The Pennsylvania Supreme Court sided with the Pocono Mountain School District in an important case involving whether school districts can be held responsible for a defunct charter school’s unpaid employer pension contributions owed to PSERS.

The school district appealed from a PDE order to deduct the amount of the delinquent employer contributions from state subsidy payments owed to the SD, pursuant to a retirement code provision allowing a subsidy intercept for such delinquent employer pension contributions and requiring that the deductions be offset against tuition payments owed by the SD to the charter schools. The Commonwealth Court affirmed the PDE decision, without even mentioning the multiple provisions of the Charter School Law that say that SDs shall not be responsible for debts of a charter school.

On appeal to the Supreme Court, PSBA filed an amicus curiae (friend of the court) brief in support of the school district, pointing out the provisions of the Charter School Law that create a statutory conflict in this situation. PSBA’s brief, available here, argued that the courts have a duty to attempt to harmonize statutes appearing to be in conflict, and construe them together so as to give effect to both.  The only way to do that, and also honor the Charter School Law protection of SDs from debts of charter schools is to construe the Retirement Code subsidy intercept provision as applying only to the extent the SD can offset the amounts deducted against tuition owed to the charter school.

On December 28, 2016, the Supreme Court issued a decision in favor of the school district, consistent with the positions expressed by PSBA, that the Charter School Law protects school districts from being left “holding the bag” when a charter school goes out of business without paying all of the employer retirement contributions it owed.

Other news from the courts

In other PSBA judicial advocacy developments, the Commonwealth Court recently heard oral argument in the case of Volk v. The School District of Lower Merion School District, involving a citizen court challenge to a school district’s right to implement tax rate increases pursuant to exceptions approved by PDE to the Act 1 index limit. The lawsuit alleges among other things that school district had over several years consistently misrepresented budget information to PDE for purposes of claiming Act 1 exceptions to real estate tax increase referendum requirements, resulting in the accumulation of excess fund balances. On Aug. 29, 2016, after a hearing, the court issued a ruling concluding that the information provided by the school district had deprived PDE of sufficient information to properly rule on the district’s Act 1 exception applications, and that the school district was not entitled to the millage increase above the Act 1 index allowed by the exceptions. The ruling included an injunction prohibiting the district from levying or collecting any tax increase above the Act 1 index limit, and requiring the district to refund the excess of any taxes already collected.

The school district appealed the injunction ruling to Commonwealth Court, and successfully petitioned for expedited disposition. PSBA filed an amicus curiae (friend of the court) brief in support of the school district. PSBA’s brief argues that the trial court had no authority to usurp the exclusive statutory authority of PDE to decide whether Act 1 exception applications should be granted. The brief also explains that contrary to the court’s conclusions, a school district’s budgeting process, the exception application process, and related information are all highly transparent and made known to the public, and as a matter of law PDE had available to it all relevant SD financial information pertinent to deciding whether the criteria for exceptions was met.

Oral argument before a panel of the commonwealth Court took place on Dec. 15, 2016. Linked here is the brief filed by the school district, the injunction, PSBA's brief and a joint brief filed by PSEA, PASBO and PASA. PSBA will provide an update when the court issues a decision.

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