20/2015 3:01:39 PM JEFFREY D. KYLE CLERK No. 03-15-00528-CV _____________________________ FILED IN 3rd COURT OF APPEALS IN THE COURT OF APPEALS AUSTIN, TEXAS FOR THE THIRD JUDICIAL DISTRICT 10/20/2015 3:01:39 PM _____________________________ JEFFREY D. KYLE Clerk TEXAS EDUCATION AGENCY AND MICHAEL WILLIAMS, COMMISSIONER OF EDUCATION, IN HIS OFFICIAL CAPACITY, Appellants, VS. ACADEMY OF CAREERS AND TECHNOLOGIES, INC. D/B/A ACADEMY OF CAREERS AND TECHNOLOGIES CHARTER SCHOOL, Appellee. ______________________________ On Appeal from the 200th Judicial District Court of Travis County, Texas Cause No. D-1-GN-15-002879 ______________________________ BRIEF OF APPELLANTS ______________________________ KEN PAXTON Attorney General of Texas ERIKA M. LAREMONT Texas Bar No. 24013003 CHARLES E. ROY Assistant Attorney General First Assistant Attorney General General Litigation Division P.O. Box 12548, Capitol Station JAMES E. DAVIS Austin, Texas 78711-2548 Deputy Attorney General for Civil (512) 463-2120 (PHONE) Litigation (512) 320-0667 (FAX) ANGELA COLMENERO ATTORNEYS FOR APPELLANTS Division Chief ORAL ARGUMENT REQUESTED October 20, 2015 IDENTITY OF PARTIES AND COUNSEL Pursuant to Rule 38.1(a) of the Texas Rules of Appellate Procedure, Appellants herein provides this Court with the following list of parties and the names and addresses of all trial and appellate counsel: Defendants-Appellants: Texas Education Agency (“TEA”) and Michael L. Williams, in his Official Capacity as the Commissioner of Education Trial & Appellate Attorney for ERIKA M. LAREMONT Defendants-Appellants: Texas Bar No. 24013003 Assistant Attorneys General Office of the Attorney General General Litigation Division P.O. Box 12548, Capitol Station Austin, TX 78711-2548 PHONE: (512) 463-2120 FAX: (512) 320-0667 Plaintiff-Appellee: Academy of Careers and Technology, Inc., d/b/a Academy of Careers and Technology Charter School Trial and Appellate Attorneys D. TODD SMITH For Plaintiff-Appellee: Texas Bar No. 00797451 Smith Law Group LLLP 1250 Capital of Texas Highway South T Three Cielo Center, Suite 601 Austin, Texas 78746 STEPHEN M. FOSTER Texas Bar No. 00792511 9013 Magna Carta Loop Austin, Texas 78754 PHONE: (512) 784-4367 ii TABLE OF CONTENTS IDENTITY OF PARTIES AND COUNSEL ........................................................ ii TABLE OF CONTENTS ...................................................................................... iii INDEX OF AUTHORITIES ................................................................................... v STATEMENT OF THE CASE ............................................................................... 1 STATEMENT REGARDING ORAL ARGUMENT ........................................... 2 ISSUE PRESENTED ............................................................................................... 2 BRIEF OF APPELLANTS ..................................................................................... 3 STATEMENT OF FACTS ...................................................................................... 4 I. 2012 SUNSET ADVISORY COMMISSION AND CHANGES TO TEXAS EDUCATION CODE. .................................................................... 4 II. THE TEXAS EDUCATION CODE PROVIDES FOR A LIMITED APPEAL PROCESS. ................................................................................. 7 A. Appeal of academic and financial accountability ratings. ......................................................................................... 7 B. Appeal of revocation decision. ................................................ 10 III. ACT FAILED TO MEET THE FINACIAL AND/OR ACADEMIC ACCOUNTATIBLITY RATING FOR THREE CONSECUTIVE YEARS. ........................................................................ 11 IV. THE TEXAS EDUCATION CODE MANDATES REVOCATION OF ACT’S CHARTER SCHOOL .......................................................... 14 SUMMARY OF ARGUMENTS........................................................................... 16 ARGUMENT .......................................................................................................... 17 I. STANDARDS OF REVIEW...................................................................... 17 A. Plea to the Jurisdiction ............................................................ 17 B. Temporary Injunction ............................................................. 18 C. Statutory Construction ............................................................ 19 II. ACT HAS FAILED TO IDENTIFY THE VEHICLE IN WHICH IT MAY SEEK JUDICIAL REVIEW........................................................ 19 A. ACT Failed to Identify a Statutory Basis for Judicial Review of TEA’s Accountability Ratings or Decision to Revoke ................................................................................... 21 iii 1. There is no statutory provision which allows this court to review TEA’s rating decisions ................... 21 2. There Is No Statutory Provision Which Allows This Court to Review TEA’s Revocation Decision ....................................................... 21 B. ACT Failed to Demonstrate a Due Process Violation. .................................................................................................... 23 1. ACT does not have a vested right in the charter contract .............................................................. 23 2. ACT failed to alleged a viable procedural- due-process claim ........................................................... 30 3. TEA applied the Texas Education Code neither arbitrarily nor capriciously in connection with ACT’s accountability ratings or revocation ................................................................... 32 C. No Violation of Some Other Constitutional Right ................ 34 1. ACT failed to demonstrate a property interest to substantiate its takings claim ..................................... 34 2. The Texas Education Code does not violate the Open Courts Provision ............................................. 37 III. ACT’S ULTRA VIRES CLAIMS ARE MERITLESS, BARRED BY SOVEREIGN IMMUNITY, AND DO NOT SUPPORT THE DISTRICT COURT’S FINDING THAT ACT WOULD LIKELY SUCCEED ON THE MERITS OF ITS CLAIMS ......................................... 38 A. ACT failed to allege that the Commissioner acted without legal authority or failed to perform a ministerial act ............................................................................. 38 B. ACT is seeking retroactive relief which is unavailable in an ultra vires action .................................................................... 41 IV. ACT FAILED TO DEMONSTRATE THE TRIAL COURT’S JURISDICTION AND, THEREFORE, THE TRIAL COURT ERRED BY DENYING TEA’S PLEA. ..................................................... 43 PRAYER ................................................................................................................. 44 CERTIFICATE OF COMPLIANCE .................................................................. 46 CERTIFICATE OF SERVICE ............................................................................ 46 iv INDEX OF AUTHORITIES Cases Adler v. Duval County School Bd., 112 F.3d 1475 (11th Cir. 1997) ........................41 Bacon v. Hist. Comm’n, 411 S.W.3d 161 (Tex. App.—Austin 2013, no pet.) ..................................................................................................................20 Bd. of Regents v. Roth, 408 U.S. 564 (1972) .................................................... 23, 24 Byers v. Patterson, 219 S.W.3d 514 (Tex.App.—Tyler 2007, no pet.) ..................32 City of Beaumont v. Bouillion, 896 S.W.2d 143 (Tex. 1995) ..................................41 City of College Station v. Turtle Rock Corp., 680 S.W.2d 802 (Tex. 1984) .....................................................................................................................35 City of Dallas v. Trammel, 101 S.W.2d 1009 (Tex. 1937) ......................................26 City of El Paso v. Heinrich, 284 S.W.3d 366 (Tex. 2009) ................... 38, 39, 41, 42 City of El Paso v. Public Utility Comm'n of Tex., 883 S.W.2d 179 (Tex. 1994) ...........................................................................................................33 City of Elsa v. Gonzalez, 325 S.W.3d 622 (Tex. 2010) ...........................................18 City of Elsa v. M.A.L., 226 S.W.3d 390 (Tex. 2007) ...............................................41 City of Houston v. Carlson, 393 S.W.3d 350 (Tex. App.—Houston [14th Dist.] 2012, no pet.)......................................................................................30 City of Houston v. Northwood Mun. Util. Dist. No. 1, 73 S.W.3d 304 (Tex.App.—Houston [1st Dist.] 2001, pet. denied) ..............................................23 City of Marshall v. City of Uncertain, 206 S.W.3d 97 (Tex. 2006) ........................19 City of Port Arthur v. Southwestern Bell Tel. Co., 13 S.W.3d 841 (Tex.App.—Austin 2000, no pet.)........................................................................37 City of San Antonio v. City of Boerne, 111 S.W.3d 22 (Tex. 2003) ........................19 Coastal Habit Alliance v. Pub. Util. Comm’n, 294 S.W.32d 276 (Tex. App.—Austin 2009, no pet.) ................................................................................31 Combs v. City of Webster, 311 S.W.3d 85 (Tex.App.—Austin 2009, pet. filed)........................................................................................................ 23, 38 Conn. Bd. of Pardons v. Dumschat, 452 U.S. 458 (1981) .......................................23 v Creedmoor–Maha Water Supply Corp. v. Tex. Comm'n on Envtl. Quality, 307 S.W.3d 505 (Tex.App.—Austin 2010, no pet.) ........... 20, 38, 39, 41 Creedmoor-Maha, 307 S.W.3d 505 (Tex. App.—Austin 2010, no pet.) .......................................................................................................... 20, 37, 38 Employees Ret. Sys. v. Jones, 58 S.W.3d 148 (Tex. App.—Austin 2001, no pet.) ........................................................................................................19 Ex parte John M. Abell, 613 S.W.2d 255 (Tex. 1981) ..................................... 24, 27 Fed. Sign v. Tex. S. Univ., 951 S.W.2d 401 (Tex. 1997) .................................. 37, 38 Gerst v. Nixon, 411 S.W.2d 350 n. 8 (Tex. 1966) ...................................................33 Graham Mortg. Corp. v. Hall, 307 S.W.3d 472 (Tex. App.—Dallas 2010, no pet.) ........................................................................................................18 Hawkins v. El Paso First Health Plans, Inc., 214 S.W.3d 709 (Tex. App.—Austin 2007, no pet.) ................................................................................17 Hot Rod Hill Motor Park v. Triolo, 276 S.W.3d 565 (Tex. App.— Waco 2008, no pet.)..............................................................................................18 Houston Belt & Terminal Ry. Co. v. City of Houston, 424 S.W.3d 663 (Tex.App.–Houston [14th Dist.] 2014, pet. filed) .................................................39 In re Gamble, 71 S.W.3d 313 (Tex. 2002) ..............................................................18 Indian Beach Prop. Owners’ Ass’n v. Linden, 222 S.W.3d 682 (Tex. App.—Houston [1st Dist.] 2007, no pet.) .............................................................18 KEM Tex., Ltd. v. Texas Dep't of Transp., No. 03-08-00468-CV, 2009 Tex. App. LEXIS 4894 (Tex. App.—Austin 2009, no pet.) ................................20 Klumb v. Houston Mun. Emp. Pension Sys., 405 S.W.3d 204 (Tex. App.—Houston [1st Dist.] 2013, pet. filed) ................................................... 25, 27 Lazarides v. Farris, 367 S.W.3d 788 (Tex.App.—Houston [14th Dist.] 2012, no pet.) ........................................................................................................42 Lee v. Tex. Workers’ Compensation Comm’n, 272 S.W.3d 806 (Tex.App.—Austin 2008).............................................................................. 24, 26 McAllen Hosps., L.P. v. Suehs, 426 S.W.3d 304 (Tex. App.— Amarillo 2014, no pet.) ................................................................................. 25, 27 Mikeska v. City of Galveston, 451 F.3d 376 (5th Cir. 2006) ....................................32 vi Olim v. Wakinekona, 461 U.S. 238 (1983) ..............................................................24 Paul v. Davis, 424 U.S. 693 (1976) .........................................................................23 Phillips v. Washington Legal Foundation, 524 U.S. 156 (1998) ............................23 Pinnacle Charter Sch. v. Bd. of Regents, 108 A.D.3d 1024, 969 N.Y.S.2d 318 (2013) ............................................................................................28 Pool v. River Bend Ranch, LLC, 346 S.W.3d 853 (Tex. App.—Tyler 2011, pet. denied) .................................................................................................18 Project Reflect, Inc. v. Metro Nashville Bd. of Pub. Educ., 947 F. Supp. 2d 868 (M.D. Tenn. 2013) .................................................................. 28, 29 Project Sch. v. City of Indianapolis, 2012 WL 3114573 (S.D. Ind. July 31, 2012) ........................................................................................................ 28, 30 Railroad Comm’n v. Texas Citizens for a Safe Future & Clean Water, 336 S.W.3d 619 (Tex. 2011) ................................................................................19 Reach Academy for Boys & Girls, Inc. v. Delaware Dept. of Educ., 46 F.Supp.3d 455 (D.Del. 2014) ...............................................................................28 Reich v. Occupational Safety & Health Review Comm’n, 102 F.3d 1200 (11th Cir. 1997) ............................................................................................41 Sch. Dist. of Kansas City v. Williamson, 141 S.W.3d 418 (Mo. Ct. App. 2004) ............................................................................................................28 Scott v. Alphonso Crutch LSC Charter Sch., Inc., 392 S.W.3d 165 (Tex. App.—Austin 2010, pet. denied) (mem. op.) .......................... 23, 25, 27, 28 Seguin v. Bexar Appraisal Dist., 373 S.W.3d 699 (Tex. App.—San Antonio 2012, pet. denied) ............................................................................ 25, 27 Sheffield Devel. Co. v. City of Glenn Heights, 140 S.W.3d 660 (Tex. 2004) .....................................................................................................................35 Simi Inv. Co. v. Harris County, 236 F.3d 240 (5th Cir. 2000) .................................32 Society of Separationists, Inc. v. Herman, 959 F.2d 1283 (5th Cir.), cert. denied, 506 U.S. 866 (1992).........................................................................42 Spring Branch Indep. Sch. Dist. v. Stamos, 695 S.W.2d 556 (Tex.1985) ............................................................................................................23 Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83 (1998) ...................................41 vii Suryanto v. Att'y Gen. of U.S., 398 Fed.Appx. 830 (3rd Cir. 2010) .........................23 Sw. Pharmacy Solutions, Inc. v. Tex. Health & Human Servs. Comm’n, 408 S.W.3d 549 (Tex. App.—Austin 2013, pet. denied) .............. 19, 40 Tarrant County v. Ashmore, 635 S.W.2d 417 (Tex. 1982) .....................................35 Tex. Dep’t of Protective & Regulatory Servs. v. Mega Child Care, Inc., 145 S.W.3d 170 (Tex. 2004) ........................................................... 20, 23, 38 Texas Dep’t of Parks & Wildlife v. Miranda, 133 S.W.3d 217 (Tex. 2004) .....................................................................................................................17 Texas Dep’t of Transp. v. Jones, 8 S.W.3d 636 (Tex. 1999)...................................20 Texas Health Care Info. Council v. Seton Health Plan, Inc., 94 S.W.3d 841 (Tex.App.—Austin 2002, no pet.)....................................................42 Town of Castle Rock v. Gonzales, 545 U.S. 748 (2005) ..........................................24 Triantaphyllis v. Gamble, 93 S.W.3d 398 (Tex. App.—Houston [14th Dist.] 2002, pet. denied) .......................................................................................18 United States v. Or. State Med. Soc’y, 343 U.S. 326 (1952) ...................................41 Univ. of Tex. Med. Sch. v. Than, 901 S.W.2d 926 (Tex. 1995) ...............................31 Walker v. Packer, 827 S.W.2d 833 (Tex. 1992) ......................................................18 Walling v. Metcalfe, 863 S.W.2d 56 (Tex. 1993) ....................................................18 Statutes 19 TEX ADMIN. CODE §157.1183 (2015) .................................................................10 19 TEX. ADMIN. CODE §109.1001 (a)(4) ..................................................................12 19 TEX. ADMIN. CODE §109.1001(a)(1) (2015) .........................................................7 19 TEX. ADMIN. CODE §109.1001(d)(1) (2015) .........................................................8 19 TEX. ADMIN. CODE §109.1002(i)(2) ...................................................................31 19 TEX. ADMIN. CODE §97.101(b) ...........................................................................31 TEX. CIV. PRAC. & REM. CODE §51.014(a)(4).........................................................16 TEX. CIV. PRAC. & REM. CODE §51.014(a)(8) ........................................................16 TEX. CIV. PRAC. & REM. CODE §6.001 ....................................................................16 viii TEX. CONST. ART. I, §13 ..........................................................................................36 TEX. CONST. ART. I, §17 ..........................................................................................34 TEX. EDUC. CODE §12.101 .......................................................................................26 TEX. EDUC. CODE §12.106 .......................................................................................34 TEX. EDUC. CODE §12.107 .......................................................................................35 TEX. EDUC. CODE §12.115 (c-1) ..........................................................................7, 10 TEX. EDUC. CODE §12.115(a) ............................................................................ 15, 26 TEX. EDUC. CODE §12.115(c) .................................................................. 6, 10, 13, 26 TEX. EDUC. CODE §12.115(c)(3) ..............................................................................14 TEX. EDUC. CODE §12.116(a) ...................................................................................13 TEX. EDUC. CODE §12.116(c) ...................................................................................22 TEX. EDUC. CODE §12.116(c)(2) ....................................................................... 14, 15 TEX. EDUC. CODE §12.1161 .............................................................................. 35, 36 TEX. EDUC. CODE §12.128 .......................................................................................34 TEX. EDUC. CODE §12.128(a)(2) ..............................................................................35 TEX. EDUC. CODE §12.128(c) ...................................................................................36 TEX. EDUC. CODE §39.053 .......................................................................................43 TEX. EDUC. CODE §39.054(b) ..................................................................................21 TEX. EDUC. CODE §39.082(g) ..............................................................................8, 31 TEX. EDUC. CODE §39.116(a) .....................................................................................7 TEX. EDUC. CODE §39.116(e) .....................................................................................7 TEX. EDUC. CODE §39.116(f) .....................................................................................7 TEX. EDUC. CODE §39.151 .......................................................................................31 TEX. EDUC. CODE §39.151(b) ....................................................................................9 TEX. EDUC. CODE §39.151(d) ..................................................................................21 TEX. EDUC. CODE §39.151(e) ...............................................................................9, 21 ix TEX. EDUC. CODE §39.152(a) ...................................................................................10 TEX. EDUC. CODE §39.152(c)(3) ....................................................................... 10, 14 TEX. GOV’T CODE §311.021.....................................................................................19 Texas Civil Practive and Remedies Code §51.014(a)(4)...........................................1 Texas Civil Practive and Remedies Code §51.014(a)(8)...........................................1 Rules TEX. R. APP. P. 29.1(b) .............................................................................................16 Tex. R. App. P. 9.4(i)(3) ..........................................................................................45 x STATEMENT OF THE CASE Nature of the Case: Appellee Academy of Careers and Technology, Inc., d/b/a Academy of Careers and Technology Charter School (“ACT”), is an open-enrollment charter school that sued TEA and the Commissioner of Education (“Commissioner”) challenging the revocation of its charter. ACT alleges, inter alia, that TEA violated its substantive and procedural due process rights, and that the Commissioner acted ultra vires by revoking its charter. Trial Court: 200th District Court, Travis County, Texas The Honorable Gisela D. Triana Trial Court The trial court denied Appellants’ plea to the Disposition: jurisdiction and granted Appellee’s Request for Temporary Injunction. CR at 440-41 (order). Parties Below: Academy of Careers and eTechnologies, Inc., d/b/a Academy of Careers and Technologies Charter School, Plaintiff Texas Education Agency (“TEA”) and Michael L. Williams, in his Official Capacity as the Commissioner of Education, Defendants Jurisdiction: Following the trial court’s denial of TEA’s plea to the jurisdiction and grant of ACT’s Request for Temporary Injunction, Appellants bring this appeal pursuant to Texas Civil Practive and Remedies Code §51.014(a)(4) and (8). 1 STATEMENT REGARDING ORAL ARGUMENT This case is factually similar to Texas Education Agency and Michael Williams, Commissioner of Education, in his Official Capacity, v. American Youthworks, Inc., d/b/a American Youthworks Charter School, Honors Academy, Inc., d/b/a Honors Academy, and Two Azleway, Inc. d/b/a/ Azleway Charter School Nos. 03-14-00283-CV and 03-14-00360-CV, which are currently on appeal before this Court. Oral Arguments were heard in these cases on September 24, 2015. This case shares the same subject matter as In Re Academy of Careers and Technology, Inc., d/b/a Academy of Careers and Technology Charter School, Case No. 03-15-00570-CV, in which ACT filed a petition for writ of mandamus and sought emergency relief, which this Court granted and remains in effect. Because the isues presented to the Court in this case are similar to the issues presented in the above-referenced cases, Appellants do not believe that oral argument will materially assist the Court in disposing of this matter. However, should Appellee request oral arguments which is then granted by this Court, Appellants request equal time for argument. ISSUE PRESENTED 1. Whether the district court erred when it denied the Commissioner’s and the Texas Education Agency’s plea to the jurisdiction and when it found that ACT demonstrated a probable right to the relief sought. 2 No. 03-15-00528-CV _____________________________ IN THE COURT OF APPEALS FOR THE THIRD JUDICIAL DISTRICT _____________________________ TEXAS EDUCATION AGENCY AND MICHAEL WILLIAMS, COMMISSIONER OF EDUCATION, IN HIS OFFICIAL CAPACITY, Appellants, VS. ACADEMY OF CAREERS AND TECHNOLOGIES, INC. D/B/A ACADEMY OF CAREERS AND TECHNOLOGIES CHARTER SCHOOL, Appellee. ______________________________ On Appeal from the 200th Judicial District Court of Travis County, Texas Cause No. D-1-GN-15-002879 ______________________________ BRIEF OF APPELLANTS ______________________________ TO THE HONORABLE COURT OF APPEALS: For the reasons that follow, Appellants Texas Eduction Agency (“TEA”) and Commissioner Michael Williams (“Commissioner”, jointly referenced as “TEA” or “Appellants”) respectfully show why this Court should reverse the trial court’s September 4, 2015 order, and dismiss this case for lack of jurisdiction or dissolve the temporary injunctions and remand this case for trial. 3 STATEMENT OF FACTS I. 2012 SUNSET ADVISORY COMMISSION AND CHANGES TO TEXAS EDUCATION CODE. The Sunset Advisory Commission (“Sunset Commission”) reviewed the Texas Education Agency in October 2012, preceding the commencement of the 83rd Texas Legislature. The Sunset Commission noted that charter schools are public schools that “operate under decreased state regulation in exchange of increased accountability for results.” CR at 316. 1 In its review of charter schools, the Sunset Commission identified the following issue: “TEA lacks a full range of tools to effectively address poor academic performance and financial mismanagement at low-performing charter schools.” Id. While many charter schools meet TEA educational expectations, charter schools experience higher rate of “academically unacceptable level than school districts.” CR at 317-18. Further, the Sunset Commission noted that “[c]harter schools receive about 80 percent of their revenues in state aid, as compared to 41 percent for traditional school districts,” and “[m]any charter schools also have poor financial performance, underscoring the importance of oversight of expenditure of state funds.” CR at 118. Significantly, the Sunset Commission found, “Charter schools have far more accountability problems requiring assignment of interventions and sanctions, and ultimately, revocation of the charter. Charter schools represent more than two-thirds, 71 percent, of schools 1 For the convenience of the Court, the clerk’s record will be referenced as, “CR at __” and the reporter’s record will be referenced as, “RR at __.” 4 assigned with sanctions, even though charter schools make up only 17 percent of the total number of districts and charters.” CR at 318-19. The Sunset Commission further observed that “TEA lacked authority to revoke a charter for a school that is imminently insolvent and fails to plan for its student’s education,” leaving students susceptible to a charter school possibly closing mid-year due to lack of funds. CR at 320. Although TEA had the authority to close a charter school and revoke the charter, the Sunset Commission criticized the process as unworkable, leaving students to be educated at underperforming charter schools. CR at 319. Of particular concern was the issue of “protracted litigation” concerning TEA’s ability to timely revoke a charter and close an underperforming charter school. The report noted the two to three years it took to close a charter school prior to Sunset review, leaving students to be educated by an underperforming school. Id. Based on these findings, the Sunset Commission recommended a change in statute that required the automatic revocation of a charter for failure to meet basic academic or financial accountability standards for three years in a row. CR at 326. It recommended that no appeal be permitted from the revocation determination. Id. According to the Sunset Commission, such a change in the law would: Allow the State to more quickly shut down the poorest performing charters, without years of litigation during which time the school remains open. The recommendation would also ensure students do not continue to attend a school lacking a quality education or with 5 serious financial problems that could affect the school and, ultimately, a student’s academic progress. Id. The findings of the Sunset Commission demonstrate that there is a compelling state need to identify and close poor-performing charter schools in order to improve the choices available to parents and students. Thus, based on the Sunset Commission’s recommendation, in 2013 Texas Legislature amended section 12.115 of the Texas Education Code to make mandatory the revocation of any open- enrollment charter school’s charter if the school fails to meet financial and/or academic performance ratings in certain years. The Commissioner is now required to revoke a school’s charter if one of three scenarios arises: (1) the charter holder has been assigned an unacceptable performance rating under Subchapter C, Chapter 39 [of the Education Code] for the three preceding years; (2) the charter holder has been assigned financial accountability performance rating under Subchapter D, Chapter 39, indicating financial performance lower than satisfactory for the three preceding school years; or (3) the charter holder has been assigned any combination of the [unacceptable ratings under either subchapter]. TEX. EDUC. CODE §12.115(c). Chapter 39, Subchapter C (academic performance) ratings allowed for 2009- 2010 and 2010-2011 to be retroactively considered but specifically excluded ratings 6 for 2011-2012.2 Id. §12.115(c-1); see also TEX. EDUC. CODE §39.116(a), (e), and (f) (allowing Commissioner to suspend academic performance rating during transition period, but authorizing sanctions during the 2011-12 school year based on prior year performance ratings). The Subchapter D (financial accountability) ratings to be considered are those assigned to the school for 2010-2011, 2011-2012, 2012- 2013 and all years subsequent to the 2013 amendment. TEX. EDUC. CODE §12.115 (c-1). II. THE TEXAS EDUCATION CODE PROVIDES FOR A LIMITED APPEAL PROCESS. A. Appeal of academic and financial accountability ratings. Every public school or open-enrollment charter school is required to submit an audited annual financial report (“AFR”) to TEA. 19 TEX. ADMIN. CODE §109.1001(a)(1) (2015). This mandate is to ensure that “school districts and charter schools are spending [taxpayer] money appropriately and within the guidelines related to purchasing and required expenditures on programs and various other regulatory matters.” RR at 106: 22-p. 107: 7. The AFR is required to be audited by an independent certified public accountant (“CPA”). RR at 108: 2-5; RR at 110: 2- 4. The school should prepare the financial statements and the auditor should then 2 This provision was necessary because ratings were essentially “held over” during the 2011-12 school year, so a charter school that earned a failing rating in 2009-10 and 2010-11, could have been treated as having three strikes in 2011-12, but for the express exclusion of ratings for that year from 12.115(c). See TEX. EDUC. CODE §39.116(e) (authorizing the imposition of sanctions during the 2011-12 school year for districts that had unacceptable performance during the prior school year). 