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Chester Upland School District, et al. v. Commonwealth of Pennsylvania

March 16, 2012


The opinion of the court was delivered by: Baylson, J.


I. Introduction

If there is one sacred cow in the pasture of public education, it is the concept that public schools should stay open during the school year.

The Chester Upland School District ("District") filed this case when it was about to run out of operating funds in the middle of the school year. The parties dispute the reasons for this, but an infusion of funds from the Pennsylvania Department of Education has kept the District Schools open so far, and they are likely to stay open through the end of this school year, June 2012.*fn1

This Memorandum addresses subject matter jurisdiction -- what claims by the parties may be heard in federal court. This threshold issue is important because federal courts have only limited jurisdiction. The District and the other Plaintiffs assert only claims arising under federal law, but some of the Intervenor parties also assert claims under Pennsylvania law.*fn2

A. Education and Federal Courts

Education is expensive, until one considers the alternatives. There is no one "true way" to educate school children, nor is there any federal rule of law mandating a particular method of education. Congress has, however, for more than 40 years, enacted many provisions, and appropriated billions of dollars, which impact elementary and secondary education. Federal regulations binding on state and localities follow the appropriations of money, thus giving federal courts jurisdiction over disputes arising under these federal statutes and regulations.*fn3

Reviewing what is now a very large footprint which Congress has planted over the education landscape, one may be surprised at the many federal cases involving education, filed and decided in federal courts, from the Supreme Court down. Thus, it cannot be said that federal courts have no impact on education; but the federal court role is limited to protecting constitutional rights and interpreting the laws passed by Congress. Despite the familiar shibboleth that education is purely a local concern, federal statutes and judicial decisions have impacted educational practices in Pennsylvania and across the United States.

B. Students with Disabilities

Federal laws enacted by Congress concern students with disabilities, who are eligible for special education services. These students have specific rights under federal law, including a private right of action to secure what is referred to as a "free and appropriate public education" ("FAPE"). One of the important allegations brought by the District (and by parents) is that the alleged funding curtailments by the Defendants will prevent the schools from providing a FAPE to these students.

Plaintiffs alleged that without emergency financing the District would no longer be able to provide the requisite services to students with disabilities, emphasizing that this result would violate federal law.

However, there are no assurances that adequate funding for students with disabilities will continue into the 2012-13 school year, which will constitute the principal inquiry for the upcoming trial, scheduled to start on May 7, 2012.*fn4

C. Sovereign Immunity

Sovereign immunity under the Eleventh Amendment impacts subject matter jurisdiction. Generally, federal courts do not have jurisdiction to hear suits against state governments or state officials, but, as with every rule, there are exceptions. One exception is that a state, such as Pennsylvania, which has accepted federal funds, may waive its sovereign immunity on certain claims. Under another exception, a state and its officials are subject to a federal court issuing prospective injunctive relief to enjoin ongoing violations of federal law.

D. Supplemental Jurisdiction

Although Congress has permitted federal courts to entertain some state law claims, when asserted along with federal claims (called "supplemental jurisdiction" under 28 U.S.C. § 1367), this Court has discretion whether to hear the Pennsylvania state law claims.

This Court will exercise supplemental jurisdiction over state law claims asserted by the Intervenors to a limited extent. The presence of companion litigation pending in the Commonwealth Court of Pennsylvania is a strong factor against this Court considering all Pennsylvania law claims, because some of them are already pending in the Commonwealth Court, and others could surely be added.*fn5

E. Charter Schools and Funding

One issue that pervades the pleadings in this case, as well as the Secretary's report, concerns the dispute between the District and the charter schools over their expected entitlements. Their in-fighting resembles the battles between the Capulets and the Montagues in Romeo and Juliet. This is not an issue of federal law and this Court is not the place to resolve disputes between the District and charter schools.

This Court has no jurisdiction to require appropriations by the state in any specific amount or to any specific school. The Secretary, exercising his authority and his discretion under Pennsylvania state law must act like Sarastro, the sage/philosopher in Mozart's The Magic Flute.

