The Settlement Between Christina and Charters Should Stand

Filed in Education by on December 8, 2016

The Short: Christina School District, DOE, and the general public gain previously non-existent oversight on how Charter Schools spend restricted money they are conditionally entitled to at a cost to the District of $150,000 (a one time payment to be divided equally among all 15 Plaintiff Charter Schools) plus the District’s legal fees.

Now, if you’re interested in the gritty details, read on:

The Long: My initial reaction to the 4-3 settlement vote was “WTF!” and I was quite emotional, and furthermore I had no idea what the he hell it meant (see? I was so emotional I stuttered). Nobody knew, except for the parties to the lawsuit and even then (and now) they still don’t seem to know what it means. It’s been a few days since my last post about the agreement to settle the funding lawsuit between Christina School District, Charter Schools, and the Delaware DOE. I’ve had considerable time to review the settlement in detail both on my own and with my Citizen’s Budget Oversight colleagues. What I am about to write here is my opinion as a taxpayer and parent of children in the District and is not intended to represent any views of the CBOC committee or its individual members. It’s just me utilizing the knowledge I’ve gained over the last few years as a Dad of 2 District students and a deeply involved public school district Citizen’s Budget Oversight Committee member who lost many hairs and years of his life fighting tooth and nail for 3 Christina School District referenda (passing 1), served on an Expense Reduction Committee, and the current Superintendent Search Committee. So, you know, I’m not screwing around here.

On the agenda for the next general business meeting of the Christina School District Board of Education is an action item for rescinding the agreement to settle. (You’ll recall settlement was agreed upon in a 4-3 vote on November 30). There are two reasons this agenda item is on there: 1) Grandstanding by the board member who submitted it and 2) There is no provisional way for the Board to take a re-vote on the agreement, according to Roberts’ Rules of Order, because no member in the prevailing majority requested a revote. So this agenda item gets around that while simultaneously making the Christina School District, its staff, supporters, parents, students, look like complete idiots, which this Board of Education is quite competent at doing, historically.

This agenda item should be pulled and the settlement agreement should stand for reasons which I will try (and fail) to concisely outline below. I would have recommend a new agenda item for discussion on the potential implications of the settlement now and going forward be added. For reference, the entire text of the settlement can be found here.

Page 3, Section 2, paragraph a.

“CSD agrees that in FY ’17 the revenue generated by the 10 cent levy authorized by the voters in Section II of the 2003 referendum (the “2003 Referendum Revenue”) shall be divided by the total number of students residing in CSD and attending public schools in order to determine the per student share of the 2003 Referendum Revenue. By December 30, 2016 there shall be an allocation of the per student share of the 2003 Referendum Revenue to each CSD Charter School based upon the number of students residing in the CSD who attend each CSD Charter School.”… “DOE will establish a unique appropriation number to be utilized by the CSD Charter Schools for the receipt of funds, and the recording of allowable expenses. All parties agree that the 2003 Referendum Revenue shall be restricted to the four programs identified in Section II of the 2003 Referendum ballot.”

Emphasis mine. Those 4 programs are:

  1. Phase-in of full day kindergarten for academically at-risk students
  2. Expansion of services for Gifted and Talented Program
  3. Expansion of services for Alternative Programs
  4. Technology replacement schedule

Important context that is not represented in this agreement: From 2004 to 2013 Charter Schools were already getting this revenue from Christina School District added to the local cost per student formula exactly as described in the non-boldface portion of Paragraph A but because local cost per student is considered general operating expenses, Charter Schools used this funding for anything they wanted. Said another way, for nearly 10 years Charter Schools received this funding without the spending restrictions placed upon it by voters in 2003. Now, stop and read that last sentence again. Charters got restricted money on an unrestricted basis. For 10 years.

It was only in 2014 that Delaware DOE (DDOE), at the request of the Christina School District (for the 11th time) granted exclusionary status to the 2003 Referendum Revenue as “Restricted Local Funds” for Christina School District and established unique appropriations for that revenue to be placed in and expended against. This action by DDOE removed the 2003 Referendum Revenue from the local cost per student formula and as a result, Charters stopped getting it. Why? Because there was no mechanism in place to control Charter expenditures against this now officially restricted money. Now we move into the bold faced portion of Paragraph A.

DDOE will establish a unique appropriation for the 2003 Referendum Revenue for Charters to expend against. That means we (the public) will now have direct oversight on how Charters spend the revenue from the 2003 Referendum where we did not have that before. We will see each and every transaction Charters make against this funding. Which is more than we can say for any other public tax revenue they get. This factor alone is worth keeping the settlement in place, because it’s a guaranteed result.