7 review that information to ensure its accuracy and “free of material misstatements.” RR at 108: 6-19; RR, Def. Ex. 1, p. 1. TEA uses the information contained in the AFR to calculate the school’s financial accountability thus it is crucial that the information be true and correct. 19 TEX. ADMIN. CODE §109.1001(d)(1) (2015). To further to goal of access to true and correct information, the Texas Education Code §39.082(g) states: Before assigning a final rating under the system, the commissioner shall assign each district or open-enrollment charter school a preliminary rating. A district or school may submit additional information to the commissioner relating to any indicator on which performance was considered unsatisfactory. The commissioner shall consider any additional information submitted by a district or school before assigning a final rating. If the commissioner determines that the additional information negates the concern raised by the indicator on which performance was considered unsatisfactory, the commissioner may not penalize the district or school on the basis of the indicator. An AFR also includes opinions of the auditor regarding compliance. RR, Def. Ex. 1, p. 16-17. If the auditor makes comments that are negative or that the school disputes, the charter school may submit an AFR that is disapproved by the charter school board. RR at 110: 11-24. Furthermore, should a charter school submit the data prior to the deadline, it has up until the deadline to make any corrections necessary. RR at 38: 19-23; 114: 16-22. However, once the deadline passes, the information submitted by the school becomes final. The appeal process is not intended to correct mistakes made by the submitting school, but rather to correct errors made by TEA. RR at 113: 23 - p. 114: 3. Indeed, by the deadline to submit 8 the financial data, the information contained in the AFR has been reviewed by an independent CPA auditor and verified by the school. RR at 114: 8-10. TEA does not and cannot second-guess the information provided by school districts and charter schools. Id. at 114: 11-15. After a school district or charter school receives its accountability or financial ratings, it has an opportunity to appeal the ratings to the Commissioner. TEX. EDUC. CODE § 39.151(a). Should a charter school seek to appeal a financial or academic rating and notify the Commissioner of such, the Commissioner must appoint a committee to make recommendations to the Commissioner on any challenge made to an agency decision. TEX. EDUC. CODE §39.151(b). After considering the committee’s recommendation, the Commissioner makes a final decision. TEX. EDUC. CODE §39.151(d). The Commissioner’s decision following any appeal is final, and the Legislature expressly prohibited any additional appeal from this final determination in “any other proceeding” if the charter “has had an opportunity to challenge the decision under [section 31.151]. TEX. EDUC. CODE §39.151(e). An accountability rating becomes final if a school does not appeal or after TEA considers the appeal. Once a rating is final, it is not subject to further appeal. TEX. EDUC. CODE §39.151(e). TEA uses final accountability ratings to make accreditation decisions. CR at 318 (“Continued poor performance on academic and financial accountability ratings can lower a district’s or charter’s accreditation status….”). A school is required to be accredited to operate, so once TEA has final 9 accountability ratings, it can determine which schools may or may not open the next school year. RR at 114: 22- p. 115: 8. B. Appeal of revocation decision. If a charter school earns an unacceptable financial accountability rating or lower than satisfactory academic accountability rating or any combination of the two for three consecutive years, the Commissioner must begin proceedings to revoke the school’s charter. TEX. EDUC. CODE §12.115(c), (c-1). This process begins when TEA notifies the charter school of its intent to revoke, specifying the reasons for the revocation decision and explaining that the “charter holder has the right to request an informal review regarding the Commissioner’s intent to revoke the charter and appoint a conservator.” CR at 61-64. The notice also states that if the charter school requests an informal hearing but the Commissioner’s decision to revoke does not change, that the charter school may appeal the Commissioner’s decision to close a school to the State Office of Administrative Hearings (“SOAH”). TEX. EDUC. CODE §39.152(a). The school must file a petition for review and meet certain requirements for the petition to be granted. 19 TEX ADMIN. CODE §157.1183 (2015). The decision of the administrative law judge is final and may not be appealed. TEX. EDUC. CODE §39.152(c)(3). 10 III. ACT FAILED TO MEET THE FINACIAL AND/OR ACADEMIC ACCOUNTATIBLITY RATING FOR THREE CONSECUTIVE YEARS. Academy of Careers and Technologies Charter School (hereinafter “ACT”) was originally issued a state charter in 1998. CR at 333-340. In 2012, 2013, and 2014 TEA found that ACT failed to meet the state’s financial accountability standards. CR 342-349; see also CR 4-5. A passing financial accountability score is 50. CR at 346-348. ACT scored a 47 in 2012 based on its financial data for the 2010-11 school year. CR at 346. It scored a 45 in 2013 related to financial information for the 2011-12 school year. CR at 347. In 2014, ACT received a 0 score related to financial information for the 2013-14 school year. CR at 348. The evidence demonstrated that: (1) ACT, not some third-party, submitted each of the financial reports at issue to TEA (RR at 37: 11-16); (2) ACT provided the information that was reviewed by the auditor ACT hired (RR at 37: 7-10); (3) ACT also was aware that the auditor it hired found deficiencies with ACT’s internal controls (RR at 40: 5-19); (4) in 2013, prior to submitting the annual financial report to TEA, ACT was aware that the auditor it hired found “that ACT was failing to properly recognize fixed assets, loan proceeds and loan disbursements” (RR at 41: 7-13); (5) the auditor noted that ACT “failed to remit federal payroll taxes to the Internal Revenue Service (IRS)” and that at the time of the 2014 audit, ACT owed $308,628 (including penalties and interest) for taxes owned for the fourth quarter of 2011, all of 2012 and the first two quarters of 2013 (RR, Def. Ex. 3, p. 11); (6) prior 11 to the submission to TEA, ACT reviewed and approved the each of the disputed annual financial and compliance reports (RR at 35: 5-17; RR at Def. Ex. 1, Certification page; 44: 24-p. 45: 6 (“Correct.”)); and (7) ACT accepted responsibility for the information contained in the annual financial reports once submitted to TEA. RR at 36: 16- p. 37: 2. According to Paula Applin, Chairman of the Governing Board of ACT, who also holds a degree in finance (RR at 19: 3-4; 20:3-7), ACT received a failing score on its financial accountability rating in 2010-11 due, in part, to ACT’s failure to properly account for a property loan, an issue identified by the auditor prior to submission to TEA. RR at 41: 14-20. Indicator 14 asks: Was the charter school’s administrative cost ratio less than the threshold ratio? ACT received a “0” score on this indicator in 2012 and 2013 because the administrative costs ACT reported exceeded the Finaincial Integrity Rating System of Texas (“FIRST”)3 rating threshold ratio for that indicator. However, years later, in March 2015 ACT filed an appeal with TEA and for the first time argued that it accidently included debt services as part of their administrative costs rather than include it as “debt services” which is a separate 3 “FIRST” is the financial accountability rating system administered by the TEA in accordance with Texas Education Code §39.082 and §39.085. The system provides additional transparency to public education finance and meaningful financial oversight and improvement for school districts (School FIRST) and open-enrollment charter schools (Charter FIRST). See 19 TEX. ADMIN. CODE §109.1001 (a)(4). 12 indicator4 in its 2011 and 2012 AFR. RR at 47: 12-21. ACT believes that it should be permitted to make the correction which would allow them to receive the full five (5) points allotted to Indicator 14 which would give them a passing scores on the 2012 and 2013 financial accountability rating. CR at 77. In 2014, ACT once again failed the financial accountability rating for failing to disclose that it was in default on a debt, which resulted in an automatic failure. The issue in 2014 was ACT failure to disclose payroll tax liability. RR, Def. Ex. 3, p. 18; RR at 52: 20- 536. ACT timely appealed only to present evidence of the tax liability. RR, Def. Ex. 4. Thus, its appeal was dismissed. However, ACT again sought to appeal the issue regarding the tax liability with another, albeit untimely, appeal in March 2015. CR at 112-117. In 2014, ACT also received a failing academic performance rating. CR at 349. It failed to meet the “post-secondary readiness” index and received an accountability rating of “Improvement Required.” Id. An “Improvement Required” rating is “an unacceptable performance rating under the accountability system used by the Texas Education Agency . . . .” CR at 358, ¶5. Based on ACT’s failing accountability ratings, TEA issued a notice of revocation in December 2014 pursuant to Texas Education Code, Section 12.115(c). ACT requested an informal review of the revocation by TEA. RR at 63; 21-23; see 4 It should be noted that ACT included part of the January 2010 TEA Resource Guide as part of its March 2015 appeal. That guide clearly stated that principal and interest on long-term debt should be included as “debt service.” 13 also TEX. EDUC. CODE §12.116(a). However, TEA reaffirmed the revocation. CR at 355. ACT also appealed its revocation to SOAH. RR at 64: 3-5; CR at 361-376. The Administrative Law Judge (“ALJ”) affirmed ACT’s revocation. CR at 362. The ALJ’s determination is final and may not be appealed. TEX. EDUC. CODE §12.116(c)(2). IV. THE TEXAS EDUCATION CODE MANDATES REVOCATION OF ACT’S CHARTER SCHOOL. The Commissioner had no discretion but to revoke ACT’s charter, since its failings in 2012, 2013 and 2014 represented three consecutive years of failure as defined by Texas Education Code §12.115(c)(3). The Commissioner and TEA notified ACT of this fact on December 8, 2014. CR at 342-349. ACT sought an informal hearing regarding the revocation. CR at 5 (3rd full paragraph). A review was conducted, but the decision to revoke ACT’s charter was upheld. CR at 355-357. ACT also availed itself of an appeal before SOAH. CR at 5 (4th full paragraph). Because there were no material factual issues in dispute, TEA filed a Motion for Summary Disposition, which provided the basis for a final decision and order of SOAH upholding the Commissioner’s decision to revoke ACT’s charter. CR at 361-376. This decision is not subject to appeal. TEX. EDUC. CODE §39.152(c)(3). 14 Put simply, in December 2014, ACT failed to meet minimum financial and academic accountability standards for three consecutive years, the Commissioner of Education revoked its charter, an action he was required by law to take. See TEX. EDUC. CODE §12.115(a). ACT availed itself of an informal review by the TEA and then sought review before the SOAH. On May 21, 2015, the ALJ upheld the revocation of ACT’s charter. By law, the ALJ’s decision may not be appealed. Id. §12.116(c)(2). More than two months after the revocation became final, and seven months after it received notice of the revocation, ACT sued in district court asserting that TEA and the Commissioner violated its rights to substantive and procedural due process, takings, and violation of the open courts provision, in addition to seeking declaratory relief and a temporary injunction prohibiting the Commissioner from engaging in various alleged ultra vires actions. CR at 3-20. Specifically, ACT sought judicial review of the appeals process only as it relates to the accountability ratings. CR at 3-20. ACT did not challenge the process by which TEA revokes charters; it only sought to have another chance to submit corrected financial data related to its failing rating in 2012 and/or 2013. TEA and the Commissioner (hereinafter “TEA” or “Appellants”) filed a Plea to the Jurisdiction and an Amended Plea to the Jurisdiction and Repsonse to ACT’s Request for Temporary Injunction. CR at 293-407. A court hearing on ACT’s 15 temporary injunction was heard on August 13, 2015 (RR at 3) and the court considered TEA’s Plea by submission. RR at 134. On August 21, 2015, the Friday before the start of the school year, the trial court notified the parties of its intent to enter a temporary injunction effectively prohibiting TEA from taking any action to wind up the failed charter school. CR at 421. The injunction was entered on September 4, 2015, two weeks after the start of the school year. CR at 440-441. The injunction ordered ACT to remain open; permits ACT to retain state-owned property for its own use; forces the State to fund a financially and academically unsuccessful school; and keeps children in a school that is not delivering a minimally accredited education. Id. TEA filed an appeal of the temporary injunction and the denial of its Plea to the Jurisdiction pursuant to TEX. CIV. PRAC. & REM. CODE §§51.014(a)(4) and (8). The appeal automatically superseded the temporary injunction. TEX. R. APP. P. 29.1(b); TEX. CIV. PRAC. & REM. CODE §6.001. SUMMARY OF ARGUMENTS ACT failed to establish jurisdiction for its collateral attack of final accountability ratings as the basis for revocation of its charter. ACT also failed to establish a constitutionally-protected property interest which is required for its due process and takings claims. Likewise, the evidence presented to the trial court clearly demonstrated that the Commissioner acted pursuant to the statute, which 16 mandated a certain course of action and was, therefore, protected by sovereign immunity. This defeats ACT’s ultra vires claims. Like many charter schools before it, ACT’s suit simply seeks to attack final, non-appealable administrative accountability ratings. This Court has repeatedly held that such an attack is jurisdictionally barred, and the Uniform Declaratory Judgments Act cannot be used to make an end-run around the jurisdictional bar. As a result, ACT failed to show that the trial court had subject-matter jurisdiction to consider any of its claims, and the trial court erred by denying Appellants’ Plea to the Juridiction. ARGUMENT I. STANDARDS OF REVIEW. A. Plea to the Jurisdiction. A plea to the jurisdiction challenges the trial court’s authority to determine the subject matter of a specific cause of action. Hawkins v. El Paso First Health Plans, Inc., 214 S.W.3d 709, 716 (Tex. App.—Austin 2007, no pet.). Whether a court has subject-matter jurisdiction and whether a plaintiff has affirmatively demonstrated subject-matter jurisdiction are questions of law that are reviewed de novo. Texas Dep’t of Parks & Wildlife v. Miranda, 133 S.W.3d 217, 226 (Tex. 2004). In deciding a plea to the jurisdiction that challenges the pleadings, the reviewing court determines whether the pleader has alleged facts that affirmatively 17 demonstrate the court's jurisdiction to hear the cause. Id. The pleadings are liberally construed in the plaintiffs favor. Id. If a plea to the jurisdiction challenges the existence of jurisdictional facts, the court considers relevant evidence submitted by the parties when necessary to resolve the jurisdictional issues raised. Id. at 227. A trial court’s order granting a temporary injunction is reviewed for abuse of discretion. Walling v. Metcalfe, 863 S.W.2d 56, 57 (Tex. 1993). “A trial court has no ‘discretion’ in determining what the law is or applying the law to the facts.” See Walker v. Packer, 827 S.W.2d 833, 840 (Tex. 1992) (orig. proceeding). Accordingly, questions of law, including whether a trial court has subject matter jurisdiction, are reviewed de novo. City of Elsa v. Gonzalez, 325 S.W.3d 622, 625 (Tex. 2010). B. Temporary Injunction. To obtain a temporary injunction, the applicant must plead and prove: (1) a cause of action against the defendant; (2) a probable right to the relief sought; and (3) a probable, imminent, and irreparable injury in the interim. Walling, 863 S.W.2d at 57. Because an injunction is an equitable remedy, a court must balance the competing equities at stake. See In re Gamble, 71 S.W.3d 313, 317 (Tex. 2002); Indian Beach Prop. Owners’ Ass’n v. Linden, 222 S.W.3d 682, 690 (Tex. App.— Houston [1st Dist.] 2007, no pet.); Pool v. River Bend Ranch, LLC, 346 S.W.3d 853, 860 (Tex. App.—Tyler 2011, pet. denied); Graham Mortg. Corp. v. Hall, 307 S.W.3d 472, 478 (Tex. App.—Dallas 2010, no pet.). Consideration of the equities 18 involves weighing the public interest against the injury to the parties from the grant or denial of injunctive relief. See Hot Rod Hill Motor Park v. Triolo, 276 S.W.3d 565, 568 (Tex. App.—Waco 2008, no pet.); Triantaphyllis v. Gamble, 93 S.W.3d 398, 401–02 (Tex. App.—Houston [14th Dist.] 2002, pet. denied). C. Statutory Construction. An agency’s construction of a statute that it is charged with enforcing is entitled to serious consideration by reviewing courts so long as that construction is reasonable and does not contradict the statute’s plain language of the statute. Railroad Comm’n v. Texas Citizens for a Safe Future & Clean Water, 336 S.W.3d 619 (Tex. 2011); Sw. Pharmacy Solutions, Inc. v. Tex. Health & Human Servs. Comm’n, 408 S.W.3d 549, 560-62 (Tex. App.—Austin 2013, pet. denied); Employees Ret. Sys. v. Jones, 58 S.W.3d 148, 151 (Tex. App.—Austin 2001, no pet.). Additionally, when construing a statute, courts must consider the statute in its entirety, assume the entire statute is effective, and avoid an absurd result. TEX. GOV’T CODE §311.021; City of Marshall v. City of Uncertain, 206 S.W.3d 97, 105 (Tex. 2006) (citing City of San Antonio v. City of Boerne, 111 S.W.3d 22, 29 (Tex. 2003)). II. ACT HAS FAILED TO IDENTIFY THE VEHICLE IN WHICH IT MAY SEEK JUDICIAL REVIEW. ACT does not believe the Commissioner and TEA should have revoked its charter because two to three years after-the-fact, it uncovered purported clerical 19 errors to its 2012 and/or 2013 AFR that it attributes to either a third party and/or TEA. It contends that these errors resulted in two of the four failing accountability ratings it received from 2012-2014. TEA’s accountability ratings are considered administrative decisions or action. See Creedmoor–Maha Water Supply Corp. v. Tex. Comm'n on Envtl. Quality, 307 S.W.3d 505, 524 (Tex.App.—Austin 2010, no pet.). In Texas there is no inherent right to judicial review of agency orders. Texas Dep’t of Transp. v. Jones, 8 S.W.3d 636, 638 (Tex. 1999); Bacon v. Hist. Comm’n, 411 S.W.3d 161, 173-74 (Tex. App.—Austin 2013, no pet.) (“One implication of these principles is that there is no general right to challenge or seek review of a state agency order or decision in Texas state court; to the contrary, state agency decisions generally cannot be challenged in court unless the Legislature has enacted a statute expressly authorizing such review.”); Creedmoor-Maha, 307 S.W.3d 505, 515 (Tex. App.—Austin 2010, no pet.) (UDJA actions “that seek declaratory or injunctive relief against agency orders from which the legislature has not granted a right of judicial review” are barred by state sovereign immunity); KEM Tex., Ltd. v. Texas Dep't of Transp., No. 03-08-00468-CV, 2009 Tex. App. LEXIS 4894, at *8-18 (Tex. App.—Austin 2009, no pet.) (challenge to non-appealable agency order barred by sovereign immunity). A person may obtain judicial review of a final decision issued after a contested case or if the action adversely affects a vested property right or otherwise violates a constitutional right. Tex. Dep’t of Protective & Regulatory Servs. v. Mega Child Care, Inc., 145 S.W.3d 170, 196-98 (Tex. 2004). 20 A. ACT Failed to Identify a Statutory Basis for Judicial Review of TEA’s Accountability Ratings or Decision to Revoke. 1. There is no statutory provision which allows this court to review TEA’s rating decisions. Chapter 39 of the Texas Education Code, entitled “Public School System Accountability,” governs the financial and academic performance system used to review both traditional public schools and charter schools. See TEX. EDUC. CODE §39.054(b). Section 39.151, however, limits the review of any accountability determination to review by the Commissioner and expressly exempts the decision from review by SOAH or a State District Court. See id., at §§39.151(d) & (e). Thus, there is no statute affording ACT the right to judicial review of its accountability ratings. 2. There Is No Statutory Provision Which Allows This Court to Review TEA’s Revocation Decision. Section 12.115(c) of the Texas Education Code provides: The commissioner shall revoke the charter of an open-enrollment charter school if: (1) the charter holder has been assigned an unacceptable performance rating under Subchapter C, Chapter 39, for the three preceding years; (2) the charter holder has been assigned an unacceptable financial accountability rating under Subchapter D, Chapter 39, indicating financial performance lower than satisfactory for the three preceding school years; or 21 (3) the charter holder has been assigned any combination of the ratings described by Subdivision (1) or (2) for the three preceding school years. TEX. EDUC. CODE §12.115(c). The Legislature directed that the Commissioner’s decision to revoke a charter can be reviewed only by SOAH, and that an ALJ’s review of that charter-revocation decision is final and unappealable. Section 12.116(c) provides: A decision by the commissioner to revoke a charter is subject to review by the State Office of Administrative Hearings. Notwithstanding Chapter 2001, Government Code: (1) the administrative law judge shall uphold a decision by the commissioner to revoke a charter unless the judge finds the decision is arbitrary and capricious or clearly erroneous; and (2) a decision of the administrative law judge under this subsection is final and may not be appealed. TEX. EDUC. CODE §12.116(c). Accordingly, the Commissioner’s revocation decision is final unless it is appealed to SOAH, and the SOAH ALJ’s decision either upholding or reversing the Commissioner’s decision is unappealable. Thus, ACT had no right to judicial review of the revocation decision, the district court lacked jurisdiction over this claim, and the district court clearly erred in denying TEA’s Plea to the Jurisdiction. 22 B. ACT Failed to Demonstrate a Due Process Violation. 1. ACT does not have a vested right in the charter contract. ACT argues that the statutory procedures related to accountability ratings employed by TEA violated their substantive and procedural due process rights. CR at 11-14. ACT must be able to demonstrate that it possessed a vested property right as the basis of its due process claim. See Combs v. City of Webster, 311 S.W.3d 85, 92 (Tex.App.—Austin 2009, pet. filed) (citing Spring Branch Indep. Sch. Dist. v. Stamos, 695 S.W.2d 556, 560–62 (Tex.1985); Texas Department of Protective and Regulatory Services v. Mega Child Care, Inc., 145 S.W.3d at 173; City of Houston v. Northwood Mun. Util. Dist. No. 1, 73 S.W.3d 304, 311 (Tex.App.—Houston [1st Dist.] 2001, pet. denied)). ACT cannot establish such an interest. To have a property interest in a benefit, a person clearly must have more than an abstract need or desire” and “more than a unilateral expectation of it. He must, instead, have a legitimate claim of entitlement to” the continuation of the charter. Bd. of Regents v. Roth, 408 U.S. 564, 577 (1972). Such entitlements are, “‘of course . . . not created by the Constitution. Rather, they are created and their dimensions are defined by existing rules or understandings that stem from an independent source such as state law.’” Paul v. Davis, 424 U.S. 693, 709 (1976) (quoting Roth, supra, at 577,); see also Phillips v. Washington Legal Foundation, 524 U.S. 156, 164 (1998). 23 Further, a right is “vested” when it has some definitive, rather than potential, existence. Scott v. Alphonso Crutch LSC Charter Sch., Inc., 392 S.W.3d 165, 170- 71 (Tex. App.—Austin 2010, pet. denied) (mem. op.). As a general matter, “[w]hen the decision to grant or withhold a benefit is entrusted to the discretion of a government actor, one has no constitutional property interest in obtaining that relief.” Suryanto v. Att'y Gen. of U.S., 398 Fed.Appx. 830, 834 (3rd Cir. 2010) (citing Conn. Bd. of Pardons v. Dumschat, 452 U.S. 458, 464 (1981)). “If the decisionmaker is not ‘required to base its decisions on objective and defined criteria,’ but instead ‘can deny the requested relief for any constitutionally permissible reason or for no reason at all,’ the State has not created a constitutionally protected . . . interest.” Olim v. Wakinekona, 461 U.S. 238, 249 (1983) (finding no legitimate claim of entitlement where there were “no standards governing the administrator’s exercise of his discretion” to transfer an inmate) (citation omitted); Lee v. Tex. Workers’ Compensation Comm’n, 272 S.W.3d 806, 817 (Tex.App.— Austin 2008) (citing Olim, 461 U.S. at 249). In other words, there is no protected property interest where the decision to remove a benefit is left to the “unfettered discretion” of the government actor. See Roth, 408 U.S. at 566–67 (concluding a nontenured university professor had no property interest in his position because “State law . . . clearly leaves the decision whether to rehire a nontenured teacher for another year to the unfettered discretion of university officials.”); Lee, 272 S.W.3d 817-18. 24 Thus, if the decision to grant the charter is left to the discretion of the commissioner, no property interest is created by granting the charter. See Town of Castle Rock v. Gonzales, 545 U.S. 748, 756 (2005) (“Our cases recognize that a benefit is not a protected entitlement if government officials may grant or deny it in their discretion.”); see also Ex parte John M. Abell, 613 S.W.2d 255, 262 (Tex. 1981) (“When the authority granting the right has the power and discretion to take that right away, it cannot be said to be a vested right”); Seguin v. Bexar Appraisal Dist., 373 S.W.3d 699, 709 (Tex. App.—San Antonio 2012, pet. denied) (taxpayer did not have vested property right in disabled-veteran tax exemption that was “legislatively revocable”); Klumb v. Houston Mun. Emp. Pension Sys., 405 S.W.3d 204, 226 (Tex. App.—Houston [1st Dist.] 2013, pet. filed) (“[A] pensioner in a statutory pension plan does not have a vested right to his pension.”); McAllen Hosps., L.P., d/b/a McAllen Medical Center and d/b/a Edinburg Regional Medical Center and d/b/a Edinburg Children’s Hospital and d/b/a McAllen Heart Hospital and Fort Duncan Medical Center, L.P., d/b/a Fort Duncan Regional Medical Center v. Thomas Suehs, Executive Commissioner of the Texas Health and Human Services Commission, Douglas Wilson, Inspector 2 General of the Health and Human Services Commission; Texas Health and Human Services Commission, et al., 426 S.W.3d 304, 313 (Tex. App.