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Chester Community Charter School v. Commonwealth of Pennsylvania

May 23, 2012

CHESTER COMMUNITY CHARTER SCHOOL, PETITIONER
v.
COMMONWEALTH OF PENNSYLVANIA, DEPARTMENT OF EDUCATION, SECRETARY OF EDUCATION GERALD L. ZAHORCHAK, CHESTER-UPLAND SCHOOL DISTRICT, CHESTER-UPLAND SCHOOL DISTRICT BOARD OF SCHOOL DIRECTORS, RESPONDENTS



The opinion of the court was delivered by: Dan Pellegrini, President Judge

:

Argued: April 18, 2012

BEFORE: HONORABLE DAN PELLEGRINI, President Judge HONORABLE BERNARD L. McGINLEY, Judge HONORABLE BONNIE BRIGANCE LEADBETTER, Judge HONORALBE ROBERT SIMPSON, Judge HONORALBE P. KEVIN BROBSON, Judge HONORABLE PATRICIA A. McCULLOUGH, Judge HONORABLE ANNE E. COVEY, Judge

OPINION BY PRESIDENT JUDGE PELLEGRINI

Before this Court is an Application for Summary Relief filed by Chester Community Charter School (Chester School)*fn1 seeking to compel the Secretary of Education (Secretary) to withhold state subsidies from the Chester- Upland School District (School District) because it failed to fund Chester School in the amounts required by law for school years dating from September 1998 to September 2007 in the total amount of $7,490,171.75. For the reasons that follow, the Application is denied.

I.

This case arises from a four-count Petition for Review filed in May 2009, later amended, in which Chester School alleged that since at least September 1998, the School District had failed to use the proper funding rates in making its mandatory payments for special education students to Chester School resulting in over $7 million in underpayments. Chester School pled that it had provided the Department of Education (Department) in 2007 with all of the necessary documentation to establish the School District's underpayments but that the Secretary failed to make the necessary deductions as required by Section 1725- A(a)(5) of the Charter School Law.*fn2 It also sought to enjoin the Department's unilateral appointment of an administrative hearing officer to consider Chester School's entitlement to the underpayment of funds scheduled for August 15, 2008.*fn3

In its Petition for Review, Chester School requested that this Court 1) permanently enjoin the Department from initiating administrative proceedings to address its entitlement to statutory funds under the Charter School Law; 2) declare that the Department and School District failed to comply with their statutory obligations under the Charter School Law; 3) require the Department and School District to follow the Charter School Law's funding requirements; and 4) compel the School District to immediately reconcile the underpayments of funds owed to Chester School.

The School District and the Department filed preliminary objections, which this Court overruled as to Counts I (Mandamus), III (Declaratory Judgment) and IV (Permanent Injunction) but sustained as to Count II (Writ of Prohibition). Chester I. Specifically, in Count I, contrary to the Department's contention that it was discretionary to withhold subsidies, we determined that the Department had a mandatory, non-discretionary duty to withhold subsidies to a school district based upon the estimated amount documented by a charter school. "There is no air in Section 1725-A(a)(5). The Secretary's responsibility to withhold subsidies is mandatory and ministerial. There is no discretion to exercise because the estimated amount to be withheld is determined by the charter school's documentation." Chester I, 996 A.2d at 77-78. In Count III, although the Department argued that it was a neutral party and Chester School had not shown that it suffered a direct, immediate or substantial injury as a result of its actions, we held that Chester School alleged sufficient facts establishing a direct, immediate and substantial injury and that an actual and ripe controversy existed between it, the School District and the Department. As to Count II, we overruled the preliminary objection insofar as it was based upon the proposition that the hearing on the withholding of subsidies took place after the subsidies were withheld.

However, we sustained the demurrer because the parties agreed to stay the hearing pending the Court's decision on the merits. "[The School District] cannot be restrained from asking for a hearing. Indeed, the Charter School Law guarantees it a hearing where it contests any amount withheld from its state subsidies." Id., 996 A.2d at 80. For that reason, we also overruled the preliminary objection to Count IV.

The School District then filed an Answer and New Matter alleging that Chester School's Petition for Review should be dismissed for numerous reasons including, inter alia, that it failed to exhaust administrative remedies and that this Court lacked subject matter jurisdiction; that its claims were barred by res judicata and/or collateral estoppel or laches; and that its claims were barred by the applicable statutes of limitations because the claims were for school years up to a decade or more in the past.*fn4

II.

The dispute on the merits focuses on Chester School's claim that it did not receive all the funds to which it was entitled for school years 1998 through 2007 for educating special education students. It alleges that the School District took credit against "total special education expenditure" cost money spent on Early Intervention services for "all handicapped infants, toddlers, and their families and eligible young children,"*fn5 putting severely handicapped placements and educating incarcerated individuals in peril. In taking those deductions, Chester School contends that the School District did not properly apply the funding formula set forth in Section 1725-A(a) (3) of the Charter School Law.

The basis for Chester School's argument is a comparison between the funding formula for "non-special education students" contained in Section 1725- A(a)(2) with the funding formula contained in Section 1725-A(a)(3) for "special education students." It points out that Section 1725-A(a)(2) specifically allows for deductions from "budgeted total expenditures." That section provides that:

For non-special education students, the charter school shall receive for each student enrolled no less than the budgeted total expenditure per average daily membership of the prior school year, as defined in section 2501(20), minus the budgeted expenditures of the district of residence for nonpublic school programs; adult education programs; community/junior college programs; student transportation services; for special education programs; facilities acquisition, construction and improvement services; and other financing uses, including debt service and fund transfers as provided in the Manual of Accounting and Related Financial Procedures for Pennsylvania School Systems established by the department. This amount shall be paid by the district of residence of each student.

Because the funding formula for non-special education students enumerates all permitted deductions from "budgeted total expenditure," which total seven deductions, then followed by the next sentence that "this amount shall be paid," the General Assembly did not intend for any additional deductions, and that was the amount that the School District was required to pay to Chester School for "non special education children."

Chester School then compares that provision with §1725-A(a)(3) which does not permit any deduction. That provision provides: For special education students, the charter school shall receive for each student enrolled the same funding as for each non-special education student as provided in clause (2), plus an additional amount determined by dividing the district of residence's total special education expenditure by the product of multiplying the combined percentage of section 2509.5(k) times the district of residence's total average daily membership for the prior school year. This amount shall be paid by the district of residence of each student.

Chester School contends that the absence of deductions when contrasted against the list of seven deductions in (a)(2) means that the General Assembly did not intend for any deductions from a school district's total special education expenditure. Because the funding formula of special education students is likewise mandatory, but unlike the funding formula for non-special education students does not provide for any additional deductions, Chester School contends that means that the Charter School Law requires a school district to take its ...


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