News: CJ Exclusives

Court: Charlotte Underfunded Charters

Appeals court ruling could mean $500,000 for charter schools in N.C.

The N.C. Court of Appeals ruled last week that Charlotte-Mecklenburg Schools systematically underfunded five charter schools in the county. The schools stand to gain nearly $500,000 because of the ruling, which could impact other charter schools and systems across the state.

Charter schools are public schools that are run by private organizations. State law mandates that charter schools receive the same per-student operating funding as regular public schools.

At issue is the procedure by which Charlotte-Mecklenburg Schools determined its per-student expenditure. In 2005, Sugar Creek Charter School, Kennedy Charter School, Crossroads Charter School, Carolina International School, and Metrolina Regional Scholars Academy sued the school system, contending that they were not receiving a truly equal amount of funding.

The issue came before the Court of Appeals after Superior Court Judge Robert Ervin ruled for the charters schools on some of their claims. Both sides appealed, bringing the case before the state’s second highest court.

One point of contention between the charter schools and the school system was how to account for “special programs.” State law allows school systems to operate certain programs outside the context of their normal operating accounts. Charter schools don’t share in funds for special programs.

Ervin found that the Bright Beginnings program was such a “special program,” because it was aimed at pre-kindergarten students, who are not yet students in the public school system. He held that the charter schools were not entitled to a portion of the Bright Beginnings funds.

The Court of Appeals disagreed with this conclusion. While state law does not define what constitutes a “special program,” it does require that such programs have their own special account. The school system never established a separate account for its Bright Beginnings funds. That omission, the Court of Appeals held on Feb. 5, was significant.

“As a result, the Bright Beginnings money was requested for the local current expense fund, allocated to the local current expense fund, deposited into the local current expense fund, and deducted from the local current expense fund,” Judge Linda Stephens wrote for the appeals court.

“Because the Charter Schools were entitled to a pro rata share of all the money in the local current expense fund, CMS was required to apportion this money on a per pupil basis between CMS and the Charter Schools before the Bright Beginnings program was funded,” Stephens wrote.

The appeals court did not address whether Bright Beginnings would qualify as a special program if it had its own account.

The Court of Appeals agreed with the lower court that the $6 million a year CMS had allocated as a high school challenge grant to three under-achieving schools was not a special program and should count toward determining the charter schools’ share of funds. The appeals court noted that the high school challenge funds had also become intermingled with general operating funds, thus entitling the charters to a share.

More broadly, the appeals court held that the school systems’ method of allocating funds systematically discriminated against the charter schools. CMS calculated per-student local current expense at the beginning of each school year based upon estimated enrollment for the school system as a whole and at each charter school. The school system required the charters to submit monthly attendance figures and paid the charters passed upon actual attendance. The school system did not require regular public schools to submit a similar monthly student accounting, and the school system as a whole kept whatever wasn’t allocated to the charters.

The Court of Appeals found fault with this method.

“Because student enrollment for both the Charter Schools and the CMS Schools decreased during each school year, CMS’s per pupil amount actually increased throughout the fiscal year,” Stephens wrote.

“CMS’s method, therefore, failed to transfer to the Charter Schools an amount ‘equal to’ the per pupil local current expense appropriation that CMS received for the fiscal year.”

The Court of Appeals ruling does not specify how much money the charter schools were seeking. However, The Charlotte Observer reported the schools stand to gain $457,000, with two-thirds coming because of the Bright Beginning accounting issue.

Court of Appeal rulings are controlling interpretations of state law unless overruled by the N.C. Supreme Court. Because the decision by the three-judge panel of the appeals court was unanimous, the high court is not required to review the case.

The case is Sugar Creek Charter School, Inc. v. Charlotte-Mecklenburg Board of Education, (07-207).

Michael Lowrey is an associate editor of Carolina Journal.