—Amarillo 2014, no pet.) (hospitals lack vested property right/interest in Medicaid reimbursement payments that were “contingent and potential rather than definitive and unconditional” prior to utilization review); 25 Robert Scott, Commissioner of Education v. Alphonso Crutch LCS Charter Sch., Inc., 392 S.W.3d at 170-71 (concluding that, because allocation to which charter school was entitled for a given time period was subject to change depending on updated attendance figures during school year, the school’s “interest in a definite amount” was not vested and “remain[ed] contingent rather than unconditional, and potential rather than definitive”). ACT’s mistakenly believes that its interest in the continuation of its charter contact is sufficient to vest a property interest. CR at 4. However, the expectation of continuing its charter is not a vested interest, but rather a “mere expectancy created by the law and liable to be revoked or destroyed by the same authority.” City of Dallas v. Trammel, 101 S.W.2d 1009, 1012 (Tex. 1937) (quoting John D. Dillon, Municipal Corporations § 431 (5th Ed. 1911)); see Lee, 272 S.W.3d at 818 (“It is well established that the legislature, ‘which creates the property interest in the first place, may also take it away.’”). The Legislature created charters, and the ability to grant a charter is left entirely up to the discretion of the Commissioner. TEX. EDUC. CODE §12.101. Thus, even if a charter school meets all of the statutory requirements, the Commissioner may still deny the charter. Moreover, notwithstanding section 12.115(c), has required the Commissioner to revoke a school’s charter when the school materially violates the terms of the charter, fails fiscal or academic accountability standards, fails to protect students enrolled in the school, or becomes imminently insolvent. Id. 26 §12.115(a)(1)-(6).5 Moreover, nothing in the statute or in ACT’s charter prohibits the Legislature from changing those standards, and the Legislature could abolish the charter-school system entirely if it chose to do so. See Ex parte John M. Abell, 613 S.W.2d at 262 (“When the authority granting the right has the power and discretion to take that right away, it cannot be said to be a vested right.”); Seguin, 373 S.W.3d at 709 (taxpayer did not have vested property right in disabled-veteran tax exemption that was “legislatively revocable”); Klumb, 405 S.W.3d at 226 (“[A] pensioner in a statutory pension plan does not have a vested right to his pension.”); McAllen Hosps., L.P. v. Suehs, 426 S.W.3d at 304 (hospitals lack vested property right/interest in Medicaid reimbursement payments that were “contingent and potential rather than definitive and unconditional” prior to utilization review); Robert Scott, Commissioner of Education v. Alphonso Crutch LCS Charter Sch., Inc., 392 S.W.3d at 170-71 (concluding that, because allocation to which charter school was entitled for a given time period was subject to change depending on updated attendance figures during school year, the school’s “interest in a definite amount” was not 5 ACT’s charter contract mirrors this statutory framework, expressly providing that: the “commissioner in his sole discretion make take any action authorized by Section 39.131, TEC or Chater 29, TEC relating to the charter contract.” See, e.g. CR at 189; and the “Board in its sole discretion may modify, place on probation, revoke or deny timely renew of a charter for cause (“adverse action.”). Id. “Adverse Actions” include (a) a material violation of the terms of the charter listed in paragraphs 2 and 3, including accountability provisions; (b) failure to satisfy generally accepted accounting standards of fiscal management; or (c) failure to comply with an applicable law or rule.” Id. The charter holders agree to these terms, understand their obligations under the contract and the law, and should know that any rights to the charter are conditioned upon the law and satisfaction of the contractual terms. 27 vested and “remain[ed] contingent rather than unconditional, and potential rather than definitive”). At present, there is no Texas state case directly dealing with a charter school’s right to its charter contract,6 but see Robert Scott, Commissioner of Education v. Alphonso Crutch LCS Charter Sch., Inc., 392 S.W.3d at 170-71, other jurisdictions have determined that a charter contract does not create a property interest. See Reach Academy for Boys & Girls, Inc. v. Delaware Dept. of Educ., 46 F.Supp.3d 455, 457 (D.Del. 2014) (“[T]he renewal of Reach’s charter, is not an interest protected by the Fourteenth Amendment’s Due Process Clause.”); Project Reflect, Inc. v. Metro Nashville Bd. of Pub. Educ., 947 F. Supp. 2d 868, 878-79 (M.D. Tenn. 2013) (concluding that a charter school did not have a constitutionally protected interest in its charter under Tennessee law because the statutory provision governing charter revocation “uses the language of discretion, not entitlement, and only minimally conditions that exercise of discretion”); Project Sch. v. City of Indianapolis, 2012 WL 3114573, at *3 (S.D. Ind. July 31, 2012) (concluding that there was no protected property interest in a charter under Indiana law because “the charter school statute frames the decision to revoke a charter as a discretionary matter”); Pinnacle Charter Sch. v. Bd. of Regents, 108 A.D.3d 1024, 969 N.Y.S.2d 318, 320 (2013) (“[T]he 6 Currently pending before this Court is Texas Education Agency and Michael Williams, Commissioner of Education, in his Official Capacity, v. American Youthworks, Inc., d/b/a American Youthworks Charter School, Honors Academy, Inc., d/b/a Honors Academy, and Two Azleway, Inc. d/b/a/ Azleway Charter School Nos. 03-14-00283-CV and 03-14-00360-CV, in which Appellees assert the same property interest in the charter. 28 New York Charter Schools Act . . . creates no constitutionally protected property interest in the renewal of a charter. . . .”); State ex rel. Sch. Dist. of Kansas City v. Williamson, 141 S.W.3d 418, 427 (Mo. Ct. App. 2004) (“[J]ust as a prospective charter school has no protected property interest at stake regarding an initial charter application, the school also has no protected property interest under the Charter Schools Act with regard to renewal of its charter.”). In Project Reflect, Inc. Smithson Craighead Middle School v. Metropolitan Nashville Board of Public Education, 947 F.Supp.2d 868, (M.D. Tennessee, 2013), the Tennessee district court considered whether a charter school sponsor (an entity similar to a charter holder in Texas) had a protected property interest in continuation of a charter school. In determining the charter lacked such an interest, the court noted that: [T]he statutory language and the charter agreement do not support Plaintiff's claim of a property interest protected by state law. “[A] party cannot possess a property interest in the receipt of a benefit when the state’s decision to award or withhold the benefit is wholly discretionary.” The charter agreement incorporates [the Tennessee Public Charter Schools Act of 2002, recovation or renewal section], which provides that “A public charter school agreement may be revoked or denied renewal by the final chartering authority if the chartering authority determines that the school . . . (2) Received identification as a priority school, as defined by the state’s accountability system.” “The word ‘may’ customarily connotes discretion.” Id. at 878 (citations omitted). It went on to state: [T]he Tennessee charter school statute repeatedly declares its purpose and intention to provide the state department of education and local 29 school systems with “options,” “alternative means,” and “flexibility”— hardly the language of a statute creating a property interest. The law constrains this discretion only by requiring the chartering authority to state its reason(s) for revoking the charter. If, as in this case, the revocation occurs because of the school's priority status, no appeal is permitted—again emphasizing state discretion, not the charter holder’s property rights. Id. at 879 (citations omitted). Similarly, in Project School v. City of Indianapolis, the district court held that Indiana’s charter school statue and the facts in the case repudiated the plaintiff charter school’s argument that it had a protected property interest in its continued ability to operate a school. No. 1:12-cv-01028-SEB-DKL, 2012 WL 3114573, *3 (S.D. Indiana, July 31, 2012). Because the charter was subject to revocation if certain conditions were met and because the sponsor was not required to grant a charter to an organizer to operate a charter school in the first place, the court held that the charter’s “argument that somehow its existence is a ‘property right’ for purposes of the Fourteenth Amendment due process is a nonstarter.” Id. at *4. For all of these same reasons, ACT has failed to identify a vested property interest that did not receive procedural or substantive due process consideration. 2. ACT failed to alleged a viable procedural-due-process claim. Even if ACT demonstrated a property interest in its charter, it received all the process it was due regarding the accountability ratings and revocation. If an order deprives a person of vested property rights without due process, the order may be set aside even absent an express provision for judicial review. See City of Houston 30 v. Carlson, 393 S.W.3d 350, 361-62 (Tex. App.—Houston [14th Dist.] 2012, no pet.). In this case, ACT received notice of its accountability ratings and the revocation decision along with an opportunity to be heard, which is all that due process requires. “Procedural due process requires notice and ‘an opportunity to be heard at a meaningful time and in a meaningful manner.’” Coastal Habit Alliance v. Pub. Util. Comm’n, 294 S.W.32d 276, 285 (Tex. App.—Austin 2009, no pet.) (quoting Univ. of Tex. Med. Sch. v. Than, 901 S.W.2d 926, 930 (Tex. 1995)). What process is due is measured by a flexible standard that depends on the practical requirements of the circumstances. This flexible standard includes three factors: (1) the private interest that will be affected by the official action; (2) the risk of an erroneous deprivation of such interest through the procedures used, and the probable value, if any, of additional or substitute procedural safeguards; and (3) the government’s interest, including the function involved and the fiscal and administrative burdens that the additional or substitute procedural requirement would entail. University of Texas Medical School at Houston, John C. Ribble, M.D., and M. David Low, M.D. v. Allan Than, 901 S.W.2d at 930-31 (citations omitted). ACT was given notice and an opportunity to appeal each of the three financial accountability ratings. CR at 350; see also TEX. EDUC. CODE §39.082(g); 19 TEX. ADMIN. CODE § 109.1002(i)(2) (financial accountability rating appeals). It was also provided notice and an opportunity to appeal its substandard academic accountability rating. CR at 358; see also TEX. EDUC. CODE §39.151; 19 TEX. ADMIN. CODE §97.101(b) (academic accountability rating appeals). 31 ACT was also given notice and an opportunity to appeal the decision to revoke its charter. CR at 342-349. It requested an informal review which was conducted by TEA. CR at 355-357. It filed a petition for review to SOAH which upheld TEA’s decision to revoke. CR at 360-376. 3. TEA applied the Texas Education Code neither arbitrarily nor capriciously in connection with ACT’s accountability ratings or revocation. A violation of substantive due process occurs only when the government deprives individuals of constitutionally protected rights by an arbitrary use of its power. Simi Inv. Co. v. Harris County, 236 F.3d 240, 249 (5th Cir. 2000), cert. denied, 534 U.S. 1022 (2001). A claimant prevails on a substantive due process claim by establishing it holds a constitutionally protected property right to which the Fourteenth Amendment’s due process protection applies and by establishing that the challenged governmental action is not rationally related to furthering a legitimate state interest. Byers v. Patterson, 219 S.W.3d 514, 525 (Tex.App.—Tyler 2007, no pet.) (citing Simi Inv., 236 F.3d at 249-50 and Mikeska v. City of Galveston, 451 F.3d 376, 379 (5th Cir. 2006)). The court must then review the government’s actions against the deferential “rational basis” test that governs substantive due process claims. Simi Inv., 236 F.3d at 249. ACT claims that TEA has created a system of rating review and revocation that is devoid of a meaningful opportunity for review. CR at 7. It further claims that the accountability ratings TEA assigned in 2012-2104 were arbitrary because ACT 32 identified the errors it submitted and was not permitted to submit corrected data. Id. ACT argues, with no supporting evidence, that TEA did this specifically and arbitrarily to ACT. Id. ACT further claims that the current “mechanism for evaluating charter schools . . . allows TEA and Commissioner to change standards after the fact without any regard for a connection with a legitimate government purpose or rational relationship on a consistent basis.” CR at 14. Again, ACT relied on the erroneous assumption that the renewal of its charter was automatic or vested which it is not. Id. An agency’s decision is arbitrary or results from an abuse of discretion (i.e is capricious) if the agency: (1) failed to consider a factor the legislature directs it to consider; (2) considers an irrelevant factor; or (3) weighs only relevant factors that the legislature directs it to consider but still reaches a completely unreasonable result. City of El Paso v. Public Utility Comm'n of Tex., 883 S.W.2d 179, 184 (Tex. 1994) (citing Gerst v. Nixon, 411 S.W.2d 350, 360 n. 8 (Tex. 1966)). Though ACT clearly opposed the results of the accountability ratings it received, it never argued that the ratings, based on the evidence actually received by TEA, were erroneous. It simply believes that it should be afforded an opportunity to correct incorrect data that it supplied years before, in an effort to avoid revocation now. ACT presented the trial court with no evidence that TEA considered factors beyond those the legislature directed it to consider: ACT’s financial and academic performance ratings. ACT presented no evidence that TEA considered a factor that 33 was irrelevant which led to the failing ratings. Finally, ACT failed to present any evidence that TEA considered the appropriate factors but reached a completely unreasonable result. In short, there is no evidence that TEA acted arbitrarily or capriciously when it reviewed the information ACT presented to it to reach the result that ACT did not meet its financial or academic benchmark for 2012-2014. There is no evidence that the Commissioner considered anything but the criteria found in the Texas Education Code when he issued the notice of intent to revoke. Indeed, a charter school is given numerous opportunities to provide correct information at or near the time the AFR is due. What ACT seeks to do is appeal ratings that are 2-3 years old, disrupting the finality of those accountability ratings as well as the accreditation process. Allowing a charter school to submit untimely appeals of years-old accountability ratings (specifically at the point of revocation) frustrates one of the purposes of the 2013 statutory amendments which was to close down underperforming charter schools efficiently. CR at 319. C. No Violation of Some Other Constitutional Right. 1. ACT failed to demonstrate a property interest to substantiate its takings claim. Notwithstanding the fact that ACT failed to demonstrate a property interest in the continuation of its charter, ACT also claimed a property interest in the property and funds that it has in its possession which are subject to seizure by TEA as a result of the charter revocation. CR at 15. Article I, section 17 of the Texas Constitution 34 provides that “[n]o person’s property shall be taken, damaged or destroyed or applied to public use without adequate compensation being made . . . .” TEX. CONST., ART. I, §17. Absent a cognizable property interest, a claimant is not entitled to compensation under article I, section 17. See Tarrant County v. Ashmore, 635 S.W.2d 417, 422 (Tex. 1982). The takings provision of the Texas Constitution is comparable to the federal takings clause. See Sheffield Devel. Co. v. City of Glenn Heights, 140 S.W.3d 660, 669 (Tex. 2004). Both provisions recognize that, while “all property is held subject to the valid exercise of the police power,” a regulation may, under some circumstances, constitute a taking requiring compensation. Id. at 670 (quoting City of College Station v. Turtle Rock Corp., 680 S.W.2d 802, 804 (Tex. 1984)). Texas Education Code §12.128 states that all property purchased or leased with funds received by the charter holder under TEX. EDUC. CODE §12.106 is considered to be public property for all purposes under state law and is held in trust for the students of the open-enrollment charter school. ACT’s contract for its charter has been revoked, and, by law, a revoked charter school may not continue to operate under Subchapter D of Texas Education Code Chapter 12 (providing for the operation of an open-enrollment charter school) and may not continue to receive funds. See TEX. EDUC. CODE §12.1161 ACT’s year ending August 31, 2011 AFR, ACT clearly listed as state property: all of its cash, land, buildings and improvements, vehicles and 35 approximately 92% of its furniture and equipment. RR, Def. exh. 1, p. 12; RR at 38: 24 – p. 39: 16. For the year ending August 31, 2012, ACT again listed as state property: all of its cash, land, buildings and improvements, vehicles and approximately 92% of its furniture and equipment. RR, Def. exh. 2, p. 12; RR at 46: 23 – p. 47: 11. Again, in the year ending on August 31, 2013, ACT listed all of its cash, land, buildings and improvements, vehicles and approximately 90% of its furniture and equipment as being state owned. RR, Def. exh. 3, p. 14. Moreover, ACT’s 2014 AFR acknowledged that 100% of its land and improvements, building improvements, vehicles, furniture and equipment were state or federally owned. CR at 395. The law is clear: public property may only be used in the operation of a public school. TEX. EDUC. CODE §12.128(a)(2). Additionally, section 12.107 of the Education Code clearly provides that funds received by a charter holder pursuant to section 12.106 are public funds held in trust by the charter holder for the benefits of students of the open-enrollment charter school. TEX. EDUC. CODE §12.107. Since ACT may not continue to operate a public school after revocation, pursuant to TEX. EDUC. CODE §12.1161, ACT must return this state property as directed by the Commissioner. TEX. EDUC. CODE §12.128(c). In this case, the only property subject to return to TEA would be the property identified by ACT as being owned by the state, and any state funds held in trust by the former charter holder that no longer operates an open-enrollment charter. 36 2. The Texas Education Code does not violate the Open Courts Provision. ACT claims that the regulations regarding individual ratings violate the Open Courts provision of the Texas Constitution by not allowing charter schools the opportunity to seek redress from the courts. CR at 15. The Open Courts Provision provides that “all courts shall be open, and every person for any injury done him, in his lands, goods, person or reputation, shall have remedy by due course of law.” Fed. Sign v. Tex. S. Univ., 951 S.W.2d 401, 410 (Tex. 1997) (quoting TEX. CONST. ART. I, §13). The Open Courts provision affords three distinct protections. First, courts must be open and operating. Id. Second, citizens must have access to the courts unimpeded by unreasonable financial barriers. Id. Finally, the law must afford meaningful legal remedies to Texas citizens, so the Texas legislature may not abrogate the right to assert a well-established common-law cause of action. Id. The Open Courts provision applies only to statutory restrictions of a cognizable common law cause of action. Id. However, “there is no common-law cause of action for judicial review of an agency’s administrative act.” Creedmoor–Maha, 307 S.W.3d at 524 (quoting City of Port Arthur v. Southwestern Bell Tel. Co., 13 S.W.3d 841, 845 (Tex.App.—Austin 2000, no pet.)). Further, ACT only cites a violation of the Open Courts Provision with regard to its non-existent property interest in its charter. CR at 15. Finally, and most importantly, ACT has demonstrated no right to judicial review of TEA’s 37 accountability ratings appeals or revocation decision. Thus, ACT failed to plead a violation of the Open Courts Provision. III. ACT’S ULTRA V IRES CLAIMS ARE MERITLESS, BARRED BY SOVEREIGN IMMUNITY, AND DO NOT SUPPORT THE DISTRICT COURT’S FINDING THAT ACT WOULD LIKELY SUCCEED ON THE MERITS OF ITS CLAIMS. A. ACT failed to allege that the Commissioner acted without legal authority or failed to perform a ministerial act. To proceed in a suit against State entities and officials, the plaintiff must either plead and prove a waiver of sovereign immunity or allege that the State official acted without legal authority, or ultra vires, which is a suit where sovereign immunity is not implicated because a State official’s illegal or unauthorized actions are not considered acts of the State. City of El Paso v. Heinrich, 284 S.W.3d 366, 370-72 (Tex. 2009) (citing Fed. Sign v. Tex. S. Univ., 951 S.W.2d 401, 404 (Tex. 1997); Creedmoor–Maha, 307 S.W.3d at 514; Combs v. City of Webster, 311 S.W.3d 85, 94 (Tex.App.—Austin 2009, pet. denied). The law distinguishes between suits that implicate sovereign immunity and those that do not. “[A] suit challenging a specific administrative order implicates sovereign immunity because it seeks to control state action — it seeks to restrain the State or its officials in the exercise of discretionary statutory or constitutional authority.” Creedmoor–Maha, 307 S.W.3d at 515 (citing Texas Dept. of Protective and Regulatory Services v. Mega Child Care, Inc., 145 S.W. 3d at 198). Conversely, 38 an ultra vires suit must allege that a state actor acted without legal authority. Heinrich, 284 S.W.3d at 372-73. “A suit asserting that a government officer acted without legal authority or seeking to compel him to comply with statutory or constitutional provisions is an ultra vires suit and is not subject to pleas of governmental immunity. Such a suit, in effect, does not seek to alter government policy; it seeks to reassert the control of and enforce existing policy of the governmental entity.” Houston Belt & Terminal Ry. Co. v. City of Houston, 424 S.W.3d 663, 668 (Tex.App.–Houston [14th Dist.] 2014, pet. filed) (citing Heinrich, 284 S.W.3d at 371–72). A suit that does not allege that a state actor acted without legal authority, “implicates sovereign immunity because it seeks to ‘control state action,’ to dictate the manner in which officers exercise their delegated authority.’” See Heinrich, 284 S.W.3d at 372; Creedmoor–Maha, 307 S.W.3d at 515–16. In other words, unless a suit alleges that a state official acted without legal authority or failed to perform a ministerial duty, then the assumption is that the state official acted with discretionary, legal authority and the suit seeks to control this lawful conduct. See Creedmoor–Maha, 307 S.W.3d at 515–16. ACT requested that the trial court enter declarations specifically (i) reversing the administrative decision of the Commissioner to revoke its charter; and (ii) challenging TEA’s use of what it considered was incorrect data to calculate ACT’s 39 financial and academic accountability ratings without giving ACT the opportunity to submit correct information well after the deadline to do so. The Commissioner did not act ultra vires in revoking ACT charter or by considering the data originally submitted by ACT to determine ACT’s accountability ratings considering the plain language of the Texas Education Code and the facts of this case. The information provided by ACT was reviewed by ACT’s auditor who specifically noted ACT’s deficiencies. RR at 40: 5-19; RR, Def. Ex. 3, p. 11. However, instead of addressing those deficiencies, ACT simply reviewed the AFR and affirmed that the information was true and correct prior to submitting it to TEA. RR at 35: 5-17; RR at Def. Ex. 1, Certification page; 44: 24-p. 45: 6 (“Correct.”); RR at 36: 16- p. 37: 2. Based on this information, TEA determined that ACT was underperforming financially for three years in a row and also found that ACT needed substantial improvement of its academic accountability based on its 2013 information. CR at 358, ¶5. Because ACT had four failing accountability ratings in the last three years, the Commissioner was mandated to revoke its charter, and the Commissioner, therefore, acted under such statutory authority in revoking ACT’s charter. See, e.g. Sw. Pharmacy Solutions, Inc. v. Tex. Health & Human Servs. Comm’n, 408 S.W.3d 549, 561-62 (Tex. App.—Austin 2013, pet. denied) (rejecting ultra vires claim where agency’s construction of statute was reasonable); see also supra, Statement 40 of Facts, Part I, (Sunset Commission recommending statute be amended to “ensure students do not continue to attend a school lacking a quality education or with serious financial problems that could affect the school and, ultimately, a student’s academic progress.”). B. ACT is seeking retroactive relief which is unavailable in an ultra vires action. Sovereign immunity does not generally shield governmental agencies from suits for equitable relief for a violation of constitutional rights. See Heinrich, 284 S.W.3d at 373 n. 6; City of Elsa v. M.A.L., 226 S.W.3d 390, 392 (Tex. 2007); City of Beaumont v. Bouillion, 896 S.W.2d 143, 149 (Tex. 1995) (determining that no private right for damages was permitted for violations of state constitutional rights and vacating jury award of damages). However, ACT seeks an injunction that addresses past decisions. CR at 18-20. If the relief sought by ACT effectively seeks to control the TEA’s or the Commissioner’s lawful, discretionary actions, then sovereign immunity is still implicated and the trial court erred in denying TEA’s Plea to the Jurisdiction based on sovereign immunity. Heinrich, 284 S.W.3d at 370- 72; Creedmoor–Maha, 307 S.W.3d at 515. “Equitable relief is a prospective remedy, intended to prevent future injuries,” Adler v. Duval County School Bd., 112 F.3d 1475, 1477 (11th Cir. 1997), and for that reason “[t]he sole function of an action for injunction is to forestall future violations.” United States v. Or. State Med. Soc’y, 343 U.S. 326, 333 (1952); see 41 also Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 109 (1998) (“Because respondent alleges only past infractions . . . and not a continuing violation or the likelihood of a future violation, injunctive relief will not redress its injury.”); Reich v. Occupational Safety & Health Review Comm’n, 102 F.3d 1200, 1202 (11th Cir. 1997) (“injunctive relief . . . addresses only ongoing or future violations”); Heinrich, 284 S.W.3d at 376 “[A] claimant who successfully proves an ultra vires claim is entitled to prospective injunctive relief, as measured from the date of injunction.”). Generally, the purpose of injunctive relief is to halt wrongful acts that are threatened or in the course of accomplishment, rather than to grant relief against past actionable wrongs or to prevent the commission of wrongs not imminently threatened. See Texas Health Care Info. Council v. Seton Health Plan, Inc., 94 S.W.3d 841, 853 (Tex.App.—Austin 2002, no pet.); see also Webb v. Glenbrook Owners Ass’n, 298 S.W.3d 374, 384 (Tex.App.—Dallas 2009, no pet.) (injunction not available to “prevent commission of wrongs not imminently threatened.”). A party seeking injunctive relief preventing alleged ultra vires acts must plead and prove, among other things, existence of imminent harm, irreparable injury, and absence of adequate remedy at law. See Lazarides v. Farris, 367 S.W.3d 788, 803 (Tex.App.—Houston [14th Dist.] 2012, no pet.); Texas Health Care Info. Council, 94 S.W.3d at 853. “To obtain equitable relief for past wrongs, a plaintiff must demonstrate either continuing harm or a real and immediate threat of repeated injury 42 in the future.” Society of Separationists, Inc. v. Herman, 959 F.2d 1283, 1285 (5th Cir.), cert. denied, 506 U.S. 866 (1992). ACT specifically sought a declaration regarding factors the Commissioner used in his accountability assessment which led to the revocation of ACT’s charter. CR at 18. It sought to have the trial court declare certain factors in ACT’s favor and then reapply those factors to its final accountability ratings for years prior to suit. Id. ACT did not request prospective (future-seeking) relief, but rather retrospective relief, seeking to remedy past harm it alleged that TEA committed against it by not allowing alleged corrected data to be considered for the 2011, 2012, and 2013 accountability ratings. These forms of requested relief are solely to remedy past alleged harm, which cannot be granted through an injunction. IV. ACT FAILED TO DEMONSTRATE THE TRIAL COURT’S JURISDICTION AND, THEREFORE, THE TRIAL COURT ERRED BY DENYING TEA’S PLEA. The Commissioner revoked ACT’s charter because of academic or financial substandard performance, or a combination of the two. Substandard academic performance ratings are issued only when a critical mass of a charter school’s students are not meeting standards on assessment instruments or are dropping out or not completing high school. TEX. EDUC. CODE §39.053. Similarly, the Texas Education Code requires that charter schools be assigned the lowest financial accountability ratings when they show signs of financial stress or insolvency. Id. §39.082(f). 