II. Plaintiffs' Legal Claims

On January 12, 2012, Plaintiffs Chester Upland School District ("District"), the Board of School Directors of the District ("Board"), a resident of the District, a taxpayer of the District, a parent of a student receiving special education services, and a parent of a general education student, initiated this civil action. Their Complaint asserts claims against the following Defendants: the Commonwealth of Pennsylvania ("Commonwealth"); the Department of Education of the Commonwealth ("Department of Education" or "Department"); Ronald Tomalis, the Secretary of Education of the Commonwealth ("Secretary")*fn6 ; Joseph P. Scarnati III, President Pro Tempore of the Senate of the Commonwealth, in his official capacity ("President Pro Tempore"); Samuel H. Smith, Speaker of the House of Representatives of the Commonwealth, in his official capacity ("Speaker"); and Tom Corbett, Governor of the Commonwealth, in his official capacity ("Governor") (ECF No. 1).*fn7

Plaintiffs assert their claims as a class action on behalf of all similarly situated persons, pursuant to Federal Rules of Civil Procedure 23(a) and 23(b)(2). Plaintiffs initially brought substantive claims for declaratory, mandamus, and injunctive relief based on a variety of constitutional, federal statutory, and state law grounds, all arising out of an alleged lack of adequate funding to ensure the District's continued operation. Plaintiffs later amended their Complaint (ECF No. 67), discarding entirely their state law claims and asserting causes of action as follows.*fn8

A. Count I - IDEA

Count I alleges that a number of funding decisions by Defendants-especially certain preferential funding allocations made to charter schools-have resulted in reductions in funding to the District that will "prevent the School District from providing educational services to special education and regular students in the School District, effectively requiring the closing of schools in the School District." Am. Compl. ¶ 42. The subsequent school closings would trigger violations of the Individuals with Disabilities Education Improvement Act ("IDEA"), 20 U.S.C. § 1400 et seq.,*fn9 including the requirement that all students with disabilities be provided a free appropriate public education ("FAPE"), and the requirement that students protected under the IDEA receive at least ten days notice of a change in educational placement. Am. Compl. ¶¶ 42-43. To remedy these alleged violations, Plaintiff requests a declaration that Defendants have a duty under federal law to maintain services for District students with disabilities in their current placement and in the least-restrictive environment ("LRE") with their non-disabled peers. Am. Compl. at 12. Plaintiffs further request that the Court enjoin Defendants from failing to provide the District funding to maintain its special education programs. Am. Compl. at 12.*fn10

B. Count II - IDEA and Other Federal Claims

Count II alleges that students with disabilities are a protected class, and that the Pennsylvania special education subsidy payment formula (P.S. § 25-2509-5) violates the IDEA, Section 504 of the Rehabilitation Act ("Section 504"), Equal Protection and Substantive Due Process under the Fourteenth Amendment, and Title I of the Elementary and Secondary Education Act ("ESEA"), 20 U.S.C. § 6301 et seq. Am. Compl. ¶ 46. Plaintiffs ask the Court to "enjoin Defendants from using and implementing a state special education subsidy formula that discriminates against students with disabilities in favor of non-disabled students." Am. Compl. at 12.

C. Count III - Federal Statutory and Constitutional Claims

Count III avers that the reduction in state educational funding to the District has disproportionately impacted racial minority students-as well as school districts with high percentages of racial minority students-and, moreover, that Defendants intended to bring about this result. Am. Compl. ¶ 49. According to Plaintiffs, this conduct violates the Equal Protection Clause, Substantive Due Process, Title IV of the Civil Rights Act, Title I of the ESEA, and the No Child Left Behind Act ("NCLB").*fn11 Am. Compl. ¶ 50. Plaintiffs ask the Court to enjoin Defendants from reducing funding to the District at a rate different from that to school districts with low percentages of minority students, and from funding the District "in a racially discriminatory manner." Am. Compl. at 13.

