Committee Substitute for SB0600FCS

SENATE FINANCE COMMITTEE SUBSTITUTE FOR

SENATE BILL 600

47th legislature - STATE OF NEW MEXICO - second session, 2006

AN ACT

RELATING TO PUBLIC SCHOOLS; ALLOWING CHARTER SCHOOLS TO DECIDE THEIR CHARTERING AUTHORITY; ALLOWING CHARTER SCHOOLS TO CHANGE THEIR CHARTERING AUTHORITY WHEN RENEWING THEIR CHARTERS; CREATING A CHARTER SCHOOLS DIVISION IN THE PUBLIC EDUCATION DEPARTMENT; PROVIDING POWERS AND DUTIES; PROVIDING FOR APPROVAL, DENIAL, RENEWAL, SUSPENSION OR REVOCATION OF STATE-CHARTERED CHARTER SCHOOLS BY THE PUBLIC EDUCATION COMMISSION; MAKING STATE-CHARTERED CHARTER SCHOOLS INDEPENDENT OF SCHOOL DISTRICTS; REQUIRING STATE-CHARTERED CHARTER SCHOOLS TO BE BOARDS OF FINANCE; CLARIFYING RESPONSIBILITIES OF CHARTER SCHOOLS AND GOVERNING BODIES; CHANGING FUNDING PROVISIONS; RECONCILING MULTIPLE AMENDMENTS TO THE SAME SECTION OF LAW IN LAWS 2005 BY REPEALING LAWS 2005, CHAPTER 176, SECTION 12; AMENDING, REPEALING AND ENACTING SECTIONS OF THE NMSA 1978.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:

Section 1. Section 9-24-4 NMSA 1978 (being Laws 2004, Chapter 27, Section 4, as amended) is amended to read:

"9-24-4. DEPARTMENT CREATED.--

A. The "public education department" is created in the executive branch. The department is a cabinet department and includes the following divisions:

(1) the administrative services division;

(2) the assessment and accountability division;

(3) the charter schools division;

[(3)] (4) the educator quality division;

[(4)] (5) the Indian education division;

[(5)] (6) the information technology division;

[(6)] (7) the instructional support and vocational education division;

[(7)] (8) the program support and student transportation division;

[(8)] (9) the quality assurance and systems integration division;

[(9)] (10) the rural education division; and

[(10)] (11) the vocational rehabilitation division.

B. The secretary may organize the department and divisions of the department and may transfer or merge functions between divisions and bureaus in the interest of efficiency and economy."

Section 2. Section 22-8-2 NMSA 1978 (being Laws 1978, Chapter 128, Section 3, as amended) is amended to read:

"22-8-2. DEFINITIONS.--As used in the Public School Finance Act:

A. "ADM" or "MEM" means membership;

B. "membership" means the total enrollment of qualified students on the current roll of a class or school on a specified day. The current roll is established by the addition of original entries and reentries minus withdrawals. Withdrawals of students, in addition to students formally withdrawn from the public school, include students absent from the public school for as many as ten consecutive school days; provided that withdrawals do not include truants and habitual truants the school district is required to intervene with and keep in an educational setting as provided in Section 22-12-9 NMSA 1978;

C. "basic program ADM" or "basic program MEM" means the MEM of qualified students but excludes the full-time-equivalent MEM in early childhood education and three- and four-year-old students receiving special education services;

D. "cost differential factor" is the numerical expression of the ratio of the cost of a particular segment of the school program to the cost of the basic program in grades four through six;

E. "department" or "division" means the public education department;

F. "early childhood education ADM" or "early childhood education MEM" means the full-time-equivalent MEM of students attending approved early childhood education programs;

G. "full-time-equivalent ADM" or "full-time- equivalent MEM" is that membership calculated by applying to the MEM in an approved public school program the ratio of the number of hours per school day devoted to the program to six hours or the number of hours per school week devoted to the program to thirty hours;

H. "operating budget" means the annual financial plan required to be submitted by a local school board or governing body of a state-chartered charter school;

I. "program cost" is the product of the total number of program units to which a school district is entitled multiplied by the dollar value per program unit established by the legislature;

J. "program element" is that component of a public school system to which a cost differential factor is applied to determine the number of program units to which a school district is entitled, including but not limited to MEM, full-time-equivalent MEM, teacher, classroom or public school;

K. "program unit" is the product of the program element multiplied by the applicable cost differential factor;

L. "public money" or "public funds" means all money from public or private sources received by a [local] school [board] district or state-chartered charter school or officer or employee of a [local] school [board] district or state-chartered charter school for public use;

M. "qualified student" means a public school student who:

(1) has not graduated from high school;

(2) is regularly enrolled in one-half or more of the minimum course requirements approved by the department for public school students; and

(3) is at least five years of age prior to 12:01 a.m. on September 1 of the school year; or

(4) is at least three years of age at any time during the school year and is receiving special education services pursuant to rules of the department; or

(5) has not reached the student's twenty-second birthday on the first day of the school year and is receiving special education services pursuant to rules of the department; and

N. "state superintendent" means the secretary of public education or the secretary's designee."

Section 3. Section 22-8-6.1 NMSA 1978 (being Laws 1993, Chapter 227, Section 8, as amended) is amended to read:

"22-8-6.1. [CERTAIN SCHOOL DISTRICT] CHARTER SCHOOL BUDGETS.--

A. Each state-chartered charter school shall submit to the [local school board] charter schools division of the department a school-based budget. For fiscal year 2008, and for the first year of operation in any fiscal year thereafter, the budget of every state-chartered charter school shall be based [upon] on the projected number of program units generated by that charter school and its students, using the at-risk index and the instructional staff training and experience index of the school district in which it is geographically located. For second and subsequent fiscal years of operation, the budgets of state-chartered charter schools shall be based on the projected number of program units generated by that state-chartered charter school and its students and its instructional staff training and experience index and the at-risk index of the school district in which the state-chartered charter school is geographically located. The budget shall be submitted to the [local school board] division for approval or amendment pursuant to the Public School Finance Act and the Charter Schools Act.

B. Each locally chartered charter school shall submit to the local school board a school-based budget. The budget shall be based on the projected number of program units generated by that charter school and its students, using the at-risk index and the training and experience index of the school district. The budget shall be submitted to the local school board for approval or amendment. The approval or amendment authority of the local school board relative to the charter school budget is limited to ensuring that sound fiscal practices are followed in the development of the budget and that the charter school budget is within the allotted resources. The local school board shall have no veto authority over individual line items within the charter school's proposed budget, but shall approve or disapprove the budget in its entirety. Upon final approval of the local budget by the local school board, the individual charter school budget shall be included separately in the budget submission to the department [of education] required pursuant to the Public School Finance Act and the [1999] Charter Schools Act."

Section 4. Section 22-8-7 NMSA 1978 (being Laws 1967, Chapter 16, Section 61, as amended) is amended to read:

"22-8-7. BUDGETS--FORM.--All budgets submitted to the department by a school district or state-chartered charter school shall be in a form specified by the department."

Section 5. Section 22-8-11 NMSA 1978 (being Laws 1967, Chapter 16, Section 66, as amended) is amended to read:

"22-8-11. BUDGETS--APPROVAL OF OPERATING BUDGET.--

A. The department shall:

(1) on or before July 1 of each year, approve and certify to each local school board and governing body of a state-chartered charter school an operating budget for use by the [local] school [board] district or state-chartered charter school; and

(2) make corrections, revisions and amendments to the operating budgets fixed by the local school boards or governing bodies of state-chartered charter schools and the [state superintendent] secretary to conform the budgets to the requirements of law and to the department's rules and procedures.

B. No school [board] district or state-chartered charter school or officer or employee of a school district or state-chartered charter school shall make any expenditure or incur any obligation for the expenditure of public funds unless that expenditure or obligation is made in accordance with an operating budget approved by the department. This prohibition does not prohibit the transfer of funds pursuant to the department's rules and procedures.

C. The department shall not approve and certify an operating budget of any school district or state-chartered charter school that fails to demonstrate that parental involvement in the budget process was solicited."

Section 6. Section 22-8-12 NMSA 1978 (being Laws 1967, Chapter 16, Section 67, as amended) is amended to read:

"22-8-12. OPERATING BUDGETS--AMENDMENTS.--Operating budgets shall not be altered or amended after approval and certification by the department, except for the following purposes and according to the following procedure:

A. upon written request of [any] a local school board or governing body of a state-chartered charter school, the [state superintendent] secretary may authorize transfer within the budget, or provide for items not included, when the total amount of the budget will not be increased thereby;

B. upon written request of [any] a local school board or governing body of a state-chartered charter school, the [state superintendent] secretary, in conformance with the rules of the department, may authorize an increase in any budget if the increase is necessary because of the receipt of revenue that was not anticipated at the time the budget was fixed and if the increase is directly related to a special project or program for which the additional revenue was received. The [state superintendent] secretary shall make a written report to the legislative finance committee of any such budget increase;

C. upon written request of [any] a local school board or governing body of a state-chartered charter school, the [state superintendent] secretary may authorize an increase in a budget of not more than one thousand dollars ($1,000); or

D. upon written request of [any] a local school board or governing body of a state-chartered charter school, the [state superintendent] secretary, after notice and a public hearing, may authorize an increase in a school budget in an amount exceeding one thousand dollars ($1,000). The notice of the hearing shall designate the school district [which] that proposes to alter or amend its budget, together with the time, place and date of the hearing. The notice of the hearing shall be published at least once a week for two consecutive weeks in a newspaper of general circulation in the county in which the school district is situated. The last publication of the notice shall be at least three days prior to the date set for the hearing. The charter schools division shall establish how a state-chartered charter school notifies the parents of its students of proposed increases in a charter school budget."

Section 7. Section 22-8-12.1 NMSA 1978 (being Laws 1978, Chapter 128, Section 5, as amended) is amended to read:

"22-8-12.1. MEMBERSHIP PROJECTIONS AND BUDGET

REQUESTS.--

A. Each local school board or governing body of a state-chartered charter school shall submit annually, on or before October 15, to the department:

(1) an estimate for the succeeding fiscal year of:

(a) the membership of qualified students to be enrolled in the basic program;

(b) the full-time-equivalent membership of students to be enrolled in approved early childhood education programs; and

(2) all other information necessary to calculate program costs; and

(3) any other information related to the financial needs of the school district or state-chartered charter school as may be requested by the department.

B. All information requested pursuant to Subsection A of this section shall be submitted on forms prescribed and furnished by the department and shall comply with the department's rules and procedures.

C. The department shall:

(1) review the financial needs of each school district or state-chartered charter school for the succeeding fiscal year; and

(2) submit annually, on or before November 30, to the secretary of finance and administration the recommendations of the [state board] department for:

(a) amendments to the public school finance formula;

(b) appropriations for the succeeding fiscal year to the public school fund for inclusion in the executive budget document; and

Section 8. Section 22-8-13 NMSA 1978 (being Laws 1974, Chapter 8, Section 3, as amended) is amended to read:

"22-8-13. REPORTS.--

A. Each [local school board shall require each] public school in [its] a school district [to] and each state-chartered charter school shall keep accurate records concerning membership in the public school. The superintendent of each school district or head administrator of a state-chartered charter school shall maintain the following reports for each twenty-day reporting period:

(1) the basic program MEM by grade in each public school;

(2) the early childhood education MEM;

(3) the special education MEM in each public school in class C and class D programs as defined in Section 22-8-21 NMSA 1978;

(4) the number of class A and class B programs as defined in Section 22-8-21 NMSA 1978; and

(5) the full-time-equivalent MEM for bilingual multicultural education programs.

