Wolf challenges charter school funding in Chester Upland

The Wolf administration on Tuesday urged a Delaware County Court judge to drastically cut how much the financially troubled Chester Upland School District pays charter schools for special-education students and online learning.

Gov. Wolf said the district's survival could hinge on winning court approval for the cuts in charter reimbursements, which would total an estimated $24.7 million in the 2015-16 school year.

"This needs to end," Wolf said, referring to Chester Upland's 25-year history of financial crises, which have led to millions of dollars in emergency state aid, massive layoffs, and a plunge in enrollment in traditional public schools. "If we do nothing, the schools won't open."

The legal moves could also be a key step toward what Wolf hopes will be major changes in charter-school funding across Pennsylvania, which would have major ramifications for other districts, most notably Philadelphia. "A lot of school districts are in pain right now," he said.

Charter-school advocates had already been sharply critical of the first-term Democratic governor, claiming that his budget proposal, which seeks to slash reimbursements for cyber charter schools statewide, and calls for audits and elimination of fund balances at charter schools, is a thinly veiled attempt to strangle school choice. The Pennsylvania Coalition on Public Charter Schools has called Wolf's proposals "a blatant first step in killing charter-school options at the expense of children."

Tim Eller, executive director of the Keystone Alliance for Public Charter Schools in Harrisburg, said the latest Chester Upland recovery plan appears to be "a backdoor approach to what has been tried in the General Assembly and failed." The push to curb charter-school reimbursements in Chester Upland is the cornerstone of a broader plan to reduce the district's long-term deficits through auditing, the appointment of a financial turnaround specialist who would negotiate new deals with creditors, and intensive fiscal monitoring of future spending.

Wolf and his education officials hope Judge Chad F. Kenney will sign off on the changes well before classes resume next month. But the measures are likely to draw strong opposition from charter schools in the Delaware County district, including the largest, Chester Community Charter School, which is managed by Vahan Gureghian, a wealthy Montgomery County lawyer and Republican political donor.

Any ruling could be appealed to Commonwealth Court.

David E. Clark Jr., Chester Community Charter School's CEO, said in a statement, "It's no coincidence that the amount the administration wants to cut from special education children matches the amount of the deficit Chester Upland faces. We wish the state would spend more time properly funding schools - every school - than cutting funds from the neediest students. What they are proposing to do makes no sense, legally or morally."

The Chester Upland school board's president, Anthony Johnson, said relief from charter school bills would be welcome. But he criticized state officials for saying the district had been mismanaged.

"How can they say the district is mismanaged when they've controlled it for 19 years? The receiver is appointed by the secretary of education. They need oversight more than we do," he said.

Charter school enrollment across Pennsylvania has skyrocketed since the turn of the century, with enrollment jumping from just under 19,000 in 2000 to 128,716 in 2013-14, and many of those gains have come in lower-income urban communities. Charter school enrollment in Philadelphia has doubled since 2007. The cost to school districts for reimbursing charter school operators has been linked to budget woes in Chester Upland, Philadelphia, and other poverty-plagued districts.

Philadelphia officials have raised the issue of tying special education costs to the individual student's actual need rather than the same price for every child.

Wolf's spokesman, Jeff Sheridan, said officials would explore other options for Chester Upland if the judge turns down their request, but said that "without any action, the doors aren't going to open."

The new plan seeks to turn a once-projected annual deficit of $22.8 million in Chester Upland into a nearly $3 million surplus, but that depends on approval of Wolf's now-overdue budget and education-spending proposal, currently stalled in the legislature.

Administration officials say fiscal sanity will not return to Chester Upland until something is done about the current $64 million cost of educating about 3,800 children who live in the district and attend publicly financed but privately managed charter schools. That is more money than Chester Upland now receives in state aid.

The biggest driver is the reimbursement for children determined to need special education. Under the current formula, officials said, Chester Upland pays out considerably more than neighboring districts - $40,315 per child - and the number of students enrolled in special education is also about 50 percent higher than the statewide average.

"It's extraordinary," state Budget Secretary Randy Albright said. "It's not something we can keep doing. It's literally bankrupting the district."

The new recovery plan, filed in County Court by Francis Barnes, the state-appointed receiver, bases reimbursement on a three-tier formula recommended in 2013 by the state's bipartisan legislative Special Education Funding Commission to better reflect costs. Administration officials said that would reduce special-ed charter reimbursements in Chester Upland by more than half - to $16,152 per student - and save $20.7 million this year.

The move also targets the cost of educating Chester Upland students in cyber charter schools - online schools that are reimbursed at the same rate as students who attend a brick-and-mortar charter school despite the much-lower overhead. It would cap annual payments for cyber students at $5,950, based on what some intermediate units charge for online learning, which would save the district about $4 million this school year.

The governor and his lieutenants said chronic mismanagement and poor spending decisions had also played a critical role in the district's financial problems, dating to the first state takeover in 1994.

However, the pace of emergency state bailouts has increased since the start of the decade, coinciding with a mass exodus of students into charter schools.

Since 2010-11, Chester Upland has received $74.25 million in one-time cash infusions from Harrisburg, despite steep spending cuts that included laying off roughly 40 percent of the staff in traditional public schools. In addition, officials said the district needed $4 million this year for needed repairs to the high school's aging heating and air-conditioning systems.

"This has to be the end of the road," Wolf said. "We have to do something substantive. We really need this to work."

Aides, including Albright and Education Secretary Pedro Rivera, said they hoped the planned audit of district finances would make up for years of poor data. The new plan would also waive a scheduled $1 million 2016 payment on an emergency $10 million loan that had been negotiated by the previous district receiver, Joe Watkins.

Administration officials said they also hope to have an academic reform plan for Chester Upland in place as early as October.

Correction: This article is corrected from an earlier version that misstated Tim Eller's position at the Keystone Alliance for Public Charter Schools in Harrisburg.