Can a Minnesota charter school join a joint powers entity like MSDLAF+ to pool investments with public school districts?

Plain-English summary

Independent School District No. 834 (Stillwater) sponsored a charter school called New Heights School, organized under Minn. Stat. § 120.064 (Supp. 1993) as a nonprofit corporation under chapter 317A. Stillwater belonged to the Minnesota School District Liquid Asset Fund Plus (MSDLAF+), a joint powers entity that pooled public school districts' short-term investments. New Heights wanted to join MSDLAF+ too.

Attorney Thomas S. Deans asked the AG whether the charter school could join. The AG said no. Under the Joint Powers Act, Minn. Stat. § 471.59, subd. 1 (1992), only "governmental units" could enter into joint powers agreements. The subdivision defined "governmental unit" to include "every city, county, town, school district, other political subdivision of this or another state, another state, and any agency of the State of Minnesota or the United States, and includes any instrumentality of a governmental unit."

The AG applied the canon of ejusdem generis (a general phrase following a list takes its meaning from the list) to conclude that "instrumentality of a governmental unit" referred only to public entities. The Minnesota Supreme Court had applied that canon in School Dist. No. 30 v. Consolidated School Dist. No. 30, 151 Minn. 52, 185 N.W. 961 (1921), and State v. End, 232 Minn. 266, 45 N.W.2d 378 (1950). Because all the listed governmental units (city, county, town, school district, agency of the state) were public entities, the residual "instrumentality" category was limited to public entities too.

A charter school, by statute, was a private entity. Minn. Stat. § 120.064, subd. 4(a) required a charter school to be "organized and operated as a cooperative under chapter 308A or nonprofit corporation under chapter 317A." Both chapters are traditional vehicles for private organizations. Section 120.064 made the charter school exempt from "all statutes and rules applicable to a school board or a school district" (subd. 7), except where the section itself imposed particular requirements. The sponsor-school relationship was "essentially contractual" and the contract could be terminated (subds. 5 and 21). Charter school teachers were not members of the Teachers Retirement Association (except in limited leave situations) and did not have tenure and seniority protections that applied to public school teachers.

The AG noted that for certain limited purposes, § 120.064 treated the charter school like a school district (audit requirements under subd. 8(h); tort liability under subd. 8(i); public employer status for purposes of chapter 179A under subd. 20). The AG read those provisions as protecting the public funding flowing to the school, not as transforming the school into a governmental unit. The AG drew a parallel to other private entities that received state education aid: post-secondary institutions under the Post-Secondary Enrollment Options Act, nonpublic school children under §§ 123.931-.947, and private alternative education programs under § 126.23. None of those private recipients became governmental units by virtue of accepting public funds.

The AG concluded that New Heights could not join MSDLAF+ under the Joint Powers Act because the charter school was not a governmental unit. The opinion did not analyze other ways for a charter school to invest funds.

Currency note

This opinion was issued in 1994. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Historical context: what the AG concluded

The opinion considered charter schools organized as nonprofit corporations or cooperatives under Minn. Stat. § 120.064. They could receive state education aid and were sponsored by a school district, while the statute imposed some requirements similar to those for public schools. The AG assessed their status specifically under the Joint Powers Act.

The AG had to decide where on that spectrum a charter school fell for purposes of the Joint Powers Act. The answer used three doctrinal tools:

1. The text of § 471.59, subd. 1 (governmental unit definition) listed only public entities and used "instrumentality of a governmental unit" as a residual category.
2. The ejusdem generis canon limited that residual to entities of the same kind as the listed examples (all public entities), citing Sch. Dist. No. 30 v. Consolidated Sch. Dist. No. 30 (1921) and State v. End (1950).
3. The structure of § 120.064 treated the charter school as a private corporation, not as a public body, with limited public-side overlays for audit and labor relations.

The opinion compared § 471.59 with § 471.16, subd. 1 (1992), which expressly let certain public entities "cooperate among themselves or with any nonprofit organization" for joint recreational programs. The AG used that comparison to support his reading that the Joint Powers Act's governmental-unit definition did not include private entities.

The opinion also distinguished receipt of public funds from public status. Minnesota gave education aid to nonpublic schools, post-secondary institutions, and alternative programs without converting those entities into governmental units. The same principle applied to charter schools.