B. The superintendent of each school district and the head administrator of each state-chartered charter school shall furnish to the department reports of the information required in Paragraphs (1) through (5) of Subsection A of this section for the first forty days of the school year. The forty-day report and all other reports required by law or by the [state board] department shall be furnished within five days of the close of the reporting period.

C. All information required pursuant to this section shall be on forms prescribed and furnished by the department. A copy of any report made pursuant to this section shall be kept as a permanent record of the school district or charter school and shall be subject to inspection and audit at any reasonable time.

D. The department shall withhold allotments of funds to any school district or state-chartered charter school where the superintendent or head administrator has failed to comply until the superintendent or head administrator complies with and agrees to continue complying with requirements of this section.

E. The provisions of this section may be modified or suspended by the department for any school district or school or state-chartered charter school operating under the Variable School Calendar Act. The department shall require MEM reports consistent with the calendar of operations of such school district or school or state-chartered charter school and shall calculate an equivalent MEM for use in projecting school district revenue."

Section 9. Section 22-8-14 NMSA 1978 (being Laws 1967, Chapter 16, Section 69, as amended) is amended to read:

"22-8-14. PUBLIC SCHOOL FUND.--

A. The "public school fund" is created.

B. [This] The public school fund shall be distributed to school districts and state-chartered charter schools in the following parts:

(1) state equalization guarantee distribution;

(2) transportation distribution; and

(3) supplemental distributions:

(a) out-of-state tuition to school districts;

(b) emergency; and

C. The distributions of the public school fund shall be made by the department within limits established by law. The balance remaining in the public school fund at the end of each fiscal year shall revert to the general fund, unless otherwise provided by law."

Section 10. Section 22-8-15 NMSA 1978 (being Laws 1967, Chapter 16, Section 70, as amended) is amended to read:

"22-8-15. ALLOCATION LIMITATION.--

A. The department shall determine the allocations to each school district and state-chartered charter school from each of the distributions of the public school fund, subject to the limits established by law.

B. The local school board in each school district with [authorized] locally chartered charter schools shall allocate the appropriate distributions of the public school fund to individual locally chartered charter schools pursuant to each locally chartered charter school's school-based budget approved by the local school board and the department. The appropriate distribution of the public school fund shall flow to the locally chartered charter school within five days after the school district's receipt of the state equalization guarantee for that month."

Section 11. Section 22-8-17 NMSA 1978 (being Laws 1974, Chapter 8, Section 7, as amended) is amended to read:

"22-8-17. PROGRAM COST DETERMINATION--REQUIRED INFORMATION.--

A. The program cost for each school district and state-chartered charter school shall be determined by the department in accordance with the provisions of the Public School Finance Act.

B. The department is authorized to require from each school district and state-chartered charter school the information necessary to make an accurate determination of the district's or state-chartered charter school's program cost."

Section 12. Section 22-8-18 NMSA 1978 (being Laws 1974, Chapter 8, Section 8, as amended) is amended to read:

"22-8-18. PROGRAM COST CALCULATION--LOCAL [SCHOOL BOARD] RESPONSIBILITY.--

A. The total program units for the purpose of computing the program cost shall be calculated by multiplying the sum of the program units itemized as Paragraphs (1) through (5) in this subsection by the instructional staff training and experience index and adding the program units itemized as Paragraphs (6) through (10) in this subsection. The itemized program units are as follows:

(1) early childhood education;

(2) basic education;

(3) special education, adjusted by subtracting the units derived from membership in class D special education programs in private, nonsectarian, nonprofit training centers;

(4) bilingual multicultural education;

(5) fine arts education;

(6) size adjustment;

(7) at-risk program;

(8) enrollment growth or new district adjustment;

(9) special education units derived from membership in class D special education programs in private, nonsectarian, nonprofit training centers; and

(10) national board for professional teaching standards certification.

B. The total program cost calculated as prescribed in Subsection A of this section includes the cost of early childhood, special, bilingual multicultural, fine arts and vocational education and other remedial or enrichment programs. It is the responsibility of the local school board or governing body of a state-chartered charter school to determine its priorities in terms of the needs of the community served by that board. Funds generated under the Public School Finance Act are discretionary to local school boards and governing bodies of state-chartered charter schools, provided that the special program needs as enumerated in this section are met."

Section 13. Section 22-8-23.1 NMSA 1978 (being Laws 1990 (1st S.S.), Chapter 3, Section 7, as amended by Laws 2003, Chapter 156, Section 1 and by Laws 2003, Chapter 386, Section 1) is amended to read:

"22-8-23.1. ENROLLMENT GROWTH PROGRAM UNITS.--

A. A school district or state-chartered charter school with an increase in MEM equal to or greater than one percent, when compared with the immediately preceding year, is eligible for additional program units. The increase in MEM shall be calculated as follows:

(Current Year MEM - Previous Year MEM)

Previous Year MEM X 100 = Percent Increase.

The number of additional program units shall be calculated as follows:

((Current Year MEM - Previous Year MEM) - (Current Year MEM x .01)) X 1.5 = Units.

B. In addition to the units calculated in Subsection A of this section, a school district or charter school with an increase in MEM equal to or greater than one percent, when compared with the immediately preceding year, is eligible for additional program units. The increase in MEM shall be calculated in the following manner:

(Current Year MEM - Previous Year MEM)

Previous Year MEM X 100 = Percent Increase.

The number of additional program units to which an eligible school district or charter school is entitled under this subsection is the number of units computed in the following manner:

(Current Year MEM - Previous Year MEM) X .50 = Units.

C. As used in this section:

(1) "current year MEM" means MEM on the fortieth day of the current year;

(2) "MEM" means the total school district or state-chartered charter school membership, including early childhood education full-time-equivalent membership and special education membership, but excluding full-day kindergarten membership for the first year that full-day kindergarten is implemented in a school pursuant to Subsection D of Section [22-2-19] 22-13-3.2 NMSA 1978; and

(3) "previous year MEM" means MEM on the fortieth day of the previous year."

Section 14. Section 22-8-23.4 NMSA 1978 (being Laws 2003, Chapter 144, Section 2 and Laws 2003, Chapter 152, Section 9) is amended to read:

"22-8-23.4. NATIONAL BOARD FOR PROFESSIONAL TEACHING STANDARDS--CERTIFIED TEACHERS PROGRAM UNITS.--The number of program units for teachers certified by the national board for professional teaching standards is determined by multiplying by one and one-half the number of teachers certified by the national board for professional teaching standards employed by the school district or state-chartered charter school on or before the fortieth day of the school year and verified by the department. Department approval of these units shall be contingent on verification by the school district or state-chartered charter school that these teachers are receiving a one-time salary differential equal to or greater than the amount generated by the units multiplied by the program unit value during the fiscal year in which the school district or state-chartered charter school will receive these units."

Section 15. A new section of the Public School Finance Act is enacted to read:

"[NEW MATERIAL] CHARTER SCHOOL STUDENT ACTIVITIES PROGRAM UNIT.--The charter school student activities program unit for a school district is determined by multiplying the number of charter school students who are participating in school district activities governed by the New Mexico activities association by the cost differential factor of 0.1. The student activities program unit shall be paid to the school district in which it is generated."

Section 16. Section 22-8-25 NMSA 1978 (being Laws 1981, Chapter 176, Section 5, as amended by Laws 2005, Chapter 176, Section 12 and by Laws 2005, Chapter 291, Section 1) is amended to read:

"22-8-25. STATE EQUALIZATION GUARANTEE DISTRIBUTION--

DEFINITIONS--DETERMINATION OF AMOUNT.--

A. The state equalization guarantee distribution is that amount of money distributed to each school district to ensure that [the school district's] its operating revenue, including its local and federal revenues as defined in this section, is at least equal to the school district's program cost. For state-chartered charter schools, the state equalization guarantee distribution is the difference between the state-chartered charter school's program cost and the two percent withheld by the department for administrative services.

B. "Local revenue", as used in this section, means seventy-five percent of receipts to the school district derived from that amount produced by a school district property tax applied at the rate of fifty cents ($.50) to each one thousand dollars ($1,000) of net taxable value of property allocated to the school district and to the assessed value of products severed and sold in the school district as determined under the Oil and Gas Ad Valorem Production Tax Act and upon the assessed value of equipment in the school district as determined under the Oil and Gas Production Equipment Ad Valorem Tax Act.

C. "Federal revenue", as used in this section, means receipts to the school district, excluding amounts that, if taken into account in the computation of the state equalization guarantee distribution, result, under federal law or regulations, in a reduction in or elimination of federal school funding otherwise receivable by the school district, derived from the following:

(1) seventy-five percent of the school district's share of forest reserve funds distributed in accordance with Section 22-8-33 NMSA 1978; and

(2) seventy-five percent of grants from the federal government as assistance to those areas affected by federal activity authorized in accordance with Title 20 of the United States Code, commonly known as "PL 874 funds" or "impact aid".

D. To determine the amount of the state equalization guarantee distribution, the department shall:

(1) calculate the number of program units to which each school district or state-chartered charter school is entitled using an average of the MEM on the eightieth and one hundred twentieth days of the prior year; or

(2) calculate the number of program units to which a school district or state-chartered charter school operating under an approved year-round school calendar is entitled using an average of the MEM on appropriate dates established by the department; or

(3) calculate the number of program units to which a school district or state-chartered charter school with a MEM of two hundred or less is entitled by using an average of the MEM on the eightieth and one hundred twentieth days of the prior year or the fortieth day of the current year, whichever is greater; and

(4) using the results of the calculations in Paragraph (1), (2) or (3) of this subsection and the instructional staff training and experience index from the October report of the prior school year, establish a total program cost of the school district or state-chartered charter school;

(5) for school districts, calculate the local and federal revenues as defined in this section;

(6) deduct the sum of the calculations made in Paragraph (5) of this subsection from the program cost established in Paragraph (4) of this subsection;

(7) deduct the total amount of guaranteed energy savings contract payments that the department determines will be made to the school district from the public school utility conservation fund during the fiscal year for which the state equalization guarantee distribution is being computed; and

(8) deduct ninety percent of the amount certified for the school district by the department pursuant to the Energy Efficiency and Renewable Energy Bonding Act [if that act becomes law pursuant to House Bill 32 or similar legislation of the first session of the forty-seventh legislature].

E. Reduction of a school district's state equalization guarantee distribution shall cease when the school district's cumulative reductions equal its proportional share of the cumulative debt service payments necessary to service the bonds issued pursuant to the Energy Efficiency and Renewable Energy Bonding Act [if that act becomes law pursuant to House Bill 32 or similar legislation of the first session of the forty-seventh legislature].

F. The amount of the state equalization guarantee distribution to which a school district is entitled is the balance remaining after the deductions made in Paragraphs (6) through (8) of Subsection D of this section.

G. The state equalization guarantee distribution shall be distributed prior to June 30 of each fiscal year. The calculation shall be based on the local and federal revenues specified in this section received from June 1 of the previous fiscal year through May 31 of the fiscal year for which the state equalization guarantee distribution is being computed. In the event that a school district or charter school has received more state equalization guarantee funds than its entitlement, a refund shall be made by the school district or charter school to the state general fund."