D. Count IV - IDEA

Count IV alleges that through the state cap on funding to the District, Defendants have violated the IDEA by failing to use federal IDEA funds to support special education services for students with disabilities in the District. Am. Compl. ¶¶ 52-55. Plaintiffs ask the Court to declare that Defendants are required to use IDEA funds "primarily to provide services to students with disabilities" including those in the District, and to enjoin Defendants from using those federal funds for other purposes. Am. Compl. at 14.

E. Count V - Federal Constitutional Claims

Finally, Count V of the Amended Complaint avers that all students in the District have a right to public education that cannot be interrupted without due process. Am. Compl. ¶ 57. According to Plaintiffs, the District's imminent closure would consequently deny its students an education, in violation of the Equal Protection Clause and the Due Process Clause of the Fourteenth Amendment. Am. Compl. ¶ 59. Plaintiffs therefore seek an injunction that both prohibits Defendants from depriving the District's students of educational services without procedural due process, and prevents Defendants from providing the District students an education that is not comparable to that of their peers in other districts. Am. Compl. at 15.

III. Facts as Asserted by Plaintiffs

A detailed review of the allegations of the Amended Complaintand the facts asserted in the Affidavits of Dr. Thomas Persing ("Persing Aff."), Acting Deputy Superintendent for the District, and Herbert Schectman ("Schectman Aff."), Assistant Chief Financial Officer for the District, filed in support of Plaintiffs' Motion for a Temporary Restraining Order and Preliminary Injunction will provide the factual background of the jurisdictional discussion below.*fn12 Though the Complaint and the affidavits contain substantial historical and background information concerning the operations, administration, and finances of the District, only the facts most pertinent to Plaintiffs' claims will be discussed.

The District encompasses the City of Chester, the Township of Chester, and the Borough of Upland. Am. Compl. ¶ 16; Persing Aff. ¶ 2. Because of the depressed economic condition of these areas, the District relies primarily on state and federal subsidies to operate its schools. Am. Compl. ¶¶ 16, 18, 26; Persing Aff. ¶¶ 2, 7; Schectman Aff. ¶ 15.*fn13 The District funds both charter and non-charter schools with these subsidies. Am. Compl. ¶ 29, 31, 33; Persing Aff. ¶¶ 7, 10; Schectman Aff. ¶¶ 15, 17.

Over 3,000 students are enrolled in the District-run schools, while over 3,000 students attend charter schools in the District. Am. Compl. ¶ 18; Persing Aff. ¶ 2. Ninety-eight percent (98%) of the students enrolled in the District are racial minorities, and over twenty percent of the students (20.4%) have disabilities, a substantial number of whom have severe handicaps. Am. Compl. ¶¶ 16-17; Persing Aff. ¶ 2.

The District has suffered financial difficulties for many years. Am. Compl. ¶¶ 16, 19; Persing Aff. ¶ 2. Although the Amended Complaint omits this information, Plaintiffs' original Complaint alleged that in 1994, the Commonwealth officially declared the District to be financially distressed and took over direct responsibility of governing the District from its Elected Board of School Directors (the "Elected Board"). Compl. ¶ 18. Subsequently, in 2006, due to continuing financial difficulties, the Secretary was appointed receiver for the District. Compl. ¶ 19. In that capacity, the Secretary was charged with financial oversight of the District, including the authority to monitor, assess, and report on its financial condition, and to approve all expenditures and contracts in excess of $5,000. Compl. ¶ 19.

From 2006-2011, the Secretary allegedly made a number of funding decisions that significantly diminished the District's financial position. These decisions included, among other things: an increase in the District's budget from $85 million to $113 million during that period; an increase in the number of employees in the District from 590 to 735 employees, even though student enrollment in the District had declined from 4,609 to 3,717 during that period; the depletion of the District's reserve funds to finance its expenditures; approval of the 2009-2010 District budget, which resulted in over-expenditures of $2.8 million by the District; failure to satisfy obligations to special education contractors and employee pension contributions in the amounts of $962,000 and $364,000, respectively; and approval of the 2010-2011 District budget, which resulted in a $4.5 million reduction in revenue to the District. Schectman Aff. ¶¶ 2-6, 9-11. These decisions led to a substantial increase in the District's debt. Schectman Aff. ¶ 2.

