CHARTER Act
- Sponsor
- Rep. DeLauro, Rosa L. [D-CT-3]
- Committees
- Education and Workforce Committee (primary)
- Last action
- Apr 30, 2026
Bottom line
The CHARTER Act aims to restrict federal funding for charter schools that utilize for-profit entities for core operational and management functions, ensuring public funds are used directly for education rather than private profit.
What it actually does
This bill, known as the CHARTER Act, amends the Elementary and Secondary Education Act of 1965 (ESEA) and the Individuals with Disabilities Education Act (IDEA) to prohibit charter schools and charter management organizations (CMOs) from receiving federal funds under these acts if they contract with for-profit entities for the operation, oversight, management, or administration of the school. It explicitly permits contracts with for-profit or nonprofit entities for non-instructional services like food, payroll, facilities maintenance, transportation, and classroom supplies. The bill's purpose is to prevent the depletion of publicly funded resources due to profit extraction by for-profit charter operators.
Proponents argue
Proponents argue that this bill closes a loophole that allows for-profit entities to extract public funds intended for student education, thereby ensuring greater accountability and transparency in how federal education dollars are spent. They contend that the original intent of ESEA and IDEA was to fund nonprofit educational institutions, and the current practice of for-profit operators managing nonprofit charter schools undermines this principle, diverting resources away from students and into private hands. This measure would safeguard taxpayer money and improve educational outcomes by focusing resources on direct student services.
Opponents contend
Opponents might argue that this bill unduly restricts the operational flexibility of charter schools and limits their ability to innovate or access specialized management expertise that for-profit entities can provide. They may contend that for-profit management can bring efficiencies and diverse educational models that benefit students, and that prohibiting such partnerships could harm charter school growth and choice, particularly in underserved communities. Furthermore, they might argue that existing oversight mechanisms are sufficient to prevent abuse, and this bill represents an overreach that could stifle educational entrepreneurship.
The bill is short and relatively straightforward, making it accessible for a quick read and understanding of its core provisions within a typical legislative review period.
Section 3(a)
Prohibition on For-Profit Management Contracts for Federal Funding
This provision amends the Elementary and Secondary Education Act (ESEA) to state that a charter school cannot receive federal funds under ESEA if it, or its charter management organization, contracts with a for-profit entity to operate, oversee, manage, or administer the school. This includes core functions like curriculum development, budget management, and faculty hiring or supervision.
Supporters argue
Supporters argue this provision ensures public funds are used directly for student education, preventing profit extraction by private companies from federal programs designed for nonprofit schools. It aligns with the original intent of ESEA and IDEA.
Critics contend
Critics might argue this provision limits the operational models available to charter schools, potentially stifling innovation and reducing options for school management that could benefit students. They may also contend it unfairly targets a specific type of management structure.
Tradeoffs
The bill balances the desire to ensure public funds are used for public good without private profit extraction against the flexibility and diverse management models that some charter schools and their advocates value.
Section 3(a)
Permitted Contracts for Ancillary Services
This provision clarifies that charter schools are still permitted to enter into contracts with either for-profit or nonprofit entities for specific, non-instructional services. These include food services, payroll, facilities maintenance, transportation, classroom supplies like textbooks, and other ancillary services or supplies.
Section 3(b) and Section 4
Harmonizing Charter School Definitions
These sections amend both the Elementary and Secondary Education Act (ESEA) and the Individuals with Disabilities Education Act (IDEA) to include a consistent definition of "charter school." This definition refers back to the amended Section 4310 of ESEA, which now includes the prohibition on for-profit management for federal funding eligibility.
Section 5
Effective Date and Applicability
This section specifies that the amendments made by the Act will take effect three years after the bill is enacted into law. Crucially, it also states that these new rules will only apply to contracts that are entered into, renewed, or extended on or after the date of the bill's enactment. This means existing contracts with for-profit entities will not be immediately terminated but will be subject to the new rules upon their next renewal or extension, or if a new contract is formed.
The amendments made by this Act will take effect three years after its enactment and will only apply to contracts entered into, renewed, or extended on or after the date of enactment.
Section 5
Why it matters:This is standard legislative practice for transition clauses, designed to provide a grace period and avoid immediate disruption to existing arrangements.
Case for: Supporters would argue this phased implementation allows charter schools and management organizations sufficient time to adjust their operational models and contracts, preventing abrupt disruptions to student services and ensuring a smooth transition to the new funding eligibility requirements.
Case against: Critics might contend that this delay prolongs the period during which federal funds can be used by for-profit entities, thereby delaying the intended benefits of the bill and allowing continued profit extraction from public education for several years.
Estimated impact: Provides a multi-year transition period for potentially hundreds of existing contracts between charter schools and for-profit management organizations, delaying the full impact of the bill.
The bill's findings section details the legal history, including a 2006 9th Circuit Court ruling that found for-profit charter schools ineligible for federal ESEA and IDEA funds, and the subsequent reorganization of these schools into for-profit operators of nonprofit organizations to circumvent the ruling.
Section 2(b)
Why it matters:This is standard legislative practice to provide a rationale for the bill. It's not evasive, but its significance can be overlooked.
Case for: Supporters would highlight these findings as the core justification for the bill, demonstrating a clear legislative intent to close a specific loophole that has allowed for-profit entities to access federal funds intended for nonprofit educational institutions.
Case against: Opponents might argue that the findings present a biased historical narrative, potentially overstating the negative impacts of for-profit management and understating any benefits or the legitimacy of the "nonprofit operator" model.
Estimated impact: Establishes the legal and policy foundation for the bill's core prohibition, framing it as a corrective measure rather than a new policy direction.