Section 17. Section 22-8-26 NMSA 1978 (being Laws 1967, Chapter 16, Section 76, as amended) is amended to read:

"22-8-26. TRANSPORTATION DISTRIBUTION.--

A. Money in the transportation distribution of the public school fund shall be used only for the purpose of making payments to each school district or state-chartered charter school for the to-and-from school transportation costs of students in grades kindergarten through twelve attending public school within the school district or state-chartered charter school and of three- and four-year-old children who meet the [state board] department approved criteria and definition of developmentally disabled and for transportation of students to and from their regular attendance centers and the place where vocational education programs are being offered.

B. In the event a school district's or state-chartered charter school's transportation allocation exceeds the amount required to meet obligations to provide to-and-from transportation, three- and four-year-old developmentally disabled transportation and vocational education transportation, fifty percent of the remaining balance shall be deposited in the transportation emergency fund.

C. Of the excess amount retained by the school district or state-chartered charter school, at least twenty-five percent shall be used for to-and-from transportation-related services, excluding salaries and benefits, and up to twenty-five percent may be used for other transportation-related services, excluding salaries and benefits as defined by rule of the department.

D. In the event the sum of the proposed transportation allocations to each school district or state-chartered charter school exceeds the amounts in the transportation distribution, the allocation to each school district or state-chartered charter school shall be reduced in the proportion that the [local] school district or state-chartered charter school allocation bears to the total statewide transportation distribution.

E. A local school [boards] board or governing body of a state-chartered charter school, with the approval of the state transportation director, may provide additional transportation services pursuant to Section 22-16-4 NMSA 1978 to meet established program needs.

F. Nothing in this section prohibits the use of school buses to transport the general public pursuant to the Emergency Transportation Act."

Section 18. Section 22-8-27 NMSA 1978 (being Laws 1967, Chapter 16, Section 77, as amended) is amended to read:

"22-8-27. TRANSPORTATION EQUIPMENT.--

A. The [state superintendent] department shall establish a systematic program for the purchase of necessary school bus transportation equipment.

B. In establishing a system for the replacement of school-district-owned buses, the [state superintendent] department shall provide for the replacement of school buses on a twelve-year cycle. School districts requiring additional buses to accommodate growth in the school district or to meet other special needs may petition the [state superintendent] department for additional buses. Under exceptional circumstances, school districts may also petition the [state superintendent] department for permission to replace buses prior to the completion of a twelve-year cycle or to [utilize] use buses in excess of twelve years contingent upon satisfactory annual safety inspections.

C. In establishing a system for the [utilization] use of contractor-owned buses by school districts or state-chartered charter schools, the [state superintendent] department shall establish a schedule for the payment of rental fees for the use of contractor-owned buses. [As with school-district-owned operations] The [state superintendent] department shall establish procedures to ensure the systematic replacement of buses on a twelve-year replacement cycle. School districts and state-chartered charter schools requiring additional buses to accommodate growth in the school district or state-chartered charter school or to meet other special needs may petition the [state superintendent] department for additional buses. Under exceptional circumstances, school districts or state-chartered charter schools may also petition the [state superintendent] department for permission to replace buses prior to the completion of a twelve-year cycle or to [utilize] use buses in excess of twelve years contingent upon satisfactory annual safety inspections. [Effective with the 1995-96 school year] No school district or state-chartered charter school shall pay rental fees for any one bus for a period in excess of five years. In the event a school bus service contract is terminated, the [state superintendent] department shall calculate the remaining number of years that a bus could be used based on a twelve-year replacement cycle and calculate a value reflecting that use. The [local] school district or state-chartered charter school shall deduct an amount equal to that value from any remaining amount due on the contract or if no balance remains on the contract, the contractor shall reimburse the school district or state-chartered charter school an amount equal to the value calculated."

Section 19. Section 22-8-29 NMSA 1978 (being Laws 1967, Chapter 16, Section 78, as amended) is amended to read:

"22-8-29. TRANSPORTATION DISTRIBUTIONS--REPORTS--PAYMENTS.--

A. Prior to November 15 of each year, each local school board of a school district and governing body of a state-chartered charter school shall report to the state transportation director, upon forms furnished by the state transportation director, the following information concerning the school district's or state-chartered charter school's operation on the fortieth day of school:

(1) the number and designation of school bus routes in operation in the school district;

(2) the number of miles traveled by each school bus on each school bus route, showing the route mileage in accordance with the type of road surface traveled;

(3) the number of students transported on the fortieth day of school and adjusted for special education students on December 1;

(4) the projected number of students to be transported in the next school year;

(5) the seating capacity, age and mileage of each bus used in the school district for student transportation; and

(6) the number of total miles traveled for each school district's or state-chartered charter school's per capita feeder routes.

B. Each local school board of a school district and governing body of a state-chartered charter school maintaining a school bus route shall make further reports to the state transportation director at other times specified by the state transportation director.

C. The state transportation director shall certify to the [state superintendent] secretary that the allocations from the transportation distributions to each school district and state-chartered charter school are based upon the transportation distribution formula established in the Public School Code. The allocations for the first six months of a school year shall be based upon the tentative transportation budget of the school district or state-chartered charter school for the current fiscal year. Allocations to a school district or state-chartered charter school for the remainder of the school year shall adjust the amount received by the school district or state-chartered charter school so that it equals the amount the school district or state-chartered charter school is entitled to receive for the entire school year based upon the November 15 report and subject to audit and verification.

D. The department shall make periodic installment payments to school districts and state-chartered charter schools during the school year from the transportation distributions, based upon the allocations certified by the state transportation director."

Section 20. Section 22-8-29.1 NMSA 1978 (being Laws 1995, Chapter 208, Section 10, as amended) is amended to read:

"22-8-29.1. CALCULATION OF TRANSPORTATION ALLOCATION.--

A. As used in this section:

(1) "annual variables" means the coefficients calculated by regressing the total operational expenditures from two years prior to the current school year for each school district and state-chartered charter school using the number of students transported and the numerical value of site characteristics;

(2) "base amount" means the fixed amount that is the same for all school districts and an amount established by rule for state-chartered charter schools;

(3) "total operational expenditures" means the sum of all to-and-from school transportation expenditures, excluding expenditures incurred in accordance with the provisions of Section 22-8-27 NMSA 1978; and

(4) "variable amount" means the sum of the product of the annual variables multiplied by each school district's or state-chartered charter school's numerical value of the school district's and state-chartered charter school's site characteristics multiplied by the number of days of operation for each school district or state-chartered charter school.

B. The department shall calculate the transportation allocation for each school district and state-chartered charter school.

C. The base amount is designated as product A. Product A is the constant calculated by regressing the total operations expenditures from the two years prior to the current school year for school district or state-chartered charter school operations using the numerical value of site characteristics approved by the [state board] department. The legislative education study committee and the legislative finance committee may review the site characteristics developed by the state transportation director prior to approval by the [state board] department.

D. The variable amount is designated as product B. Product B is the predicted additional expenditures for each school district or state-chartered charter school based on the regression analysis using the site characteristics as predictor variables multiplied by the number of days.

E. The allocation to each school district and state-chartered charter school shall be equal to product A plus product B.

F. For the 2001-2002, 2002-2003 and 2003-2004 school years, the transportation allocation for each school district shall not be less than ninety-five percent or more than one hundred five percent of the prior school year's transportation expenditure.

G. The adjustment factor shall be applied to the allocation amount determined pursuant to Subsections E and F of this section."

Section 21. Section 22-8-29.4 NMSA 1978 (being Laws 1995, Chapter 208, Section 13, as amended) is amended to read:

"22-8-29.4. TRANSPORTATION DISTRIBUTION ADJUSTMENT FACTOR.--

A. The [state superintendent] department shall establish a transportation distribution adjustment factor. The adjustment factor shall be calculated as follows:

(1) calculate the unadjusted transportation allocation for each school district [previously] and state-chartered charter school, designated in Section 22-8-29.1 NMSA 1978 as product A plus product B;

(2) the sum total of product A plus product B in all school districts and state-chartered charter schools added together equals product C; and

(3) subtract product C from the total operational transportation distribution for the current year and divide the result by product C and then add 1 in the following manner:

"[(total operational transportation distribution - C) ÷ C] + 1". The result is the transportation distribution adjustment factor.

B. As used in this section, "total operational transportation distribution" means the total legislative appropriation for the transportation distribution minus amounts included for capital outlay expenses."

Section 22. Section 22-8-30 NMSA 1978 (being Laws 1974, Chapter 8, Section 17, as amended) is amended to read:

"22-8-30. SUPPLEMENTAL DISTRIBUTIONS.--

A. The [state superintendent] department shall make supplemental distributions only for the following purposes:

(1) to pay the out-of-state tuition of students subject to the Compulsory School Attendance Law who are attending school out-of-state because school facilities are not reasonably available in the school district of their residence;

(2) to make emergency distributions to school districts or state-chartered charter schools in financial need, but no money shall be distributed to any school district or state-chartered charter school having cash and invested reserves, or other resources or any combination thereof, equaling five percent or more of the school district's or state-chartered charter school's operational budget;

(3) to make program enrichment distributions in the amount of actual program expense to school districts and state-chartered charter schools for the purpose of providing specific programs to meet particular educational requirements that cannot otherwise be financed;

(4) a special vocational education distribution to area vocational schools or state-supported schools with [state board] department-approved vocational programs to reimburse those schools for the cost of vocational education programs for those students subject to the Compulsory School Attendance Law who are enrolled in such programs; and

(5) to make emergency capital outlay distributions to school districts or state-chartered charter schools that have experienced an unexpected capital outlay emergency demanding immediate attention.

B. The [state superintendent] department shall account for all supplemental distributions and shall make full reports to the governor, legislative education study committee and legislative finance committee of payments made as authorized in Subsection A of this section.

C. The [state superintendent] department may divert any unused or unneeded balances in any of the distributions made under the supplementary distribution authority to make any other distribution made pursuant to the same authority."

Section 23. Section 22-8-38 NMSA 1978 (being Laws 1967, Chapter 16, Section 96, as amended) is amended to read:

"22-8-38. BOARDS OF FINANCE--DESIGNATION.--

A. Upon written application to and approval of the [state superintendent, any] department, a local school board may be designated a board of finance for public school funds of the school district. [Any] A local school board designated as a board of finance may require all funds distributed to, allocated to or collected for the school district or the public schools under its jurisdiction to be deposited with it. The [state superintendent] department shall designate a local school board as a board of finance if:

[A.] (1) the local school board shows to the satisfaction of the [state superintendent] department that it has personnel properly trained to keep accurate and complete fiscal records;

[B.] (2) the local school board agrees to consult with the [state superintendent] department on any matters not covered by the manual of accounting and budgeting before taking any action relating to funds held by it as a board of finance;

[C.] (3) the persons handling these funds are adequately bonded to protect the funds entrusted to them from loss; and

[D.] (4) the local school board making application has not been suspended and not reinstated as a board of finance within the past year.

