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Wolf warns Chester Upland schools may not open without drastic interventions

He is proposing a plan that would slash the amount that the district pays for charter special education students.

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

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Without immediate action, Gov. Wolf said Tuesday, the Chester Upland School District will not be in a financial position to open its doors next month.

Wolf has a plan to rectify the situation, resting partly on the backs of area charter schools.

Wolf has asked a Delaware County judge to approve drastic reductions in the payments that Chester Upland sends to charter schools.

Without action, Wolf said, Chester Upland’s almost $24 million operating deficit would prevent it from opening in September.

"I, for the life of me, don’t know how you can open financially with what they’re staring at," said Wolf, in a telephone interview.

Flawed system?

The governor’s solution hinges on what many education advocates have long considered a flaw in the way that the state finances charter schools for special education students.

Under the current system, charters have a financial incentive to enroll students with relatively mild educational disabilities.

It works like this: Districts must give charters whatever the districts spend, on average, on special education.

If a charter enrolls many children with less costly needs, the charter makes out better financially.

And then a vicious cycle is created. With fewer mildly disabled students in the district, the district’s average cost climbs, which it then must pay to the charter.

Right now, Chester Upland sends about $40,000 to each charter that enrolls an area special education student, no matter the student’s disability.

The Wolf administration’s official court filing points out that the money sent by Chester Upland School District to charters for special ed is "disproportionately higher than any other school district sending students to the same schools."

"This is patently inequitable," the filing stated.

Wolf wants to implement a new formula in Chester Upland that would align charter special education payments more closely with actual costs.

Wolf’s plan is based on the 2013 recommendations of the legislature’s bipartisan special education funding commission. It proposed a three-tiered system of funding for special education based on the severity of student need.

Those recommendations were never adopted by the General Assembly.

Under Wolf’s plan, Chester Upland’s special ed charter bill would drop from $40,000 per student to $16,000 per student – saving the district $21 million.

"The special education issue is something that charter schools and public schools all across the commonwealth are struggling with," said Wolf. "There’s an inducement to try to categorize more students than maybe should be categorized as special education just because of the way the formula works."

Overall, Wolf’s proposal would decrease the amount that Chester Upland spends on special education payments to charters from $64.4 million to $39.8 million.

"As with any experiment, you need some tweaking," Wolf added, of the way charters are funded in Pennsylvania.

Wolf also wants to cap the funding that the state’s cyber charters receive for students from Chester Upland to just under $5,980, saving the district $4 million more.

The twofold approach would wipe away the district’s existing deficit, the governor said.

Wolf’s plan also calls for a forensic audit of the district’s finances and the appointment of a new turnaround specialist.

The petition to amend Chester Upland’s recovery plan was submitted by state Education Secretary Pedro Rivera and Chester Upland receiver Francis Barnes, a Corbett administration appointee.

Without action, Chester Upland’s deficit will reach $46 million by the end of the school year.

Chester Upland as ‘poster child’

The district was first classified as financially distressed in 1994. The Pennsylvania Department of Education said that from 2003 to 2012, the district overspent $44.4 million.

Over the last five years, the state has sent Chester Upland $74 million in extra, one-time infusions of aid.

"I don’t really care whose fault it is. Over the last 20-some years, I guess there’s plenty of blame to go around. But regardless, it’s our problem," said Wolf. "I thought we needed drastic action in Chester Upland, and this is my best effort at that drastic action."

Wolf’s plan assumes that the General Assembly will approve his bid to raise state education aid by a half-billion dollars. Negotiations over the state budget have dragged on since the fiscal year ended on June 30.

Education Law Center staff attorney David Lapp described Chester Upland as the "poster child" for what’s wrong with how Pennsylvania funds special education in charter schools.

He lamented that the recommendations of the special ed funding commission were still sitting on the shelf.

"Unfortunately, the General Assembly was unwilling to compromise and nothing got fixed. Meanwhile, until the state legislature complies with their constitutional mandate to provide adequate, equitable, and predictable funding for all students in all schools, we can expect more of these fights over whether to rob Peter or Paul."

Chester County Community Charter

If approved by the courts, Wolf’s plan for Chester Upland would have a large impact on the level of funding to Chester Community Charter School – the largest brick-and-mortar charter in the state.

Payments to charters account for 46 percent of Chester Upland’s budget, and most of that goes to CCCS. The school has 3,126 students, nearly as many as the 3,300 attending schools in the Chester Upland district.

CCCS is run by the for-profit Charter School Management Inc., owned by Vahan Gureghian, a prominent Republican in Montgomery and Delaware Counties and major donor to political candidates. He was the largest individual campaign contributor to former Gov. Tom Corbett.

CCCS has traditionally enrolled a high proportion of special education students, most of them classified in the less expensive categories. According to the latest report to the state, nearly one in four CCCS students is in special ed – about the same rate as that in the Chester Upland district as a whole, but far above the statewide rate of 15.6 percent.

At CCCS, more than 27 percent of the students are classified as having a "speech and language impairment," the least expensive disability. That is close to twice the state rate of 15.4 percent and 11 times the Chester Upland rate of 2.4 percent for that category.

By contrast, the CCCS percentage for the more costly categories of autism, emotional disturbance and intellectual disability are far below Chester Upland’s rates.

As the minimally disabled and least expensive special ed students are drained from Chester Upland, the district is left with students with more costly disabilities and its per-pupil spending rises. That then inflates the charter payment for the the next year.

The cost is also driven up because the state assumes that all districts have 16 percent
special education students. In cases like Chester Upland where the special education percentage is higher than 16 percent – at 24 percent, it is 50 percent higher – the total cost is divided by a lower number than it should be.

"They should be dividing by 24 percent," said the Education Law Center’s Lapp. "If you have more than 16 percent, you get a higher number for the per pupil cost than you should."

Due to these factors, since 2012, Chester Upland’s payment to charters for each special education student has risen from $24,528 to $40,170 this year – an increase of 63 percent. Between last year and this, it went up 15 percent, from $34,931 to $40,170.

Charters can spend the money they receive for special education in any way they see fit.

Gureghian has declined to open the books of his management company to public scrutiny, arguing that it is a private business. He complied with one limited court ruling on a right-to-know request from the Inquirer in 2008.

Wolf said his proposal was not pointed at CCCS.

"It’s not. It’s pointed at trying to make sure that the Chester Upland School District is able to open for all kids on time," said Wolf.

School CEO David E. Clark Jr. vigorously disagreed.

"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," he said in a statement issued Tuesday night. "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."

CCCS was also implicated in allegations of a standardized test cheating scandal, when a forensic audit for the 2009 tests found statistically improbable erasures of wrong-to-right answers.

A state investigation into what happened was aborted, and CCCS was allowed to investigate itself. No one connected with the school was ever held accountable, but when strict protocols were imposed, test scores dropped 30 points in each subject in each grade.

Gureghian and his wife, Danielle, were also disclosed to be the major donors to a PAC that gave to former state Treasurer Rob McCord, who resigned and pleaded guilty to extortion charges involving contributions to his failed gubernatorial campaign.

The Philadelphia Inquirer has reported that federal investigators are still probing the conditions under which the contributions were made.

This story has been updated with comment from the CEO of Chester Community Charter School.

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