Education funds ruling splits court

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Commonwealth Court panel has ruled that the state Department of Education may not withhold state subsidies from a school district for the current school year for a claim made by a charter school alleging underfunding in a previous school year.

The ruling comes nearly two years after the court found the department must first withhold funds from a district accused of underfunding a charter school before it can hold a hearing to sort out whether those claims are true.

On May 23, the court, by 4-3, denied Chester Community Charter School's application for summary relief and found that because the charter school's claim against defendant Chester Upland School District is for underfunding in a previous school year, funds appropriated for the current school year may not be withheld.

As a result, the state's secretary of education must hold a hearing on the merits of the charter school's claim, the court said.

Judge Dan Pellegrini, writing for the majority, said the Charter School Law prohibits the secretary from withholding state funds from a district in any year other than the one to which that a charter school's claim for underfunding pertains.

"Under [the law], challenges are made by the charter school to one or all of the 12 equal monthly payments calculated by the school district based on the budgeted education expenditures within the operating school year," Judge Pellegrini wrote. "That ties the challenge to the withholding to a particular school year."

Judge Pellegrini -- joined by Judges Bernard L. McGinley, Bonnie Brigance Leadbetter and Robert Simpson -- directed the secretary to hold a hearing on the merits of Chester Community's claim.

Judge P. Kevin Brobson penned a dissent, arguing that the majority's position does not comport with another section of the Charter School Law, which requires the secretary "deduct the estimated amount [of the underfunding], as documented by the charter school, from any and all state payments made to the district after receipt of documentation from the charter school."

Judge Brobson said he would have granted summary judgment to the charter school and ordered the secretary to withhold state subsidies in the amount of the disputed funds until the claim is resolved.

He was joined by Judges Patricia A. McCullough and Anne E. Covey.

But Judge Pellegrini countered that even if the court were to adopt the interpretation of the Charter School Law in Judge Brobson's dissent, "Summary relief would still be denied because of the futility of ordering the secretary to withhold funds" that have already been spent.

In June 2010, a three-judge Commonwealth Court panel ruled that a 2002 amendment to the Charter School Law signified a "sea change" in how charter schools are to be funded. The three-judge panel in Chester Community Charter School v. Department of Education ruled the department erred in appointing a hearing officer to settle a dispute between a Chester charter school and the city's school district before it withheld the contested amount of funding in the form of state subsidies.

The Chester Community Charter School argued that it had been shorted more than $7 million by the school district between September 1998 and September 2007 because of the district's actions.

The district acknowledged in September 2007 that it underfunded Chester Community during the 2006-07 school year and agreed to pay nearly $740,000 within 12 months.

That figure was some $1.8 million less than Chester Community claimed it was owed. Further, the district did not pay the charter school any funds for the time periods covering 1998 to the beginning of the 2006-07 school year and from the end of that school year until September 2007.

As a result, Chester Community requested that Gerald L. Zahorchak, the former secretary of the Department of Education, withhold state subsidies from the Chester Upland School District.

In his May 23 opinion, Judge Pellegrini laid out the procedure for how the department must handle a claim in instances where a school district has no money and there are no funds to withhold.

"When there are no funds to withhold, the secretary must still acknowledge the receipt of the claim for underpayment from the charter school, state that there are no appropriated funds for the year in which the charter school claim can be withheld, and because there is no 'trigger' for the school district to appeal, the secretary must inform the charter school that the claim will go directly to a hearing," Judge Pellegrini said.

Chester Community's attorney, Thomas A. Leonard of Obermayer Rebmann Maxwell & Hippel in Philadelphia, could not be reached for comment at press time, nor could a spokesperson for the department.

Chester Upland's attorney, Craig D. Ginsburg of the Levin Legal Group in Huntingdon Valley, Pa., declined to comment on pending litigation.

legalnews

Zack Needles: zneedles@alm.com or 215-557-2493. To read more articles like this, visit www.thelegalintelligencer.com. First Published June 11, 2012 12:00 AM


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