Common questions

Q: Could a charter school join an investment pool at all?
A: The opinion decides only that a charter school formed under the cited statute could not join MSDLAF+ under the Joint Powers Act. It does not address another investment pool or another legal basis for participation.

Q: Could the sponsoring school district let the charter school use its existing MSDLAF+ account?
A: The opinion does not address use of the sponsor district's account. It says only that New Heights itself could not join MSDLAF+ under § 471.59.

Q: Did this mean charter schools were entirely "private" for all legal purposes?
A: No. The AG was careful to note that § 120.064 treated charter schools like school districts for limited purposes: audit requirements, tort liability, and labor relations (the charter school board was a "public employer" under chapter 179A). The opinion was that for purposes of the Joint Powers Act specifically, charter schools were private entities.

Q: What about charter school employees?
A: Charter school teachers were not members of the Teachers Retirement Association (except in limited leave situations) and did not have tenure and seniority protections that applied to public school teachers. The AG cited these features as evidence that charter schools were not governmental units.

Q: Could the Legislature have given charter schools governmental-unit status?
A: Yes, by amending § 471.59 to include charter schools in the definition of "governmental unit." The AG was reading the statute as enacted in 1994; the Legislature could have changed it. (Charter school law and its interaction with the Joint Powers Act may have evolved since this opinion.)

Q: What was the standard for analyzing whether some other entity counted as a "governmental unit"?
A: The AG read the governmental-unit definition in § 471.59, subd. 1 in light of its list of public entities. He concluded that the residual category, "instrumentality of a governmental unit," included only public entities under that statute. A charter school organized as a cooperative or nonprofit corporation under § 120.064 did not qualify.

Background and statutory framework

Minn. Stat. § 120.064 described a charter school organized as a nonprofit corporation or cooperative, sponsored by a school district or the State Board of Education, and eligible for state education aid. It imposed some minimum requirements while generally exempting charter schools from statutes and rules applicable to school boards or districts.

The Joint Powers Act, Minn. Stat. § 471.59, allowed two or more "governmental units" to enter into agreements for the joint exercise of their powers. Subdivision 1's definition was inclusive ("includes every city, county, town, school district, other political subdivision...") but the AG read it as limited by the ejusdem generis principle to public entities.

The Minnesota School District Liquid Asset Fund Plus (MSDLAF+) was a joint powers entity formed under § 471.59. The sponsoring district was a member, and New Heights sought to join.

The AG answered no to New Heights' request to join MSDLAF+ under the Joint Powers Act. He did not assess other investment arrangements.

Citations and references

Statutes:

• Minn. Stat. § 120.064 (1992 and Supp. 1993) (charter schools)
• Minn. Stat. § 120.101, subd. 7(1) (1992) (compulsory attendance, licensed teachers)
• Minn. Stat. § 123.3514 (1992 and Supp. 1993) (Post-Secondary Enrollment Options Act)
• Minn. Stat. §§ 123.931-.947 (1992 and Supp. 1993) (nonpublic school education aids)
• Minn. Stat. § 124.248 (1992 and Supp. 1993) (charter school eligibility for state aids)
• Minn. Stat. § 125.12 (Supp. 1993) (continuing contract law)
• Minn. Stat. § 125.17 (Supp. 1993) (teacher tenure act, first-class cities)
• Minn. Stat. § 126.23 (1992) (alternative education programs)
• Minn. Stat. § 471.16, subd. 1 (1992) (recreational program cooperation with nonprofits)
• Minn. Stat. § 471.59, subd. 1 (1992) (Joint Powers Act, governmental unit definition)
• Minn. Stat. ch. 179A (labor relations provision cited in the opinion)
• Minn. Stat. ch. 308A (cooperatives)
• Minn. Stat. ch. 317A (nonprofit corporations)

Cases:

• Sch. Dist. No. 30 v. Consolidated Sch. Dist. No. 30, 151 Minn. 52, 185 N.W. 961 (1921) (ejusdem generis)
• State v. End, 232 Minn. 266, 45 N.W.2d 378 (1950) (ejusdem generis)

Source

• Landing page: https://www.ag.state.mn.us/Office/Opinions/
• Original PDF: https://www.ag.state.mn.us/Office/Opinions/1007-19940311.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain, the linked PDF is authoritative.

