Coatesville Area School District Funding Dispute Response
On October 7, 2021, an article was posted in the Daily Local News. To understand the context of our response, please read this article, "CASD disputes requested payments from charter schools" by Bill Rettew.
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How PA Charter School Funding Works
A Deep Dive into the CASD Funding Dispute
The District is, by its own admission, struggling financially. In recent years, the District has alleged publicly that its financial difficulties are substantially the result of its funding obligation to the charter schools that educate its students, including Avon Grove.
To resolve its own financial difficulties, the District has attempted different mechanisms to avoid its statutory funding obligations. In 2017-18, the District passed a budget that underestimated total expenditures by approximately seven million dollars, and ultimately resulted in an underpayment to Avon Grove of $654,340.84. Avon Grove sought reimbursement of the amounts due to it from PDE, which properly withheld the appropriate sum from the District’s state subsidies.
The District objected to that withholding. in spite of repeated demands; however, it has failed to articulate any basis for its objection.
Thereafter, the District has stopped making payments to Avon Grove altogether, the result of which was that, pursuant to statute, the Pennsylvania Department of Education (“PDE”) became obliged to make payment on the District’s behalf out of state payments that would otherwise go to the District.
Although state law requires PDE to withhold the full amount due to Avon Grove, it was unable to do so because CASD’s debt to its charter schools exceeded its state funding—indeed, that was the purpose of its decision to shift its payment obligation onto PDE, which was simply another attempt to shortchange its charter school. In 2021, CASD accrued a balance of $3.7MM owed to Avon Grove, more or less, in unpaid tuition subsidies.
Avon Grove and Collegium Charter School went to court to compel CASD to pay the full amount due rather than allowing PDE to make partial payments on its behalf, and won. CASD has now returned to making direct payments to its charter schools--but has once again underbudgeted, resulting in an $820,180 shortfall in payments to Avon Grove. This it cannot do.
In general, the Charter School Law provides that for each non-special education student enrolled in a charter school, the charter school shall receive from the student’s school district of residence a portion of that school district’s budgeted total expenditure per average daily membership for the prior school year. For each special education student enrolled in a charter school, the Charter School Law provides that the charter school shall receive the same funding as for non-special education students, together with an additional amount representing a portion of the school district’s actual per capita expenditure on special education students.
More specifically, Section 17-1725-A provides as follows:
(2) For non-special education students, the charter school shall receive for each student enrolled no less than the budgeted total expenditure per average daily membership of the prior school year, as defined in section 2501(20), minus the budgeted expenditures of District for nonpublic school programs; adult education programs; community/junior college programs; student transportation services; for special education programs; facilities acquisition, construction and improvement services; and other financing uses, including debt service and fund transfers as provided in the Manual of Accounting and Related Financial Procedures for Pennsylvania School Systems established by the department. This amount shall be paid by District of each student.
(3) For special education students, the charter school shall receive for each student enrolled the same funding as for each non-special education student as provided in clause (2), plus an additional amount determined by dividing District’s total special education expenditure by the product of multiplying the combined percentage of section 2509.5(k) times District’s total average daily membership for the prior school year. This amount shall be paid by District of each student.
24 P.S. § 17-1725-A. Thus, all of the funding received by charter schools for non-special education students, and a portion of the funding received by charter schools for special education students, is dependent on its students’ school districts of residence’s per-capita budgets. The remaining portion of the funding received by charter schools for special education students is based on District’s “total special education expenditure.”
If a district fails to remit the total amount demanded to a charter school serving its students, Section 17-1725-A provides that “the secretary shall deduct the estimated amount, as documented by the charter school, from any and all State payments made to the district after receipt of documentation from the charter school.” Id. at § 17-1725-A(a)(5). If the district believes the withholding is made in error, it may file a notice of its objection with PDE, which must then conduct a hearing to determine “whether the charter school documented that its students were enrolled in the charter school, the period of time during which each student was enrolled, the school district of residence of each student and whether the amounts deducted from the school district were accurate.” Id. at § 17-1725A(a)(6). Thus, Section 17-1725-A provides a mechanism to ensure that charter schools are paid even where a school district defaults. Pennsylvania Virtual Charter Sch. v. Dep't of Educ., 244 A.3d 885, 894 (Pa. Commw. 2020) (it is “the intention of the legislature to place the burden on the school district to fund charter schools in the correct amount.”)
Importantly, the strict language of § 17-1725A suggests that a District like CASD can avoid part of its obligation to charter schools by underbudgeting. CASD might, for instance, pass a budget of $1, spend based on a shadowbudget that vastly exceeds its promulgated budget, and the contend that it has substantially no payment obligation to charter schools at all, (at least for regular education students.) State law, however, prohibits CASD from doing this.
Specifically, the Public School Code of 1949 prevents school districts from exceeding their budgets. 24 P.S. § 6-609, (“No work shall be hired to be done, no materials purchased, and no contracts made by any board of school directors which will cause the sums appropriated to specific purposes in the budget to be exceeded.”) As a result, school districts cannot avoid their funding obligations to charter schools by approving a nominal budget, exceeding that budget, and depriving charter schools of the funding they would otherwise be entitled to under Section 17-1725-A. Where they do, PDE has issued guidance to that charter schools like AGCS can recoup the over-budgeted expenditures.
As a result, at the end of each year, CASD presents PDE with a reconciliation based on the actual amounts spent by CASD for special education students, and actual amounts spent by CASD for regular education students to the extent actual expenditures exceed budget. That is what happened here and, for that reason, CASD is obligated to pay a balance this year to AGCS.