43 The Legislature clearly chose to automatically revoke the charters of schools that fail to meet accountability standards for three years in a row. The Commissioner complied with the statute, and ACT’s revocation should have been effective on June 30, 2015. CR at 355. ACT sought the temporary injunction to delay the revocations citing meritless constitutional and ultra vires claims, none of which demonstrated that the trial court possessed jurisdiction to consider. PRAYER For the foregoing reasons, Commissioner Williams and the Texas Education Agency respectfully request the Court reverse the trial court’s denial of their Plea to the Jurisdiction and dismiss this case for lack of subject-matter jurisdiction. Alternatively, Commissioner Williams and the TEA request the Court hold the trial court’s September 4, 2015 temporary injunction order is void, to dissolve it, and remand the case to the district court for further proceedings. 44 Respectfully submitted, KEN PAXTON Attorney General of Texas CHARLES E. ROY First Assistant Attorney General JAMES E. DAVIS Deputy Attorney General for Civil Litigation ANGELA COLMENERO Division Chief /s/ Erika M. Laremont ERIKA M. LAREMONT Attorney in Charge Texas Bar No. 24013003 Office of the Attorney General General Litigation Division P.O. Box 12548, Capitol Station Austin, TX 78711-2548 PHONE: (512) 475-4196; FAX: (512) 320-0667 Erika.Laremont@texasattorneygeneral.gov ATTORNEYS FOR APPELLANTS 45 CERTIFICATE OF COMPLIANCE Pursuant to Tex. R. App. P. 9.4(i)(3), I certify that this brief contains 12,478 words, exclusive of the exempted portions in Tex. R. App. P. 9.4(i)(1). /s/ Erika M. Laremont ERIKA M. LAREMONT Assistant Attorney General CERTIFICATE OF SERVICE I certify that a copy of the above Brief of Appellants was served by certified mail, return receipt requested, on October 20, 2015 upon the following individuals at the listed address: D. Todd Smith State Bar No. 00797451 SMITH LAW GROUP LLLP 1250 Capital of Texas Highway South Three Cielo Center, Suite 601 Austin, Texas 78746 Stephen M. Foster 9013 Magna Carta Loop Austin, Texas 78754 (512) 784-4367 /s/ Erika M. Laremont ERIKA M. LAREMONT Assistant Attorney General 46 No. 03-15-00528-CV _____________________________ IN THE COURT OF APPEALS FOR THE THIRD JUDICIAL DISTRICT _____________________________ TEXAS EDUCATION AGENCY AND MICHAEL WILLIAMS, COMMISSIONER OF EDUCATION, IN HIS OFFICIAL CAPACITY, Appellants, VS. ACADEMY OF CAREERS AND TECHNOLOGIES, INC. D/B/A ACADEMY OF CAREERS AND TECHNOLOGIES CHARTER SCHOOL, Appellee. ______________________________ On Appeal from the 200th Judicial District Court of Travis County, Texas Cause No. D-1-GN-15-002879 ______________________________ APPENDIX OF APPELLANT ______________________________ APPENDIX Tab A Amended Defendants’ Plea to the Jurisdiction and Response to Plaintiff’s Request for Temporary Injunction and Exhibits Tab B Plaintiff’s Response to Defendants’ Plea to the Jurisdiction Tab C Defendants’ Reply to Plaintiff’s Response to Defendants’ Plea to the Jurisdiction and Response to Plaintiff’s Request for Temporary Injunction Tab D Order Granting Temporary Injunction and Denying Defendant’s Amended Plea to the Jurisdiction Tab E-1 Adler v. Duval County School Bd., 112 F.3d 1475, 1477 (11th Cir. 1997) Tab E-2 Bd. of Regents v. Roth, 408 U.S. 564, 577 (1972) Tab E-3 Conn. Bd. of Pardons v. Dumschat, 452 U.S. 458, 464 (1981) Tab E-4 Mikeska v. City of Galveston, 451 F.3d 376, 379 (5th Cir. 2006) Tab E-5 Olim v. Wakinekona, 461 U.S. 238, 249 (1983) Tab E-6 Paul v. Davis, 424 U.S. 693, 709 (1976) (quoting Roth, supra, at 577,) Tab E-7 Phillips v. Washington Legal Foundation, 524 U.S. 156, 164 (1998) Tab E-8 Pinnacle Charter Sch. v. Bd. of Regents, 108 A.D.3d 1024, 969 N.Y.S.2d 318, 320 (2013) Tab E-9 Project Reflect, Inc. v. Metro Nashville Bd. of Pub. Educ., 947 F. Supp. 2d 868, 878-79 (M.D. Tenn. 2013) Tab E-10 Project School v. City of Indianapolis, 2012 WL 3114573, *3 (S.D. Indiana, July 31, 2012) Tab E-11 Reach Academy for Boys & Girls, Inc. v. Delaware Dept. of Educ., 46 F.Supp.3d 455, 457 (D.Del. 2014) Tab E-12 Reich v. Occupational Safety & Health Review Comm’n, 102 F.3d 1200, 1202 (11th Cir. 1997) Tab E-13 Simi Inv. Co. v. Harris County, 236 F.3d 240, 249 (5th Cir. 2000), cert. denied, 534 U.S. 1022 (2001). Tab E-14 Society of Separationists, Inc. v. Herman, 959 F.2d 1283, 1285 (5th Cir.), cert. denied, 506 U.S. 866 (1992). Tab E-15 Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 109 (1998) Tab E-16 Suryanto v. Att'y Gen. of U.S., 398 Fed.Appx. 830, 834 (3rd Cir. 2010) Tab E-17 Town of Castle Rock v. Gonzales, 545 U.S. 748, 756 (2005) Tab E-18 United States v. Or. State Med. Soc’y, 343 U.S. 326, 333 (1952) Tab F Tex. Educ. Code § 12.115 Tab G Tex. Educ. Code, Subchapter C Tab H Tex. Educ. Code, Subchapter D Tab I Tex. Admin. Code § 97.1001 Amended 8-7-13 (2) Tab J 19 TEX. ADMIN. CODE §109.1002, amended 10-18-11 Tab K 19 TEX. ADMIN. CODE §109.1002, amended 10-3-13 8/12/2015 3:38:21 PM Velva L. Price District Clerk Travis County CAUSE NO. D-1-GN-15-002879 D-1-GN-15-002879 Jessica Arzola ACDEMY OF CAREERS AND § IN THE DISTRICT COURT TECHNOLOGIES INC. d/b/a ACADEMY § OF CAREERS AND § TECHNOLOGIES CHARTER SCHOOL, § Plaintiffs, § § v. § 98TH JUDICIAL DISTRICT § TEXAS EDUCATION AGENCY and § MICHAEL WILLIAMS in his Official § Capacity as the Commissioner of § Education, § TRAVIS COUNTY, TEXAS Defendants. § AMENDED DEFENDANTS' PLEA TO THE JURISDICTION AND RESPONSE TO PLANTIFF'S REQUEST FOR TEMPORARY INJUNCTION TO THE HONORABLE JUDGE OF THE COURT: COME NOW Defendants, Texas Education Agency ("TEA") and Michael L. Williams, in his Official Capacity as the Commissioner ofEducation (individually "Williams" and, collectively with TEA, the "Defendants"), and file this Amended Plea to the Jurisdiction. I. BACKGROUND A. 2012 Sunset Advisory Commission and Changes to Texas Education Code. The Sunset Advisory Commission ("Commission") reviewed the Texas Education Agency in October 2012, preceding the commencement of the 83rd Texas Legislature. In its review, the Commission identified the following issue: "TEA lacks a full range of tools to effectively address poor academic performance and financial mismanagement at low-performing charter schools." Ex. 1. In identifying this issue, the Commission noted that "a higher rate of charter schools performed at an academically unacceptable level than school districts," and that "[ m ]any charter schools also have poor financial performance, underscoring the importance of oversight of 1 Tab A 293 expenditure of state funds." !d. at 70-71. Significantly, the Commission found: Charter schools have far more accountability problems requiring assignment of interventions and sanctions, and ultimately, revocation of the charter. Charter schools represent more than two-thirds, 71 percent, of schools assigned with sanctions, even though charter schools make up only 17 percent of the total number of districts and charters. !d. at 71-72. Although TEA had the authority to close a charter school and revoke the charter, the Commission criticized the process as unworkable, leaving students to be educated at underperforming charter schools. !d. at 72. Based on these findings, the Commission recommended a change in statute that required the automatic revocation of a charter for failure to meet basic academic or financial accountability standards for three years in a row. !d. at 79. It recommended that no appeal be permitted from the revocation determination. According to the Commission, such a change in the law would "allow the State to more quickly shut down the poorest performing charters, without years of litigation during which time the school remains open. The recommendation would also ensure students do not continue to attend a school lacking a quality education or with serious financial problems that could affect the school and, ultimately, a student's academic progress." !d. at 79. Thus, based on the Commission's recommendation, the 83rd Texas Legislature amended section 12.115 of the Texas Education Code to make mandatory the revocation of any open- enrollment charter school's charter if the school fails to meet financial and/or academic performance ratings in certain years. The Commissioner of Education ("Commissioner") is now required to revoke a school's charter if one of three scenarios arises: (1) the charter holder has been assigned an unacceptable performance rating under Subchapter C, Chapter 39 [of the Education Code] for the three preceding years; (2) the charter holder has been assigned financial accountability performance rating under Subchapter D, Chapter 39, indicating financial performance lower than satisfactory for the three preceding school years; or 2 294 (3) the charter holder has been assigned any combination of the [unacceptable ratings under either subchapter]. TEX. EDUC. CODE§ 12.115(c). Chapter 39, Subchapter C (academic performance) ratings to be considered are those assigned to the school for 2009-2010, 2010-2011, and 2012-2013 rating years. !d. § 112.115(c- 1). However, "[f]or the purposes of revocation under Subsection (c)(1), performance during the 2011-2012 school year may not be considered." !d.; see also TEX. EDUC. CODE § 39.116(a) and (f) (allowing commissioner of education to suspend academic performance rating during transition period). The Subchapter D ratings to be considered are those assigned to the school for the 2010- 2011, 2011-2012, and 2012-2013 rating years. TEX. EDUC. CODE§ 12.115(c-1). The findings of the Sunset Advisory Commission demonstrate that there is a compelling state need to identify and close poor-performing charter schools in order to improve the choices available to parents and students. B. The Appeal Process as Defined in the Texas Education Code. After a school district or charter school receives its accountability or financial ratings, it has an opportunity to appeal the ratings to the Commissioner of Education. TEX. EDUC. CODE § 39.151(a). Should a charter school seek to appeal a financial or academic rating and notifies the commissioner of such, the Commissioner must appoint a committee to make recommendations to the commissioner on any challenge made to an agency decision. TEX. EDUC. CODE §39.151(b). After considering the committee's recommendation, the Commissioner makes a final decision. TEX. EDUC. CODE §39.151(d). The commissioner's decision following any appeal is final, and the Legislature expressly prohibited any additional appeal from this final determination in "any other proceeding" if the charter "has had an opportunity to challenge the decision under [section 31.151]. TEX. EDUC. CODE §39.151(e). 3 295 A school district or charter school may also seek redress of the Commissioner's decision to close a school to the State Office of Administrative Hearings ("SOAH"). TEX. EDUC. CODE§ 39.152(a). The school must file a petition for review and include certain requirements for the petition to be granted. 19 TAC § 156.1183. The decision of the administrative law judge is final and may not be appealed. TEX. EDUC. CODE §39.152(c)(3). Strikingly absent is any mention of judicial review of TEA's ratings or decision to revoke a charter. C. The Texas Education Code Mandates Revocation of Plaintiff's Charter School. Plaintiff Academy of Careers and Technology, Inc., d/b/a Academy of Careers and Technology Charter School ("ACT") was originally issued a state charter in 1998. Ex. 2. In 2012, 2013, and 2014 TEA found that ACT failed to meet the state's financial accountability standards. Ex. 3; Ex. 4; see also Pl. Orig. Petition, pp. 2-3. ACT did not file an appeal to these ratings until 2015. The committee recommended that the appeals be dismissed, and the Commissioner followed the committee's recommendations. Ex. 5. ACT also failed to meet academic accountability standards in 2014 and appealed the 2014 academic accountability rating to the outside appeal committee. Ex. 6. The committee recommended that the appeal be dismissed, and the Commissioner followed the committee's recommendation. Ex. 6. Under the Texas Education Code, these decisions are not appealable. TEX. EDUC. CODE §39.151(e). Commissioner Williams had no discretion but to revoke ACT's charter, since its failings in 2012, 2013 and 2014 represented three consecutive years of failure as defined by Texas Education Code§§ 12.115(c)(3) & 12.115(c-1). The TEA notified ACT of this fact on December 8, 2014. Ex. 3. ACT sought an informal hearing regarding the revocation. Pl. Orig. Petition, p. 3. A review was conducted, but the decision to revoke ACT's charter was sustained. Ex. 5. It is 4 296 undisputed that ACT filed a petition for review seeking review of the revocation decision before the State Office of Administrative Hearings ("SOAH"). Pl. Orig. Petition, p. 3. Because there were no material factual issues in dispute, TEA filed a Motion for Summary Disposition, which provided the basis for a final decision and order of SOAH upholding the Commissioner's decision to revoke ACT's charter. Ex. 7. This decision is not subject to appeal. TEX. EDUC. CODE §39.152(c)(3). D. This Court Lacks Jurisdiction to Consider ACT's Claims. In its Original Petition for Declaratory Action and For Temporary Restraining Order and Temporary & Permanent Injunction, ACT's challenge fails to invoke the jurisdiction of this Court. The Legislature has broad latitude to shape and define the public school system in Texas. As a part of this discretion, the Legislature is free to have a stringent accountability system, and to even eliminate the charter system altogether. To this end, the Legislature has designated SOAH as the sole avenue for any administrative recourse a charter holder may seek in the event it disagrees with TEA's assessment of its performance in connection with an action to revoke the charter holder's charter. And, importantly, unlike many other administrative processes before SOAH, the Legislature has specifically exempted these SOAH proceedings from further review in the State District Courts, leaving SOAH as the ultimate arbiter of any charter holder's dispute with TEA on all issues relevant to the instant claims. II. ARGUMENTS AND AUTHORITIES A. Plea to the Jurisdiction- The Legal Standard The Texas Supreme Court has long recognized that sovereign immunity, unless waived, protects the State of Texas ("State"), its agencies, and its officials from lawsuits for damages, absent legislative consent to sue the State. Tex. A & M Univ. Sys. v. Koseoglu, 233 S.W.3d 835, 5 297 844 (Tex. 2007); Tex. Dep 't ofTransp. v. Jones, 8 S.W.3d 636, 638 (Tex. 1999) (per curiam); Fed. Sign v. Tex. S. Univ., 951 S.W.2d 401, 405 (Tex. 1997). Sovereign immunity embraces two principles: immunity from suit and immunity from liability. Fed. Sign, 951 S.W.2d at 638 (citing Missouri Pac. R.R. Co. v. Brownsville Navigation Dist., 453 S.W.2d 812, 813 (Tex.1970)). Immunity from suit prevents the State from being sued without legislative consent, even if the States' liability is not disputed. !d. (citing Brownsville Navigation Dist., 453 S.W.2d at 813). "Immunity from liability protects the State from judgments even if the Legislature has expressly given consent to the suit." !d. (citing Brownsville Navigation Dist., 453 S.W.2d at 813) (emphasis omitted). A party may challenge the trial court's subject matter jurisdiction by filing a plea to the jurisdiction. See Tex. Dep'tofParks & Wildlifev. Miranda, 133 S.W.3d217, 225-26 (Tex. 2004). In deciding a plea to the jurisdiction, a court may not weigh the claims' merits, but must consider only the plaintiff's pleadings and the evidence pertinent to the jurisdictional inquiry. County of Cameron v. Brown, 80 S.W.3d 549, 555 (Tex. 2002); see also Miranda, 133 S.W.3d at 227. If a defendant demonstrates that the trial court lacks jurisdiction, the burden shifts to the plaintiff to establish a fact question on the issue of jurisdiction. Mission Consol. Indep. Sch. Dist. v. Garcia, 372 S.W.3d 629, 635 (Tex. 2012). If the relevant evidence is undisputed and fails to present a fact question, the trial court should rule on the plea as a matter of law. !d. Texas courts defer to the legislature to waive immunity from suit because this allows the legislature to protect its policymaking function. Tex. Natural Res. Conservation Comm 'n v. IT- Davy, 74 S.W.3d 849, 854 (Tex.2002). Any waiver of immunity must be expressed by clear and unambiguous language. TEX. Gov'T CODE § 311.034. 6 298 B. The District Court Lacks Subject Matter Jurisdiction to Review Defendants' Final Decisions Regarding ACT's Financial and Academic Accountability Ratings and SOAH's Final Decision and Order Regarding Revocation. Through its Original Petition, ACT seeks judicial review of financial and academic ratings issued by the Commissioner in 2012, 2013, and 2014 as well as SOAR's final decision and order revoking the Plaintiff's contract for charter. Unless, the Texas Legislature has waived sovereign immunity, either by statute or legislative resolution, this Court does not have jurisdiction to consider Plaintiff's claims. Indeed, "[a] person may obtain judicial review of an administrative action only if a statute provides that right, or the action adversely affects a vested property right or otherwise violates a constitutional right." Tex. Dep 't of Protective & Regulatory Servs. v. Mega Child Care, Inc., 145 S.W.3d 170, 173 (Tex. 2004). Such a right must be articulated by the legislature through "clear and unambiguous language." !d. at 197. 1. There is no statutory provision which allows this Court to review TEA's rating decisions. Chapter 39 of the Texas Education Code, entitled "Public School System Accountability," governs the financial and academic performance system used to review both traditional public schools and charter schools. See TEX. EDUC. CODE§ 39.054(b). Section 39.151, however, limits the review of any accountability determination to the Commissioner and expressly exempts the decision from review by SOAH or a State District Court. See id., at§§ 39.151(d) & (e). Here, ACT has failed to point to any provision in the Texas Education Code or any other statutory provision that provides for judicial review of TEA's financial and academic ratings that form the basis of the decision to revoke. See Burkhalter v. Tx. State Bd. Of Med. Exam 'r, 918 S.W.3d 1, 3 (Tex. App.-Austin 1996)("The right to appeal from an administrative order to the courts is not a natural or inherent one but is one that may be granted or withheld at the discretion of the Legislature."). 7 299 ACT claims that it failed the 2012 and 2013 financial accountability ratings due to "third party" errors in its annual financial reports. See Pl. Orig. Petition, p. 2. The "third party" in question is the independent auditor that ACT hired to prepare its annual financial report (AFR). Ex. 8; see also TEC §44.008. In addition to preparing the report, ACT's Board of Trustees approved the reports in question, as well as the report that led to the 2014 failed accountability rating. TEC §44.008(d). While ACT characterizes the failures as "mutual" mistakes, the Agency relied on the financial information submitted by ACT, who was responsible for submitting correct data. Id at pp. 2-3. ACT claims that the TEA rules impermissibly limited the appeal to errors made by TEA and argues that the statute requires TEA to allow ACT to correct its allegedly erroneous data. Id at pp. 3-4. However, the statute clearly allows the Commissioner to adopt rules for the review of the accountability ratings. See TEC §39.151(a) " ... The Commissioner by rule shall provide a process for a ... open enrollment charter school to challenge an agency decision made under this chapter relating to an academic or financial accountability rating that affect the ... school."). The Commissioner reasonably interpreted the term "appeal" to mean an opportunity to challenge the Agency's rationale and methodology for issuing the rating, rather than an opportunity for ACT to re-submit data. An appeal is typically limited to the facts under which a decision was made, and frequently will not allow for additional evidence to be submitted. ACT, therefore, has no procedural or substantive due process right to re-submit its data. Finally, while ACT complains that the appeal was limited, ACT cannot and does not allege that it provided "corrected" financial information in its appeals. ACT did file appeals for all the accountability ratings at issue. Exs. 4 and 6. However, ACT does not allege that it provided new financial information in its appeals that the Agency rejected. Moreover, while ACT claims that 8 300 the audited financial statements it submitted were incorrect, it has not provided new audited financial statements to substantiate this claim. 2. There is no statutory provision which allows this Court to review TEA's revocation decision. Section 12.115(c) of the Texas Education Code provides: The commissioner shall revoke the charter of an open-enrollment charter school if: (1) the charter holder has been assigned an unacceptable performance rating under Subchapter C, Chapter 39, for the three preceding years; (2) the charter holder has been assigned an unacceptable financial accountability rating under Subchapter D, Chapter 39, indicating financial performance lower than satisfactory for the three preceding school years; or (3) the charter holder has been assigned any combination of the ratings described by Subdivision (1) or (2) for the three preceding school years. TEX. EDUC. CODE §12.115(c). The Legislature has mandated that the Commissioner's decision to revoke a charter can be reviewed only by SOAH, and that an ALJ's review of that charter-revocation decision is final and not subject to appeal. Section 12.116(c) provides: A decision by the commissioner to revoke a charter is subject to review by the State Office of Administrative Hearings. Notwithstanding Chapter 2001, Government Code: (1) the administrative law judge shall uphold a decision by the commissioner to revoke a charter unless the judge finds the decision is arbitrary and capricious or clearly erroneous; and (2) a decision of the administrative law judge under this subsection is final and may not be appealed. TEX. EDUC. CODE § 12.116(c). Accordingly, the Commissioner's revocation decision is final unless it is appealed to SOAH, and the SOAH ALJ's decision either upholding or reversing the Commissioner's decision is not subject to appeal. Because ACT has no right to judicial review of 9 301 the revocation decision, the district court lacks jurisdiction over this suit. See Texas Dep 't of Transp. v. Jones, 8 S.W.3d 636, 638 (Tex. 1999); Bacon v. Hist. Comm 'n, 411 S.W.3d 161, 173- 74 (Tex. App.-Austin 2013, no pet.) ("One implication of these principles is that there is no general right to challenge or seek review of a state agency order or decision in Texas state court; to the contrary, state agency decisions generally cannot be challenged in court unless the Legislature has enacted a statute expressly authorizing such review."); Creedmoor-Maha Water Supply Corp, 307 S.W.3d 505, 515 (Tex. App.-Austin 2010, no pet.) (UDJA actions "that seek declaratory or injunctive relief against agency orders from which the legislature has not granted a right of judicial review" are barred by state sovereign immunity.); KEM Tex., Ltd. v. Texas Dep't of Transp., No. 03-08-00468-CV, 2009 Tex. App. LEXIS 4894, at *8-18 (Tex. App.-Austin 2009, no pet.) (challenge to non-appealable agency order barred by sovereign immunity). C. ACT Has No Property Interest that Implicates a Due Process Violation. ACT complains that it did not receive all the process it was due regarding the accountability ratings. See Pl. Orig. Petition, p. 4. "Due process is implicated when the state or its agents deprive a person of a protected liberty or property interest." Bd. of Regents v. Roth, 408 U.S. 564, 569 (1972). At issue is whether ACT has a constitutionally-protected property interest in its charter or its accountability ratings. If a constitutionally-protected property interest is at stake, then the Court determines what process is sufficient to protect that interest. "To have a property interest in a benefit, a person clearly must have more than an abstract need or desire" and "more than a unilateral expectation of it. He must, instead, have a legitimate claim of entitlement to it." !d. at 577. Such entitlements are, "'of course ... not created by the Constitution. Rather, they are created and their dimensions are defined by existing rules or understandings that stem from an independent source such as state law.'" Paul v. Davis, 424 U.S. 693, 709 (1976) (quoting Roth, supra, at 577,); 10 302 see also Phillips v. Washington Legal Foundation, 524 U.S. 156, 164 (1998). Here, ACT asserts its property interest in its charter through the implication that such an interest was created in 1998 when ACT was granted its charter by the TEA. See Pl. Orig. Pet. at 2. Indeed, the ability to grant a charter is left entirely up to the discretion of the Commissioner.! The Texas Education Code §12.101 provides, "[T]he commissioner may grant a charter on the application of an eligible entity for an open-enrollment charter school to operate in a facility of a commercial or nonprofit entity, an eligible entity or a school district, including a home-rule school district." (emphasis added). Thus, even if a charter school meets all of the statutory requirements, the Commissioner may still deny the charter. However, the statute that granted ACT's charter does not create a constitutionally- protected property interest. "To determine whether a particular statute creates a constitutionally- protected property interest, we ask whether the statute or implementing regulations place 'substantive limitations on official discretion."' Lee v. Tex. Workers' Compensation Comm 'n, 272 S.W.3d 806, 817 (Tex.App.-Austin 2008) (citing Olim v. Wakinekona, 461 U.S. 238, 249 ( 1983)). If "the legislature leaves final determination of which eligible individuals receive benefits to the unfettered discretion of administrators, no constitutionally-protected property interests exists." !d. at 817-18 (citing Roth, 408 U.S. at 567). Thus, if the decision to grant the charter is left to the discretion of the commissioner, no property interest is, therefore, created by granting the charter. See Town of Castle Rock v. Gonzales, 545 U.S. 748, 756 (2005) ("Our cases recognize that a benefit is not a protected entitlement if government officials may grant or deny it in their discretion."); see also Ex parte Abell, 613 S.W.2d 255, 262 (Tex. 1981) ("When the authority granting the right has the power and discretion to take that right away, it cannot be said to be a 1 This power was formerly held by the State Board of Education. This authority was transferred to the Commissioner by Senate Bill2 in 2013. Acts 2013, 83rd Leg., ch. 1140 (S.B. 2), §9, effective September 1, 2013. 11 303 vested right"); Seguin v. Bexar Appraisal Dist., 373 S.W.3d 699, 709 (Tex. App.-San Antonio 2012, pet. denied) (taxpayer did not have vested property right in disabled-veteran tax exemption that was "legislatively revocable"); Klumb v. Houston Mun. Emp. Pension Sys., 405 S.W.3d 204, 226 (Tex. App.-Houston [1st Dist.] 2013, pet. filed) ("[A] pensioner in a statutory pension plan does not have a vested right to his pension."); McAllen Hasps., L.P. v. Suehs, 426 S.W.3d 304, 313 (Tex. App.-Amarillo 2014, no pet.) (hospitals lack vested property right/interest in Medicaid reimbursement payments that were "contingent and potential rather than definitive and unconditional" prior to utilization review); Scott v. Alphonso Crutch LCS Charter Sch., Inc., 392 S.W.3d 165, 170-71 (Tex. App.-Austin 2010, pet. denied) (concluding that, because allocation to which charter school was entitled for a given time period was subject to change depending on updated attendance figures during school year, the school's "interest in a definite amount" was not vested and "remain[ ed] contingent rather than unconditional, and potential rather than definitive"). Additionally, although there is no Texas case directly dealing with a charter school's right to its charter contract, there are two out-of-state federal district court cases that directly address the issue. See University of Tex. Med. Sch. v. Than, 901 S.W.2d 926, 929 (Tex.1995) (citing Mellinger v. City of Houston, 68 Tex. 37, 3 S.W. 249, 252-53 (1887) (following contemporary federal due process interpretations of procedural due process issues). In Project Reflect, Inc. Smithson Craighead Middle School v. Metropolitan Nashville Board of Public Education, the Tennessee district court considered whether a charter school sponsor (an entity similar to a charter holder in Texas) had a protected property interest in continuation of a charter school. 