Eventually the elected School Board resumed governing the District. During the 2010-2011 school year, the Board requested that the Secretary permit it to fund the debt it inherited through a proposed bond issue, but the Secretary refused. Schectman Aff. ¶ 8. At the end of that school year, however, the District received an advance of $8.7 million from the Commonwealth to cover salaries and the funds the District needed to pay the charter schools. Persing Aff. ¶ 3; Schectman Aff. ¶ 12.

The District's budget for the 2011-2012 school year is $96 million. Am. Compl. ¶ 30. For that period, state and federal subsidies to the District have been reduced from the previous year by a total of $23 million, which includes $8.7 million of state subsidies that the Secretary has withheld as repayment for the advance made to the District by the Commonwealth. Am. Compl. ¶ 30; Persing Aff. ¶ 3; Schectman Aff. ¶¶ 13, 14.

Under both state and federal law, the District is required to provide special education services to students with disabilities. Am. Compl. ¶ 35. The Commonwealth requires the District to allocate funds for these services in accordance with the formula set forth in the Pennsylvania Charter School Law, 24 P.S. § 25-2509.5. Am. Compl. ¶¶ 29; Persing Aff. ¶ 10; Schectman Aff.

¶ 17. Under this formula, charter schools are allocated a separate dollar amount for each enrolled regular education and special education student. Am. Compl. ¶ 29; Persing Aff. ¶ 10; Schectman Aff. ¶ 17. For the 2011-2012 school year, the District is required to provide charter schools $9,858 for each regular education student and $24,500 for each special education student, while non-charter schools are allocated $3,600 for each special education student. Am. Compl. ¶¶ 29, 31; Persing Aff. ¶¶ 10, 12; Schectman Aff. ¶¶ 17, 18.

The Affidavits provide no explanation of, nor any rationale for, the funding disparity between the District schools and charter schools. The $23 million reduction in state and federal subsidies to the District was not accompanied by a corresponding adjustment to the formula for funding charter schools. Am. Compl. ¶¶ 30; Persing Aff. ¶ 11. Accordingly, over forty-four percent (44.8%) of the District's $96 million budget for the 2011-2012 school year is devoted to charter schools. Am. Compl. ¶ 29; Persing Aff. ¶ 10; Schectman Aff. ¶ 17.

As a result of the reduction in state and federal subsidies to the District without a corresponding adjustment to the funding formula, the District has been unable to pay the Charter School the full amount required under the Pennsylvania Charter School Law. Am. Compl. ¶ 33. The Secretary has withheld $18 million from the District's subsidies in order to pay the charter schools directly. Am. Compl. ¶ 34.

The financial crisis has also impacted District staff and students. The District has already furloughed teachers and support staff and increased class sizes. Am. Compl. ¶ 24. The decreased state funding also caused the District to cut certain educational programs, including music, art, language and advanced academic classes. Am. Compl. ¶¶ 24-25. Plaintiffs allege that these programming cuts adversely impact racial minority students and students with disabilities, who no longer have access to the enrichment courses available to their peers in neighboring districts. Am. Compl. ¶ 25.

Although the Commonwealth has provided certain funds to the District since litigation commenced, Plaintiffs allege that if the Secretary continues to withhold the District's subsidies, the District will be unable to meet its payroll obligations and other operating expenses.*fn14 Am. Compl. ¶¶ 36-38, 40; Persing Aff. ¶¶ 14, 17-20. This will force non-charter schools in the District to close. Am. Compl. ¶ 32; Persing Aff. ¶ 14. On February 27, 2012, when they filed their Amended Complaint, Plaintiffs ...

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