This report contains findings of a study conducted by the Little Hoover Commission, which investigated ways to support and expand opportunities for charter schools in California. Over 100 charter schools were in operation in California as of March 1996. Data were based on visits to 26 charter schools in the state. The report concludes that: (1) The statutory cap on charter-school expansion limits creative energy and student access; (2) the lines of authority between charter schools, districts, and the California State Department of Education are ambiguous; (3) the charter-school formation process limits flexibility and reduces opportunities for innovation; and (4) many of the systemic funding problems that adversely affect all schools affect the ability of charter schools to be innovative and flexible. Recommendations are made to eliminate the 100-school cap; fund charter schools directly from the state; recognize charter schools as separate legal governmental entities; create alternative sponsors and alternative petition mechanisms; and clarify the funding base for charter schools. Thirteen sidebars are included. Appendices contain lists of members of the Little Hoover Commission advisory committee, of witnesses appearing at hearings, and of schools visited, and the text of California charter-school law. (Contains 97 endnotes.) (LMI)