947 F.Supp.2d 868, (M.D. Tennessee, 2013). In determining the charter lacked such an interest, the court noted that: the statutory language and the charter agreement do not support Plaintiffs claim of a property interest protected by state law. "[A] party cannot possess a property 12 304 interest in the receipt of a benefit when the state's decision to award or withhold the benefit is wholly discretionary." The charter agreement incorporates Tenn. Code Ann. § 49-13-122(a), which provides that "A public charter school agreement may be revoked or denied renewal by the final chartering authority if the chartering authority determines that the school ... (2) Received identification as a priority school, as defined by the state's accountability system." "The word 'may' customarily connotes discretion." !d. at 878 (citations omitted). It went on to state: the Tennessee charter school statute repeatedly declares its purpose and intention to provide the state department of education and local school systems with "options," "alternative means," and "flexibility"-hardly the language of a statute creating a property interest. The law constrains this discretion only by requiring the chartering authority to state its reason( s) for revoking the charter. If, as in this case, the revocation occurs because of the school's priority status, no appeal is permitted-again emphasizing state discretion, not the charter holder's property rights. !d. at 879 (citations omitted). Similarly, in Project School v. City of Indianapolis, the district court held that Indiana's charter school statue and the facts in the case repudiated the plaintiff charter school's argument that it had a protected property interest in its continued ability to operate a school. No. 1: 12-cv- 01028-SEB-DKL, 2012 WL 3114573, *3 (S.D. Indiana, July 31, 2012). Because the charter was subject to revocation if certain conditions were met and because the sponsor was not required to grant a charter to an organizer to operate a charter school in the first place, the court held that the charter's "argument that somehow its existence is a 'property right' for purposes of the Fourteenth Amendment due process is a nonstarter." !d. at *4. ACT has, therefore, failed to identify a property interest that did not receive procedural or substantive due process consideration. D. ACT's Takings Claim Fails Because it Only Possesses State and Federal Property. ACT claims that it has a property interest in the property and funds that it has in its possesswn. See Pl. Orig. Pet. at 8. TEX. EDUC. CODE § 12.128 states that all property purchased or 13 305 leased with funds received by the charter holder under TEX. EDUC. CODE§ 12.106 are considered to be public property for all purposes under state law and is held in trust for the students of the open-enrollment charter school. ACT's contract for charter has been revoked, and TEX. EDUC. CODE §12.1161 states that a revoked charter school may not continue to operate under Subchapter D of Texas Education Code Chapter 12 (providing for the operation of an open-enrollment charter school) and may not continue to receive funds. ACT's last Annual Financial Report acknowledges that all of the assets held by ACT are either state property or federal property. Ex. 8. This public property may only be used in the operation of a public school. TEX. EDUC. CODE§ 12.128(a)(2). Since ACT may not continue to operate a public school after revocation, pursuant to TEX. EDUC. CODE §12.1161, ACT must return this state property as directed by the Commissioner. TEX. EDUC. CODE§ 12.128(c). E. The Commissioner's Discretion in not Overbroad. ACT argues that the entire statutory scheme is overbroad. While the statutory scheme grants the Commissioner discretion in the issuance of ratings and making a revocation decision, the statute provides safeguards. For accountability determinations, there is a right to challenge before a committee composed entirely of non-TEA employees. TEC §39.151(b). For revocation decisions, there is a right to challenge such decisions through a SOAH substantial evidence review. TEC §12.116(c). F. ACT Failed to Properly Plead a Violation of the Open Courts Provision. The Open Courts provision of the Texas Constitution provides that "all courts shall be open, and every person for any injury done him, in his lands, goods, person or reputation, shall have remedy by due course oflaw." Fed. Sign v. Tex. S. Univ., 951 S.W.2d 401,410 (Tex. 1997) (quoting TEX. CONST. ART. I,§ 13). The Open Courts provision affords three distinct protections. 14 306 First, courts must be open and operating. !d. Second, citizens must have access to the courts unimpeded by unreasonable financial barriers. !d. Finally, the law must afford meaningful legal remedies to Texas citizens, so the Texas legislature may not abrogate the right to assert a well- established common law cause of action. !d. The Open Courts provision applies only to statutory restrictions of a cognizable common law cause of action. !d. First, "there is no common-law cause of action for judicial rev1ew of an agency's administrative act." Creedmoor-Maha Water Supply Corp. v. Tex. Comm'n on Envtl. Quality, 307 S.W.3d 505, 524 (Tex.App.-Austin 2010, no pet.) (quoting City of Port Arthur v. Southwestern Bell Tel. Co., 13 S.W.3d 841, 845 (Tex.App.-Austin 2000, no pet.)). Second, ACT only cites a violation of the Open Courts Provision with regard to its non-existent property interest in its charter. Pl. Orig. Petition, pp. 13. Finally, and most importantly, ACT has demonstrated no right to judicial review of Defendants' accountability ratings appeals or revocation decision. Thus, ACT failed to plead a violation of the Open Courts Provision. G. Commissioner Williams Did Not Act Ultra Vires, and is, Therefore, Entitled To Sovereign Immunity. 1. ACT failed to allege that Commissioner Williams acted without legal authority or failed to perform a ministerial act. To proceed in a suit against State entities and officials, the plaintiff must either plead and prove a waiver of sovereign immunity or allege that the State official acted without legal authority, or ultra vires, which is a suit where sovereign immunity is not implicated because a State official's illegal or unauthorized actions are not considered acts of the State. City of El Paso v. Heinrich, 284 S.W.3d 366,370-72 (Tex. 2009) (citing Fed. Sign v. Tex. S. Univ., 951 S.W.2d 401,404 (Tex. 1997); Creedmoor-Maha Water Supply Corp. v. Tex. Comm'n on Envtl. Quality, 307 S.W.3d 505, 514 (Tex.App.-Austin 2010, no pet.); Combs v. City ofWebster, 311 S.W.3d 85,94 (Tex.App.- 15 307 Austin 2009, pet. denied). The law distinguishes between suits that implicate sovereign immunity and those that do not. "[A] suit challenging a specific administrative order implicates sovereign immunity because it seeks to control state action - it seeks to restrain the State or its officials in the exercise of discretionary statutory or constitutional authority. " Creedmoor-Maha, 307 S. W .3d at 515 (citing Tex. Dep 't of Protective & Regulatory Servs. v. Maga Child Care, Inc., 145 S.W. 3d 170, 198 (Tex. 2004)). Conversely, an ultra vires suit must allege that a state actor acted without legal authority. Heinrich, 284 S.W.3d at 372-73. "A suit asserting that a government officer acted without legal authority or seeking to compel him to comply with statutory or constitutional provisions is an ultra vires suit and is not subject to pleas of governmental immunity. Such a suit, in effect, does not seek to alter government policy; it seeks to reassert the control of and enforce existing policy of the governmental entity." Houston Belt & Terminal Ry. Co. v. City ofHouston, 424 S.W.3d 663, 668 (Tex.App.-Houston [141h Dist.] 2014, pet. filed) (citing Heinrich, 284 S.W.3d at 371-72). A suit that does not allege that a state actor acted without legal authority, "implicates sovereign immunity because it seeks to 'control state action,' to dictate the manner in which officers exercise their delegated authority."' See Heinrich, 284 S.W.3d at 372; Creedmoor- Maha, 307 S.W.3d at 515-16. In other words, unless a suit alleges that a state official acted without legal authority or failed to perform a ministerial duty, then the assumption is that the state official acted with discretionary, legal authority and the suit seeks to control this lawful conduct. See Creedmoor-Maha, 307 S.W.3d at 515-16. ACT's seeks this Court to enter declarations specifically challenging the administrative decision of Commissioner Williams to use prior-year data for calculation of the following year's accountability ratings. See Pl. Orig. Petition, p. 9. The Commissioner did not act ultra vires in 16 308 using prior-year data for the following year's accountability because to do otherwise would yield the absurd result of requiring consideration of a school-year rating for revocation purposes while simultaneously prohibiting it. See, e.g., Jose Carreas, MD., P.A. v. Marroquin, 339 S.W.3d 68, 73 (Tex. 2011) ("We ... interpret statutes to avoid an absurd result."). ACT's claim is particularly weak in light of the judicial deference given to an agency's reasonable interpretation of a statute it is charged with enforcing. See, e.g. Sw. Pharmacy Solutions, Inc. v. Tex. Health & Human Servs. Comm 'n, 408 S.W.3d 549, 561-62 (Tex. App.-Austin 2013, pet. denied) (rejecting ultra vires claim where agency's construction of statute was reasonable). Finally, ACT's interpretation would frustrate the legislative intent behind section 12.115(c-1) by delaying another year the issuance of performance ratings. See Hunter v. Fort Worth Capital Corp., 620 S.W.2d 547, 552 (Tex.1981) (courts should not insert words in a statute except to give effect to clear legislative intent); see supra, Statement of Facts, Part I, (Sunset Commission recommending statute be amended to "ensure students do not continue to attend a school lacking a quality education or with serious financial problems that could affect the school and, ultimately, a student's academic progress."); l.CR.343. 2. ACT is seeking retroactive relief which is unavailable in an ultra vires action. Sovereign immunity does not generally shield governmental agencies from suits for equitable relieffor a violation of constitutional rights. See Heinrich, 284 S.W.3d at 373 n. 6; City of Elsa v. MA.L., 226 S.W.3d 390, 392 (Tex. 2007); City of Beaumont v. Bouillion, 896 S.W.2d 143, 149 (Tex. 1995) (determining that no private right for damages was permitted for violations of state constitutional rights and vacating jury award of damages). However, ACT seeks an injunction that addresses past decisions. Pl. Orig. Petition, pp. 13-15. If the relief sought by ACT effectively seeks to control the TEA's or Commissioner Williams' lawful, discretionary actions, 17 309 then sovereign immunity is still implicated. Heinrich, 284 S.W.3d at 370-72; Creedmoor-Maha, 307 S.W.3d at 515. "Equitable relief is a prospective remedy, intended to prevent future injuries," Adler v. Duval County School Bd., 112 F.3d 1475, 1477 (11th Cir. 1997), and for that reason "[t]he sole function of an action for injunction is to forestall future violations." United States v. Or. State Med. Soc y, 343 U.S. 326, 333 (1952); see also Steel Co. v. Citizens for a Better Env 't, 523 U.S. 83, 109 (1998) ("Because respondent alleges only past infractions ... and not a continuing violation or the likelihood of a future violation, injunctive relief will not redress its injury."); Reich v. Occupational Safety & Health Review Comm 'n, 102 F.3d 1200, 1202 (11th Cir. 1997) ("injunctive relief ... addresses only ongoing or future violations"); Heinrich, 284 S.W.3d at 376 "[A] claimant who successfully proves an ultra vires claim is entitled to prospective injunctive relief, as measured from the date of injunction."). Generally, the purpose of injunctive relief is to halt wrongful acts that are threatened or in the course of accomplishment, rather than to grant relief against past actionable wrongs or to prevent the commission of wrongs not imminently threatened. See Texas Health Care Info. Council v. Seton Health Plan, Inc., 94 S.W.3d 841, 853 (Tex.App.-Austin 2002, no pet.); see also Webb v. Glenbrook Owners Ass 'n, 298 S.W.3d 374, 384 (Tex.App.-Dallas 2009, no pet.) (injunction not available to "prevent commission of wrongs not imminently threatened."). A party seeking injunctive relief preventing alleged ultra vires acts must plead and prove, among other things, existence of imminent harm, irreparable injury, and absence of adequate remedy at law. See Lazarides v. Farris, 367 S.W.3d 788, 803 (Tex.App.-Houston [14th Dist.] 2012, no pet.); Texas Health Care Info. Council, 94 S.W.3d at 853. "To obtain equitable relief for past wrongs, a plaintiff must demonstrate either continuing harm or a real and immediate threat of repeated 18 310 injury in the future." Society of Separationists, Inc. v. Herman, 959 F.2d 1283, 1285 (5th Cir.), cert. denied, 506 U.S. 866 (1992). ACT specifically seeks a declaration regarding factors Commissioner Williams used to in his accountability assessment which led to the revocation of ACT's charter. Pl. Orig Pet. p. 16. It seeks to have the Court declare certain factors in ACT's favor and then reapply those factors to its accountability ratings. !d. ACT's requests are not prospective (future-seeking) in nature, but rather, are retrospective, seeking to remedy past harm. These forms of requested relief are solely to remedy past alleged harm, which cannot be sought through an injunction. H. This Court Lacks Jurisdiction to Hear Any of ACT's Claims 1. ACT has no appeal as of right to a state district court. For the reasons outlined above, ACT is limited in any challenge to the decisions raised in this case to, at most, a proceeding before SOAH. This is the extent of ACT's right to appeal. In fact, ACT did seek appeal of many of the granular complaints listed in its Original Petition. For those issues, ACT's appellate rights began and ended with the appeals committee, and there is no further right to appeal to this Court or elsewhere. ACT had a right to appeal the revocation decision to SOAH, an appeal that it pursued and lost, and it, was therefore, provided with all of the procedural due process to which it was entitled. 2. ACT has no constitutional interest beyond those defined by the contractual and statutory scheme for charter schools. ACT wishes to collaterally attack many decisions of TEA, up to and including the revocation decision in this Court. However, as outlined above, ACT has no constitutionally protected interest that would warrant review by a District Court. The Legislature has broad discretion to require charter schools to meet any set of performance criteria it wishes to set. It is entirely up to a charter school to either comply with those requirements or forfeit its charter. There 19 311 is no third option to ask a Court to forgive any charter school from the obligations imposed upon the charter school by the state. Indeed, the Texas statutory scheme that governs charter schools is subject to amendment and could be replaced or deleted entirely. 3. The appointment of a conservator is not ripe/no legal injury. ACT argues that the appointment of a conservator constitutes a taking of ACT's property without due process. Pl. Orig. Petition, p. 16. ACT also argues the TEC §12.128 is unconstitutional. Pl. Orig. Petition, p. 17. However, ACT's own financial report acknowledges that all the property in the possession of ACT is either state or federal property, therefore there is no takings issue for the court to adjudicate. Ex. 8. 4. Charter schools, as governmental entities, cannot sue the state for constitutional violations. That ACT is considered a governmental entity, which cannot acquire vested rights against the State, further precludes its arguments. Accordingly ACT cannot bypass the statutory bar on judicial review of revocation decisions by claiming a constitutional violation. LTTS Charter School v. C2 Construction, 342 S.W.3d 73, 76 (Tex. 2011). 5. The "high risk" designation of ACT by TEA is not a subject for relief in state court. ACT has requested that the court prohibit TEA from continuing to apply a "high risk" designation to ACT's federal grant reimbursement requests. See Pl. Orig. Petition, p. 15. This requests fails for two reasons: 1) the designation has already been made and, is therefore, not subject to prohibitory injunctive relief; and 2) ACT has not been denied federal funds, which would entail offering procedural due process; instead, ACT must simply meet additional requirements to receive federal grant fund reimbursements. Ex. 9. ACT, is not, therefore, entitled to any relief regarding the "high risk" designation. 20 312 PRAYER WHEREFORE, PREMISES CONSIDERED, Defendants pray that Plaintiff take nothing by its suit that all costs be taxed and adjudged against Plaintiff, and that Defendants be granted such other and further relief to which they may be justly entitled. Respectfully submitted, KEN PAXTON Attorney General of Texas CHARLES E. ROY First Assistant Attorney General JAMES E. DAVIS Deputy Attorney General for Civil Litigation ANGELA V. COLMENERO Division Chief- General Litigation /s/ EvlM;;vlvl. L(MI'~ ERIKA M. LAREMONT State Bar No. 24013003 Assistant Attorney General General Litigation Division Post Office Box 12548, Capitol Station Austin, Texas 78711-2548 512-463-2120 (Telephone) 512-320-0667 (Facsimile) erika.l aremont(fi{texasattomeygencral. gov ATTORNEYS FOR DEFENDANTS 21 313 CERTIFICATE OF SERVICE I hereby certify that on August 12, 2015, the foregoing document was delivered by telephonic document transfer to the following: Stephen M. Foster 90 13 Magna Carta Loop Austin, Texas 78754 (512) 784-4367 Attorneys for Plaintiff /s/ EvlM;;vlvl. L(MI'~ ERIKA M. LAREMONT 22 314 SuNSET ADVISORY COMMISSION STAFF REPORT Texas Education Agency OcTOBER 2 0 12 ACT Ex. 1-Su nset 315 Sunset Advisory Commission October 2012 ISSUE 7 TEA Lacks a Full Range of Tools to Effectively Address Poor Academic Performance and Financial Mismanagement at Low-Performing Charter Schools. Background Charter schools are public schools meant to improve student learning, allow for teacher innovation, and increase the number of quality education choices for families. Charters operate under decreased state regulation in exchange for increased accountability for results. While charter schools do not have a local tax base, they receive state funding for operations, just like traditional school districts, but not for facilities. In the 2011-2012 school year, charter schools educated about 155,000 students, or roughly 3 percent ofTexas students, and expended state funds totaling approximately $938 million. Statute provides for four types of charter schools: open-enrollment charters, campus charters, home- rule school district charters, and college, university, or junior college charters. 1 This issue focuses solely on open-enrollment charters, because they are regulated byTEA. 2 Statute authorizes the State Board of Education (SBOE) to grant an open-enrollment charter to an applicant that meets financial, governance, and operational standards adopted by the Commissioner. 3 TEA just adopted these standards, effective for the next group - or generation - of charters, in 2013. Most open-enrollment charters are self-governed 501(c)(3) nonprofit organizations with an appointed board to oversee operations of the charter school. State law caps the number of charters at 215, but existing charter holders may expand the number of campuses they operate without getting a new charter and affecting this cap. 4 As of September 2012,201 charters are in effect, representing 549 campuses. • State oversight. After SBOE grants a charter, TEA regulates charter schools, including a charter renewal process, amendment and expansion process, and monitoring financial and academic performance through accountability ratings. TEA may apply interventions and sanctions to those charters that fail to meet academic or financial accountability standards, or that violate certain provisions oflaw or rule through two enforcement processes in separate chapters of the Education Code. Chapter 12 governs charter schools and requirements for charter contracts, and Chapter 39 governs TEA's academic and financial accountability requirements, including intervention and sanction authority, for both districts and charters. • Sanction authority. The charter school statute, Chapter 12, authorizes TEA to revoke a charter, after a process for a full contested case hearing at the State Office of Administrative Hearings (SOAH), if the charter holder: commits a material violation of the charter, including failure to satisfY accountability provisions prescribed by the charter; fails to satisfY generally accepted accounting standards of fiscal management; Texas Education Agency Staff Report Issue 7 69 316 October 2012 Sunset Advisory Commission fails to protect the health, safety, or welfare of the students enrolled at the school; or fails to comply with a law or rule. 5 The accountability statute, Chapter 39, provides TEA with a range of interventions and sanctions for application to both districts and charters, including appointment of a monitor, conservator, or board of managers. 6 A charter holder can challenge certain decisions of the Commissioner, including closure, under the accountability statute through a formal record review process at the agency, which is subject to review by SOAH, under a substantial evidence standard of review. 7 If the Commissioner orders the charter closed under the accountability statute, the charter is automatically revoked. 8 Neither chapter's enforcement process provides for a judicial appeal of the Commissioner's final decision. Findings Statute frees charter schools from certain state restrictions in exchange for an expectation of higher, more innovative, performance. The Legislature has an expectation that charter schools will satisf}r performance standards, particularly academic performance, and that expanded autonomy through freedom from certain state restrictions that apply to traditional school districts will enable charter schools to achieve high performance in innovative ways. Because charter contracts are subject to certain limitations, such as compliance with academic and financial accountability standards, charter schools essentially operate on performance contracts. Appendix C Charter schools provides more detail on which state restrictions apply to charter schools and essentially which do not. operate on performance The Legislature's performance expectation is reflected in TEA's approach to contracts. school closure. The Legislature created charter schools to be vehicles for innovation and to offer families choices in educational settings. However, traditional districts serve as the school oflast resort for students. If a charter school closes, students may be displaced, but are still afforded an education by attending their local school district. If a school district closes, students likely do not have another local education option, and could be required to travel some distance to another district, at additional cost. In the past 15 years, TEA has shut down 48 charters, but has closed only four traditional districts. 9 While many charter schools perform well, poor performance by some charter schools threatens provision of a quality education for their students. Many charter schools clearly meet the Legislature's expectations for innovation and success. In fact, in 2011, 8.5 percent of charters received exemplary academic ratings, as compared to only 4.4 percent of school districts. However, as can be seen in the bar chart on the following page, Academic Accountability Ratings for Charters and Districts, a higher rate of charter schools performed at an academically unacceptable level than school Texas Education Agency Staff Report 70 Issue 7 317 Sunset Advisory Commission October 2012 Academic Accountability Ratings for Charters and Districts 2011 Academically Academically Exemplary Recognized Acceptable Unacceptable 60 50 gJ 40 01 .l9 5j 30 ~ &. 20 10 districts. Of the 1,029 districts and 199 charters rated, a higher percentage of charters- 17.6 percent versus 4. 9 percent- were academically unacceptable in 2011. Charters receive Many individual charter school campuses have also demonstrated poor 80 percent of academic performance for years. Appendix D shows the number of years their funding individual charter campuses, by generation, have been ranked academically from the State, unacceptable, including four charter campuses that have been ranked compared to academically unacceptable for 10 or more years. 10 41 percent for traditional Many charter schools also have poor financial performance, underscoring schools. the importance of oversight for expenditure of state funds. Charter schools receive about 80 percent of their revenues in state aid, as compared to 41 percent for traditional school districtsY Beginning in 2012, TEA expanded the FIRST financial accountability ratings for charter schools from three to 19 indicators, consistent with the indicators used to rank districts, minus one indicator related to facilities. The bar Failing Financial chart, Failing Financial Accountability Ratings, illustrates Accountability Ratings that 13.1 percent of charter schools failed TEA's financial 2012 accountability system in 2012, significantly higher than the 20 2 percent of districts. 15 Continued poor performance on academic and financial 01 ,§ accountability ratings can lower a district's or charter's ·n; u.. accreditation status or lead to a series of interventions and 'E 10 sanctions, including TEA appointment of a monitor or ~ Q) conservator. Charter schools have far more accountability fl. 5 problems requiring assignment of interventions and sanctions and, ultimately, revocation of the charter. Charter schools represent more than two-thirds, 71 percent, of Charters Districts schools with assigned sanctions, even though charter Texas Education Agency Staff Report Issue 7 71 318 October 2012 Sunset Advisory Commission schools make up only 17 percent of the total number of districts and charters. In the last three years, TEA has revoked or not renewed 10 charters, and accepted the surrender of five others in lieu of enforcement action. Charters represent 71 TEA cannot act quickly to revoke a charter for chronic poor percent of performance, placing student education at risk. schools with Because charter schools are expected to meet performance standards in sanctions, but exchange for greater autonomy, demonstrated records of continuous poor only 1 7 percent performance should not warrant the State spending significant time and of all schools. resources to shut these charters down. Revocation of these charters should occur more quickly to protect students from an inadequate education. Despite the many instances of poor performance and interventions and sanctions among charter schools, TEA cannot act quickly, particularly in circumstances warranting revocation, to address charter schools that have failed to improve over time or through intermediate sanctions. The table, Academically Unacceptable Charters Academically Unacceptable Charters and Districts for and Districts for Consecutive Years Consecutive Years, shows that more charter schools have 2010-2011 School Year unacceptable academic performance over consecutive Years Academically years than traditional school districts. Unacceptable Charters Districts While the agency has statutory authority to close a 3 Years 5 1 charter school and revoke the charter, TEA's actions are subject to protracted litigation, unlike with traditional 2 Years 5 2 school districts, because a charter is considered a legal 1 Year 25 47 contract or property right. Revocation of a charter under the charter school statute typically takes two to three years, on top of several years of poor performance, during which time a charter school remains open. While TEA's ability to revoke a charter under the accountability statute can move more quickly, it is not always workable, does not address health, safety, or welfare violations, and does not grant TEA the ability to suspend funding and operations. In one case, TEA has been working to revoke a charter for 12 years. A long revocation process leaves In one case, students to be educated at underperforming charter schools. TEA has been working to Beyond the practical challenges of winding down a school's operations, TEA revoke a charter typically faces opposition to revocation on several fronts. Students and their for 12 years. families often have an emotional attachment to their school or fear that closure reflects poorly on their decision to attend the school; teachers and school employees have professional or financial stakes in the operation of their school; and opposition from elected officials can create high political costs for the agency. TEA is unlikely to hear vocal support for school closure or revocation, as parents dissatisfied with the charter have likely already left the school to pursue other education options. Protracted hearings and litigation can also result in closure of a charter school during the middle of the school year, which can displace teachers, students, and their families. Further, poor-performing charter schools threaten the Texas Education Agency Staff Report 72 Issue 7 319 Sunset Advisory Commission October 2012 reputation of the many high-performing charter schools, and, because of the statutory cap on the number of charters the State may issue, limit opportunities for new charter schools that may perform well. Poor-performing TEA lacks authority to intervene when a charter fails to address charters threaten its imminent financial insolvency. the reputation ofthe many TEA lacks authority to revoke a charter for a school that is imminently high-performing insolvent and fails to plan for its students' education. If a charter school opens charters. in the fall and then runs out of funds, it could then be forced to shut down mid-year, with instruction and students' forward academic progress halted; teachers not paid or losing their jobs; teachers, students, and their families displaced to other schools; and student records not completed or transferred to new schools. However, TEA has no statutory authority to prevent such a situation. In one recent example, TEA suspended an imminently insolvent charter's operations and prevented it from opening for school this fall. However, TEA based its actions on the charter's failure to submit its annual financial report - a material violation of its charter - and not on the charter's inability to show a positive cash flow to continue its operations. In 2012, TEA identified 20 charter schools with circumstances that could lead to insolvency. Of the charters TEA revoked in the last three years, six of the 10 were likely imminently insolvent, in addition to demonstrating other problems that led to revocation. As currently structured, charter renewal is not an effective oversight tool. While TEA reviews a charter's performance after five years to determine whether it should be renewed for up to 10 years, the agency's process fails to accomplish the purpose of standard renewal processes. In practice, the process leaves charters pending in renewal for years until TEA can justif}r either revocation or renewal. In other regulatory agencies, renewal processes exist to ensure a regulated entity continues to meet standards for operation. TEA has no Renewal processes provide an alternative to the sanctioning process when an process to close a entity no longer meets standards for continued operation. poor-performing While TEA has statutory authority to deny renewal of a charter, statute charter short combines the basis for all adverse actions, including denying renewal and of revocation. revocation, under the same provision. 