Chester Upland: Exhibit A for broken charter law

The district’s situation highlights statewide issues: Special ed, a lack of transparency, and financial challenges linked to charter payments.

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

To put some noteworthy flaws of Pennsylvania’s charter law in stark relief, one need look no further than the Chester-Upland School District, a desperately poor enclave in generally well-off Delaware County.

As the state’s most distressed district, it is so unable to meet its students’ needs that it is under the control of a receiver.

Nearly half of the students in Chester Upland attend charter schools, and 46 percent of its budget goes to charter payments. Most charter students there are enrolled in the Chester Community Charter School (CCCS). The K-8 school has 2,900 students, nearly as many as the 3,300 K-12 students in the district. The state’s largest brick-and-mortar charter by far, CCCS was founded and is operated for profit by a company owned by businessman Vahan Gureghian, a major supporter of former Gov. Tom Corbett and other Republican candidates and causes.

CCCS and its management company, Charter School Management Inc., have built a reputation for taking maximum advantage of the financial opportunities built into the charter school law, while strenuously resisting any public scrutiny about where that money goes.

Special ed allotments

Until court-sanctioned action that lowered payments this year, the state’s special-education funding formula required Chester-Upland to send its charters more than $40,000 for every special education student. How much of that actually went to student services is not known, in part because the charter law does not require CCCS or any other charter to make that information public.

What is known, however, is that CCCS spends a healthy chunk of its budget on fees paid to Gureghian’s management company. Gureghian won’t open his books, but about 10 years ago, the school spent an estimated 40 percent of its revenue on management, as opposed to the state average for charters of about 16 percent.

What is also known is that the Chester Upland district’s payments to CCCS for special education have a profound effect on the district’s budget. “Unfair and excessive special education payments are bankrupting the District,” wrote Chester Upland officials in their recent recovery plan. Last summer, Gov. Wolf asked a judge to intervene and bring special education payments more in line with special education expenses.

A hallmark of the CCCS approach is that the school identifies large numbers of students as needing special education, usually in relatively low-cost categories.

For instance, in the 2014-15 school year, more than 27 percent of the special education students were classified as having a “speech and language impairment,” the least expensive classification of disability, which generally requires speech therapy once or twice a week. That is close to twice the state rate of 15.4 percent and more than 11 times the Chester Upland district rate of 2.4 percent for that category.

By contrast, the percentage of CCCS students classified with the more-expensive categories of autism, emotional disturbance, and intellectual disability were far below Chester Upland’s rate.

In one court filing, the Wolf administration called the situation “patently inequitable,” arguing that the money that Chester Upland School District sends to charters for special ed is “disproportionately higher than any other school district sending students to the same schools.”

Governor’s plan

Last August, Wolf called for a plan that would have slashed the per-student special education payment to $16,000 from $40,000 and reduced the total that Chester Upland sends to charters from about $64 million to $40 million.

But Delaware County Judge Chad Kenney denied Wolf’s request for a wholesale shake-up of special ed funding, calling instead for the district to take part in a financial audit and seek savings. His written opinion echoed many common criticisms of the way the Pennsylvania charter law handles special ed funding for charters.

But after noting that the legislative formula allows charters across the state to receive between $14,000 and $40,000 for each special education student, amounts that are “over and above what it costs to educate them,” Kenney wrote: “It is clear the Legislature did not mean for its averages to produce such windfalls to the Charter School industry in a distressed district.”

In a statement at the time, Gureghian did not address those concerns. Instead, he said that CCCS and its supporters were “pleased with Judge Kenney’s decision. … CCCS looks forward to having opportunities to work together with the Wolf administration … in the months and years to come.”

Subsequently, the Wolf administration submitted an amended rescue plan in which the three charter operators with schools in Chester, including Gureghian, voluntarily agreed to accept less money for their special education students this year, a little over $27,000 per student. (Wolf publicly thanked Gureghian in the press release announcing the agreement.) Those lower payments started last fall, with Judge Kenney’s OK, but still have not pulled the Chester Upland School District out of its dire financial hole.

In May, after Judge Kenney approved, the General Assembly included in the school code a $12 million extra payment to be added to Chester Upland’s regular basic education subsidy this year and built into its base going forward.

Paradoxical effects of the formula

Why does the formula make Chester Upland’s payment to charter schools for their special education students so high?

One reason is the higher proportion of special education students in general in both the Chester Upland district and its charters.

Another is that as the less disabled and less expensive special ed students moved from Chester Upland district, it was left with students with the more expensive disabilities. So the district’s per-pupil special ed cost went up, which then inflated its mandated charter payment for the next year.

The cost was also driven up because the state calculates all districts’ per-pupil cost by assuming that 16 percent of students need special education. In cases like Chester Upland, where the special ed percentage is higher than 16 percent, the total cost is divided by a lower number than it should be.

Dividing the total by the actual percentage of special ed students – in this case, 24 percent – would yield a much lower per-pupil amount. But the charter law doesn’t allow that.

Wolf’s move in Chester came on the heels of an earlier, failed attempt by lawmakers to fix the entire charter payment formula to correct problems like this. In 2013, a bipartisan special education commission created a plan for a three-tiered system designed to separate students with low-cost issues from those with high-cost disabilities and fund schools appropriately.

Charters exempted

But when the plan reached lawmakers, so, too, did a wave of charter-school lobbyists, and charters were ultimately exempted from the plan. Its proposed tiers of special ed funding applied to a small fraction of the funds received by school districts in the 2014-15 budget (specifically, to about $20 million in new funding). But the tiers don’t apply to charters, which continue to get the single amount for all special ed students that is called for in the charter law’s formula.

The tier system would have dramatically changed the amounts that charters in Chester Upland and around the state received for low-cost special education services, such as speech therapy. Payments for such students would have dropped to an average of about $16,000, even as payments for more intensive needs would have risen.

But so far, there is no indication that overall changes to charter funding are in the cards.

“Statewide,” said Wolf spokesman Jeffrey Sheridan, “it is still a heavy lift for us to reform the way the school districts pay charters.”