B. A charter school applicant requesting a charter from the commission shall submit a plan detailing how its governing body will qualify for designation as a board of finance for public school funds of the charter school. The governing body of a proposed state-chartered charter school shall qualify as a board of finance before the first year of operation of the charter school. The governing body of a state-chartered charter school designated as a board of finance may require all funds distributed to, allocated to or collected for the state-chartered charter school to be deposited with the governing body. The commission shall designate the governing body of a state-chartered charter school as a board of finance if:

(1) the governing body shows to the satisfaction of the commission that it has personnel properly trained to keep accurate and complete fiscal records;

(2) the governing body agrees to consult with the division on any matters not covered by the manual of accounting and budgeting before taking any action relating to funds held by it as a board of finance;

(3) the persons handling these funds are adequately bonded to protect the funds entrusted to them from loss; and

(4) the governing body was not a governing body of a charter school or does not have a member who was a member of a governing body of a charter school that was suspended and not reinstated as a board of finance.

C. Failure of the governing body of a proposed state-chartered charter school to qualify for designation as a board of finance constitutes good and just grounds for denial, nonrenewal or revocation of its charter."

Section 24. Section 22-8-39 NMSA 1978 (being Laws 1967, Chapter 16, Section 97, as amended) is amended to read:

"22-8-39. BOARDS OF FINANCE--SUSPENSION.--The [state superintendent] department may at any time suspend a local school board or governing body of a state-chartered charter school from acting as a board of finance if [he] the department reasonably believes there is mismanagement, improper recording or improper reporting of public school funds under [its] the local school board's or governing body of a state-chartered charter school's control. When a local school board or governing body of a state-chartered charter school is suspended from acting as a board of finance, the [state superintendent] department shall:

A. immediately take control of all public school funds under the control of the local school board or governing body of a state-chartered charter school acting as a board of finance;

B. immediately have an audit made of all funds under the control of the local school board or governing body of a state-chartered charter school acting as a board of finance and charge the cost of the audit to the school district or state-chartered charter school;

C. act as a fiscal agent for the school district or state-chartered charter school and take any action necessary to conform the fiscal management of funds of the school district or state-chartered charter school to the requirements of law and good accounting practices;

D. report any violations of the law to the proper law enforcement officers;

E. act as fiscal agent for the school district or state-chartered charter school until [he] the department determines that the local school board or governing body of a state-chartered charter school is capable of acting as a board of finance or until [he] the department determines that the county treasurer should act as fiscal agent for the school district [and] or state-chartered charter school;

F. inform the local school board or governing body of a state-chartered charter school in writing of [his] the department's determination as to who is to act as board of finance or fiscal agent for the school district or state-chartered charter school and also inform the county treasurer in writing if [he] it determines that the county treasurer should act as fiscal agent for the school district or state-chartered charter school; and

G. consider commencing proceedings before the commission to suspend, revoke or refuse to renew the charter of the state-chartered charter school in the case of a state-chartered charter school that has engaged in serious or repeated mismanagement, improper recording or improper reporting of public school funds under its control."

Section 25. Section 22-8-40 NMSA 1978 (being Laws 1977, Chapter 136, Section 2, as amended) is amended to read:

"22-8-40. DEPOSIT OF PUBLIC SCHOOL FUNDS--DISTRIBUTION--INTEREST.--

A. All public money in the custody of [local school boards which] school districts or state-chartered charter schools that have been designated as boards of finance shall be deposited in qualified depositories in accordance with the terms of this section.

B. Deposits of funds of the [local] school district or state-chartered charter school may be made in noninterest-bearing checking accounts in one or more banks, savings and loan associations or credit unions, as long as the credit union deposits are insured by an agency of the United States, located within the geographical limits of the school district.

C. Deposits of funds of the [local] school district or state-chartered charter school may be made in interest-bearing checking accounts, commonly known as "NOW" accounts, in one or more banks, savings and loan associations or credit unions, as long as the credit union deposits are insured by an agency of the United States, located within the geographical limits of the school district.

D. Public money placed in interest-bearing deposits, in banks and savings and loan associations, other than interest-bearing checking accounts as defined in Subsection C of this section, shall be equitably distributed among all banks and savings and loan associations having their main or manned branch offices within the geographical boundaries of the [local] school district [which] that have qualified as public depositories by reason of insurance of the account by an agency of the United States or by depositing collateral security or by giving bond as provided by law in the proportion that each such bank's or savings and loan association's net worth bears to the total net worth of all banks and savings and loan associations having their main office or a manned branch office within the geographical boundaries of the school district. The net worth of the main office of a savings and loan association and its manned branch offices within the geographical boundaries of a school district is the total net worth of the association multiplied by the percentage that deposits of the main office and the manned branch offices located within the geographical boundaries of the school district are of the total deposits of the association. The net worth of each manned branch office or aggregate of manned branch offices of a savings and loan association located outside the geographical boundaries of the school district in which the main office is located is the total net worth of the association multiplied by the percentage that deposits of the branch or aggregate of branches located outside the geographical boundaries of the school district in which the main office is located are of the total deposits of the association. The director of the financial institutions division of the regulation and licensing department shall promulgate a formula for determining the net worth of banks' main offices and branches for the purposes of distribution of public money as provided for by this section. "Net worth" means assets less liabilities as reported by such banks and savings and loan associations on their most recent semiannual reports to the state or federal supervisory authority having jurisdiction.

E. Notwithstanding the provisions of Subsection D of this section, public money may be placed in interest-bearing deposits, other than interest-bearing checking accounts as defined in Subsection C of this section, at the discretion of the board of finance, in credit unions having their main or manned branch offices within the geographical boundaries of the [local] school district to the extent such deposits are insured by an agency of the United States.

F. The rate of interest for all public money deposited in interest-bearing accounts in banks, savings and loan associations and credit unions shall be set by the state board of finance, but in no case shall the rate of interest be less than one hundred percent of the asked price on United States treasury bills of the same maturity on the date of deposit. Any bank or savings and loan association that fails to pay the minimum rate of interest at the time of deposit provided for herein for any respective deposit forfeits its right to an equitable share of that deposit under this section.

If the deposit is part or all of the proceeds of a bond issue and the interest rate prescribed in this subsection materially exceeds the rate of interest of the bonds, the interest rate prescribed by this subsection shall be reduced on the deposit to an amount not materially exceeding the interest rate of the bonds if the bond issue would lose its tax exempt status under Section 103 of the United States Internal Revenue Code of 1954, as amended.

G. Public money in excess of that for which banks and savings and loan associations within the geographical boundaries of the [local] school district have qualified may be deposited in qualified depositories, including credit unions, in other areas within the state under the same requirements for payment of interest as if the money were deposited within the geographical boundaries of the [local] school district.

H. The board of finance of the school district or state-chartered charter school may temporarily invest money held in demand deposits and not immediately needed for the operation of the school district or state-chartered charter school. Such temporary investments shall be made only in securities [which] that are issued by the state or by the United States government, or by their departments or agencies, and [which] that are either direct obligations of the state or the United States or are backed by the full faith and credit of those governments.

I. The department of finance and administration may monitor the deposits of public money by [local school boards] school districts or state-chartered charter schools to assure full compliance with the provisions of this section."

Section 26. Section 22-8B-1 NMSA 1978 (being Laws 1999, Chapter 281, Section 1, as amended) is amended to read:

"22-8B-1. SHORT TITLE.--Chapter 22, Article 8B NMSA 1978 may be cited as the "[1999] Charter Schools Act"."

Section 27. Section 22-8B-2 NMSA 1978 (being Laws 1999, Chapter 281, Section 2) is amended to read:

"22-8B-2. DEFINITIONS.--As used in the [1999] Charter Schools Act:

A. "charter school" means a conversion school or start-up school [within a school district authorized by the local school board to operate as a charter school] authorized by the chartering authority to operate as a public school;

B. "chartering authority" means either a local school board or the commission;

C. "commission" means the public education commission;

[B.] D. "conversion school" means an existing public school within a school district that was authorized by [the] a local school board to become a charter school prior to July 1, 2007;

E. "division" means the charter schools division of the department;

[C.] F. "governing body" means the governing structure of a charter school as set forth in the school's charter; and

[D.] G. "start-up school" means a public school developed by one or more parents, teachers or community members authorized by the [local school board of the school district in which the school is located] chartering authority to become a charter school."

Section 28. Section 22-8B-3 NMSA 1978 (being Laws 1999, Chapter 281, Section 3) is amended to read:

"22-8B-3. PURPOSE.--The [1999] Charter Schools Act is enacted to enable individual schools to [restructure] structure their educational curriculum to encourage the use of different and innovative teaching methods that are based on reliable research and effective practices or have been replicated successfully in schools with diverse characteristics; to allow the development of different and innovative forms of measuring student learning and achievement; to address the needs of all students, including those determined to be at risk; to create new professional opportunities for teachers, including the opportunity to be responsible for the learning program at the school site; to improve student achievement; to provide parents and students with an educational alternative to create new, innovative and more flexible ways of educating children within the public school system; to encourage parental and community involvement in the public school system; to develop and use site-based budgeting; and to hold charter schools accountable for meeting [state board minimum] the department's educational standards and fiscal requirements."

Section 29. A new section of the Charter Schools Act is enacted to read:

"[NEW MATERIAL] PUBLIC EDUCATION COMMISSION--POWERS AND DUTIES.--The commission shall receive applications for initial chartering and renewals of charters for charter schools that want to be chartered by the state and approve or disapprove those charter applications. The commission may approve, deny, suspend or revoke the charter of a state-chartered charter school in accordance with the provisions of the Charter Schools Act. The chartering authority for a charter school existing on July 1, 2007 may be transferred to the commission; provided, however, that if a school chartered under a previous chartering authority chooses to transfer its chartering authority, it shall continue to operate under the provisions of that charter until its renewal date unless it is suspended or revoked by the commission. An application for a charter school filed with a local school board prior to July 1, 2007, but not approved, may be transferred to the commission on July 1, 2007."

Section 30. A new section of the Charter Schools Act is enacted to read:

"[NEW MATERIAL] CHARTER SCHOOLS DIVISION--DUTIES.--The "charter schools division" is created in the department. The division shall:

A. provide staff support to the commission;

B. provide technical support to all charter schools;

C. review and approve state-chartered charter school budget matters; and

D. make recommendations to the commission regarding the approval, denial, suspension or revocation of the charter of a state-chartered charter school."

Section 31. Section 22-8B-4 NMSA 1978 (being Laws 1999, Chapter 281, Section 4, as amended) is amended to read:

"22-8B-4. CHARTER SCHOOLS' RIGHTS AND RESPONSIBILITIES--OPERATION.--

A. A charter school shall be subject to all federal and state laws and constitutional provisions prohibiting discrimination on the basis of disability, race, creed, color, gender, national origin, religion, ancestry or need for special education services.

B. A charter school shall be governed by a governing body in the manner set forth in the charter; provided that a governing body shall have at least five members; and provided further that no member of a governing body for a charter school that is initially approved on or after July 1, 2005 or whose charter is renewed on or after July 1, 2005 shall serve on the governing body of another charter school.

C. A charter school shall be responsible for: (1) its own operation, including preparation of a budget, subject to audits pursuant to the Audit Act; and

(2) contracting for services and personnel matters.

D. A charter school may contract with a school district, a university or college, the state, another political subdivision of the state, the federal government or one of its agencies, a tribal government or any other third party for the use of a facility, its operation and maintenance and the provision of any service or activity that the charter school is required to perform in order to carry out the educational program described in its charter [provided that]. Facilities used by a charter school shall meet the standards required pursuant to Section 22-8B-4.2 NMSA 1978.

E. A conversion school chartered before July 1, 2007 may choose to continue using the school district facilities and equipment it had been using prior to conversion, subject to the provisions of Subsection F of this section.