“All parties further agree that, in the annual certification of CSD’s Local Cost Per Student pursuant to Section 509(e), both the 2003 Referendum and CSD’s expenditures will be neither included in, nor excluded from, CSD’s Total Local Operating Expenditures.”

This part is a head-scratcher and subsequently means nothing. This is exactly how the funding amounts were calculated in the first place from 2004-2013.

Let’s say for simplicity’s sake, Christina’s Cost Per Student was $1000 and in total there were 100 public school students (District, Charter and Choice combined). $950 of that came from general operating revenue and $50 from the 2003 Referendum Section II.  Prior to 2014, the funding to Charters was calculated like this: Local Cost Per Student = (Local Cost – 2003 Section II Revenue) divided by total students. Then take the 2003 Section II money, divide by total students, and add the two together.(LCPS isn’t that simple, but this gets the point across). So, $1000-$50= $950/100 = $9.50 per student Local Cost, plus $50/100=$0.50 2003 Section II Revenue for a grand total of $10.00 per student.

This language says: Instead of Local Cost Per Student starting at $1000, it starts at $950 and we pretend the 2003 Section II Revenue doesn’t exist for the purposes of the LCPS calculation. The 2003 money will be its own entity to be divided by the total # of students and not part of the LCPS. $950/100= $9.50 and separately: $50/100=$0.50 for a grand total of, you guessed it, still $10.00 per student. Which is exactly how it’s been done since 2004.

A big Charter Brand Nothingburger.

Benefit: Christina School District & taxpayers.

Section 2, paragraph b.

“The 2003 Referendum Revenue generated in subsequent fiscal years (i.e., FY ’18 and thereafter) shall be allocated to CSD Schools in the manner set forth in Paragraph 2.a. above, subject to the restriction stated therein. In subsequent fiscal years, 80% of the anticipated 2003 Referendum Revenue shall be paid by November 7, and the balance shall be paid when DOE finalizes the Charter Bills. In the event there is a general reassessment of property values, all parties recognize that the 10 cent levy is subject to change in accordance with 14 Del. C. § 1916.”

This is also exactly how it’s been done in the past. Due dates exist for all school funding payments (County to DDOE, DDOE to Districts, Districts to Charters) and it absolutely makes sense that a change in property assessment translates to a change in tax revenue. This is a side of Charter Brand Zero-Fries to go with their Nothingburger.

Benefit: Lawyers’ bank accounts.

Section 2, paragraph c

In which we find (again) charter schools and their administrations have no clue how public school finances work (I’m doing all I can to avoid using the word incompetent). Remember that Charter School general operating funding is based upon the sending School District’s previous fiscal year EXPENDITURES and this “new” formula demanded by Charters calculates based on REVENUE.

“Because CSD’s expenditures for FY ’16 were $6.03 million, and because the revenue calculation set forth in Paragraph 2.a. above will generate only $5.5 million to be shared among CSD, CSD Charter Schools and other district schools attended by CSD resident students, CSD agrees to a one-time payment to Charter School Plaintiffs in the amount of $150,000 to offset this discrepancy for FY ’17 only.”

Normalish speak: This shiny “new” formula for 2003 Referendum Revenue calculated using the 2003 10 cent levy revenue will generate less funding than the historically used formula (from 2004-2013) that calculated based upon expenses if the sending District spends an amount equal to or less than what is collected as revenue. If the District spent more money on “Technology Refresh” than they collected from the 10 cent levy, Charters used to get a cut of the full expended amount. Now they only get a cut of exactly what’s collected by the 10 cent levy regardless of what the District spends and we will all have direct oversight as to how Charters spend their now smaller amount of restricted funding.

The Charters basically can’t seem to understand why they are now getting less money, even with this new settlement and “new” formula. And we know they like to complain, and writhe, and bang on about ‘getting stiffed’. So this is, from what I can tell, a “Shut UP Already” payment to charters. It’s a shakedown by Charters. And it’s completely unrestricted, which means Greg Meece can unilaterally decide to spend it on his legal fees if he wants to which he has apparently said he will do.

This is the portion of the settlement that I’m pissed about. The District basically threw money at Charters (that they weren’t going to get as a result of the settlement otherwise) to get them to agree to the settlement and stop showing the District (and by proxy, the public) that they have absolutely no idea what they’re doing. HOWEVER. In the bigger picture, it’s only $150,000 divided among 15 charters to get them to agree to previously non-existent financial oversight for money they (historically) had already been getting.

Overall Benefit: Christina School District & Taxpayers

Section 2, paragraph d.

