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COURT REJECTS COMMISSIONER’S DECISION TO ALLOW CHARTERS TO CARRY EXCESS SURPLUS FUNDS

April 3, 2013

A New Jersey Appeals Court has ordered Commissioner of Education Christopher Cerf to reconsider the claim of the Piscataway Township school district that charter schools receiving tuition from the district should not retain excess surplus in their budgets, but should return those monies to the district and its students. 

Piscataway's appeal challenged Commissioner Cerf's February 2012 decision that the surplus funds had been "appropriately retained" by four charter schools, without providing any explanation or support for his decision.

In filing an appeal, Piscataway relied on a Department of Education regulation that authorizes school districts to request reductions in their tuition payments when a charter has excess surplus – meaning surplus that exceeds 2% of the charter school's budgeted general fund or $250,000, whichever is greater. 

Despite having based his decision on this regulation, Commissioner Cerf tried to justify allowing the charters to carry the excess surplus by arguing on appeal that he lacked legislative authority to redirect the excess charter surplus back to the district.

Finding procedural shortcomings, and noting the importance of the issue, the Court was unwilling to affirm the Commissioner's decision to allow the charter schools to keep a total of over $950,000 in excess surplus accumulated from Piscataway's tuition payments for students enrolled in the charters in 2010-12. Instead, the Court noted that "the manner in which the Commissioner's terse letter of denial was fundamentally changed on appeal is less than ideal for our review of a final agency decision" and sent the case back to the Department of Education for further consideration.

In an amicus brief filed in support of Piscataway, Education Law Center argued that Commissioner Cerf must establish reasonable standards governing the use of charter school surplus funds. ELC further noted that over one-third of NJ school districts, including Piscataway, are operating with budgets below  the amounts determined to be constitutionally adequate under the State's funding formula – the School Funding Reform Act – and, as a result, any excess charter surplus should be returned to support the education of district students.

"The Commissioner's refusal to act to ensure the effective use of all public school funds by returning excess surplus in charter schools to their host districts is startling," said Elizabeth Athos, ELC senior attorney who wrote the amicus brief. "Before addressing that issue, the Court has properly ordered Commissioner Cerf to explain the reasons for his decision. We will continue to press the Commissioner to direct all charter schools to return any excess surplus to their host districts and students."

 

Related Story: 

ELC SUPPORTS PISCATAWAY LAWSUIT TO CAP CHARTER SCHOOL SURPLUS

 

Press Contact:

Sharon Krengel
Policy and Outreach Director
skrengel@edlawcenter.org
973-624-1815, x 24