The state’s highest court unanimously ruled Monday that Atlanta Public Schools can’t force a dozen relatively new city charter schools to help pay off an enormous, decades-old pension debt.
The amount of money charter schools receive is set by state law, and it can’t be changed to pay for system-wide expenses like the pension liability, according to a Georgia Supreme Court ruling that possibly saved some charters from going out of business. Annual payments toward the $550 million debt instead will have to come from the school system’s financially strained traditional schools and central office.
“We are disappointed in the decision because it perpetuates a funding inequity to the detriment of traditional school students,” said Superintendent Erroll Davis. “Atlanta Public Schools will continue to pursue other options to resolve this growing disparity in funding for our school district.”
As a result of the court decision, $2.8 million that was withheld from charter schools last year will be released, creating a windfall after many of the schools cut teachers and increased class sizes to get by.
The funding loss contributed to the closure of at least one charter school, Tech High, which said in a statement last year it couldn’t afford to stay open while waiting for the legal system to resolve the pension liability issue.
“It’s an incredible outcome for us in the charter school community,” said Kimau Bobb, chairman of Wesley International Academy. “Had it not been the case, it would have been really difficult for us to survive, and I think other charter schools would have had to close.”
Because charter schools don’t have to contribute, debt payments will likely come from money that would have otherwise gone toward services for traditional students.
Charter schools are public schools that offer students an alternative to traditional public schools, with their own curriculum and management. Teachers at charter schools aren’t part of the district’s pension system.
The ruling doesn’t affect charter schools in other areas of the state because no other school system has changed how education money is distributed to charters, said Louis Erste, charter schools division director for the Georgia Department of Education.
“The only disputes have been about understanding what the law is. Once we’ve explained it, the dispute is over,” Erste said. “For those worried they weren’t going to get all their funding, they now have the Supreme Court ruling say they have to get it.”
The dispute began in May 2012, when Atlanta Public Schools announced it would begin paying off the pension debt from its total revenue before calculating the amount of money to be distributed to both traditional and charter schools. Initial payments last year amounted to $38.6 million, with $35.8 million paid by traditional schools and $2.8 million paid by charters.
The charter schools sued, claiming their funding formula was set by state law, and it couldn’t be altered to pay down a debt burden they have nothing to do with. The debt has been accumulating since the late 1970s.
But Atlanta’s public school system has argued that all schools in the district share services, and charter schools shouldn’t be exempt from having to deal with the school district’s financial problems.
Similar disagreements over charter school funding are playing out across the country, although those fights are more frequently about what school services should be provided to charter schools and at what cost, said Alex Medler, vice president of policy and advocacy for the Chicago-based National Association of Charter School Authorizers.
School systems in Detroit and Denver have also been struggling with conflicts over pension payments, Medler said.
“Charter schools should not be charged by districts for things they’re not receiving services or benefits from,” he said.
After trimming faculty, increasing class sizes and dipping into reserve funds, Atlanta Neighborhood Charter School will be able to restore education services now that the legal process has concluded, said the school’s executive director, Matt Underwood.
If the court had ruled in favor of Atlanta Public Schools, Atlanta Neighborhood Charter School would have continued to struggle, he said.
“It certainly would have changed the nature of what we’re able to do, and maybe threatened our very existence,” he said.
Per pupil general fund spending for traditional students in Atlanta amounted to $13,388 in the 2013 fiscal year, compared to $10,013 per pupil in charter schools, according to an analysis by financial consultant Robert Stockwell that excludes local option sales taxes and pension payments. The difference was largely caused by administration, pension and transportation costs.
Traditional students will have less and less money compared to students in charter schools as pension payments increase in coming years, said Thomas Cox, an attorney who represented Atlanta Public Schools.
The decision could impede the future growth of charter schools in Atlanta because new charters won’t have to contribute to the pension, Cox said.
Davis recommended that the school board deny approval of Atlanta Classical Academy last month because the court case was pending. But board members granted the school’s charter because they said they didn’t want to reject a high-quality school for financial reasons.
The Georgia Supreme Court’s decision likely ends the legal fight, with Chief Justice Hugh Thompson writing that changes in the state’s funding formula would have to be made by the General Assembly.