State Is Killing School District While Claiming to Save It

A new, 50 page, bureaucratic report from Pennsylvania’s state Auditor General tells a shocking story about ideology hurting children and promoting parasitic school choice at the expense of the host—the School District of Philadelphia.

Over time Pennsylvania has not only slashed state school funding but also expanded charter schools with a morass of untenable regulations—forcing the School District of Philadelphia to remove a charter school authorization cap in place since 2008—taking away a state reimbursement to help pay for charter schools—withholding contested tuition reimbursements for specific charters from the Philadelphia school district’s state school funding and awarding payments to the charters without ever holding required state hearings on the contested payments.  The rules by which Pennsylvania operates charter schools are clearly a trap for a school district in dire need of support from its state government.

Writing for the Philadelphia School Notebook, reporter Kevin McCorry quotes Pennsylvania Auditor General Eugene DePasquale describing the report’s findings: “Our charter school law is simply the worst charter school law in the United States.”

The report released two weeks ago by the office of the Commonwealth of Pennsylvania Department of the Auditor General  describes some of the constraints imposed on the School District of Philadelphia since in 2001 it was declared by the state to be a “Distressed School District,” and put under the control of an appointed School Reform Commission: “The District is… unique because it is the only district in the Commonwealth that has no power to independently levy and impose most types of taxes, including property taxes.  The District is almost completely dependent on monies received from the City of Philadelphia, the Commonwealth, and the federal government.  Given its status as a financially distressed school district, the District is also not allowed to engage in deficit spending.” Although as a Distressed School District Philadelphia had been permitted since 2008 to hold down costs by imposing a cap on the expansion of charter schools and on enrollment in specific charter schools, the school district launched a “Renaissance Schools Initiative” in 2010 to turn around persistently low-scoring schools. Philadelphia supports a huge charter sector—86 charter schools that serve 68,000 students, a third of students in Philadelphia, and half of all charter school students in Pennsylvania.

Then the legislature removed the cap on the authorization of independent charters in 2014, when, in response to the district’s financial crisis, the legislature did pass enabling legislation for a local Philadelphia cigarette tax.  Into that law legislators inserted a poison pill—a provision requiring “the District and the SRC (the appointed School Reform Commission) to accept new charter school applications and give (previously) denied applicants a right to appeal denials…” The Auditor General’s new report cites the two most serious problems the cigarette tax law will impose on the school district: “First, the loss of more District students to newly approved charter schools will put additional financial strain on the District’s operating budget as charter school tuition payments will continue to increase.  Total charter and cyber charter school tuition payments already topped $700 million in the 2013-2014 school year…. It is possible at some point in the future that additional charter school tuition payments generated from charter schools approved during the time period the Cigarette Tax Law is in effect will outstrip the revenue received from the cigarette tax… Second, the additional responsibilities placed upon the Charter School Office through the application review process and potential appeals process will ultimately cost the District money to provide the resources necessary to properly evaluate new charter applications, review resubmitted applications, and respond to any appeals.” “Given the District’s exponential growth of both charter openings and enrollments, the historical lack of closures, the required acceptance of new charter applications, and the continued legal challenges over enrollment caps, there is no current evidence to suggest that openings and closures will be an even trade off.”

Lawsuits already filed by charter schools and management companies around charter school authorization and growth and over the school district’s attempts to oversee charters have, “resulted in uncontrollable and unpredictable legal costs, as well as legal complications over the past several years. Constant litigation has impeded the District’s attempts to manage charter school growth, improve its financial position by controlling charter school tuition payments, and better its charter school oversight by implementing policies aimed at keeping the District more informed about its operating charters. Continual appeals have extended cases for several years, with no final resolution in sight.”

Especially problematic are 65 disputes the School District of Philadelphia has filed to protest what it alleges are questionable tuition payments to charter schools.  Pending the resolution of these disputes, the state has been withholding (from the school district’s state funding) these charter schools’ tuition payments and awarding tuition in question to the charter schools: “(B)y withholding state funding from the District without giving the District the opportunity to be heard in a formal hearing to consider the District’s evidence regarding disputed charter tuition payments, PDE (Pennsylvania Department of Education) reduced the District’s state subsidy funding, without knowing whether or not the charter schools were actually entitled to those payments.” “During the 2012-13, 2013-14, and 2014-15 school years, PDE deducted $15 million from the District’s state subsidy payments for charter school tuition payments that remain disputed and unresolved.  PDE’s failure to address and resolve these disputed amounts is, in part, due to its changing procedures over the past four years… In addition, the CSL (Charter school Law) lacks clarity as to PDE’s requirements regarding charter school withholdings and disputes.”

The School District of Philadelphia, enduring a long financial crisis particularly since former governor Tom Corbett cut Pennsylvania school funding by $1.1 billion in 2011, has been trying to manage its state imposed responsibility to oversee charter schools with a skeleton staff: “The District’s CSO (Charter School Office) operated with a staff of only six employees and no Executive Director during the 2014-15 school year, yet it was tasked with overseeing 86 charters authorized by the District, educating approximately one-third of the District’s public school students. The CSO also inherited the additional responsibility of considering new charter school applications in 2014-15 for the first time since 2008. Further, the CSO is constantly faced with the possibility of having to revise existing policies and procedures based on court case decisions impacting its oversight capabilities.”  “By failing to have sufficient staffing and resources to adequately perform and document routine oversight measures, the District is unable to verify the validity of hundreds of millions of dollars it is paying to charter schools in tuition payments. In addition, the District is unable to determine if all of its charter schools are operating efficiently, effectively and in accordance with the charter agreements.”

Ironically, while the state auditor cites the problem of lack of capacity in the Philadelphia school district’s Charter School Office, the report refrains from assigning blame to the School District of Philadelphia.  The state has clearly created a fiscal and regulatory nightmare.