F. [A] The school district in which a charter school is geographically located shall provide a charter school with available facilities for the school's operations unless the facilities are currently used for other educational purposes. A charter school shall not be required to pay rent for the school district facilities if the facilities can be provided at no cost to the school district. If facilities are available but cannot be provided at no cost to the school district, the school district shall not charge more than the actual direct cost of providing the facilities. As used in this subsection, "other educational purposes" includes health clinics, daycare centers, teacher training centers, school district administration functions and other ancillary services related to a school district's functions and operations.

G. A locally chartered charter school may pay the costs of operation and maintenance of its facilities or may contract with the school district to provide facility operation and maintenance services.

H. Locally chartered charter school facilities are eligible for state and local capital outlay funds and shall be included in the school district's five-year facilities plan.

I. A locally chartered charter school shall negotiate with a school district to provide transportation to students eligible for transportation under the provisions of the Public School Code. The school district, in conjunction with the charter school, may establish a limit for student transportation to and from the charter school site not to extend beyond the school district boundary.

J. A charter school shall be a nonsectarian, nonreligious and non-home-based public school. [that operates within a school district]

K. Except as otherwise provided in the Public School Code, a charter school shall not charge tuition or have admission requirements.

L. With the approval of the [school district] chartering authority, a single charter school may maintain separate facilities at two or more locations within the same school district; but, for purposes of calculating program units pursuant to the Public School Finance Act, the separate facilities shall be treated together as one school.

M. A charter school shall be subject to the provisions of Section 22-2-8 NMSA 1978 and the Assessment and Accountability Act.

N. Within constitutional and statutory limits, a charter school may acquire and dispose of property; provided that, upon termination of the charter, all assets of the charter school shall revert to the [local school board] state.

O. The governing body of a charter school may accept or reject any charitable gift, grant, devise or bequest; provided that no such gift, grant, devise or bequest shall be accepted if subject to any condition contrary to law or to the terms of the charter. The particular gift, grant, devise or bequest shall be considered an asset of the charter school to which it is given.

P. [A charter school] The governing body may contract and sue and be sued. A local school board [that approves a charter school] shall not be liable for any acts or omissions of the charter school.

Q. A charter school shall comply with all state and federal health and safety requirements applicable to public schools, including those health and safety codes relating to educational building occupancy.

R. A charter school is a public school that may contract with a school district or other party for provision of financial management, food services, transportation, facilities, education-related services or other services. The governing body shall not contract with a for-profit entity for the management of the charter school.

S. To enable state-chartered charter schools to submit required data to the department, an accountability data system shall be maintained by the department.

T. A charter school shall comply with all applicable state and federal laws and rules related to providing special education services. Charter school students with disabilities and their parents retain all rights under the federal Individuals with Disabilities Education Act and its implementing state and federal rules. Each charter school is responsible for identifying, evaluating and offering a free appropriate public education to all eligible children who are accepted for enrollment in that charter school. The state-chartered charter school, as a local educational agency, shall assume responsibility for determining students' needs for special education and related services. The division may promulgate rules to implement the requirements of this subsection."

Section 32. Section 22-8B-5 NMSA 1978 (being Laws 1999, Chapter 281, Section 5) is amended to read:

"22-8B-5. CHARTER SCHOOLS--STATUS--LOCAL SCHOOL BOARD AUTHORITY [STATE BOARD AUTHORITY].--

A. The local school board may waive only locally imposed school district requirements for locally chartered charter schools.

B. A state-chartered charter school is exempt from school district requirements. A state-chartered charter school is responsible for developing its own written policies and procedures in accordance with this section.

[B. The state board shall waive requirements relating to individual class load and teaching load, length of the school day, staffing patterns, subject areas and the purchase of instructional material. The state board may]

C. The department shall waive [state board] requirements or rules and provisions of the Public School Code pertaining to [graduation requirements] individual class load, teaching load, length of the school day, staffing patterns, subject areas, purchase of instructional material, evaluation standards for school personnel, school principal duties and driver education. The department may waive requirements or rules and provisions of the Public School Code pertaining to graduation requirements. Any waivers granted pursuant to this section shall be for the term of the charter granted but may be suspended or revoked earlier by the department.

[C.] D. A charter school shall be a public school accredited by the [state board] department and shall be accountable to the [school district's local school board] chartering authority for purposes of ensuring compliance with applicable laws, rules and charter provisions.

[D. No] E. A local school board shall not require any employee of the school district to be employed in a charter school.

[E. No] F. A local school board shall not require any student residing within the geographic boundary of its district to enroll in a charter school.

[F.] G. A student who is suspended or expelled from a locally chartered charter school shall be deemed to be suspended or expelled from the school district in which the student resides."

Section 33. Section 22-8B-6 NMSA 1978 (being Laws 1998, Chapter 281, Section 6, as amended) is amended to read:

"22-8B-6. CHARTER SCHOOL REQUIREMENTS--APPLICATION PROCESS--AUTHORIZATION--BOARD OF FINANCE DESIGNATION REQUIRED.--

A. A local school board has the authority to approve the establishment of a charter school within the school district in which it is located.

B. At least one hundred eighty days prior to initial application, the organizers of a proposed charter school shall provide written notification to the commission and the school district in which the charter school is proposed to be located of intent to establish a charter school. Failure to notify may result in an application not being accepted.

C. A charter school applicant shall apply to either a local school board or the commission for a charter. [An applicant shall only submit an application in the district in which the school is located.] If an application is submitted to a chartering authority, it must process the application. Applications for initial charters shall be submitted by July 1 to be eligible for consideration for the following fiscal year; provided that the July 1 deadline may be waived upon agreement of the applicant and the [local school board] chartering authority.

D. An application shall include the total number of grades the charter school proposes to provide, either immediately or phased. A charter school may decrease the number of grades it eventually offers, but it shall not increase the number of grades or the total number of students proposed to be served in each grade.

[C.] E. An application shall include a [request] detailed description of the charter school's projected capital outlay needs, including projected requests for capital outlay [funding] assistance.

[D.] F. An application for a start-up school may be made by one or more teachers, parents or community members or by a public post-secondary educational institution or nonprofit organization. Municipalities, counties, private post-secondary educational institutions and for-profit business entities are not eligible to apply for or receive a charter.

G. An initial application for a charter school shall not be made after June 30, 2007 if the proposed charter school's proposed enrollment for all grades would equal or exceed ten percent of the total MEM of the school district in which the charter school will be geographically located and that school district has a total enrollment of not more than one thousand three hundred students.

H. An initial application for a charter school shall not be made after June 30, 2007 if the proposed charter school's proposed enrollment for all grades would equal or exceed ten percent of the total MEM of the school district in which the charter school will be geographically located and that school district has a total enrollment of not more than one thousand tree hundred students.

I. A state-chartered charter school shall not be approved for operation unless its governing body has qualified to be a board of finance.

[E. An application for a conversion school shall include a petition of support signed by no less than sixty-five percent of the employees in the school. Additionally, a petition in support of the charter school signed by a majority of the households whose children are enrolled in a proposed conversion school shall accompany the application.

F.] J. The [local school board] chartering authority shall receive and review all applications for charter schools submitted to it. The [local school board] chartering authority shall not charge application fees. [If the board finds the charter school application is incomplete, the board shall request the necessary information from the charter school applicant.

G.] K. The [local school board] chartering authority shall hold at least one public meeting in the school district in which the charter school is proposed to be located to obtain information and community input to assist [the local school board] it in its decision whether to grant a charter school application. Community input may include written or oral comments in favor of or in opposition to the application from the applicant, the local community and, for state-chartered charter schools, the local school board and school district in whose geographical boundaries the charter school is proposed to be located. The [local school board] chartering authority shall rule on the application for a charter school in a public meeting within sixty days after receiving the application. If not ruled upon within sixty days, the charter application shall be automatically reviewed by the secretary in accordance with the provisions of Section 22-8B-7 NMSA 1978. The charter school applicant and the [local school board] chartering authority may, however, jointly waive the deadlines set forth in this section.

[H. If the local school board denies a charter school application or imposes conditions that are unacceptable to the charter school applicant, the charter school applicant may appeal the decision to the secretary pursuant to Section 22-8B-7 NMSA 1978.]

L. A chartering authority may approve, approve with conditions or deny an application. A chartering authority may deny an application if:

(1) the application is incomplete or inadequate;

(2) the application does not propose to offer an educational program consistent with the requirements and purposes of the Charter Schools Act;

(3) the proposed head administrator or other administrative or fiscal staff was involved with another charter school whose charter was denied or revoked for fiscal mismanagement or the proposed head administrator or other administrative or fiscal staff was discharged from a public school for fiscal mismanagement;

(4) for a proposed state-chartered charter school, it does not request to have the governing body of the charter school designated as a board of finance or the governing body does not qualify as a board of finance; or

(5) the application is otherwise contrary to the best interests of the charter school's projected students, the local community or the school district in whose geographic boundaries the charter school applies to operate.

[I.] M. If [a local school board] the chartering authority denies a charter school application or approves the application with conditions, it shall state its reasons for the denial or conditions in writing within fourteen days of the meeting. If [a local school board] the chartering authority grants a charter, [it shall send a copy of the approved charter to the department within fifteen days after granting the charter] the approved charter shall be provided to the applicant together with any imposed conditions.

N. A charter school that has received a notice from the chartering authority denying approval of the charter shall have a right to a hearing by the secretary as provided in Section 22-8B-7 NMSA 1978."

Section 34. Section 22-8B-7 NMSA 1978 (being Laws 1999, Chapter 281, Section 7, as amended) is amended to read:

"22-8B-7. [CHARTER SCHOOL APPLICATION] APPEAL OF DENIAL, NONRENEWAL, SUSPENSION OR REVOCATION--[APPEAL] PROCEDURES.--

A. The secretary, upon receipt of a notice of appeal or upon the secretary's own motion, shall review decisions of [a local school board] a chartering authority concerning charter schools in accordance with the provisions of this section.

B. A charter applicant or governing body that wishes to appeal a decision of [a local school board] the chartering authority concerning the denial, nonrenewal, suspension or revocation of a charter school or the imposition of conditions that are unacceptable to the charter school or charter school applicant shall provide the secretary with a notice of appeal within thirty days after the [local school board's] chartering authority's decision. The charter school applicant or governing body bringing the appeal shall limit the grounds of the appeal to the grounds for denial, nonrenewal, suspension or revocation or the imposition of conditions that were specified by the [local school board] chartering authority. The notice shall include a brief statement of the reasons the charter school applicant or governing body contends the [local school board's] chartering authority's decision was in error. Except as provided in Subsection E of this section, the appeal and review process shall be as follows [(1)] within sixty days after receipt of the notice of appeal, the secretary, at a public hearing that may be held in the school district in which the charter school is located or in which the proposed charter school has applied for a charter, shall review the decision of the [local school board] chartering authority and make findings. If the secretary finds that the [local school board's decision was contrary to the best interests of the students, school district or community, the secretary shall remand the decision to the local school board with written instructions for approval of the charter. The instructions shall include specific recommendations concerning approval of the charter] chartering authority acted arbitrarily or capriciously, rendered a decision not supported by substantial evidence or did not act in accordance with law, the secretary may reverse the decision of the chartering authority and order the approval of the charter with or without conditions. The decision of the secretary shall be final [and not subject to appeal; and

(2) within thirty days following the remand of a decision by the secretary, the local school board, at a public hearing, shall approve the charter].

