In a case of first impression, the Commonwealth Court on November 4, 2025, heard oral argument in Penn Hills Charter School of Entrepreneurship v. Penn Hills School District, et al. which could tackle the issue of whether school districts are statutorily authorized to suspend Charter School payments during a budget impasse.
Background in the Case
On October 24, 2024, Penn Hills Charter School of Entrepreneurship (“Petitioner”) filed an Application for Emergency Relief in the Commonwealth Court based upon its original jurisdiction seeking an expedited hearing for a preliminary injunction, a declaratory judgement, and a Writ of Mandamus against Penn Hills School District, the Department of Education, and the Pennsylvania Secretary of Education (collectively “Respondents”).
Petitioner alleges that it will suffer irreparable harm because it will run out of money on November 5, 2025, due to Penn Hills School District not paying approximately $3 million owed for the 2025-2026 school year and an additional $317,000.00 that is outstanding from the 2024-2025 school year.
On October 30, 2025, Respondents filed an Answer and New Matter contending that under Pennsylvania law, they have statutory discretion to manage their funds which includes temporarily suspending payments to charter schools while the Commonwealth is in a budget impasse and they are not receiving state subsidies. Thereafter, a hearing was scheduled for November 4, 2025, to dispute the merits of the case.
The Hearing
Before the hearing began in earnest, the parties addressed the School District’s approximate $130,000 payment to Petitioner on November 3. The parties stipulated that this payment was from the 2016-2017 school year, and it does not alter Petitioner’s position that they could suffer irreparable harm, nor would it affect the testimony of expert witnesses. Specifically, to the latter point, the parties stipulated to Petitioner’s expert who gave an opinion that Petitioner will become insolvent if Respondents do not fund the school. However, the court noted that it is stipulation to an opinion and the court is not bound by it.
Petitioner’s Case-in-Chief
The parties waived opening statements, and the Petitioner began its case-in-chief by calling Penn Hills Superintendent as a witness. The Superintendent testified that the School District is relying on its own discretion to withhold payments to charter schools as opposed to other school districts who are doing so via resolution. The Superintendent went on to say that the reason why they did not pay the Petitioner during the 2024-2025 school year was because of disputes that date back multiple years going through mediation. Further testimony revealed that the School District pays $7.2 million a year to the Petitioner when there are no ongoing disputes and a budget impasse.
On cross-examination, the Superintendent stated that the School District will make payments to charter schools once state subsidies come through and that the bottom line is to protect the School District itself so as to not fall back into a state of financial imbalance and receivership.
Respondents’ Case-in-Chief
Respondents called the CFO of Penn Hills School District as a witness.
On direct examination the CFO testified that there is no money in its general fund from the Pennsylvania Department of Education (“PDE”). The money that they do have in their cash balance is already committed and not freely assignable. Additionally, the funds the School District usually gets for charter schools have not been received by the School District. The CFO further stated that no charter school has been paid for the 2025-2026 school year. If the School District is ordered to pay all charter schools, then depending on when the budget is passed, the School District’s financial stability could be threatened.
On cross-examination the CFO acknowledged that while the School District has cash reserves and ongoing revenue from local sources to pay Petitioner, it has chosen not to pay the charter school absent state funding as that is the current policy of the School District and there is no statute preventing them from not paying. The CFO further testified that in September they made reconciliation and payroll payments for the 2024-2025 school year but have still not made payments to Petitioner for the 2023-2024 school year due to a PDE 363 dispute.
Closing Arguments
In closing, the Petitioner argued that under 24 P.S. § 17-1725-A(a)(5) of the Charter School Law, the School District is statutorily mandated to make the payments, and the School District has $53 million in school balances to pay Petitioner. The state budget impasse is not a pretext to withhold payments, but rather payments must be made under Section 17-1725-A(a)(5). Thus, the Petitioner faces immediate irreparable harm requiring an injunction because of the immediate insolvency which would leave over 500 students without an education and over 70 employees without jobs.
The Respondents in closing maintained that 24 P.S. § 5-511 of the School Code grants school districts broad discretion in managing and expending district funds. This complements Respondents’ interpretation that Section 17-1725-A(a)(5) establishes that the subsidy Redirection Process is the exclusive statutory mechanism for Petitioner to seek non-payment. Accordingly, the School District maintains that it retains discretion over its financial management, particularly in circumstances where neither the School District nor PDE has available funds to allocate during a budget impasse.
Court Inquires about Administrative Remedies
The court inquired if Petitioner sought redress with the Secretary of Education as per Section 17-1725-A(a)(5). The Petitioner stated that it would be futile to do so due to the budget impasse as relief under this avenue could not be resolved until November 26, 2025, as per the Redirection Process and also being contingent on a state budget being passed. Thus, the uncertainty of this recourse led Petitioner to directly file in the Commonwealth Court.
Bottom Line For Schools
Given the unique facts of this case, it is hard to pinpoint what exactly the precedential value of this case is to local school districts who for the first time, due to the budget impasse, are withholding payments to charter schools. What can be gleaned from this case of first impression depends on how the court frames the issues presented. The court may fashion an opinion that only touches the particular merits of this case, or the court could frame the opinion more broadly on how school districts should handle charter-school funding obligations.
Nevertheless, the court is given an opportunity to clarify, more poignantly, whether school districts possess any statutory discretion to suspend charter school payments during a budget impasse, or are they obligated to make the payments even without receipt of state subsidies.
KingSpry will continue to monitor developments in the case and recommends school districts stay tuned for updates regarding the final disposition of Penn Hills Charter School of Entrepreneurship v. Penn Hills School District, et al.
School Law Bullets are a publication of KingSpry’s Education Law Practice Group. They are meant to be informational and do not constitute legal advice. If your school has a question, please consult legal counsel or one of the Education attorneys at KingSpry.
