CalSTRS Penalty Assessment Authority for Charter School Errors

The California Attorney General (“AG”) has issued a significant opinion clarifying CalSTRS’ authority to assess penalties against county offices of education for charter school contribution and reporting errors. This opinion addresses critical questions regarding penalty assessment, administrative remedies, and cost recovery mechanisms that directly impact charter school operations and their relationship with county superintendents.

Key Legal Holdings and Charter School Implications

The AG conclusively determined that CalSTRS possesses statutory authority to assess penalties under the Education Code against county offices of education for contribution and reporting errors attributable to charter schools. This authority exists despite the fact that county superintendents are not the direct employers of charter school personnel. The opinion emphasizes that county superintendents serve as mandatory intermediaries for CalSTRS reporting and contribution submission, creating independent statutory obligations under sections 23001 and 47611.3 that support penalty assessment practices.

Charter schools must understand that reporting and contribution errors will result in penalties assessed against the county office of education that serves as their CalSTRS intermediary. And while the opinion provides important protections through administrative appeal rights and cost recovery mechanisms, it is only the county superintendent (and not a charter school) that possesses the discretionary right to appeal and contest penalty assessments through formal administrative hearings.  The opinion suggests that charter schools have financial incentives to provide comprehensive assistance to county superintendents during appeal proceedings, as successful appeals directly benefit the charter school’s financial position.

Financial Recovery and Risk Management

Further, the opinion states that county superintendents possess broad authority under the Education Code to recover CalSTRS’ penalties from the charter schools’ funds in the county treasury. This recovery mechanism encompasses not only benefit overpayments but extends to “contributions, assessments, or any other payment required by the system.” Charter schools should anticipate that penalties assessed against their county office of education will ultimately be recovered from their state-allocated funds, creating direct financial consequences for reporting and contribution deficiencies.

While AG opinions are advisory and only binding on state agencies, courts tend to defer to these opinions. As a result, charter schools should: (1) implement robust internal controls for CalSTRS reporting and contribution processes, maintain detailed documentation of employment relationships and compensation calculations; and (2) establish a contractual agreement with the county offices of education that clearly delineates responsibilities and cooperation requirements for penalty appeals.  Charter schools must recognize that while county superintendents bear initial penalty liability, the ultimate financial responsibility and operational consequences flow directly to the charter school that generated the underlying compliance failures.

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