On November 25, 2024, the Commonwealth Court of Pennsylvania issued a significant ruling in the Esperanza Academy Charter School, et al., v. the School District of Philadelphia, et al case.
Esperanza confirmed that the cost of pre-kindergarten and Ready To Learn Block Grants should not be included in calculating charter school tuition.
Background in the Case
The Petitioners, Esperanza Academy Charter School and Esperanza Cyber Charter School (the “Charter Schools”), contend that the School District of Philadelphia (“SDP”) underpaid them for the 2015-2016 school year.
On November 21, 2022, the Pennsylvania Department of Education (the “Department”) issued an Order finding in favor of SDP. The Order concluded that SDP appropriately used budgeted expenditures to calculate tuition rates, using the additional deductions listed on the PDE-363. The Order further directed the parties to calculate the aforementioned rates using the amended budgets and the Average Daily Membership (“ADM”) to reconcile the contested school years.
The Charter Schools filed an appeal of the Order to the Commonwealth Court, and the Court heard oral argument on September 11, 2024.
Issue Before the Court
At issue was the statutory interpretation of the Charter School Law as it pertains to:
1. Whether SDP’s charter school tuition rates were calculated based upon budgeted total expenditures per ADM; and
2. Whether SDP appropriately utilized the additional deductions listed on the PDE-363 for federal funding, Pre-Kindergarten expenses, and Ready to Learn Block Grant revenue.
Judge Covey’s Opinion
On November 25, 2024, Judge Anne E. Covery wrote for a unanimous Court, affirming the Order and finding in favor of SDP. The Opinion is likely to impact several other charter school funding disputes taking place across the Commonwealth.
1. PDE-363
PDE-363 is a form that aids districts in calculating charter school tuition rates. Judge Covey explained that the PDE-363 includes deductions from total expenditures for several types of education programs, such as regular education and vocational education, for which school districts receive federal funding.
Judge Covey dismissed the Charter Schools’ argument that such funds should be included in the total expenditures, making it clear that “the only permissible use of [federal] funds is for the benefit of [SDP]’s students.” She further noted that “it is clear that [SDP] is not permitted to divert any of its federal funding to charter schools.”
2. Pre-Kindergarten Funding
The Charter Schools also argued that SDP should not have deducted Pre-Kindergarten funding from its total budgeted expenditures. However, Judge Covey explained that the deduction of Pre-Kindergarten funding was proper, because charter schools are not approved providers to offer Pre-Kindergarten programs. As such, Pre-Kindergarten funding should not be considered in the calculation of charter school funding.
3. Ready to Learn Block Grant
Allocations made through the Ready to Learn Block Grant (the “Grant”) are intended to enhance learning opportunities for students in qualifying school districts. The Charter Schools further argued that such funding should not have been deducted from SDP’s total expenditures; however, Judge Covey found otherwise.
Judge Covey determined that, pursuant to the Fiscal Code, the Grant is not to be included in SDP’s total expenditures, and as such, should not be considered in the calculation of charter school funding.
Which Budget Should be Used Moving Forward?
The Charter Schools argued that SDP should not have been permitted to utilize its amended budgets to determine the amount it was to pay the Charter Schools.
Judge Covey addressed this argument, providing that the Charter School Law only requires the use of budgeted total expenditures when calculating charter school funding. Because the Charter School Law does not specify whether initial or amended budgets are to be used, and because the Pennsylvania General Assembly is presumably aware that school districts amend their budgets, “[SDP]’s use of amended budgets does not violate the Charter School Law.”
While the Opinion does not specifically address which budget is to be used by schools districts when calculating charter school funding, it suggests that school districts may use either their initial budget or their amended budget.
Bottom Line For Schools
This charter school funding dispute presents great significance to SDP and all other school districts across the Commonwealth. As conveyed by SDP and the amici curiae (“friends of the court”), a reversal of the Order would likely lead to disastrous consequences for schools, students, and taxpayers across the Commonwealth.
Due to the significance of the case, several charter school funding disputes were stayed pending the Commonwealth Court’s decision. The Charter Schools have thirty (30) days to file an appeal. We will keep an eye out for any developments.
If your school has a question, please consult your local counsel or one of the Education attorneys at KingSpry.