I’m not quoting, because it essentially says: DDOE will be responsible for ensuring the 2003 Referendum Revenue will be used by Charters in accordance with the purposes approved by the voters. We know “DDOE” and “oversight” don’t belong in the same sentence but every member of the public (including the members of the Christina School District Citizen’s Budget Oversight Committee) will now have an itemized list of expenses on this restricted revenue for every Charter School that has a CSD resident student.

Benefit: Christina School District & Taxpayers

Section 3, paragraph a.

“Upon payment of the sums contemplated by this Agreement, but not later than December 30, 2016, Plaintiffs agree to execute a stipulation among Plaintiffs and Defendants pursuant to which the Lawsuit will be dismissed with prejudice, including the dismissal with prejudice of all claims against Robert Silber. The Parties agree that such dismissal shall include all claims that were brought, or which could have been brought, in the Lawsuit regarding FY ’17 or any earlier fiscal year. Such dismissal, however, shall not have the effect of any claim to be made by any Plaintiff in respect of any fiscal year after FY ‘17”

Once Charters get their money, the lawsuit will be dismissed with prejudice (so they can’t come back at the District or Mr. Silber for the same reasons). And any historical claims or disputes over unreceived 2003 Referendum Revenue for the years 2014-2016 are dismissed as well. But if they want, they can stir up trouble in the future.

Not really anything to report from this paragraph except, District is off the hook for paying back-funding for the prior 3 fiscal years, which is huge.

Major Benefit: Christina School District & Taxpayers.

Section 3, paragraph b.

“In particular, Plaintiffs are free to contend for fiscal 2018 and thereafter that Match Tax Revenues should be included in the calculation of Local Cost Per Student pursuant to Section 509. CSD is free to condent for fiscal 2018 and thereafter that Match Tax Revenues should not be included in the calculation of Local Cost Per Student pursuant to Section 509.”

This is ok. Why? Because every single School District up and down the State would push back against any action brought by Charters over Match Tax Funding. Match Tax Funding is defined in Delaware Code, and District School Boards are legally empowered to collect only the District’s local tax match to State funds. As an example, with respect to Minor Capital Improvements (which Match Tax raises funds for), Local match funds are not provided to Charters, they receive State funds only and School Districts are only legally able to raise taxes to match what the District receives from the State. (see 148th Generally Assembly Bond and Capital Improvements Act for FY17, page 63 for further examples.) Changes to this would require Legislative Action.

Benefit: All Public School Districts & Taxpayers

Section 4, paragraph a.

No quotes, but it says that Christina acknowledges that DOE now has to create a transparent process by which they will accept District requests to exclude certain restricted funds (like the 2003 Referendum Revenue), meet with Districts and Charters regarding the exclusion requests, and disclose their tentative decisions on excludability, allow for discussion on said tentative decisions between Charters and Districts, and then share the final decisions. DOE shall further establish a timeline schedule of how it plans to do all of that which will be followed every year.

Benefit: All Public School Districts and Taxpayers – no more sneaky backroom cash-grab math done in Dover to benefit Charter schools.

Section 4, paragraph b. “Tuition Analysis”

This is subject to some concern, some of which I feel is probably unfounded. Christina did not agree to give up any tuition tax funding that they were not already legally required to give up.

99% of the language in this paragraph is not, except for what I’ll explain in a minute, new. It is currently in Delaware Code. By law, Charters are able to take advantage of Tuition Tax funding for their special needs students in compliance with the law. Today, Newark Charter School could bill for Tuition Tax funding for a special education student and they would be eligible to receive it. What’s new is this part:

“In any case in which a CSD Charter School asserts a right under Section 509(f) to receive Tuition Tax funding, CSD and DOE may satisfy themselves that the services being provided by a CSD Charter School in any individual case are the same or sufficiently similar to CSD’s Special Needs Services so as to justify the sharing of Tuition Tax revenues.”

The Christina School District now has a fiduciary responsibility and ability to verify that any special education tuition funding requests from any Charter with special needs CSD resident student are being spent on services that are similar to the District’s own services and appropriate for the individual student’s needs. Previously, the Charters were responsible for internally verifying their special education students’ needs are being met appropriately.

Additional oversight.

Benefit: Christina School District, Special Education proponents, & all Taxpayers.

The rest of the settlement is just standard boilerplate stuff. “No one admits to any wrong doing, etc, etc.”

