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State has paid millions to charter schools since SRC suspended the code

This article was originally published in The Notebook. In August 2020, The Notebook became Chalkbeat Philadelphia.

The Pennsylvania Department of Education revealed today that it has directly paid more than $3.7 million in disputed per pupil allotments to six Philadelphia charter schools this fall. That’s $3.7 million in expected state aid that the School District won’t be receiving.

The state’s payments to charters appear to defy an August decison of the School Reform Commission that suspended the part of the school code requiring the state to make such payments when a charter and a district disagree about how much the district should pay them.

The SRC action was designed to allow the District to control charter growth — to impose enrollment caps — so that it could plan financially. But the issue of whether the District can limit a charter’s enrollment has long been the object of legal and political wrangling between the Philadelphia District and its charters.

When the state pays charters directly in a dispute over students, it withholds an equal amount from its subsidy to the chartering district. Districts pay charter schools on a per pupil basis, and Philadelphia was anticipating paying $675 million to charters this year, not counting transportation costs.

According to a spreadsheet obtained from PDE, the state has directly paid more than $5.1 million to 10 charters this year because of disputed enrollment numbers. Nearly $1 million of that was to reconcile underpayments from the 2012-13 school year, and $516,000 was paid in July and August to Walter D. Palmer Leadership Learning Partners Charter, which has been the most aggressive in seeking direct payments in disputes with the District. Palmer has taken the District to court and has prevailed in most legal rulings in the ongoing case.

The SRC suspended the code on Aug. 15.

But more than $3.7 million was paid out after the suspension to six charter schools: KIPP Philadelphia, Richard Allen, Walter Palmer, Discovery, Solomon (which closed in October), and Delaware Valley Charter High School.

The August SRC resolution reads: "suspension of the requirements of these provisions will eliminate the secretary’s duty to withhold money from the School District’s basic subsidies and pay the amount to charter schools solely on the unilateral request from the charter school and will allow the School District to responsibly manage its budget by controlling charter school enrollment growth."

But a statement from PDE spokesperson Tim Eller said that the state is still obligated to make the payments.

"The Charter School Law and Commonwealth Court decisions require the department to withhold payments due to a school district when a charter school presents to the department documentation of an underpayment, irrespective of the reason for the dispute," the statement said. "The department has complied with its duty under the Charter School Law and Commonwealth Court decisions. The department will respond to any objection filed by a school district by adjudicating the matter between the two entities."

In October, invoking the SRC’s powers, Deputy Superintendent Paul Kihn sent letters to charters that had refused to sign agreements with enrollment caps. Kihn warned the charters not to seek direct payments from the state, saying that if they did so, they risked having the District take action against them, which could include proceedings to revoke their charters.

"Failure of your Charter School to bring itself into compliance by December 15, 2013, shall be grounds for suspension, nonrenewal or revocation by the SRC of the purported charter on which that Charter School relies," the letter says.

As of early November, 19 charters had not reached agreements with the District. Six of them are overenrolled by the District’s accounting, spokesman Fernando Gallard said at the time.

One of the charters that received payments, Discovery, had been threatened with revocation of its charter by the District before the code suspension because it enrolled more students than its cap allowed. In June, when Discovery broke ground for a new building, officials said that it reached an agreement to pay back the District more than $400,000. But in October and November, it received nearly $354,000 directly from PDE.

This year, Palmer has received the most money, more than $2.2 million.

Gallard said last week that the District, which has struggled to close a $304 million budget gap by cutting thousands of staff positions and reducing services, will pay an additional $12 million to $15 million to charter schools this year because of higher than expected enrollment in them. It is unclear how much of that is because of charter students in excess of any caps.

KIPP CEO Marc Mannella said that the payments to his school — more than $616,000 — were for students in grades 3 and 12 that the school was already educating. KIPP typically adds a grade each year. He said that the SRC in July approved its right to add those grades to its elementary and high school, but did not increase its enrollment allotment. The District has flatly declined to increase existing enrollment caps for charters in recent months.

"We invoiced the state for those funds, as we are currently educating these students, and we were happy to learn today that the state has approved the payment of these funds so we can continue to do this work," Mannella said.

Gallard said Friday that Kihn would have more to say about the charters’ responses to his letters and any further action that the District plans early next week.

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