12 The agency has interpreted this statutory grouping to mean that TEA must set the same performance standards and meet the same burden of proof for both actions: denying renewal and revoking the charter. Because TEA cannot always meet this high standard, especially for charters with intermittent poor performance, TEA generally no longer attempts to deny renewal of a charter. As a result, the agency has no process to shut down a poor performing charter short of revocation. Texas Education Agency Staff Report Issue 7 73 320 October 2012 Sunset Advisory Commission Non -renewal and revocation should not have the same performance standard; the tools should be used for two separate purposes. Revocation should be used when a charter's performance is so poor, or a violation is so egregious, that the situation puts students' education at risk and a charter school should be shut down during its authorized term. Non-renewal should occur when a charter's performance record is not bad enough to stop operations mid-term, but ongoing deficiencies do not warrant renewal of a charter for another term. Similarly, while the State must prove its case for revocation of a charter, for renewal, the burden is typically on the regulated entity, the charter holder in this case, to prove why its charter should be renewed. Because statute does not distinguish the basis for revocation from denying renewal, this burden is reversed onto the State, instead of the charter holder, to prove why a charter's Some charters authority to operate should not be renewed. have been pending in While the process reauthorizes strong Outstanding performers, it holds weak performers in a Charter Renewals renewal for nine years. perpetual state of pending renewal until the Years Left Number of agency can justif}r the higher standards for either Pending Charters renewal or revocation. For example, if a charter 1 16 has a few years of poor academic or financial ratings, or has a monitor or conservator in 2 5 place, TEA may delay renewal of a charter until 3 1 performance either improves or deteriorates further. As a result, charters may linger in a 4 3 state of pending renewal for years. The chart, 5 0 Outstanding Charter Renewals, illustrates that 6 3 some charters have been pending in renewal for up to nine years. Without more flexibility 7 5 in setting performance standards for renewal, 8 0 TEA also cannot offer an incentive or benefit 9 4 to charters exceeding performance standards. While a charter can continue to operate while it is waiting for renewal, the uncertainty of the charter's status can still affect its operations. For example, Without more charter schools report that it is difficult to access loans for new facilities while flexibility, TEA their charter is left pending in the renewal process. cannot offer an incentive to charters to exceed Certain statutory provisions limit the agency's ability to scale performance sanctions to the nature of the violation. standards. The charter school statute provides too little discretion for certain sanctions, and too much for others, restricting TEA's flexibility to apply sanctions appropriate to the violation. Criteria for applying sanctions should be clear, objective, and scaled to the nature of the violation. Similar to renewal, as discussed in the previous finding, TEA's interpretation of its sanction authority in the charter statute also makes the use of modification and probation meaningless. TEA must meet the same burden of proof to modif}r Texas Education Agency Staff Report 74 Issue 7 321 Sunset Advisory Commission October 2012 or probate a charter as for revocation. As such, TEA lacks the flexibility to use these lesser sanctions for less egregious violationsY Requirements in the charter school statute similarly limit the agency's discretion in applying sanctions for health and safety violations. If TEA finds that a charter fails to protect the health and safety of its students, TEA may suspend its operations. Statute requires that TEA hold a hearing within three days of the suspension, after which TEA must either cease its suspension or seek revocation of the charter. 14 Other intermediate sanctions in the accountability statute would, in most cases, allow the agency to more TEA lacks the appropriately address a charter school's deficiencies and still ensure the health flexibility to and safety of students without seeking revocation of the charter. use less severe Conversely, the charter school statute specifies that adverse action by the sanctions for Commissioner be based on the best interest of the school's students, any less egregious previous violations, and the severity of those violationsY The subjective violations. criterion of acting in the best interest of students does not provide either TEA or charter holders clear guidance on a threshold for applying sanctions and could exclude sanctions for some clear statutory violations. For example, if a school performs acceptably academically, but has clear financial management violations, a charter holder could argue that certain sanctions, including closure, are not in the best interests of students, despite the violations. The best interest of a school's students is a valuable principle that should be considered in guiding actions ofboth the charter and the agency. However, the inclusion of such a subjective criterion in determining appropriate sanctions is not a standard practice of other regulatory entities, as it can lead to inconsistent and unfair application of sanctions. Differences between the agency's rules and its practice create unclear performance expectations for charter schools. While TEA's rules provide for revocation or denial of renewal for failure to meet certain performance standards, in practice, TEA's policies are more lenient than its rules. The agency does not typically revoke or deny renewal of a charter for failure to meet performance standards in rule. For example, TEA's rules provide for revocation after two consecutive years of unsatisfactory, or unacceptable, academic performance, but TEA's matrix guiding accreditation sanctions, used for both districts and charters, does not provide for revocation until after four years of unacceptable academic performance. 16 The inconsistency between rule and practice results in uncertainty regarding the level of performance charters must maintain for renewal or to avoid sanctions or interventions. TEA may also have difficulty ensuring its decisions, and perception of its decisions, are fair, consistent, and transparent. Agency practices that are inconsistent with, and more lenient than, agency rules reflect TEA's cautious approach to seeking revocation of a charter. While TEA regularly applies interventions and sanctions to poor performing charters, TEA waits and builds strong cases before pursuing revocation Texas Education Agency Staff Report Issue 7 75 322 October 2012 Sunset Advisory Commission instead of taking more immediate action to revoke based on serious violations or chronic poor performance. As a result of the agency not taking more immediate action to revoke a charter, a high number of charters remain pending in renewal and with interventions and sanctions over long periods of time. TEA lacks authority to address inadequate oversight by the governing board of a charter. Short of revoking the charter, TEA does not have any tools to address inadequate oversight by a charter holder board, especially when it results in performance or operational problems. Charter schools' freedom from certain state restrictions requires strong oversight to ensure charter schools operate consistent with their charters and missions to achieve acceptable performance. Unlike traditional school boards of trustees, which TEA can require to hold new school board elections with use of a board of managers, TEA lacks a Regular charter similar tool to address appointed charter holder governing boards that fail to board oversight remedy operational and accountability concerns for the school. is critical to ensuring In several examples, after a TEA-appointed conservator and board of a school's managers addressed a charter school's concerns, TEA had to turn the school's accountability. oversight back over to the exact same people who failed to ensure the school met accountability standards in the first place. TEA also regularly encounters situations at charter schools in which the governing boards fail to meet regularly or cannot reach a quorum. Without regular board oversight, even routine activities like approval of the school's budget and annual financial report can negatively affect a charter school's accountability ratings. These situations increase the likelihood of continued operational and performance problems. Without appropriate enforcement tools to strengthen the leadership and oversight capacity of a charter school's governing board, TEA's only remedy is to seek revocation of the charter. Statutory provisions related to nepotism at charter schools are confusing, and allowance of this practice is an exception among publicly funded entities. State law prohibits officers or members of a board of the State, or a district, precinct, school district or other political subdivision of the State, from appointing or employing a person directly or indirectly compensated with public funds if the person is closely related within certain degrees of blood kinship or marriageY Statute exempts charter schools from standard restrictions on nepotism as long as the school remains academically acceptable for two of the last three years. When a charter fails to meet the academic standard set in law for nepotism, TEA requires a charter school to change its organizational structure to eliminate direct reporting or supervision of family members within the third degree of consanguinity and second degree of affinity. The chart on the following page, Consanguinity and Affinity Relationships, defines these relationships. Texas Education Agency Staff Report 76 Issue 7 323 Sunset Advisory Commission October 2012 Consanguinity and Affinity Relationships Great-grandchildren 3rd Degree Aunt Uncle Sister Brother Niece Nephew CONSANGUINITY Great- Great- (Related by blood) grandmother grandfather Spouse's Spouse's AFFINITY Great- Great- (Related by marriage) grandmother grandfather Degree Spouse Children Spouse's Spouse's Niece Sister-in-law 2nd Brother-in-law Nephew Degree Spouse's Spouse's Aunt Uncle 3rd Degree Spouse's Great-grandchildren Note: A spouse of an individual listed in the consanguinity portion of the chart is related to the individual to the same degree by affinity. • Allowance of nepotism is uncommon. While nepotism does not always lead to problems in Potential Effects of Nepotism an organization, state law prohibits nepotism Nepotism can give the appearance of, or result in, in governmental or publicly funded entities the following. because of the inherent conflicts of interests • Conflicts of interest the practice can present, detailed further in the • Misuse of office textbox, Potential Effects of Nepotism. While • Preferential treatment or patronage charter schools are predominantly publicly funded, averaging 94 percent funded with state • Bad morale or resentment among other or federal funds in fiscal year 2011, statute employees, including potential discrimination claims provides charter schools with an exception to laws prohibiting nepotism. Thus, some charters • Employees who are not qualified or lack appropriate training or expertise for their still use family extensively in the school's positions operations and oversight. One charter school reported eight family members, including • Undermining of public trust - the public may perceive that actions of the organization a sibling, a daughter, and several nieces and are not always in the best interest of the nephews of the same individual employed as community or students staff at the school. Texas Education Agency Staff Report Issue 7 77 324 October 2012 Sunset Advisory Commission • Confusing standards. Separate from nepotism provlSlons, board members are required to abstain from voting on contracts or other items if they are related to a person within the third degree of consanguinity or affinity. While this conflict of interest provision applies within the third degree of affinity, nepotism requirements apply within the second degree of affinity if a charter does not meet academic standards for the exception. Differing standards for conflict of interest and nepotism laws can be confusing to both charter schools and the public. • Risk to public funds. Confusion over which standards or exceptions apply in which circumstances can lead to violations of law and create a culture where preferential treatment occurs more frequently. Public funds are most at risk from this confusion, which can lead to contracting or conflict of interest violations. In such cases, the State cannot ensure competitive bidding requirements are met or arms-length transactions ensure efficient use of public funds. Charter schools sometimes pay disproportionately large salaries or have substantial financial contracts with family members. One charter school with just over 450 students pays its superintendent and board president $214,000; his wife, the personnel director, $164,000; his brother, the assistant superintendent, $175,000, and a daughter, a principal, $60,000. As a comparison, superintendent salaries in similarly sized districts range from $73,000 to $99,000. 18 • Current nepotism provision is hard to enforce. While intended to target low-performing charters, TEA cannot enforce provisions allowing exceptions to standard nepotism prohibitions. TEA does not have the resources to monitor this practice at every charter school, and even when TEA investigates complaints,it cannot be sure that forced reorganizations to prohibit direct reporting relationships change the actual practices or culture of a charter school. The agency finds that nepotism is present, often when prohibited, in most charter revocation cases. In fact, of the 10 charters revoked in the past three years, only two self-reported nepotism, but TEA found nepotism present in six others. Although TEA has started collecting self-reported data on nepotism, TEA is unaware of the Some charters true number of schools with nepotism present. have substantial contracts with • Governing board conflicts of interest. While statute requires family members governing board members to abstain from votes in which a conflict or staff. of interest is presented, this provision is also not enforceable by TEA. Statute also prohibits family members from making up a quorum on the governing board. Despite these statutory provisions to prevent self-dealing and substantial contracts with family members, TEA finds occurrences of these practices regularly during investigations or through reports from assigned monitors or conservators. For example, one charter school superintendent, who is also the governing board president, contracts with herself for transportation services for more than $900,000 for only 778 students. Texas Education Agency Staff Report 78 Issue 7 325 Sunset Advisory Commission October 2012 Allowing family members and relatives to serve on a charter holder board together to direct the operation and oversight of publicly funded charter schools can present difficult situations in which the interests of family members and their own financial interests can be pitted against the best interests of the students. Governing board members have a strong influence over appointments to, and removal from, the board. The prevalence of several family members on a board can make it difficult for the governing board to maintain independence in its decision making for the charter. Strong oversight at the governance level, especially given the greater levels of autonomy, is essential to ensure charter schools achieve acceptable performance and act in the best interest of students. Recommendations Change in Statute 7.1 Require revocation of a charter for failure to meet basic academic or financial accountability standards for three years in a row. This recommendation would require the Commissioner to revoke a charter without an agency hearing, if: • for three consecutive years, the charter fails to satisfY academic accountability standards; or • for three consecutive years, the charter fails to satisfY financial accountability standards. If a charter meets either of the above-listed criteria, the Commissioner would order closure of all campuses under the charter and revoke the charter. A charter would not be able to appeal the Commissioner's revocation order through either an agency review or contested case hearing at SOAH. However, a charter could contest the current year's rating under existing processes for academic or financial rating appeals. 19 TEA would be required to issue academic and financial accountability ratings by June 15 for those charters in jeopardy of triggering automatic revocation based on academic or financial performance. This date would allow time for a charter subject to automatic revocation to appeal its rating, and to provide as much notice as possible to the charter, students and their families, and teachers, that the school will not open the next school year, while also providing the agency a limited amount of time to collect and evaluate data needed to issue the ratings. TEA should evaluate its current financial and academic appeal processes and make any rule changes necessary to accommodate earlier ratings and appeals for charters in jeopardy of automatic revocation by June 1, 2014. As a result, TEA could automatically revoke a charter based on three consecutive years of poor academic or financial performance after the issuance of ratings in summer 2014. Mandatory revocation of charters demonstrating continuing poor performance would allow the State to more quickly shut down the poorest performing charters, without years of litigation during which time the school remains open. The recommendation would also ensure students do not continue to attend a school lacking a quality education or with serious financial problems that could affect the school and, ultimately, a student's academic progress. Clear statutory authority to revoke a charter after chronic poor performance will speed up the charter revocation process by removing agency discretion and local politics from the decision, as well as clearly demonstrate the Legislature's expectation for high performance. Texas Education Agency Staff Report Issue 7 79 326 October 2012 Sunset Advisory Commission 7.2 Authorize the Commissioner to suspend operations and pursue revocation of an imminently insolvent charter to ensure it does not open without sufficient funding to complete the term. This recommendation would authorize the Commissioner to suspend the operations of all campuses under a charter on an effective date that would prevent the charter from opening for a new school year or term, and pursue revocation if the Commissioner determines the charter is imminently insolvent and does not have sufficient funding to complete the next school year. This recommendation would require the agency to define, in rule, conditions under which a charter would be considered imminently insolvent. TEA would be required to adopt these rules by March 1, 2014. A charter would be entitled to challenge the suspension of its operations through a hearing at TEA, similar to the process the agency currently provides for health, safety, and welfare issues. TEA would be required to hold a hearing at the agency within 10 days of its suspension order. Mter the suspension hearing, if the Commissioner still determines the charter is imminently insolvent and cannot make it through the next school year, the Commissioner would order revocation of the charter. The Commissioner's order could be appealed to SOAH as a contested case hearing in the same manner as an appeal of any other order of the Commissioner under Chapter 12, except that the charter's operations would remain suspended pending the outcome of the appeal. Consistent with current processes, a charter could not appeal the Commissioner's final decision following the SOAH hearing. This recommendation would allow the Commissioner to prevent a charter from opening for the next school year when the Commissioner believes the charter is at high risk of shutting down in the middle of the school year or term and displacing students, as well as placing state funds at risk. As is TEA's current practice, ifTEA were to discover a charter's imminent insolvency in the middle of a school year, TEA would work with the charter to help it complete the school year or term, or help the charter deal with actual insolvency as it occurs. 7.3 Set eight-year terms for charters and restructure the renewal process to ensure failure to meet basic standards for accountability can lead to nonrenewal. This recommendation would specif}r in statute that the initial and renewal term for a charter is eight years, at the end of which authority to operate a charter school would expire unless renewed by TEA. A longer, eight-year authorization term for initial and renewal terms would provide consistency in term lengths, and implementation of an automatic revocation process in Recommendation 7.1 should provide a mechanism for TEA to address the poorest performing charters that consistently fail accountability requirements. Charter holders would apply for renewal in advance of the eight-year expiration, under terms and timelines adopted by TEA in rule. TEA would be required to issue a decision on renewal of a charter before the expiration of the charter. For charters with a proven record ofhigh academic and financial performance, with no interventions or sanctions, TEA would provide the charter greater autonomy through a streamlined review and renewal process. TEA would be required to adopt clear standards for eligibility for this streamlined renewal in rule. For all other charters, TEA would examine the extent to which the charter has met academic, financial, and governance standards, as well as the extent to which the charter school has operated in compliance with its charter. TEA would be required to adopt in rule clear academic, financial, governance, or any other standards for renewal. TEA would have authority to ask for any additional information it deems necessary to determine whether a charter should be renewed. IfTEA does not renew a charter, TEA would be authorized to impose conditions or requirements for improvement Texas Education Agency Staff Report 80 Issue 7 327 Sunset Advisory Commission October 2012 during a one-year probationary period. If a charter fails to meet TEA conditions or standards within the one-year period, TEA must deny renewal of the charter. IfTEA does not renew a charter, the charter holder would be entitled to a contested case hearing at SOAH, under the framework outlined in the charter school statute. A charter school may stay open until the Commissioner makes a final decision to close and not renew the charter. If litigation results in final decision in the middle of a school year, existing statutory provisions allowing a charter that is not renewed to complete the school year would continue to apply. TEA would be required to adopt rules by September 1, 2014. 7.4 Provide for objective criteria and flexibility in applying sanctions to charter schools. This recommendation would separate authority to deny renewal, revoke, probate, or modif}r a charter, and require the agency to establish separate performance standards or violations warranting each sanction. This recommendation would also change the bases for taking adverse action against a charter under the charter school statute to remove the subjective requirement to take action in the best interest of the school's students, and replace it with the following objective criteria: • the charter's history of violations or performance on accountability systems; • the severity of the charter's previous violations or poor performance on accountability systems; • efforts by the charter to correct the violations or poor performance on accountability systems; and • actions the Commissioner deems necessary to deter future violations or poor performance. Statute would maintain the best interest of the school's students as a general principle, but it would no longer be a criterion for determining sanctions. This recommendation would also grant TEA additional flexibility in applying sanctions for health and safety violations. Mter the agency holds a hearing, it would no longer be required to either cease its suspension or revoke the charter. Instead, TEA could apply any of the sanctions listed in the accountability statute, such as requiring professional services or appointment of a monitor or conservator. 7.5 Authorize TEA to reconstitute the governing board of a charter holder. This recommendation would authorize the Commissioner to reconstitute the governing board of a charter holder if the Commissioner finds that the board is not providing adequate oversight of a charter school and other intermediate sanctions have not been effective in remedying the problems. The Commissioner would make all appointments to the new charter holder board, in accordance with terms and other provisions of the charter holder's bylaws. Before making appointments to the charter holder board, TEA would be required to gather local input from community members and parents. The Commissioner should consider appropriate expertise and credentials for appointment to the board, such as financial expertise, whether the person lives in the charter district, or if the person is an educator. This recommendation would allow TEA to re-appoint current members of the charter holder board. If the charter holder board also oversees other enterprises of the nonprofit, this recommendation would authorize TEA to require the charter holder to create a new, single-purpose 501(c)(3) organization to oversee the charter school. TEA would appoint the members of that board and transfer the charter to that separate nonprofit. The charter holder would also have the option of surrendering the charter in Texas Education Agency Staff Report Issue 7 81 328 October 2012 Sunset Advisory Commission lieu of reconstitution. None of the authority that would be granted to TEA in this recommendation would supersede the Attorney General's authority over charitable organizations. Reconstituting a charter holder's board to be composed of qualified and interested board members would provide TEA with a tool to strengthen oversight of a charter, in lieu of seeking the charter's revocation. TEA would be required to adopt rules by September 1, 2014. 7.6 Apply standard prohibitions on nepotism to all charter schools. This recommendation would remove the statutory exception to the prohibition on nepotism for charter schools with acceptable academic performance for two of the last three years. As a publicly funded entity, all restrictions, requirements, and prohibitions of Chapter 573 of the Government Code, such as prohibitions on the appointment, employment, or confirmation of employees within the third degree of consanguinity and second degree of affinity, would apply to all members of the charter holder board or employees of a charter school. This recommendation would also change the provision related to conflicts of interest for members of the charter holder board to the second degree of affinity, from the third degree of affinity, to be consistent with the nepotism requirements and reduce confusion on the part of charter schools. 