C. The secretary, on the secretary's own motion, may review a [local school board's] chartering authority's decision to grant a charter. Within sixty days after the making of a motion to review by the secretary, the secretary, at a public hearing that may be held in the school district in which the proposed charter school that has applied for a charter will be located, shall review the decision of the [local school board] chartering authority and determine whether the decision was arbitrary or capricious or whether the establishment or operation of the proposed charter school would:

(1) violate any federal or state laws concerning civil rights;

(2) violate any court order; or

(3) threaten the health and safety of students within the school district [or

(4) violate the provisions of Section

22-8B-11 NMSA 1978, prescribing the permissible number of charter schools].

D. If the secretary determines that the charter would violate the provisions set forth in Subsection C of this section, the secretary shall [remand the decision back to the local school board with instructions to] deny the charter application. The secretary may extend the time lines established in this section for good cause. The decision of the secretary shall be final [and not subject to appeal].

E. If a [local school board] chartering authority denies an application or refuses to renew a charter because the public school capital outlay council has determined that the facilities do not meet the standards required by Section 22-8B-4.2 NMSA 1978, the charter school applicant or charter school may appeal the decision to the secretary as otherwise provided in this section; provided that the secretary shall reverse the decision of the [local school board] chartering authority only if the secretary determines that the decision was arbitrary, capricious, not supported by substantial evidence or otherwise not in accordance with the law.

F. A person aggrieved by a final decision of the secretary may appeal the decision to the district court pursuant to the provisions of Section 39-3-1.1 NMSA 1978."

Section 35. Section 22-8B-8 NMSA 1978 (being Laws 1999, Chapter 281, Section 8) is amended to read:

"22-8B-8. CHARTER APPLICATION--CONTENTS.--The charter school application [whether] for a start-up school [or a conversion school] shall be a proposed agreement between the [local school board] chartering authority and the charter school and shall include:

A. the mission statement of the charter school;

B. the goals, objectives and student performance standards to be achieved by the charter school;

C. a description of the charter school's educational program, student performance standards and curriculum that must meet or exceed the [state board of education's] department's educational standards and must be designed to enable each student to achieve those standards;

D. a description of the way a charter school's educational program will meet the individual needs of the students, including those students determined to be at risk;

E. a description of the charter school's plan for evaluating student performance, the types of assessments that will be used to measure student progress toward achievement of the state's standards and the school's student performance standards, the time line for achievement of the standards and the procedures for taking corrective action in the event that student performance falls below the standards;

F. evidence that the plan for the charter school is economically sound, including a proposed budget for the term of the charter and a description of the manner in which the annual audit of the financial and administrative operations of the charter school is to be conducted;

G. evidence that the fiscal management of the charter school complies with all applicable federal and state laws and [regulations] rules relative to fiscal procedures;

H. evidence of a plan for the displacement of students, teachers and other employees who will not attend or be employed in the conversion school;

I. a description of the governing body and operation of the charter school, including:

(1) how the initial governing body will be selected;

(2) qualification and terms of members, how vacancies on the governing body will be filled and procedures for changing governing body membership; and

(3) the nature and extent of parental, professional educator and community involvement in the governance and operation of the school [and the relationship between the governing body and the local school board];

J. an explanation of the relationship that will exist between the proposed charter school and its employees, including evidence that the terms and conditions of employment will be addressed with affected employees and their recognized representatives, if any;

K. the employment and student discipline policies of the proposed charter school;

L. for a locally chartered charter school, an agreement between the charter school and the local school board regarding their respective legal liability and applicable insurance coverage;

M. a description of how the charter school plans to meet the transportation and food service needs of its students;

N. a description of the waivers that the charter school is requesting from the local school board and the [state board] department and the charter school's plan for addressing these waiver requests;

O. a description of the facilities the charter school plans to use; and

P. any other information reasonably required by the [local school board] chartering authority."

Section 36. Section 22-8B-9 NMSA 1978 (being Laws 1999, Chapter 281, Section 9) is amended to read:

"22-8B-9. CHARTER SCHOOL--CONTRACT CONTENTS--RULES.--

A. An approved charter application [shall be] is a contract between the charter school and the [local school board] chartering authority.

B. The [contract between the charter school and the local school board] charter shall reflect all agreements regarding the release of the charter school from [school district] department rules and policies.

C. For locally chartered charter schools, the contract between the charter school and the local school board shall reflect all requests for release of the charter school from [state board] department rules or the Public School Code. Within ten days after the contract is approved by the local school board, any request for release from [state board] department rules or the Public School Code shall be delivered by the local school board to the [state board] department. If the [state board] department grants the request, it shall notify the local school board and the charter school of its decision. If the [state board] department denies the request, it shall notify the local school board and the charter school that the request is denied and specify the reasons for denial.

D. Upon approval of the charter, [by the local school board, the charter school shall be waived from] the Public School Code provisions relating to [individual class load and] teaching load requirements, length of school day, staffing patterns, subject areas and purchase of instructional materials may be waived.

E. The charter school shall participate in the public school insurance authority.

F. Any revision or amendment to the terms of the [contract may] charter shall be made only with the approval of the [local school board] chartering authority and the governing body of the charter school.

G. For locally chartered charter schools, the charter shall include procedures agreed upon by the charter school and the local school board for the resolution of disputes between the charter school and the local school board. [H.] The charter shall include procedures that shall be agreed upon by the charter school and the local school board in the event that [such] the board determines that the charter shall be revoked pursuant to the provisions of Section [12 of the 1999 Charter Schools Act] 22-8B-12 NMSA 1978."

Section 37. Section 22-8B-10 NMSA 1978 (being Laws 1999, Chapter 281, Section 10) is amended to read:

"22-8B-10. CHARTER SCHOOLS--[EMPLOYEE OPTIONS--HIRING AND FIRING] EMPLOYEES.--

A. [Notwithstanding the provisions of Section 22-5-4 NMSA 1978] A charter school shall hire its own employees. The provisions of the School Personnel Act shall [otherwise] apply to such employees; provided, however, that a charter school may determine by indicating in its charter that either its governing body or head administrator shall make all employment decisions. The governing body shall be deemed to be responsible for making all employment decisions if the charter does not specify the decision maker.

[B. An employee of a conversion school who was previously an employee of the school district in which the conversion school is located shall be considered to be on a one-year leave of absence from the school district. The leave of absence shall commence on the initial date of employment for the charter school. Upon request of the employee, the one-year leave of absence shall be renewed for up to two additional one-year periods, absent good cause.

C. The time during which an employee is on a leave of absence shall be counted for longevity credit on the school district's salary schedule.

D. During the period of time that an employee is on a leave of absence from the school district and is actively employed by the charter school, the charter school shall continue the retirement or other benefits previously granted to the employee.

E. A leave of absence shall not be considered a break in service with the school district with which an employee was previously employed.

F. An employee who is on a leave of absence and actively teaching at a charter school and who submits a notice of intent to return to the school district in which the employee was employed immediately prior to employment in the charter school shall be given employment preference by the school district if:

(1) the employee's notice of intent to return is submitted to the school district within three years after ceasing employment with the school district; and

(2) if the employee is a teacher, a position for which the teacher is certified or is qualified to become certified is available. If the employee is not a teacher, a position for which the employee is qualified is available.

G. An employee who is on leave of absence and employed by a charter school and is discharged or terminated for just cause by the charter school shall be considered discharged or terminated by the school district.]

B. A charter school shall not initially employ or approve the initial employment of a head administrator who is the spouse, father, father-in-law, mother, mother-in-law, son, son-in-law, daughter or daughter-in-law of a member of the governing body. A charter school shall not initially employ or approve the initial employment of a licensed school employee who is the spouse, father, father-in-law, mother, mother-in-law, son, son-in-law, daughter or daughter-in-law of the head administrator. The governing body may waive the nepotism rule for family members of a head administrator.

C. Nothing in this section shall prohibit the continued employment of a person employed on or before July 1, 2007."

Section 38. Section 22-8B-11 NMSA 1978 (being Laws 1999, Chapter 281, Section 11) is amended to read:

"22-8B-11. CHARTER SCHOOLS--MAXIMUM NUMBER ESTABLISHED.--

A. [Local school boards] The commission shall authorize the approval of [both conversion and] start-up charter schools [within their school districts].

B. No more than fifteen start-up schools [and five conversion schools] may be established per year statewide. The number of charter school slots remaining in that year shall be transferred to succeeding years up to a maximum of seventy-five start-up schools [and twenty-five conversion schools] in any five-year period. [The state board shall promptly notify the local school board of each school district when the limits set forth in this section have been reached.]"

Section 39. Section 22-8B-12 NMSA 1978 (being Laws 1999, Chapter 281, Section 12, as amended) is amended to read:

"22-8B-12. CHARTER SCHOOLS--TERM--RENEWAL OF CHARTER--GROUNDS FOR NONRENEWAL OR REVOCATION.--

A. A charter school may be approved for an initial term of six years; provided that the first year shall be used exclusively for planning and not for completing the application. A charter may be renewed for successive periods of five years each. Approvals of less than five years may be agreed to between the charter school and the [local school board] chartering authority.

B. Prior to the end of the planning year, the charter school shall demonstrate that its facilities meet the requirements of Section 22-8B-4.2 NMSA 1978.

C. Prior to the end of the planning year, a state-chartered charter school shall demonstrate that it has qualified as a board of finance and has satisfied any conditions imposed by the commission before commencing full operation for the remainder of its charter term. The commission shall either issue or refuse to issue the authorization to commence full operation within twenty-one days of the request. If the commission refuses to issue the authorization, it shall provide its reasons in writing to the charter school.

[C.] D. No later than [January 1 of the year prior to the year] two hundred seventy days prior to the date in which the charter expires, the governing body may submit a renewal application to the [local school board] chartering authority. A charter school may apply to a different chartering authority for renewal. The [local school board] chartering authority shall rule in a public hearing on the renewal application no later than [March 1 of the fiscal year in which the charter expires, or on a mutually agreed-upon date] one hundred eighty days prior to the expiration of the charter.

[D.] E. A charter school renewal application submitted to the [local school board] chartering authority shall contain:

(1) a report on the progress of the charter school in achieving the goals, objectives, student performance standards, state minimum educational standards and other terms of the initial approved charter application, including the accountability requirements set forth in the Assessment and Accountability Act;

(2) a financial statement that discloses the costs of administration, instruction and other spending categories for the charter school that is understandable to the general public, that allows comparison of costs to other schools or comparable organizations and that is in a format required by the department;

(3) contents of the charter application set forth in Section 22-8B-8 NMSA 1978;

(4) a petition in support of the charter school renewing its charter status signed by not less than sixty-five percent of the employees in the charter school;

(5) a petition in support of the charter school renewing its charter status signed by [a majority] at least seventy-five percent of the households whose children are enrolled in the charter school; and

(6) a description of the charter school facilities and assurances that the facilities are in compliance with the requirements of Section 22-8B-4.2 NMSA 1978.

[E.] F. A charter may be suspended, revoked or not renewed by the [local school board] chartering authority if the [board] chartering authority determines that the charter school did any of the following:

(1) committed a material violation of any of the conditions, standards or procedures set forth in the charter;

(2) failed to meet or make substantial progress toward achievement of the [state board] department's minimum educational standards or student performance standards identified in the charter application;

(3) failed to meet generally accepted standards of fiscal management; or

(4) violated any provision of law from which the charter school was not specifically exempted.