JOINT POWERS ACT: CHARTER SCHOOLS: Charter schools formed as contemplated by Minn. Stat. § 120.064 (1992 and Supp. 1993) are not "governmental units" as the term is defined in the Joint Powers Act, Minn. Stat. § 471.59, subd. 1 (1992); consequently, such charter schools may not be a party to a joint powers agreement.

1007
(Cr. Ref. to 160 h and 160 c)
March 11, 1994

Thomas S. Deans, Esq.
Knutson, Flynn, Hetland, Deans & Olsen
Suite 1900
Minnesota World Trade Center
30 East Seventh Street
St. Paul, Minnesota 55101

Dear Mr. Deans:

In your letter to Attorney General Hubert H. Humphrey III you present substantially the following:

FACTS

Independent School District No. 834 (Stillwater) is the sponsor of a charter school formed pursuant to Minn. Stat. § 120.064 (Supp. 1993). The charter school, referred to as New Heights School, is organized and operated as a nonprofit corporation under Minn. Stat. ch. 317A and provides an educational program as an outcome-based school as contemplated by section 120.064.

District No. 834 is a member of the Minnesota School District Liquid Asset Fund Plus (MSDLAF+), a Minnesota joint powers entity formed pursuant to Minn. Stat. § 471.59. New Heights School would like to become a member of the MSDLAF+.

You then ask substantially the following:

QUESTION

Whether New Heights School is authorized under the provisions of Minn. Stat. § 471.59 to become a member of MSDLAF+?

OPINION

In our opinion, New Heights School, as a charter school, is not authorized under Minn. Stat. § 471.59 (1992), the Joint Powers Act, to become a member of a joint powers organization because it is not a governmental unit as the term is used in the Act.

Under the Joint Powers Act, only governmental units may enter into agreements for the joint exercise of their powers. In pertinent part, subdivision 1 of section 471.59 provides that:

The term "governmental unit" as used in this section includes every city, county, town, school district, other political subdivision of this or another state, another state, and any agency of the State of Minnesota or the United States, and includes any instrumentality of a governmental unit. For the purpose of this section, an instrumentality of a governmental unit means an instrumentality having independent policy making and appropriating authority.

To qualify as a "governmental unit" under subdivision 1, we conclude that such a unit must be a public entity. Except for the last term, "any instrumentality of a governmental unit," all of the preceding examples listed in subdivision 1 are clearly public entities. Although there may be instances in which an instrumentality of a governmental unit need not necessarily be a public entity, that is not the case under section 471.59.

Ejusdem generis, a rule of statutory construction, provides that "[a]s a general rule the words of a statute are to be construed with reference to the words with which they are associated, and when those used in a particular sense and having a specific meaning are followed by others of a general meaning, the latter are to be construed as applicable only to things of a like nature to those designated by the former." Sch. Dist. No. 30 v. Consolidated Sch. Dist. No. 30, 151 Minn. 52, 56-7, 185 N.W. 961, 963 (1921). "The principal underlying rule of ejusdem generis is that the legislature had in mind things of the same kind and was speaking of them as a class." State v. End, 232 Minn. 266, 272, 45 N.W.2d 378, 381 (1950). Since all of the preceding examples listed in subdivision 1 are public entities, it is reasonable to conclude that the term "any instrumentality of a governmental unit" includes only public entities. Thus, although the term "governmental unit" as used in subdivision 1 is broad in its scope, it encompasses only public entities and does not include private entities. Compare Minn. Stat. § 471.16, subd. 1 (1992) which allows various public entities to "cooperate among themselves or with any nonprofit organization" to jointly operate recreational programs. (Emphasis added.)

A charter school is not a "governmental unit." Minn. Stat. § 120.064, subd. 4(a) (Supp. 1993) provides that a charter school "shall be organized and operated as a cooperative under chapter 308A or nonprofit corporation under chapter 317A." Minn. Stat. chs. 308A and 317A are two of the traditional options for the creation of private organizations and companies. Nothing in either chapter suggests that organizing as either a cooperative or a nonprofit corporation would result in the formation of a governmental unit.

Similarly, nothing in Minn. Stat. § 120.064 establishes a charter school as a public entity or a governmental unit. Although a school district or, in some cases, the State Board of Education acts as the "sponsor" of a charter school, the charter school is thereafter generally organized, governed and operated as a private entity. Minn. Stat. § 120.064, subd. 4(a) (Supp. 1993). The relationship between the sponsor and the charter school is essentially contractual and the contract may be terminated. Minn. Stat. § 120.064, subds. 5 and 21 (Supp. 1993).