Is the settlement a good thing? Debatable depending on your point of view. What it is, though, is the least bad outcome this school district could have gotten from this lawsuit. The 2003 Referendum Revenue, as stated on the ballot, should legally go to the Charters if they have CSD students and any or all of the 4 programs that revenue was approved for. The net effect is going to be additional public oversight for Charter School spending at the cost of $150,000 in shakedown money, and the Christina School District sending the 2003 Referendum Revenue on a per-student basis to eligible Charter Schools with CSD students, just like they were from 2004-2013, but now with the added stipulations on if and how it can be spent. And we get to see it happen and make sure they spend it on only the 4 programs identified in the ballot language from 2003. We live to fight another day.

What happens if Christina’s Board of Education rescinds? Well since they already entered into to a legally binding contract, they would place the District, themselves, 15,000 students, thousands of educators, and every single parent and taxpayer in breach of legal contract opening it all up to more lawsuits, legal action and potentially undoing every single financial oversight benefit we stand to gain with this settlement. Not to mention, the very real possibility of a long protracted legal battle in court that will do nothing but further tarnish this District’s reputation and further illustrate that its Board of Education is completely incompetent and has no regard for the light its’ actions cast on the greater Christina School District community, and potentially put the District on the hook for much larger amounts of funding to be sent to Charter Schools. Nothing is certain, of course, and there is the possibility of a more favorable financial outcome for the District should this go to court, just like there’s a possibility of a less favorable financial outcome. While a settlement may be ‘perceived’ as bad, breaching contract, getting dragged through a court battle to ultimately give up the same amount of funding (maybe more) would be perceived as worse and cost a hell of a lot more (lawyers aren’t cheap).

Remove the agenda item, and look ahead. The battle is far from over, even now.

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About the Author ()

A dad, husband, and public education supporter. Small tent progressive/liberal. Christina School District Citizen's Budget Oversight Committee member, who knows a bit about a lot when it comes to the convoluted mess that is education funding in the State of Delaware.

Comments (4)

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  1. John Young says:

    I’m sorry you feel taxpayers getting an opportunity to speak out is grandstanding. It’s not, and you are dead wrong about my motivations, not that you would bother to ask. There are legitimate concerns that the settlement is not legal joined by the counter parties which make the motion to rescind in order due to lack of evidence it’s irreversible. The bottom line is a judge, and a group of lawyers gave our board literally less than 48 hours to legally call a meeting, less than 2 hours to review the document, and the public was effectively removed from the process. This motion is not a grandstand, it’s designed to give voice to the people’s whose money is in our stewardship, as a trust. Failing to give the public access is a far greater concern than a vote to rescind, which will likely fail. My motives are on the table and 100% above board on this: it’s their money and we serve them and their children, not ourselves.

  2. Harrie Ellen Minnehan says:

    Excellent piece, Bryan! Thank you for spelling this out in simple, easy to understand English!

  3. I do NOT think the agenda item should be removed. I also think the board should rescind the vote. There is a lot of information, some of which I don’t think even the author of this article is aware of, that will be coming out on this whole thing by the time the Board votes on Tuesday. The transparency surrounding this is FAR from over.

  4. Brian says:

    Here’s the thing. Transparency around this issue is one thing. The matter of whether the money should go to Christina resident students attending Charter & Choice schools is entirely, another. In the eyes of the law, despite personal feelings otherwise, charter students are public school students and when voters in 2003 approved an additional 10 cent increase to pay for 4 specific programs, there was no language in the ballot that specified “in-district-only”.

    If the concern is transparency, well no shit this thing has been shady as hell and rushed to begin with. HOWEVER. As it is now, the agreement is a legal contract. CSD backing out isn’t giving taxpayers any more say on the matter than they had in the first place which was next to none.

    If the goal is to reserve the 10-cent revenue for District-only programs, only one thing can accomplish that: another referendum. Go back out for a referendum to change the restrictions on what and where the money is spent or, go out for referendum to repeal the 10-cent revenue and replace with more specific language on what and whom it will be spent on.

    If the instigators of the lawsuit went about it in the improper (or illegal) way, I’d prefer CSD to NOT be on the “Breach of Contract” side of this first by the Board needlessly placing it there. Kevin, if whatever you know or believe is out there regarding how this all came to be on the Charter side nails them on the wrong side of the law, okay. That puts the legal trouble on them. Not the District. If however the District rescinds, breaks contract, and STILL has to send the funds to Charters (which unless we pass a referendum as described above or legislative action intervenes, will happen), we’ve created additional legal problems and cost us more of the taxpayers money you guys seem so concerned about, and sprayed more mud on the District’s face.

    As you may note if you re-read my post, I never said this is a good outcome. I said this was the ‘least bad’ outcome. A distinction made purposefully.