[F.] G. If a [local school board] chartering authority suspends, revokes or does not renew a charter, the [local school board] chartering authority shall state in writing its reasons for the suspension, revocation or nonrenewal.

[G.] H. A decision to suspend, revoke or not to renew a charter may be appealed by the governing body pursuant to Section 22-8B-7 NMSA 1978."

Section 40. Section 22-8B-13 NMSA 1978 (being Laws 1999, Chapter 281, Section 13) is amended to read:

"22-8B-13. CHARTER SCHOOL FINANCING.--

A. The amount of funding allocated to [the] a charter school shall be not less than ninety-eight percent of the school-generated program cost. The school district or division may withhold and use two percent of the school-generated program cost for its administrative support of a charter school.

B. That portion of money from state or federal programs generated by students enrolled in a locally chartered charter school shall be allocated to that charter [schools] school serving students eligible for that aid. Any other public school program not offered by the locally chartered charter school shall not be entitled to the share of money generated by a charter school program.

C. When a state-chartered charter school is designated as a board of finance pursuant to Section 22-8-38 NMSA 1978, it shall receive state and federal funds for which it is eligible.

D. Charter schools may apply for all federal funds for which they are eligible.

[C.] E. All services centrally or otherwise provided by [the] a local school district, including custodial, maintenance and media services, libraries and warehousing shall be subject to negotiation between the charter school and the [local] school district. Any services for which a charter school contracts with a school district shall be provided by the district at a reasonable cost."

Section 41. Section 22-12-2 NMSA 1978 (being Laws 1967, Chapter 16, Section 170, as amended) is amended to read:

"22-12-2. COMPULSORY SCHOOL ATTENDANCE--RESPONSIBILITY.--

A. Any qualified student and any person who because of [his] the person's age is eligible to become a qualified student as defined by the Public School Finance Act until attaining the age of majority shall attend a public school, a private school, a home school or a state institution. A person shall be excused from this requirement if:

(1) the person is specifically exempted by law from the provisions of this section;

(2) the person has graduated from a high school;

(3) the person is at least seventeen years of age and has been excused by the local school board or the governing body of a state-chartered charter school or its authorized representative upon a finding that the person will be employed in a gainful trade or occupation or engaged in an alternative form of education sufficient for the person's educational needs and the parent [guardian or other person having custody and control] consents; or

(4) with consent of the parent of the person to be excused, the person is excused from the provisions of this section by the superintendent of schools of the school district [in which the person is a resident] or by the head administrator of the state-chartered charter school and the person is under eight years of age.

B. A person subject to the provisions of the Compulsory School Attendance Law shall attend school for at least the length of time of the school year that is established in the school district in which the person is a resident or the state-chartered charter school in which the person is enrolled.

C. Any parent of a person subject to the provisions of the Compulsory School Attendance Law is responsible for the school attendance of that person.

D. Each local school board and each governing [authority] body of a charter school or private school shall enforce the provisions of the Compulsory School Attendance Law for students enrolled in their respective schools."

Section 42. Section 22-12-3 NMSA 1978 (being Laws 1971, Chapter 238, Section 1, as amended) is amended to read:

"22-12-3. RELIGIOUS INSTRUCTION EXCUSAL.--A student may, subject to the approval of the school principal, be excused from school to participate in religious instruction for not more than one class period each school day with the written consent of [his] the student's parents at a time period not in conflict with the academic program of the school. The local school board or governing body of a charter school, and its school employees, shall not assume responsibility for the religious instruction or permit it to be conducted on school property."

Section 43. Section 22-12-7 NMSA 1978 (being Laws 1967, Chapter 16, Section 175, as amended) is amended to read:

"22-12-7. ENFORCEMENT OF ATTENDANCE LAW--HABITUAL TRUANTS--PENALTY.--

A. Each local school board and each governing [authority] body of a charter school or private school shall initiate the enforcement of the provisions of the Compulsory School Attendance Law for students enrolled in their respective schools.

B. To initiate enforcement of the provisions of the Compulsory School Attendance Law against an habitual truant, a local school board or governing [authority] body of a charter school or private school or its authorized representatives shall give written notice of the habitual truancy by certified mail to or by personal service on the parent of the student subject to and in noncompliance with the provisions of the Compulsory School Attendance Law.

C. If unexcused absences continue after written notice of habitual truancy as provided in Subsection B of this section has occurred, the student shall be reported to the probation services office of the judicial district where the student resides for an investigation as to whether the student shall be considered to be a neglected child or a child in a family in need of services because of habitual truancy and thus subject to the provisions of the Children's Code. In addition to any other disposition, the children's court may order the habitual truant's driving privileges to be suspended for a specified time not to exceed ninety days on the first finding of habitual truancy and not to exceed one year for a subsequent finding of habitual truancy.

D. If, after review by the juvenile probation office where the student resides, a determination and finding is made that the habitual truancy by the student may have been caused by the parent of the student, then the matter will be referred by the juvenile probation office to the district attorney's office or any law enforcement agency having jurisdiction for appropriate investigation and filing of charges allowed under the Compulsory School Attendance Law. Charges against the parent may be filed in metropolitan court, magistrate court or district court.

E. A parent of the student who, after receiving written notice as provided in Subsection B of this section and after the matter has been reviewed in accordance with Subsection D of this section, knowingly allows the student to continue to violate the Compulsory School Attendance Law shall be guilty of a petty misdemeanor. Upon the first conviction, a fine of not less than twenty-five dollars ($25.00) or more than one hundred dollars ($100) may be imposed, or the parent of the student may be ordered to perform community service. If violations of the Compulsory School Attendance Law continue, upon the second and subsequent convictions, the parent of the student who knowingly allows the student to continue to violate the Compulsory School Attendance Law shall be guilty of a petty misdemeanor and shall be subject to a fine of not more than five hundred dollars ($500) or imprisonment for a definite term not to exceed six months or both.

F. The provisions of this section shall apply beginning July 1, 2004."

Section 44. Section 22-12-8 NMSA 1978 (being Laws 1985, Chapter 104, Section 1, as amended) is amended to read:

"22-12-8. EARLY IDENTIFICATION--UNEXCUSED ABSENCES AND TRUANCY.--Notwithstanding the provisions of Section 22-12-7 NMSA 1978, if a student is truant, the school district or charter school shall contact the student's parent to inform the parent that the student is truant and to discuss possible interventions. The provisions of this section do not apply to any absence if the parent has contacted the school to explain the absence."

Section 45. Section 22-12-9 NMSA 1978 (being Laws 2004, Chapter 28, Section 1, as amended) is amended to read:

"22-12-9. UNEXCUSED ABSENCES AND TRUANCY--ATTENDANCE POLICIES.--

A. As used in this section and Sections 22-12-7 and 22-12-8 NMSA 1978:

(1) "habitual truant" means a student who has accumulated the equivalent of ten or more unexcused absences within a school year;

(2) "truant" means a student who has accumulated five unexcused absences within any twenty-day period; and

(3) "unexcused absence" means an absence from school or a class for which the student does not have an allowable excuse pursuant to the Compulsory School Attendance Law or rules of the local school board or governing authority of a charter school or private school.

B. Each school district and charter school shall maintain an attendance policy that:

(1) provides for early identification of students with unexcused absences, truants and habitual truants and provides intervention strategies that focus on keeping truants in an educational setting and prohibit out-of-school suspension and expulsion as the punishment for truancy;

(2) uses withdrawal as provided in Section

22-8-2 NMSA 1978 only after exhausting efforts to keep students in educational settings; and

(3) requires that class attendance be taken for every instructional day in every public school or school program in the school district.

C. School districts and charter schools shall report truancy and habitual truancy rates to the department in a form and at such times as the department determines and shall document efforts made to keep truants and habitual truants in educational settings. Locally chartered charter schools shall provide copies of their reports to the school district."

Section 46. Section 22-13-3.7 NMSA 1978 (being Laws 1989, Chapter 113, Section 5, as amended) is amended to read:

"22-13-3.7. DISBURSEMENT OF FUNDS--APPROVED PROJECTS.--

A. Any school district or state-chartered charter school may apply for a grant from the literacy for children at risk fund for the purpose of acquiring, equipping and staffing a learning laboratory.

B. The department shall adopt [regulations] rules setting forth the criteria that a school district or state-chartered charter school shall meet in order to qualify for a grant from the literacy for children at risk fund. The criteria to qualify for a grant shall include, but are not limited to, the following:

(1) the learning laboratory shall improve the reading, writing or math literacy levels of children at risk by at least one grade level per year, as demonstrated to the department's satisfaction;

(2) the learning laboratory shall encompass the teaching of children in kindergarten through grade twelve who are reading below grade level;

(3) the learning laboratory shall have reading diagnostic capabilities; and

(4) the learning laboratory shall have the capability to self-monitor the performance of both the learning laboratory and the children at risk [utilizing] using the laboratory.

C. The amount of any grant awarded under Subsections A and B of this section shall be equal to eighty percent of the total cost of acquiring, equipping and staffing a learning laboratory. Any grant awarded is contingent upon the qualifying school district or state-chartered charter school demonstrating to the department's satisfaction that it can pay for twenty percent of the total cost of the learning laboratory.

D. Any school district or state-chartered charter school that establishes a learning laboratory under this section may use the laboratory for any other reading, writing or math literacy program when it is not in use for the purposes of the Literacy For Children At Risk Act.

E. The department, after approving the application of a school district or state-chartered charter school to receive a grant under the Literacy For Children At Risk Act, shall authorize a disbursement of funds, in an amount equal to the grant, from the literacy for children at risk fund directly to the approved school district or charter school."

Section 47. Section 22-15-2 NMSA 1978 (being Laws 1967, Chapter 16, Section 206, as amended) is amended to read:

"22-15-2. DEFINITIONS.--As used in the Instructional Material Law:

A. "division" or "bureau" means the instructional material bureau of the department;

B. "director" or "chief" means the chief of the bureau;

C. "instructional material" means school textbooks and other educational media that are used as the basis for instruction, including combinations of textbooks, learning kits, supplementary material and electronic media;

D. "multiple list" means a written list of those instructional materials approved by the department;

E. "membership" means the total enrollment of qualified students on the fortieth day of the school year entitled to the free use of instructional material pursuant to the Instructional Material Law; [and]

F. "additional pupil" means a pupil in a school district's, state institution's or private school's current year's certified forty-day membership above the number certified in the school district's, state institution's or private school's prior year's forty-day membership; and

G. "school district" includes state-chartered charter schools."

Section 48. Section 22-15C-1 NMSA 1978 (being Laws 2003, Chapter 149, Section 1) is amended to read:

"22-15C-1. SHORT TITLE.--[This act] Chapter 22, Article 15C NMSA 1978 may be cited as the "School Library Material Act"."

