Blog Logo
Blog Logo

John T. Vogel

Shareholder

Co-chair, Municipal & School Group

Contact information

View All News & Insights
BACK TO John T.’S PROFILE

State Secretary of Education Allows Deduction of Federal Expenditures, PreKindergarten and Certain Block-Grant Expenditures from School District Charter School Tuition Rates

School District of Philadelphia v. Antonia Pantoja Charter School, et al. Miscellaneous Docket Nos. before Secretary of Education —  Secretary of Education upholds Philadelphia School District’s Charter School Tuition Rates on Budgeted Total Expenditures Per Average Daily Membership and that Certain Deductions of Federal Expenditures from the Charter School Rates   were Permissible.

BACKGROUND

Under the Pennsylvania Public School Code, a school district is to pay a charter school for students lawfully enrolled in the charter school who are residents of the school district. If the school district, however, fails to pay a charter school, the charter school may request a redirection of subsidy from the school district. If the charter school asks for such redirection, a district may file an objection with the Department of Education and request a hearing on the subsidy redirection before the Secretary of Education. At such hearings, per the Charter School Law, the school district effectively has the burden to prove the redirection demand is inaccurate.

Several school districts had filed for redirection against the School District of Philadelphia (“SDP”). It was alleged SDP improperly deducted certain payments received and calculated “budgeted total expenditures per average daily membership,” which essentially is the basis for payments to charter schools.  Essentially, the issues for determination were (1) whether SDP’s   charter school tuition rates for the 2015 – 2016 and 2016 – 2017 school years were properly calculated based upon “budgeted total expenditures for average daily membership” and (2) whether the deduction of federal expenditures, pre-K program expenditures and a portion of the Ready to Learn Block Grant expenditures from the District’s charter school tuition rates was proper. 

DISCUSSION

In analyzing this issue, the Secretary of Education, in reviewing objections to rulings of a Pennsylvania Department of Education (“PDE”) hearing examiner, reiterated that charter schools are subject to separate funding scheme from school districts, such centered around the Charter School Law (“CSL”) particularly Section 1725-A of the School Code. Keep in mind that charter school funding is established by a formula which focuses on “budgeted total expenditures for average daily membership” of the prior school year.

Also in Pennsylvania, charter schools are local education agencies (LEAs) for purposes of federal funding. Under Pennsylvania’s scheme, most federal grant programs distribute federal funds through the state agency (Pennsylvania Department of Education) to the LEA, which spends them. Accordingly, charter schools receive federal funding directly from PDE for state-administered programs. Also, charter schools are eligible to apply for and receive direct federal grants on the same basis as school districts in the state. But as to “budgeted total expenditures for average daily membership,” the term “budgeted” is not defined by the CSL so as to dictate which particular budget may be adopted by a school district to calculate charter school tuition rates. 

Because the SDP used an amended budget in its budget formulating process, as allowed by its Home Rule Charter, it utilized  PDE Form 363. According to the Secretary, the CSL did not specify which formatted version of a budget a school district must use. The charter schools at the hearing focused on that the School District did not meet its burden to sustain an objection to redirection because it did not prove that PDE Form 2028 (which does not reflect a district’s amended operating and capital budgets) was invalid. The Secretary disregarded this argument finding that as SDP used its budget to calculate its per pupil tuition rates, albeit through an authorized amended budget, this was a proper method to determine “budgeted total expenditures for average daily membership.”

Charter schools also objected to the use of Form 363 form because it allowed for deductions of expenditures associated with federal funds, pre-K programs, and a portion of the Ready to Learn Block Grant in calculating charter school tuition rates.  SDP argued that the deductions were proper and that the charter schools were essentially “double dipping” by not only being able to receive these funds from the federal government, but by demanding that these funds be included in the school district’s calculation of its charter school tuition rates. Conversely, the charter schools contended that SDP did not have the authority to make these deductions and that only the state legislature could expressly allow such.

The Secretary rejected these arguments and found, as to federal funds, the Public School Code clearly stated that school districts were not required to include such funds in their budget.  Fundamentally, charter schools are eligible and receive federal funds in the same manner as school districts. But including federal funds in SDP’s calculation of charter school tuition rates would result in charter schools receiving more money than they would be otherwise entitled as they would be receiving federal funds directly from PDE and indirectly through the charter school tuition rate. Moreover, in indirectly receiving federal funds from SDP, the charter schools would benefit from the receipt of federal funds without having to comply with eligibility requirements and other terms and conditions to each grant. As to pre-K programs, the Secretary concluded that the CSL was silent as to pre-K expenditures. Further SDP consistently had made that deduction because charter schools are not allowed to have pre-K programs and do not qualify for pre-K Counts funds. In other words, requiring the charter school law to include pre-K programs would be absurd as to such schools are not authorized to operate such programs in the first place. As to Ready to Learn Block Grants, the Secretary found that the state’s fiscal codes clearly prohibited school districts from including these grants in calculating charter school tuition rates.

The Secretary decision also addressed evidentiary issues dealing with the hearing officer’s discussion of certain items. But on the main legal issues, the Secretary concluded that the School District appropriately used budgeted expenditures to calculate tuition rates and the additional deductions listed on PDE 363 were necessary to give effect to the charter school law and other laws.

PRACTICAL ADVICE

Charter school laws and funding are very complicated. However, it does appear that the Secretary in addressing redirection requests is not taking a rigid approach and in the spirit of fairness will determine whether “budgeted total expenditures for average daily membership” and deduction of charter school tuition rates is determined equitably.      

January 01, 2023

Serving our clients successfully since 1900

The same attributes that have anchored over a century of success are still our guiding principles today.

Stay up-to-date on the latest News & Insights by subscribing to our alerts

Enter your email address below and be notified when we post new information.