7.7 Prohibit family members from serving on a charter holder board together. Under this approach, persons related to each other within the third degree of consanguinity and second degree of affinity would be prohibited from serving on a charter holder board at the same time. A charter holder would have two years from the effective date of this recommendation to replace any persons serving on a charter holder board to comply with this recommendation. This recommendation would ensure the charter holder board is free from situations in which the interests of family members on the board may conflict with the best interest of students. Management Action 7.8 TEA should revise its practices for applying interventions and sanctions to clarify expectations and ensure appropriate and timely action against poor performing charters. This recommendation would direct the agency to revise its policies or practices for applying enforcement actions to be consistent with requirements or performance standards in rule for non -renewal, revocation, or other interventions and sanctions. TEA should ensure its rules for taking enforcement action set clear performance expectations and that the agency acts in accordance with those rules. TEA should use its full range of remedies in a timely manner to ensure charter schools meet accountability and performance expectations and provide a quality education for students. TEA would be required to adopt rules by September 1, 2014. Fiscal Implication These recommendations should not result in additional costs to the State. While TEA would need to devote staff time to develop the changes to rules required by these recommendations, no new staff would be required. Texas Education Agency Staff Report 82 Issue 7 329 Sunset Advisory Commission October 2012 Chapter 12, Texas Education Code. 2 College and university charters are also regulated by TEA, and subject to most of the same rules as open-enrollment charters. However, college and university charters are granted under a different subchapter, and do not count against the statutory cap on open-enrollment charters. 3 Section 12.101(b), Texas Education Code. 4 Ibid. 5 Section 12.115, Texas Education Code. 6 Subchapter E, Chapter 39, Texas Education Code. 7 Section 39.152, Texas Education Code; 19 T.A.C. Sections 97.1037 and 157.1151. Section 39.104(c), Texas Education Code. 9 In the last 15 years, TEA revoked or denied renewal of 27 charters, and charter holders surrendered 21 charters in lieu of enforcement action. 10 Following the 2010-2011 school year, TEA revoked one of these four charters and another charter was surrendered in lieu of revocation. 11 Texas Education Agency, Snapshot 2011 Summary Tables, accessed August 31, 2012, http:!/ritter. tea. state. tx.us/perfreport/ snapshot/20 11/state.html. 12 Section 12.115, Texas Education Code. 13 Ibid. 14 Section 12.1162, Texas Education Code. 15 Section 12.115(b), Texas Education Code. 16 19 T.A.C. Section 100.1022(b)(1); Texas Education Agency, Accreditation Status Matrix, accessed October 2, 2012, http://www.tea.state. tx. us/index2. aspx?id=214 7 494 532&menu_id=214 7483 702. 17 Chapter 573, Texas Government Code. 18 The Texas Tribune, Interactive: How Much Does Your Superintendent Make?, accessed September 17,2012, http://www.texastribune.org/ library/data/texas-superintendent-salaries-2011/. 19 Section 39.151, Texas Education Code. Texas Education Agency Staff Report Issue 7 83 330 October 2012 Sunset Advisory Commission Texas Education Agency Staff Report 84 Issue 7 331 Sunset Staff Review of the Texas Education Agency Report Prepared By Karen Latta, Project Manager Erick Fajardo Sarah Kirlde Amy Trost Skylar Wilk Cee Hartley Ginny McKay, Project Supervisor Ken Levine Director Sunset Advisory Commission Location Mail Robert E. Johnson Bldg., 6th Floor PO Box 13066 1501 North Congress Avenue Austin, TX 78711 Austin, TX 78701 Website Email www.sunset.state. tx.us sunset@sunset.state. tx.us Phone (512) 463-1300 332 ----------------------------------·----------- ----------------- . ,; . . ~ : ::· 1. Definitions. As used in this contract "Charter" means the open-enrollment charter, as provided by Subchapter D. Chapter 12, Texas Education Code (TEC). granted by this contract "Charter school" means the open-enrollment charter schooL Chartemolder agrees to operate as provided in this contract. The charter school is a Texas public school. "Agency" means the Texas Education Agency. 2. The Charter. This contract grants to Charterholder an open-enrollment charter under Subchapter D. Chapter 12, TEC. The tenns of the charter include: (a) this contract; (b} applicable law; (c) Request for Application #701-98-016; (d) any condition, amendment. modification, revision or other change to the charter adopted or ratified by the Board; (e) all statements, assurances, commitments and representations made by Charterholder in its application for charter, attachments or related documents, to the extent consistent with (a) through (d); and (f) assurance by Chartemolder, evidenced by execution of this contract, that no false information was submitted to the Agency or the Board by Chartemolder, its agents or employees in support of its application for charter, . 3. Authority Granted by Charter. The charter authorizes Charterholder to operate a charter school subject to the terms of the charter. Action inconsistent with the terms of the charter shall constitute a material violation of the charter. 4. Alienation of Charter. The charter may not be assigned, encumbered, pledged or in any way alienated for the benefit of creditors or otherwise. Chartemolder may not delegate, assign, subcontract or otherwise alienate any of its rights or responsibilities under the charter. Any attempt to do so shall be null and void and of no force or effect; provided, however, that Charterholder may contract at fair market value for services necessary to carry out policies adopted by Charterholder or the governing body of the charter school. 5. Tenn ~ Ch,rter. The charter shall be in effect from October ZJ:'f!' , 1998 through July 31, 2003, unless renewed or terminated. 183 333 Ex. 2-Charter Contract CONTRACT 6. Renewal of Charter. On timely application by Charterho!der in a manner prescribed by the Board, the charter may be renewed for an additional period determined by the Board. The charter may be renewed only by written amendment approved by vote of the Board and property executed by its chair. 7. Revision by Agreement. The terms of the charter may be revised with the consent of Charterholder by written amendment approved by vote of the Board. The commissioner of education ("the commissioner") may revise the charter on a provisional basis during an interim between Board meetings; however, such action shall expire unless ratified by the Board at its next regular meeting. Nothing in this paragraph limits the authority of the Board or the commissioner to act in accordance with other provisions of this contract. 8. Open Enrollment. Admission and enrollment of students shall be open to any person who resides within the geographic boundaries stated in the charter and who is eligible for admission based on l~riteria identified in the charter. Total enrollment shall not exceed~ students. The charter school's admission policy shall prohibit discrimination on the basis of sex, national origin, ethnicity, religion, disability, academic or athletic ability, or the district the student would otherwise attend. Students who reside outside the geographic boundaries stated in the charter shan not be admitted to the charter school until an eligible applicants who reside within the boundaries have been enrolled. 9. Public Education Grant Students. Charterholder shall adopt an express policy providing for the admission of, and shall admit under such policy, students eligible for a public education grant, including those students who reside outside the geographic area identified in the charter application, under Subchapter G, Chapter 29, TEC. 10. Non-discrimination. The educational program of the charter school shall be nonsectarian, and shalf not discriminate against any student or employee on the basis of race, creed, sex, national origin, religion, disability or need for special education services. 11. Children with Disabilities. The charter school is a "local educational agency" as defmed by federal law. Charterholder must comply with the Individuals with Disabilities Education Act (IDEA), 20 U.S.C. §1401, et seq., and implementing regulations; Section 504 of the Rehabilitation Act of 1973 ("Section 504"), 29 U.S.C.§794, and implementing regulations; Title II of the Americans with Disabilities Act, 42 U.S.C. §12131-12165, and implementing regulations; Chapter 29, TEC, and implementing rules; and the many court cases applying these laws. For example: 184 334 -------------------------------------------- CONTRACT (a) Child Find. Charterholder must adopt and implement policies and practices that affirmatively seek out, identify, locate, and evaluate children with disabilities enrolled in the charter school or contacting the charter school regarding enrollment, and must develop and implement a practical method to detennine which children with disabilities are currently receiving needed special education and related services. For each eligible child, Chartemolder must develop and offer an individualized education plan appropriate to the needs of that student (b) Free AQQropriate Pub!ic Education. Charterholder must provide a free appropriate public education to all childre-n with disabilities otherwise eligible to enroll in the charter schooL If the program, staff or facilities of the charter school are not capable of meeting the needs of a particular child, Charterholder must implement changes necessary to accommodate the child at the charter schooL If reasonable accommodations would be insufficient to enable the child to benefit from the charter school's program, Chartemolder must, at its own expense, place the child at an appropriate school. (c) Services to Expelled Students. Chartemolder must continue to provide a free appropriate public education to a child with disabilities even after expeHing or suspending the child for valid disciplinary reasons. This obligation to serve the child continues until the end of the school year. (d) Monitoring. The charter school's implementation of the laws governing education of children with disabilities will be monitored for compliance by the United States Department of Education, Office of Special Education Programs; the United States Department of Education, Office of Civil Rights; the Texas Education Agency; and others. This monitoring activity includes responding to complaints, random on-site inspections and other investigations by the enforcing agencies, and will result in corrective actions imposed on Charterholder by these agencies for all discrepancies found. {e) Due Process Hearings. The charter school's implementation of the laws governing education of children with disabilities will, in addition, be subject to court supervision via litigation against Charterholder brought by individuals affected by the actions of the charter school. The cost of this litigation can be substantial. Notice: These are only a few of the charter school's legal responsibilities in this area, included here for illustrative purposes only. 12. Student Perfonnance and Accountabllity. Charterholder shall satisfy Subchapters 8, C, D, and G of Chapter 39 of the TEC, and related agency rules, as well as the student perfonnance accountability criteria stated in its application for charter. Charterholder shall annually provide in a manner and form defined by the commissioner a written evaluation of the charter school's compliance with the statements, assurances, 185 335 CONTRACT commitments and representations made by Charterholder in its application for a charter, attachments, and related documents. 13. Criminal Historv. Chartemolder shan take prompt and appropriate measures if Charterhofder or the charter school, or any of their employees or agents, obtains infonnation that an employee or volunteer of the charter school or an employee, officer, or board member of a management company contracting with the charter school has a reported criminal history that bears directly on the duties and responsibitities of the employee, volunteer, or management company at the school. Charterholder further represents that the Board and the agency shall be notified immediately of such information and the measures taken. 14. ReQorting Child Abuse or Neglect. Charterholder shall adopt and disseminate to all charter school staff and volunteers a policy goveming child abuse reports required by Chapter 261, Texas Family Code. The policy shall require that employees, volunteers or agents of Charterholder or the charter school report child abuse or neglect directly to an appropriate entity listed in Chapter 261, Texas Family Code. 15. Notice to District. Charterholder shall notify the school district in which the student resides within three business days of any action expelling or withdrawing a student from the charter school. 16. School Year. Charterholder shall adopt a school year with fixed beginning and ending dates. H 'I ... 17. Fiscal Year. Charterho!der shall adopt a fiscal year beginning September 1 and ending August 31. 18. Financial Accounting. Unless otherwise notified by the agency, Charterholder shall comply fully with generally accepted accounting principles ("GAAP") and the Financial Accountability System Resource Guide, Bulletin 679 or its successor ("Bulletin 679u) published by the agency in the management and operation of the charter school. 19. Federal Requirements. Failure to comply w\th Internal Revenue Service withholding regulations shall constitute a material violation of the charter. 20. Workers' Compensation. Charterholder shaH extend workers· compensation benefits to charter school employees by (1) becoming a self-insurer; (2) providing insurance under a workers· compensation insurance policy; or (3) entering into an agreement with other entities providing for self-insurance. 21. Annual Audit Charterholder shalf at its own expense have the financial and programmatic operations of the charter school audited annually by a certified public accountant holding a permit from the Texas State Board of 186 336 ---------------------- -·-·-·-·-··-·------··-·-··· CONTRACT Public Accountancy. Charterholder shall file a copy of the annual audit report, approved by Charterholder, with the agency not later than the 120th day after the end of the fiscal year for which the audit was made. The audit must comply with Generally Accepted Auditing Standards and must include an audit of the accuracy of the fiscal information provided by the charter school through PEIMS. Financial statements in the audit must comply with Government Auditing Standards and the Office of Management and Budget Circular 133. 22. Attendance Accounting. To the extent required by the commrss1oner, Charterholder shall comply with the •student Attendance Accounting Handbook· published by the Agency; provided, however, that Charterholder shall report attendance data to the agency at six-week intervals or as directed by the agency. 23. Foundation School Program. . Distribution of funds to the charter school under Section 12.106, TEC, is contingent upon charterholder's compliance with the terms of the charter. Charterholder is ineligible to receive Foundation School Program funds prior to execution of this contract by the board. Within 30 days of receiving notice of overallocation and request for refund under Section 42.258, TEC, Charterhotder shall transmit to the agency an amount equal to the requested refund. If Charterho!der fails to make the requested refund, the agency may recover the overallocation by any means permitted by law, including but not limited to the process set forth in Section 42.258, TEC. 24. Tuition and Fees. Charterholder shall not charge tuition and shall not charge a fee except that it may charge a fee listed in Subsection 11.158(a), TEC. 25. Assets of Charter. Charterholder shall not apply, hold, credit, transfer or otherwise make use of funds, assets or resources of the charter school for any purpose other than operation of the charter school described in the charter. 26. Indebtedness of Charter. Charterholder shall not incur a debt, secure an obligation, extend credit, or otherwise make use of the credit or assets of the charter school for any purpose other than operation of the charter school described in the charter. 27. Interested Transactions. All financial transactions between the charter school and (a) Charterholder; (b) an officer, director, or employee of Charterholder or of the charter school; or {c) a person or entity having partial or complete control over Charterholder or the charter school shall be separately and clearly reflected in the accounting, auditing, budgeting, reporting, and record keeping systems of the charter schooL Charterholder shall not transfer any asset of the charter or incur any debt except in retum for goods or services provided for the benefit of the charter school at fair market value. 187 337 CONTRACT 28. Non-Charter Activities. Charterholder shall keep separate and distinct accounting, auditing, budgeting, reporting, and record keeping systems for the management and operation of the charter schooL Any business activities of Charterholder not directly related to the management and operation of the charter school shall be kept in separate and distinct accounting, auditing, budgeting, reporting, and record keeping systems from those reflecting activities under the charter. Any commingling of charter and non-charter business in these systems shall be a material violation of the charter. 29. Non-Profrt Status.- Charterholder shall take and refrain from all acts necessary to be and remain in good standing as an 9rganization exempt from taxation under Section 501 (c)(3), Internal Revenue Code. If Charterholder is incorporated, it shall in addition comply with all applicable laws governing its corporate status. Failure to comply with this paragraph is a material violation of the charter, and the Board may act on the violation even if the Internal Revenue Service, Secretary of State, or other body with jurisdiction has failed to act. 30. Records Retention and Management. Charterholder shall implement a records management system that conforms to the system required of school districts under the Local Government Records Act, Section 201.001 et seq., Local Government Code, and rules adopted thereunder; provided, however, that records subject to audit shall be retained and available for audit for a period of not less than five (5) years from the latter of the date of tennination or renewal of the charter. 31. PEIMS Reporting. Charterhotder shall report timely and accurate information to the Public Education Information Management System (PEIMS), as required by the commissioner. 32. Conflict of Interest. Charterholder shall comply with any applicable prohibition, restriction or requirement relating to conflicts of interest. If an officer or board member of Charterholder or of the charter school has a substantial interest, within the meaning of Chapter 171, Local Government Code, in a transaction, such interest shall be disclosed in pubtic session at a duly called meeting of the governing body prior to any action on the transaction. 33. Disclosure of Campaign Contributions. Charterholder shall adopt policies that will ensure compliance with the disclosure requirements of State Board of Education Operating Rule 4.3 or its successor. 34. Indemnification. Charterholder shall hold the Board and agency harmless from and shall indemnify the Board and agency against any and all claims, demands, and causes of action of whatever kind or nature asserted by any third party and occurring or in any way incident to, arising 188 338 ------------------------------------------------------------------------------------- .. CONTRACT out of, or in connection with wrongful acts of Charterholder, its agents, employees, and subcontractors. 35. Failure to Operate. Charterholder shall operate the charter school for the full school term as described in the charter application in each year of the charter contract. Charterholder may not suspend operation for longer than 21 days without a revision to its charter, adopted by the Board, stating that the charter school is dormant and setting forth the date on which operations shall resume and any applicable conditions. Suspension of operations in violation of this paragraph shall constitute abandonment of this contract and of the charter. 36. Charter School Facility. Charterho!der shatl have and maintain throughout the term of the charter a lease agreement, title or other legal instrument granting to Charterholder the right to occupy and use one or more facilities suitable for use as the charter school facitities described by the charter. During any period of dormancy granted by the Board, this requirement may be waived by the Board. Facilities occupied and used as charter school facilities shall comply with all applicable laws, including, but not llmited to, the Texas Architectural Barriers Act, Article 9102, Vernon's Texas Civil Statutes. 37. Agency Investigations. The commissioner may in his sound discretion direct the agency to conduct investigations of the charter school to determine compliance with the terms of the charter or as authorized in Sections 39.074 and 39.075, Subchapter D, Chapter 39, TEC or other Jaw. Charterholder, its employees and agents shall fully cooperate w1th such investigations. Failure to timely comply wlth reasonable requests for access to sites, personnel, documents or things is a material violation of the charter. 38. Commissioner Authoritv. The commissioner in his sole discretion may take any action authorized by Section 39.131, TEC or Chapter 29, TEC relating to the charter school. Such action is not "adverse action" as used in this contract. Charterholder. its employees and agents shall fully cooperate with such actions. Failure to timely comply with any action authorized by Section 39.131, TEC or Chapter 29, TEC is a material violation of the charter. 39. Adverse Action. The Board in its sole discretion may modify, place on probation, revoke or deny timely renewal of the charter for cause ("adverse action"). Each of the following shall be cause for adverse action on the charter: (a) any material violation of the terms of the charter listed in paragraphs 2, 3, and 20; (b) failure to satisfy generally accepted accounting standards of fiscal management; or (c) failure to comply with an applicable law or rule. 189 339 COl\T'fRACT 40. Entire Agreement This contract, including all referenced attachments and terms incorporated by reference, contains the entire agreement of the parties. All prior representations, understandings and discussions are merged into, superseded by and canceled by this contract. 41. Severability. lf any provision of this contract is determined by a court or other tribunal to be unenforceable or invalid for any reason, the remainder of the contract shall remain in full force and effect, so as to give effect to the intent of the parties to the extent valid and enforceable. 42. Conditions of Contract Execution .of this contract by the Board is conditioned on full and timely compliance by Charterholder with: (a} the terms, required assurances and conditions of Request for Application #701-97-028; (b} applicable law; and (c) all ·commitments and representations made in Charterholder's application and any supporting documents (to the extent such commitments and representations are consistent with the terms of this contract). 43. No Waiver of Breach. No assent, express or implied, to any breach of any of the covenants or agreements herein shall waive any succeeding or other breach. 44. Venue. Any suit arising under this contract shaH be brought in Travis County, Texas. 45. Governing law. In any suit arising under this contract. Texas law shatl apply. 46. Authority. By executing this contract. Charterholder represents that it is an "eligible entity" within the meaning of Section 12.101 (a). TEC. Charterholder shall immediately notify the Board of any legal change in its status which would disqualify it from holding the charter, of any violation of the terms and conditions of this contract, or of any change in the chief operating officer of the charter school or Charterholder. Charterholder further represents that the person signing this contract has been properly delegated authority to do so. Entered into this at:. # day of , 1998. Texas State Board of Education ~~ 190 340 TEA Texas Education Agency 1701 NorthCongressAvenue • Austin,Texas78701-1494 • 512463-9734 • 512463-9838FAX • tea.texas.gov Michael Williams Commissioner STATE OF TEXAS § § COUNTY OF TRAVIS § CERTIFIED RECORDS OF THE TEXAS EDUCATION AGENCY I, Mo Brantley, a custodian of official records of the Texas Education Agency, after causing a search to be made of such records, do hereby certify that the following documents are true and correct copies of the documents from the Agency's files: • Commissioner's December 8, 2014, Notice oflntent to Revoke Open-Enrollment Charter sent to the Academy of Careers and Technologies. (8 pages) IN TESTIMONY THEREOF, I have signed my name officially and caused to be impressed hereon the Seal of the Texas Education Agency at my office in the city of Austin, Travis County, Texas, this j]_ day ofMarch, 2015. MOBRANTLEY CUSTODIAN OF RECORDS, TEXAS EDUCATION AGENCY, OFFICE OF COMPLAINTS, INVESTIGATIONS & ENFORCEMENT 341 Ex. 3-Notice of Intent to Revoke Texas Education Agency Michael Williams Commissioner 015-816 NOTICE OF INTENT TO REVOKE OPEN-ENROLLMENT CHARTER December 8, 2014 Via Certified Mail Tonja Nelson, Superintendent Academy of Careers and Technologies Charter School PO Box 681 866 San Antonio, Texas 78268 Paula Applin, Board President Academy of Careers and Technologies Inc. PO Box 681866 San Antonio, Texas 78268 RE: Open-Enrollment Charter Held by Academy of Careers and Technologies Inc. Dear Dr. Nelson and Ms. Applin: This is to notify you that I, as Commissioner of Education, am revoking the open- enrollment contract for charter held by Academy of Careers and Technologies Inc. (hereinafter referred to as the ucharter holder") for the Academy of Careers and Technologies Charter School pursuant to Texas Education Code (TEC) §12.115(c). I. Revocation under TEC §12.115(c) On or about September 1, 1998, a charter contract creating the open-enrollment charter school that is the subject of this action was entered into by Academy of Careers and Technologies lnc. 1 and the State Board of Education (SBOE). During the 83rd legislative session, TEC §12.115 was amended to include a statutory provision for the revocation of charters that fail to meet academic or financial accountability performance ratings for the three preceding school years, or any combination thereof. Charters failing to meet the specified criteria are subject to mandatory revocation of their charter. The specific school years that must be considered in reaching any revocation decision are also listed. TEC §12.115(c). 1 Subsequent to the execution of the charter contract, the charter holder's name has changed to the name referenced in this document. 342 The commissioner shall revoke the charter of an open-enrollment charter school if: 1) the charter holder has been assigned an unacceptable performance rating under Subchapter C, Chapter 39, for the three preceding school years; 2) the charter holder has been assigned a financial accountability performance rating under Subchapter D, Chapter 39, indicating financial performance lower than satisfactory for the three preceding school years; or 3) the charter holder has been assigned any combination of the rating described by Subdivision (1) or (2) for the three preceding school years. For revocation actions initiated following the issuance of the 2013-14 academic and financial accountabllity ratings, the three preceding academic accountability ratings that shall be considered are the 2010-2011, 2012-2013, and 2013-14 academic accountability ratings. 2 The three preceding financial accountability ratings that shall be considered are the 2011-2012, 2012- 2013, and 2013-14 financial accountability ratings. TEC §12.115(c-1 ). Specifically, Academy of Careers and Technologies Charter School was assigned the following ratings: • 2011-2012 financial accountability rating of "Substandard Achievement" (Exhibit A}; • 2012-2013 financial accountability rating of "Substandard Achievement" (Exhibit B); • 2013-2014 financial accountability rating of "Substandard Achievement" (Exhibit C); and • 2013-2014 academic accountability rating of "Improvement Required" (Exhibit D). All rights to appeal the ratings identified above have been waived or exhausted, and these ratings are now final and not appealable. TEC §39.151 (d). Accordingly, pursuant to TEC 12.115(c), the charter held by Academy of Careers and Technologies Inc. is subject to mandatory revocation. 