Spending Showdown Threatens School District

PHILADELPHIA (CN) - In an escalating spending standoff that threatens to shut a suburban school district, a federal judge on Friday told the district to give the state a list of people who absolutely must be paid to avoid an immediate shutdown.

The Chester Upland School District sued the state on Thursday, seeking a temporary restraining order directing the state to give it at least $7 million in emergency funding to assure that it can continue operating for the next 6 weeks.

Without that order, the district said, it would be unable to make payroll starting Wednesday.

U.S. District Judge Michael Baylson told the parties in a telephone conference Friday that he'd prefer to see them resolve the TRO request without a court order.

Amy Foerster, representing the state, said the Commonwealth is waiting to receive from the district a list of payments that are "absolutely required to keep the district running by the end of the month."

Leo Hackett, representing the district, told Baylson he'd provide that list of "essential payments" immediately.

Baylson said he hoped the parties could come to an agreement that would keep the district running until mid-February, and obviate the need for a TRO.

"I think everybody ought to work towards getting in a frame of mind that will keep the school [district] open pending further legal developments so that I don't have to reach a decision on the TRO," the judge said.

The 3,600-student district said in an affidavit that it's been teetering on the brink of financial collapse after the state, knowing the district was in the throes of "a cash-flow crisis and in danger of not being able to make salary payments," decided in December to withhold around $8 million as repayment for money it had advanced to the district in June.

The district said it needed that advance to meet its obligations under Pennsylvania's unfair Charter School Law, which forces the district to fund special-education services provided by charter schools at an oppressively high per-student rate.

Citing a report that Gov. Tom Corbett is considering a state takeover of the district, Judge Baylson said the issue of immediate emergency funding would be more appropriately addressed outside the court.

An agreement negotiated by Corbett, state lawmakers and district officials to keep Chester Upland running in the near term would be "far superior to asking a federal judge to step into an area that is not familiar territory for us," the judge said.

If a resolution cannot be reached over the long weekend, Baylson said, he'd be forced to rule on the TRO after a hearing Tuesday afternoon.

Beyond the issue of immediate funding, the longer-term question before Baylson is whether the formula used by the state for apportioning special-education subsidies is constitutional.

In its lawsuit, the district said the formula focuses on "the number of students in the school district without regard to the number of disabled students or their disability," and that it unfairly limits "the percentage of students for whom [special-education] funding is provided."

The formula therefore discriminates against districts like Chester Upland, which educates large numbers of disabled students, the district said.

Chester Upland said the state decided to withhold millions in subsidies to ensure that local charter schools received the cut of special-education funding to which they're entitled under the Pennsylvania Charter School Law.

The district asked the court to enjoin application of a component of that law which, the district says, requires it to bankroll special-education services provided by charter schools at a per-student rate that is oppressively high.

"The Commonwealth of Pennsylvania requires the School District to fund special education in charter schools at an annual rate of $14,670 per student ... while at the same time the Commonwealth of Pennsylvania provides funding to the School District for special education students at the rate of $3,600 per student," the complaint states.

Chester Upland says that in addition to the $8.7 million being withheld by the state, "the School District needs approximately $12,000,000 to cover the cost of education through June 2012."

Chester Upland is represented by Leo Hackett of Media, Pa.

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