Charter schools are not generally subject to state laws affecting public education. Except as otherwise provided in section 120.064, a charter school is "exempt from all statutes and rules applicable to a school board or a school district...." Minn. Stat. § 120.064, subd. 7 (1992) (emphasis added). While subdivision 7 enables a charter school to "elect to comply with one or more provisions of statutes or rules," that language only allows a charter school to assume obligations: it does not empower a charter school to assume the authority of a school district nor does it alter the legal status of a charter school as a private entity. Id. (emphasis added). Subdivisions 8, 9 and 12 of section 120.064 (1992 and Supp. 1993) establish minimal statutory requirements which a charter school must meet to be eligible for public funding. Although the standards are similar or identical to some of those mandated for public schools, nothing in these subdivisions transforms a charter school formed as a private, nonprofit corporation into a public or governmental body. Similarly, the eligibility for public funding does not alter the private nature of a charter school. Minn. Stat. § 124.248 (1992 and Supp. 1993) allows a charter school to qualify for certain state education aids "as though it were a school district." This language certainly suggests that a charter school is not a school district. Moreover, receipt of public funding for education is not limited to public schools. E.g., Minn. Stat. § 123.3514 (1992 and Supp. 1993) (private, post-secondary institutions eligible to receive public education funding under the Post-Secondary Enrollment Options Act); Minn. Stat. §§ 123.931-.947 (1992 and Supp. 1993) (public education aids for nonpublic school children); and Minn. Stat. § 126.23 (1992) (public education aid for private alternative education programs). The statutory language requiring that a charter school "must be nonsectarian" is language generally applied to private entities to be eligible for public education funding. See, e.g., Minn. Stat. § 123.3514, subd. 4 (1992) and Minn. Stat. § 126.23 (1992).

For some other purposes, section 120.064 treats a charter school like a school district. For example, subdivision 8(h) (Supp. 1993) subjects a charter school to the same audit requirements as a school district and subdivision 8(i) (Supp. 1993) treats it as a school district for purposes of tort liability. These provisions, however, recognize the State's interest in protecting the public funding resources used to operate a charter school; they do not change the private nature of the nonprofit corporation. Subdivision 20 of section 120.064 makes a charter school's board of directors a public employer "for the purposes of chapter 179A." Subdivision 20 thereby establishes a procedure for the charter school and its employees to use to address labor relations issues: it does not transform the private nonprofit corporation into a governmental unit.

According to section 120.064, subdivision 11 (Supp. 1993), a charter school must employ teachers "who hold valid licenses to perform the particular service for which they are employed in the [charter] school." The requirement to employ licensed teachers does not, however, make a charter school a governmental unit. Part of Minnesota's Compulsory Attendance Law, Minn. Stat. § 120.101, subd. 7(1) (1992), includes the use of licensed teachers as an acceptable alternative for private schools to meet compulsory attendance standards. More importantly, nothing in section 120.064 provides charter school teachers with the statutory tenure and seniority protection generally afforded public school teachers in Minnesota. E.g., Minn. Stat. § 125.12 (Supp. 1993) (the continuing contract law); and § 125.17 (Supp. 1993) (the teacher tenure act for school districts in cities of the first class). In addition, unlike public school teachers generally, charter school teachers are not members of the Teachers Retirement Association (TRA). A charter school teacher, if on leave from a public school district to teach at the charter school, may elect to continue TRA membership under the procedures established in Minn. Stat. § 120.064, subd. 10 (1992) which provide that:

During a leave, the teacher may continue to aggregate benefits and credits in the teachers' retirement association account by paying both the employer and employee contributions based upon the annual salary of the teacher for the last full pay period before the leave began. The retirement association may impose reasonable requirements to efficiently administer this subdivision.

Note that the teacher's TRA contribution is based upon the salary when employed by the school district, not the salary received from the charter school.

In conclusion, charter schools are organized and operated as private cooperatives or private nonprofit corporations. Nothing contained in section 120.064 alters the private nature of charter schools or makes them governmental units for purposes of the Joint Powers Act.

Very truly yours,

HUBERT H. HUMPHREY III
Attorney General

CHARLES T. MOTIL
Assistant Attorney General