11. Appointment of a Conservator Further, I am assigning a conservator, pursuant to TEC §39.1 02(a)(7) and 19 Texas Administrative Code (TAC) §§ 97.1057, 97.1059 and 97.1073, due to the on-going and long- standing deficiencies and because such intervention is necessary to prevent substantial or imminent harm to the welfare of the charter school's students or to the public interest. I am appointing Richard Clifford to the Academy of Careers and Technologies Charter School to serve as a Texas Education Agency (TEA) conservator. As a TEA conservator, Richard Clifford's role will include, but is not limited to, the following: • Overseeing the financial management and governance of the charter school to ensure the charter school complies with state and federal law; • Attending board meetings, including executive session, and directing the board as necessary to address the findings in the Final Report required by TAC §100.1052(a); and • Overseeing all close-out activities of the charter school. Please note that the appointment of Richard Clifford does not relieve the charter school and its governing board of the responsibility to, at all times, operate the charter school in 2 No academic accountability ratings were issued for the 2011-12 school year due to the transition from the TAKS test to the STAAR test, and performance from that academic year is not considered for purposes ofrevocation under TEC §12.115(c)(1 ). TEC §12.115(c-1 ). 343 compliance with all applicable statutes and rules. The agency reserves the right to implement all available interventions and sanctions under TEC, Chapters 39, and Title 19, TAC, Chapters 97, to address the current, or any future, deficiencies identified for Academy of Careers and Technologies Charter School. Agency staff will be present at the next meeting of the charter school's governing board to introduce Richard Clifford to the members of the board. The cost of the conservator's services will be paid by the charter school in accordance with TEC §39.11 0. The conservator's fee shall be $85 per hour plus necessary travel expenses not to exceed the state per diem rate. Failure to make timely payments to the conservator may result in appropriate amounts being deducted from the charter school's Foundation School Program (FSP) funds. Ill. Opportunity for Informal Review and Hearing This is your Notice of my intent, as Commissioner of Education, to revoke the open- enrollment charter contract held by Academy of Careers and Technologies Inc. and to appoint a conservator. As set forth in 19 TAC §157.1123, the charter holder has the right to request an informal review regarding the Commissioner's intent to revoke the charter and to appoint a conservator. However, this informal review shall be provided only if the charter holder submits a written request for informal review not later than January 12, 2015. 19 TAC §157.1123(b). Written information may be submitted by the required deadline for requesting an informal review. 19 TAC §157.1123(c). If no informal review is requested by the deadline, a final decision may be issued without informal review. 19 TAC §157.1123(d). Failure to submit a request by January 12, 2015 shall result in waiver of any right to a hearing on the proposed revocation of the open-enrollment charter. If you submit a timely request and I do not change my decision regarding the revocation during the informal review, this issue will be sent to the State Office of Administrative Hearings for a hearing pursuant to TEC §12.116. Any hearing provided shall be limited to the specific findings and/or recommendations detailed in this correspondence. Under TEC §12.116(c), the administrative law judge must uphold my decision unless the judge finds the decision arbitrary and capricious or clearly erroneous. The decision of the administrative law is final and may not be appealed. Any written response or other correspondence pertaining to this Notice must be sent to: Eric Marin, Legal Counsel Texas Education Agency 1701 North Congress Avenue Suite 2-150 Austin, Texas 78701-1494 344 Sincerely, MW/cc Enclosures cc: Dr. Ronald L. Beard, Executive Director, Region 20, Education Service Center Lizzette Gonzalez Reynolds, Chief Deputy Commissioner, TEA Michael Berry, Deputy Commissioner, Policy and Programs, TEA Alice McAfee, Associate Commissioner, Complaints, Investigations, and Enforcement, TEA Lisa Dawn-Fisher, Associate Commissioner, School Finance, TEA Sally Partridge, Associate Commissioner, Accreditation and School Improvement, TEA Nora Hancock, Associate Commissioner, Grants and Federal Fiscal Compliance, TEA Von Byer, General Counsel, TEA Heather Mauze, Director, Charter Schools, TEA Chris Cowan, Director, Enforcement Coordination, TEA Ron Rowell, Director, Governance, TEA Eric Marin, Legal Counsel Richard Clifford, Conservator 345 11/17/2014 Charter School Status Detail *~~~~~cw User: Public User Role: Public Rating Year: t 2011-2012 •] CON: [o15816 •] [S._s_e_le~c~t_A_n_O_p_t_io_n~-~-~·····=··:~. . ·"'"'··-·~~1 ~-~el~ I 1 • f Home 1 Ex1t 2011-2012 Ratings Based on School Year 2010-2011 Data- Charter School Status Detail Charter School Status Detail Indicator Detail Summary Determination of Ratings Size-Dependent Indicators Name: ACADEMY OF CAREERS AND TECHNOLOGIES Publication Level 0: 6/19/2012 CHARTER SCHOOL(015816) 4:03:28 PM Status: FAILED Publication Levell: 8/7/2012 9:16:36 AM Rating: Substandard Achievement Publication Level 2: 9/20/2012 8:29:51 AM Charter School Score: 47 Passing Score: 50 Last Updated: 6/19/2012 4:03:28 PM Options Audit Home Page: School Financial Audits I Send comments or suggestions to schoolaudlts@tea.state.tx.us The Texas Education Agency 1701 North Congress Avenue· Austin, Texas, 78701 · (512) 463-9095 Copyright© Texas Education Agencv {TEA) 2007-2012 This website is best viewed in Internet Explorer 6.0 and above. CSSF 1.1.0.15 hltps://pryor .lea.state.tx.usrrea.C SSF .Web/Form s/D islriciStatusDetail.aspx 346 1/2 Exhibit A 11/17/2014 Charter School Status Detail > Charter School .. School FIRST Financlallntqtity Rating System oCTem User: Public User Role: Public Rating Year: \2012-2013 "\CON: I 015816 "l!..._s~~e_l_e_ct_~_·_n_O~p_t_io_n_ _ _ ___,.""'H,...,·~=~=-:""'J ~ 1 2012-2013 Ratings Based on School Year 2011-2012 Data - Charter School Status Detail Charter School Status Detail Indicator Detail Summary Determination of Ratings Size-Dependent Indicators Name: ACADEMY OF CAREERS AND TECHNOLOGIES Publication Level 0: 6/20/2013 CHARTER SCHOOL(015816) 10:42:58 AM Publication Level 1: 9/12/2013 Status: FAILED 6:37:32 PM Publication Level 2: 9/12/2013 Rating: Substandard Achievement 5:37:32 PM Charter School Score: 45 Last Updated: 9/12/2013 Passing Score: 50 5:37:32 PM Options Audit Home Page: School Financial Audits I Send comments or suggestions to schoolaudlts@tea.state.tx.us The Texas Education Agency 1701 North Congress Avenue· Austin, Texas, 78701 · (512) 463-9095 Copyright© Texas Education Agency (TEA) 2007-2012 This website is best viewed in Internet Explorer 6.0 and above. CSSF 1.1.0.15 https ://pryor .lea.state.lx .usrrea.C SSF .WebJForms/DistrictStatus Detai l.aspx Exhibit 8 3471/2 11/17/2014 Charter School Status Detail ..J~, Charter School; School FIRST ~ FinanciaJ Integrity Rating System of Texas User: Public User Role: Public Rating Year: 12013-2014 ,.] CON: [ 015816 ~] ,_[s_e_l_ec~t_A_._n_O~p_t~io_n_ _~-~~~,-~~,.,...,~ l Home 2013-2014 Ratings Based on School Year 2012-2013 Data - Charter School Status Detail Charter School Status Detail Indicator Detail Summary Determination of Ratings Size-Dependent Indicators Name: ACADEMY OF CAREERS AND TECHNOLOGIES Publication Level 0: 6/17/2014 CHARTER SCHOOL(015816) 8:14:23 AM Publication Level 1: 9/5/2014 Status: FAILED 3:56:38 PM Publication Level 2: 9/5/2014 Rating: Substandard Achievement 3:58:47 PM Charter School Score: 0 Last Updated: 9/5/2014 3:58:47 Passing Score: 50 PM Options Audit Home Page: School Financial Audits 1 Send comments or suggestions to schoolaudits@tea.state.tx.us The Texas Education Agency 1701 North Congress Avenue· Austin 1 Texas, 78701 · (512) 463M9095 Copyright© Texas Education Agency (TEA) 2007-2012 This website is best viewed In Internet Explorer 6.0 and above. CSSF 1.1.0.15 https://pryor .tea.state.tx.usffea.CSSF .Web/Form s/DlstrictStatus Detai l.aspx Exhibit C 3481/2 TEXAS EDUCATION AGENCY 2014 Accountability Summary ACADEMY OF CAREERS AND TECHNOLOGIE (015816) Met Standards on Did Not Meet Standards on -Student Achievement -Postsecondary Readiness - Closing Performance Gaps 100 75 50 25 1,-,jox 3 Index~ Student 0>$1 ... Po>mecorldary At;t~evomolll Perlonnance Gaps Road~ {T~~I San•SS) (Taf'llol S.:oro • 31) {T~ot s.:ore • 57) Points Maximum Index Index Earned Points Score Number and Percent of Indicators Met 1 - Student Achievement 64 96 67 Performance Rates 4 out of 6 = 67% 2- Student Progress N/A N/A N/A 3 -Closing Performance Gaps 259 BOO 32 Participation Rates o outof4 = 0% 4 - Postsecondary Readiness Graduation Rates 0 out of 2 = 0% STMR Score 7.6 Graduation Rate Score 16.9 Met Federal Limits on Alternative Assessments 0 out of 1 = 0% Graduation Plan Score 18.8 Postsecond;uy Indicator Score 5.0 48 Total 4 out of 13 =31% For further information about this report, please see the Performance Reporting Division web site at http:l/rltter.tea.state.tx.us!perfreport/account/201411ndex.html TEA Division of Performance Reporting Page 1 Exhibit D 349 TEA's Motion for Summury Disposition TEA v. Academy of Careers und Technologies Inc. SOAII Docket No. 701~15·2748 STATE OF TEXAS § § COUNTY OF TRAVIS § AFFIDAVIT OF DR. LISA DAWN-FISHER 1. My name is Dr. Lisa Dawn~Fisher. ram over the age of 18, of sound mind, and able to make this affidavit. I have personal knowledge of the .facts stated in this atndavit. 2. I am employed by the Texas Education Agency as the Chief School Finance Officer. 3. l have examined the exhibits attached to the letter dated December 8, 2014, sent by the Texas Commissioner of Education to Academy of Careers and Technologies Inc. 4. Exhibits A. B, and C show that Academy of Careers and Technologies Charter School (charter school) was assigned ratings of"Substandard Achievement" for the 2011-2012, 2012~2013~ and 2013-2014 school years. 5. Ratings of"Substandard Achievement" in the 2011-2012, 2012-2013. and 2013-2014 school years constitute lower than satisfactory performance ratings under the accountability system used by the Texas Education Agency to implement Subchapter D, Chapter 39, of the Texas Education Code. 6. The charter school was provided with notice and an opportunity to appeal its 2011 ~2012, 2012-2013, and 2013-2014 financial performance ratings. lt appealed each of the three ratings, and each appeal was denied. No further appeal is available, and these ratings are now finaL S\VOfu~ TO AND SUBSCRIBED before me, on this the \Urh_ day ofMarch, 2015, by Dr. Lisa Dawn-Fisher. ~\ru -~ Notary Public's Signature 19 350 Ex. 4-Affidavit of LDF 11/1712014 Charter School Status Detail -~ Charter School "School ARST User: Public User Role: Public "I coN: Io1ss16 T] ,_r;_e_l_e_ct_A_n_o_p_ti_o_n______,=f.t~o=·~""·:J="~-m:~~ 1 Rating Year: [2o11-2012 2011-2012 Ratings Based on School Year 2010-2011 Data- Charter School Status DetaH Charter Schoof Status Detail Indicator Detail Summary Determination of Ratings Size-Dependent Indicators Name: ACADEMY OF CAREERS AND TECHNOLOGIES Publication Level 0: 6/19/2012 CHARTER SCHOOL(015816) 4:03:28 PM Publication level 1: 8/7/2012 Status: FAILED 9:16:36 AM Publication Level 2: 9/20/2012 Rating: Substandard Achievement 8:29:51 AM Charter School Score: 47 Last Updated: 6/19/2012 4:03:28 PM Options Audit Home Page: School Financial Audits I Send comments or suggestions to schoolaudits@tea.state.tx.us The Texas Education Agency 1701 North Congress Avenue· Austin, Texas, 78701 · (512) 463-9095 Copyright© Texas Education Agency (TEA) 2007-2012 This website is best viewed in Internet Explorer 6.0 and above. CSSF 1.1.0.15 https:J/pryor .tea.state. tx .us.rrea. C SSF .Wet:liF orm s/D istrictStalusDetail.aspx 1/2 Exhibit A 351 11/17/2014 Charter School Status Detai I · Charter School ; School FIRST F1.011lCW Integrity Rmng System ofTa:as User: Public User Role: Public Rating Year: !2012-2013 v CD N: I 015816 v] J !. .s_e_l_e_ct_A_n_O_p~ti_o_n . _ _ _ _----,-===-~ j-,,.,.....,...,;..~ I Home 2012-2013 Ratings Based on Schoo! Year 2011-2012 Data- Charter School Status Detail Charter School Status Detail Indicator Detail Summary Determination of Ratings Size-Dependent Indicators Name: ACADEMY OF CAREERS AND TECHNOLOGIES Publication Level 0: 6/20/2013 CHARTER SCHOOL(015816) 10:42:58 AM Publication Level 1: 9/12/2013 Status: FAilED 6:37:32 PM Publication Level 2: 9/12/2013 Rating: Substandard Achievement 6:37:32 PM Charter School Score: 45 l Passing Score: _s_o__ Last Updated: 6:37:32 PM 9/12/2013 Options Audit Home Page: School Financial Audits 1 Send comments or suggestions to schoolaudfts(a)tea.state.tx.us The Texas Education Agency 1701 North Congress Avenue· Austin, Texas, 78701 · (512) 463-9095 Copyright© Texas Education Agency (TEA} 2007-2012 This website is best viewed in Internet Explorer 6.0 and above. CSSF 1.1.0.15 t1tlps:J/pryor .tea.stale.tx .LJS!Tea.C SSF .W cbiF orms/DfstrictStatusDetaif .as px Exhibit B 1/2 352 11/17/2014 Charter School Status Detail '" Cbaner School.-School FIRST Fin:mcW Integrity hting Systrm ofTCJW User: Public User Role: Public Rating Year: 12013-2014 .., I CDN:! 015816 "!] s_e_l_e_c_t_A_n_O_p_ti_o_n_ _ _ _ ._! ....._,,~.. ~. .~..,...,.,-!~.1.1 . !:'_e_l?__ I Home _l Exit 2013-2014 Ratings Based on School Year 2012-2013 Data -Charter School Status Detail Charter School Status Detail Indicator Detail Summary Determination of Ratings Size-Dependent Indicators Name: ACADEMY OF CAREERS AND TECHNOLOGIES Publication level 0: 6/17/2014 CHARTER SCHOOL(015816) 8:14:23 AM Publication level 1: 9/5/2014 Status: FAILED 3:56:38 PM Publication level 2: 9/5/2014 Rating: Substandard Achievement 3:58:47 PM Charter School Score: 0 ~sing Sco'e' 50 Last Updated: PM 9/5!2014 3:ss:47 1 .J Options Audit Home Page: School Financial Audits f Send comments or suggestlons to schoolaudits@tea.state.tx.us The Texas Education Agency 1701 North Congress Avenue· Austin, Texas, 78701 · (512) 463-9095 Copyright (C) Texas Education Agency (TEA) 2007-2012 This website is best viewed in Internet Explorer 6.0 and above. CSSF 1.1.0.15 https ://pryor .tea.stale.tx.usfTea CSSF .Web/Form s/Distri ciS latus Delail.aspx =xhibit C 1/2 353 7EA Texas Education Agency 1701 NorthCongressAvenue • Austin,Texas78701-1494 • 512463-9734 • 512463-9838FAX • tea.texas.gov Michael Williams Commissioner STATE OF TEXAS § § COUNTY OF TRAVIS § CERTIFIED RECORDS OF THE TEXAS EDUCATION AGENCY I, Mo Brantley, a custodian of official records of the Texas Education Agency, after causing a search to be made of such records, do hereby certify that the following documents are true and correct copies of the documents from the Agency's files: • Commissioner's February 19,2015, letter sent to Academy of Careers and Technologies regarding the informal review decision. (3 pages) IN TESTIMONY THEREOF, I have signed my name officially and caused to be impressed hereon the Seal of the Texas Education Agency at my office in the city of Austin, Travis County, Texas, this j]_ day of March, 2015. MOB NTLEY CUSTODIAN OF RECO S, TEXAS EDUCATION AGENCY, OFFICE OF COMPLAINTS, INVESTIGATIONS & ENFORCEMENT 354 Ex. 5-IR Decision 015-816 February 19, 2015 Tonja Nelson, Superintendent Academy of Careers and Technologies Charter School PO Box 681866 San Antonio .• Texas 78268 Paula Applin, Board President Academy of Careers and Technologies Inc. PO Box 681866 San Antonio, Texas 78268 RE: Open-EnroUment Charter Held by Academy of Careers and Technologies, Inc. Dear Dr. Nelson and Ms. Applin: I, as Commissioner of Education, have received your response to the Texas Education Agency's {TEA) December 8, 2014 1 notice of intent to revoke the open enrollment charter held by Academy of Careers and Technologies, lnc. I have conducted an informal review of your response and determined that the TEA will proceed with the revocation of the contract for the charter effective August 21, 2015, with school operations to cease no later than June 30, 2015. Pursuant to 19 Texas Administrative Code (TAG) §157. 1183, a petition for review of this decision must be received no later than March 6, 2015. tf a petition for review complying with the requirements contained in 19 TAC § 157.1183 (attached) is received by the deadline, it wm be forwarded to the State Office of Administrative Hearings (SOAH) for a hearing pursuant to §12. i 16(c) of the Texas Education Code (TEC). A petition for review pursuant to 19 TAC § 157.1183 requires the following: ( 1) The petition for review sha!llnclude a copy of the challenged decision and any attachments or exhibits to the decision. {2) The petition for review shalf concisely state, in numbered paragraphs: 355 (A} if aUeglng the decision was arbitrary or capricious, each finding, inference, conclusion, or decision affected and the specific facts supporting a conclusion that each was so affected; {B) if alleging the decision was clearly erroneous, each finding, inference, conclusion, or decision affected and the specific facts supporting a conclusion that each was so affected; and (C) for each violation, error, or defect alleged under subparagraphs {A) and (B) of this paragraph, the substantial rights of the school district or charter school that were prejudiced by such violation, error, or defect (3) A petition for review shall further contain: (A) a concise statement of the relief sought by the petitioner, and (B) the name, mailing address, telephone number, and facsimile number of the petitioner's representative. (4} A request for relief in a review under this division may not be made orally or as part of the record at a prehearing conference or hearing. If the petition for review does not meet the requirements of 19 TAC § 157.1183, the petition for review wm be dismissed without further review and without referral to SOAH. The charter holder also requested an informal review of the December 8, 2014, conservator appointment and, after review, I have determined that the appointment should remain in effect No further review of the appointment is available under the TEC or applicable rules. Any written response or other correspondence pertaining to this notice must be sent to: Eric Marin, legal Counsel Texas Education Agency 1701 North Congress Avenue Suite 2-150 Austin, Texas 78701-1494 Mich ! Williams Co lssioner of Education MW/cc Enc!osures 356 cc: Dr. Ronald L Beard, Executive Director, Region 20, Education Service Center Uzzette Gonzalez Reynolds, Chief Deputy Commissioner, TEA Michael Berry, Deputy Commissioner, Policy and Programs, TEA Alice McAfee, Associate Commissioner, Complaints, trwestigations, and Enforcement, TEA Usa Dawn-Fisher, Associate Commissioner, School Finance, TEA Sally Partridge, Associate Commissioner, Accreditation and School Improvement, TEA Nora Hancock, Associate Commissioner, Grants and Federal Fiscal Compliance, TEA Von Byer, General Counsel, TEA Christopher Jones, Senior Legal Counsel, TEA Eric Marin, Legal Counsel, TEA Heather Mauze, Director, Charter Schools, TEA Chris Cowan, Director, Enforcement Coordination, TEA Ron Rowell, Director, Governance, TEA Richard Clifford, Conservator 357 TEA's Motion for Summary Disposition TEA v. Academy of Careers and Technologies Inc. SOAH Docket No. 701·15-2748 STATE OF TEXAS § § COUNTY OF TRAVIS § AFFIDAVIT OF SHANNON HOUSSON 1. My name is Shannon Housson. I am over the age of 18, of sound mind, and able to make this affidavit. I have personal knowledge ofthe facts stated in this affidavit. 2. I am employed by the Texas Education Agency as the director of the Division of Performance Reporting. 3. I have examined the exhibits attached to the letter dated December 8, 2014, sent by the Texas Commissioner of Education to Academy of Careers and Technologies Inc. 4. Exhibit D shows that Academy of Careers and Technologies Charter School (charter school) was assigned a rating of"lmprovement Required'' in the 2013-2014 school year. 5. A rating of"Improvement Required" in the 2013-2014 school year is an unacceptable performance rating under the accountability system used by the Texas Education Agency to implement Subchapter C, Chapter 39, of the Texas Education Code. 6. The charter school was provided with notice and an opportunity to appeal its 2013-2014 academic performance rating. The charter school filed an appeal, and the appeal was denied. No further appeal is available, and this rating is now final. .hbo~ Shannon Housson SWORN TO AND SUBSCRIBED before me, on this the { U~day ofMarch, 2015, c by Shannon Housson. ~i~~ Notary Public's Signature 21 358 Ex. 6- SH Affidavit TEXAS EDUCATION AGENCY 2014 Accountability Summary ACADEMY OF CAREERS AND TECHNOLOGIE (015816) Met Standards on Did Not Meet Standards on - Student Achievement - Postsecondary Readiness - Closing Performance Gaps 100 15 Stud~t Student Cllilno; P~ea;rAlrJ Ad'levemerl Ptoge.ss Perfcnnam~ G.a~ Ae&d~ (T>~I~•SS) (Tarcet Scet.e • 31} {Target Score • 57) Points Maximum Index Earned Points Number and Percent of Indicators Met Index Score 1 - Student Achievement 64 96 67 Performance Rates 4 out of 6 = 57% 2 - Student Progress N/A N/A N/A 3- Closing Performance Gaps 259 800 32 Participation Rates 0 out of4 =0% 4- Postsecondary Readiness Graduation Rates 0 out of 2 =0% STAAR Score 7.6 Graduation Rate Score 16.9 Met Federal Limits on Graduation Plan Score 18.8 Alternative Assessments 0 out of 1 =0% Postsecondary Indicator Score 5.0 48 Totar 4outof13=31% For funhcr information about this report. please see the Performance Reporting Di\~sion web site at hnp:/Jritter.tea.state.tx.us!perfreportiaccount!20141inde.x.html TEA Division of Performance Reporting Page 1 Exhibit D 359 STATE OF TEXAS § CERTIFICATION OF OFFICIAL § RECORD OF THE STATE OFFICE COUNTY OF TRAVIS § OF ADMINISTRATIVE HEARJNGS I, Susan Gage, I am of sound mind, capable of making this affidavit, and personally acquainted with the facts herein stated. The State Office of Administrative Hearings (SOAH) has delegated to me the authority to serve as custodian of records and documents referred to below. Pursuant to this authority, I have attached hereto true and correct copy of the fOllowing: Docket No. XXX-XX-XXXX; In the Matter ofTexas Education Agency vs Academy of Careers and Technologies, Inc. d/b/a Academy of Careers and Technologies Charter School * Copy of Decision and Order Records are kept in the regular course of business by SOAH. It was in the regular course of business for an employee or representative ofSOAH, with knowledge ofthe act or event, to make the record or to transmit information thereof to be included in such record; and the record. was made at or the near the time or reasonably soon thereafter. The records attached hereto are exact duplicates of the documents on file with SOAH. IN WITNESS WHEREOF, I have executed this certificate under the official seal of the State Office of Administrative Hearings this 4th day of August, 2015, in the city of Austin, Travis County, Texas. 360 Ex. 7-SOAH Decision and Order Cathleen Parsley Chief Administrative Law Judge May 21,2015 Christopher Jones VIA INTERAGENCY Texas Education Agency Charter School Division 1701 Congress Avenue, 2nd Floor Austin, Texas 7870 l RE: SOAH Docket No. 701-15~2748; Tcxns Education Agency v. Academy of Careers and Technologies, J.nc. d/b/a Academy of Cm·ecrs and Technologies Charter S~·hool Dear Mr. Jones: Enclosed please find the Decision and Order on Summary Disposition in the above- referenced case. Sincerely, ~~ ~ 'oi.- Sharon Cloninger Administrative Law Judge SCilh Enclosure (Certified Evidenliary Record and Case File CD) xc: Eric ,\>Iarin, A~slstnnt Counsel, Texas Education Agency, 1701 N. Congress Ave., 2nd Floor, Austin, TX 7870 I • VIA INTERAGENCY Stephen M. Foster, Attorney, 9013 Mngna Curwl.Mp, Austin,TX 78754 ·VIA IU~GIJLAR MAIL 300 W. 151h Street, Suite 502, Austin, Texas 78701 I P.O. Box 13025, Austin, Texas 78711-3025 512.475.4993 (Main} 512.475.3445 (Docl PLICABLE LAW A. Standard of Ucvicw Section 12.1 16 of the Texas Education Code states in relevant pan: (c) A decision by the commissioner to revoke a charter is subject to review by the State Office of Administrative 'Hearings. Notwithstanding Chapter 2001, Government Code: 10 (I) the administrative law judge shall uphold a decision by the commissioner to revoke a charter unless the judge finds the decision is arbitrary and capricious or clearly en·oneous .... 11 An agency's decision can be arbitrary and capricious if the agency: • failed to consider legally relevant factors,'~ • considered a legally iJTelevanl n1ctor, f) • failed to follow its own rules or regulations, 14 • denied a respondent due process and thereby prejudiced its substantial rights, 15 or considered only le~ally relevant factors but still reached a complett::ly unreasonable result 1 ' 10 * Government Code ch, 200 I docs not apply to a procedure that is reln!ed to a revocation under Texas Education C signed an unacceptable perfonnance rating under Subchapter C, Chapter 39, for the three preceding school years; (2) the charter holder has been a. rmance ratings in deciding to revoke Respondent's charter. BecaL1se the stature provides that the Commissioner "shall revoke the charter'' if the holder's performance ratings are below specified levels (and Respondent's ratings were below those levels), the statute gives the Commissioner no authority to exercise his discretion and not revoke the charter. The ALJ concludes that, in revoking Respondent's charter, the Commissioner followed th~ legally applicable substantive law, considered all legally relevant £actors, and did not consider legally irrelevant factors. IV. SOAH HAS NO JmUSDICTION TO REVIEW THE UNDERLYING RATINGS A. Respondent':; Evidence and Argument Respondent states UUlt technical errors and erroneously entered data resulted in its unacceptable and lower than satisfactory ratings. Respondent requests that the teclmical errors Ja TEA Exhibit I. 11 TEA Exhibit 3. 12 TEA Exhibit 4. Jl TEA El S Respondent's Response at 2. The 2010-2011 pertormnnce rating is not for (lOC of the three preceding. school years upon which the Commissioner's revocation decision was based. 6 ) Tex. Educ. Code § 39.151 (e). 17 TEA Exhibits 3 nnd 4, 369 SOAH DOCI(ET NO. XXX-XX-XXXX DECISION AND ORDER PAGE9 unacceplable and lower than satisfactory performance ratings were denied. 38 Upon receiving the Commissioner's December 8, 2014 Nerice of Intent to Revuke Open-Enrollment Charter, Respondent requested an infmmal review. The Commissioner did not change his dc1ermination as a result of the infom1nl n::vicw. 39 The Commissioner's linal decision setting the pert't1rmancc ratings may not be appealed under any law .40 Thus, the scope of the ALl's review does not include consideration of whelher the financial and academic perfom1ance ratings underlying the Commissioner's revocation decision were arbitrary and capricious, or clearly cn·oneous. Insread, the AU is limited to determining whether the Commissioner's revocation decision is arbitrary and capricious, or clearly erroneous.41 Therefore, !he AU cannot consider Respondent's assertions regarding the correctness of it.:; academic perfonnance or financial accountability perfom1ance ratings. V. RESt>ONDENT WAS PROVIDED OUR PROCESS One of the ways in which the Commissioner's revocation decision could be found to be arbitrary and capricinu~ is if Respondent was not providcd due process. However, the Al..l finds Respondent was provided due process. Subsections (a) and (b) of Section 12.116 ofthc Texas Education Code state: (a) The commissioner shall adopt an informal procedure to he used for revoking the charter of an open-enrollment charter school . . . as authorized by Section 12. 115. (b) Chapter 2001. Government Code, does not apply to a procedure that. is related to a revocation ... under this subchapter. t~ TEA Exhibits 2, 3, and 4. J') TEA £x;hibit 2. ~ 0 Tcx Educ. Code § 39.151 (d), T~x. 41 Educ Code§ 12.ll6(c)(l). 370 SOAB DOCKET NO. 701~15-2748 DEClSION AND OJWER PACF. 10 Given these statmes, the Commissioner was not required to follow a formal procedure to revoke Respondent's charter. Instead, he was required to follow an unspecified informal procedure. Despite the statutory requirement to use an informal process. the Commissioner provided Respondent with the ba'iic elements of due process-notice and an opportunity to be heard at a meaningful time and in u meaningfuJ manncr.12-beforc the Commissioner revoked Respondent's charter. On December 8, 2014, the Commissioner provided Respondent with written notice of his decision to revoke its charter, setting out the factual and legal bases for that decision. 4J rn that same letter, the Commissioner notitled Respondent of the opportunity for an informal review of that decisioi1 by submitting a written request, by January 12, 2015, that contained specific responses to each of the findings that led the Commissioner to decide to revoke its charter. 4-l Respondent appan::ntly requested an infonm1l r_eview of the Commissioner's decision. On February 19, 2015, the Commissioner notified Respondent of his decision to proceed with the revocation. 45 The ALJ concludes thai the Commissioner followed the applicable procedural law, provided the Respondent with due process, and did not prejudice Respondent's substantial rights before deciding to revoke its charter. VL REVOCA TJON IS NOT A COMJ>LETELY UNREASONABLE RESULT Even if an agency considered only legally relevant factors, its decision would be an abuse of discretion if it reached a completely unreasonable resuiL 46 A decision might be c.ompletely unreasonable if it is inconsistent with a prior decision or order of the agency related to the same ~ 2 University ofTe:r:os Med ,)'ch. a/ HousJrm \1. Than, 90 r s. W.2d 926, 930 (Tex. 1995) (citing Mathe;vs V. Eldridgl!, 424 U.S. 319, 313, 96 S. Ct. 893, 902,47 L. Ed. 2d 18 (I 976)}; House