Section 49. Section 22-15C-2 NMSA 1978 (being Laws 2003, Chapter 149, Section 2) is amended to read:

"22-15C-2. DEFINITIONS.--As used in the School Library Material Act:

A. "additional student" means a student in the certified forty-day membership of the current year for a school district or state institution above the number certified in the forty-day membership of the prior year for the school district or state institution;

B. "bureau" means the instructional material bureau of the department [of education];

C. "fund" means the school library material fund;

D. "library material processing" means cataloging of school library material, including in electronic format, according to nationally accepted standards, and the application of bar code labels and call-number classification labels to the material;

E. "membership" means the total enrollment of qualified students on the fortieth day of the school year entitled to the free use of school library material pursuant to the School Library Material Act;

F. "qualified student" means a public school student who:

(1) has not graduated from high school;

(2) is regularly enrolled in one-half or more of the minimum course requirements approved by the [state board] department for public school students; and

(3) is at least five years of age prior to 12:01 a.m. on September 1 of the school year; or

(4) is at least three years of age at any time during the school year and is receiving special education services pursuant to regulation of the [state board and] department;

G. "school library material" means books and other educational media, including online reference and periodical databases, that are made available in a school library to students for circulation and use in the library; and

H. "school district" includes state-chartered charter schools."

Section 50. Section 22-15D-1 NMSA 1978 (being Laws 2003, Chapter 152, Section 1) is amended to read:

"22-15D-1. SHORT TITLE.--[Sections 1 through 6 of this act] Chapter 22, Article 15D NMSA 1978 may be cited as the "Fine Arts Education Act"."

Section 51. Section 22-15D-2 NMSA 1978 (being Laws 2003, Chapter 152, Section 2) is amended to read:

"22-15D-2. PURPOSE.--

A. The purpose of the Fine Arts Education Act is to encourage school districts and state-chartered charter schools to offer opportunities for elementary school students to participate in fine arts activities, including visual arts, music, theater and dance.

B. Participation in fine arts programs encourages cognitive and affective development by:

(1) focusing on a variety of learning styles and engaging students who might otherwise fail;

(2) training students in complex thinking and learning;

(3) helping students to devise creative solutions for problems;

(4) providing students new challenges; and

(5) teaching students how to work cooperatively with others and to understand and value diverse cultures."

Section 52. Section 22-15D-4 NMSA 1978 (being Laws 2003, Chapter 152, Section 4) is amended to read:

"22-15D-4. [STATE BOARD AND] DEPARTMENT [OF EDUCATION]--POWERS AND DUTIES.--[A.] The [state board] department shall issue guidelines for the development and implementation of fine arts education programs. [B.] The department [of education] shall:

[(1)] A. administer and enforce the provisions of the Fine Arts Education Act; and

[(2)] B. assist [local] school [boards] districts and charter schools in developing and evaluating programs."

Section 53. Section 22-15D-5 NMSA 1978 (being Laws 2003, Chapter 152, Section 5) is amended to read:

"22-15D-5. PROGRAM PLAN AND EVALUATION.--

A. A [local] school [board] district or state-chartered charter school may prepare and submit to the department [of education] a fine arts education program plan in accordance with guidelines issued by the [state board] department.

B. At a minimum, the plan shall include the fine arts education programs being taught, the ways in which the fine arts are being integrated into the curriculum and an evaluation component.

C. At yearly intervals, the [local] school [board] district or state-chartered charter school, the department [of education] and a parent advisory committee from the school district or charter school shall review the goals and priorities of the plan and make appropriate recommendations to the [state board] secretary."

Section 54. Section 22-20-1 NMSA 1978 (being Laws 1967, Chapter 16, Section 270, as amended) is amended to read:

"22-20-1. SCHOOL CONSTRUCTION--APPROVAL OF THE PUBLIC SCHOOL FACILITIES AUTHORITY--COMPLIANCE WITH STATEWIDE ADEQUACY STANDARDS--STATE CONSTRUCTION AND FIRE STANDARDS APPLICABLE.--

A. Each local school board or governing body of a charter school shall secure the approval of the director of the public school facilities authority or the director's designee prior to the construction or letting of contracts for construction of any school building or related school structure or before reopening an existing structure that was formerly used as a school building but that has not been used for that purpose during the previous year. A written application shall be submitted to the director requesting approval of the construction, and, upon receipt, the director shall forward a copy of the application to the secretary. The director shall prescribe the form of the application, which shall include the following:

(1) a statement of need;

(2) the anticipated number of students affected by the construction;

(3) the estimated cost;

(4) a description of the proposed construction project;

(5) a map of the area showing existing school attendance centers within a five-mile radius and any obstructions to attending the attendance centers, such as railroad tracks, rivers and limited-access highways; and

(6) such other information as may be required by the director.

B. The director or the director's designee shall give approval to an application if the director or designee reasonably determines that:

(1) the construction will not cause an unnecessary proliferation of school construction;

(2) the construction is needed in the school district or by the charter school;

(3) the construction is feasible;

(4) the cost of the construction is reasonable;

(5) the construction project:

(a) is in compliance with the statewide adequacy standards adopted pursuant to the Public School Capital Outlay Act; and

(b) if relevant, is appropriately integrated into the school district or charter school master plan;

(6) the school district or charter school is financially able to pay for the construction; and

(7) the secretary has certified that the construction will support the educational program of the school district or charter school.

C. Within thirty days after the receipt of an application filed pursuant to this section, the director or the director's designee shall in writing notify the local school board or governing body of a charter school making the application and the department of approval or disapproval of the application.

D. A local school board or governing body of a charter school shall not enter into a contract for the construction of a public school facility, including contracts funded with insurance proceeds, unless the contract contains provisions requiring the construction to be in compliance with the statewide adequacy standards adopted pursuant to the Public School Capital Outlay Act; provided that for a contract funded in whole or in part with insurance proceeds:

(1) the cost of settlement of any insurance claim shall not be increased by inclusion of the insurance proceeds in the construction contract; and

(2) insurance claims settlements shall continue to be governed by insurance policies, memoranda of coverage and rules related to them.

E. Public school facilities shall be constructed pursuant to state standards or codes promulgated pursuant to the Construction Industries Licensing Act and rules adopted pursuant to Section 59A-52-15 NMSA 1978 for the prevention and control of fires in public occupancies. Building standards or codes adopted by a municipality or county do not apply to the construction of public school facilities, except those structures constructed as a part of an educational program of a school district or charter school.

F. The provisions of Subsection E of this section relating to fire protection shall not be effective until the public regulation commission has adopted the International Fire Code and all standards related to that code.

G. As used in this section, "construction" means any project for which the construction industries division of the regulation and licensing department requires permitting."

Section 55. Section 22-20-2 NMSA 1978 (being Laws 1967, Chapter 16, Section 271) is amended to read:

"22-20-2. SCHOOL BUILDING CONSTRUCTION--DISTANCE FROM HIGHWAYS.--

A. No local school board or governing body of a charter school shall construct or cause the construction of any public school building within four hundred feet of any main artery of travel without the prior written approval of the [state board] department.

B. The district court may enforce the provisions of this section by any appropriate civil remedy in an action brought by an interested party.

C. As used in this section, "main artery of travel" means any designated state or federal-aid highway used primarily to accommodate transient motor traffic through a municipality and any type of public highway used primarily to accommodate transient motor traffic through a rural community or area."

Section 56. Section 22-21-1 NMSA 1978 (being Laws 1967, Chapter 16, Section 282, as amended) is amended to read:

"22-21-1. PROHIBITING SALES TO THE DEPARTMENT [OF EDUCATION], TO SCHOOL DISTRICTS AND TO SCHOOL PERSONNEL--EXCEPTION--PENALTY.--

A. A member of the [state board] commission, a member of a local school board, a member of the governing body of a charter school, the [state superintendent] secretary, an employee of the department [of education, a certified school instructor or a certified school administrator] or a school employee shall not, directly or indirectly, sell or be a party to any transaction to sell any instructional material, furniture, equipment, insurance, school supplies or work under contract to the department [of education], school district or public school with which [he] such person is associated or employed. No such person shall receive any commission or profit from the sale or any transaction to sell any instructional material, furniture, equipment, insurance, school supplies or work under contract to the department [of education], school district or public school with which [he] the person is associated or employed.

B. The provisions of this section shall not apply to a person making a sale in the regular course of [his] business who complies with the provisions of Sections [13-1-1 through 13-1-26] 13-1-21, 13-1-21.2 and 13-1-22 NMSA 1978. The provisions of this section shall not apply in cases in which [certified school instructors or certified school administrators] school employees contract to perform special services with the department [of education], school district or public school with which they are associated or employed during time periods wherein service is not required under a contract for instruction, [or] administration or other employment.

C. No member of the [state board] commission, member of a local school board, [state superintendent] member of the governing body of a charter school, the secretary, employee of the department [of education, certified school instructor or certified school administrator] or school employee shall solicit or sell or be a party to a transaction to solicit or sell insurance or investment securities to any employee of the department [of education] or any employee of the school district whom [he] such person supervises. Nothing in this subsection shall prohibit a financial institution from requiring the purchase of insurance in connection with a loan or offering and selling such insurance in accordance with the provisions of the New Mexico Insurance Code.

D. No state employee who supervises or exercises control over [local] school districts or charter schools, which supervision or control includes but is not limited to school programs, capital outlay and operating budgets, shall enter into any business relationship with an employee of a local school district or charter school over which [he] the state employee exercises supervision or control.

E. Any person violating any provision of this section is guilty of a fourth degree felony under the Criminal Code. The [state board of education] department may suspend or revoke the [certification of a certified school administrator or a certified school instructor] licensure of a licensed school employee for violation of this section."

Section 57. Section 22-23-2 NMSA 1978 (being Laws 1973, Chapter 285, Section 2, as amended) is amended to read:

"22-23-2. DEFINITIONS.--As used in the Bilingual Multicultural Education Act:

A. "bilingual multicultural education program" means a program using two languages, including English and the home or heritage language, as a medium of instruction in the teaching and learning process;

B. "culturally and linguistically different" means students who are of a different cultural background than mainstream United States culture and whose home or heritage language, inherited from the student's family, tribe or country of origin, is a language other than English;

C. "department" means the public education department;

D. "district" means a public school or any combination of public schools in a district or a charter school;

E. "English language learner" means a student whose first or heritage language is not English and who is unable to read, write, speak or understand English at a level comparable to grade level English proficient peers and native English speakers;

F. "heritage language" means a language other than English that is inherited from a family, tribe, community or country of origin;

G. "home language" means a language other than English that is the primary or heritage language spoken at home or in the community;

H. "school board" means a local school board or governing body of a state-chartered charter school; and

I. "standardized curriculum" means a district curriculum that is aligned with the state academic content standards, benchmarks and performance standards."

Section 58. Section 22-24-3 NMSA 1978 (being Laws 1975, Chapter 235, Section 3, as amended) is amended to read:

"22-24-3. DEFINITIONS.--As used in the Public School Capital Outlay Act:

A. "council" means the public school capital outlay council; [and]

B. "fund" means the public school capital outlay fund; and

C. "school district" includes state-chartered charter schools."

Section 59. TEMPORARY PROVISION--CAPITAL OUTLAY STUDY.--The public school capital outlay oversight task force, in consultation with the public school capital outlay council, the public education department and the public school facilities authority, shall study statutory provisions governing the funding of charter school capital outlay facilities, transportation costs and any other capital outlay issues concerning charter schools and shall make recommendations to the legislative education study committee, the legislative finance committee and the governor by November 1, 2006.

Section 60. REPEAL.--

A. Section 22-8B-15 NMSA 1978 (being Laws 1999, Chapter 281, Section 15) is repealed.

B. Laws 2005, Chapter 176, Section 12 is repealed.

Section 61. EFFECTIVE DATE.--The effective date of the provisions of Section 58 of this act is May 17, 2006. The effective date of the provisions of Sections 1 through 57 and 59 of this act is July 1, 2007.