Two Charter Schools Sue State Over Funds

Two of California’s largest and oldest charter schools are suing the state after the Department of Education asked them to pay back millions of taxpayer dollars.

State education officials cut funding to the schools in April, citing concerns that both Southern California-based charters weren’t spending enough money on their teachers and students while the schools’ founders pocketed more than $4 million.

But Options for Youth, a nonprofit school, and Opportunities for Learning, a for-profit charter, allege in their lawsuit that the state has not set up clear enough guidelines on how they should spend their money.

“It’s like changing the rules in the fourth quarter,” said John Hall, who, with his wife, Joan, runs both charters.

The schools, which offer independent-study programs for high school dropouts at about 60 school sites throughout the state, are asking a judge to block the cutback.

The lawsuit, filed Wednesday in Sacramento County Superior Court, alleges that the State Board of Education failed to set up regulations required by law outlining how much money should be spent on teachers and students.

Charter schools are public schools run by private organizations. They don’t have to follow many of the rules that govern regular schools, giving them more flexibility in how they spend their money.

Until a few years ago, independent-study and home-school charters received the same amount of money that regular schools did -- about $5,000 per student.

That changed, however, in 2001 when the Legislature passed a bill by now-Supt. of Public Instruction Jack O’Connell, who was then a state senator.

The idea was that independent-study programs don’t have the same overhead costs as traditional schools, such as classroom and building costs, so they shouldn’t get as much money.

Now, independent-study schools that want state dollars have to turn in financial records showing why they deserve the money. Although the majority of such schools -- about 90 of about 120 -- received full funding this year, the state board voted to cut funding for Opportunities for Learning and Options for Youth by 40%.

Those retroactive reductions mean the schools must repay nearly $15.4 million. Joe Budenholzer, the schools’ chief financial officer, said the schools expected a 30% cut because their costs are lower.

Now, Budenholzer said, the additional cuts will force them into a deficit.

To justify the reduction, state education officials point to the schools’ high administrative costs during the 2001-02 academic year.

Of the nearly $37 million given to both schools, more than 55% went toward administrative costs. The Halls each took home $122,000 in annual pay, plus more than $4 million in profits earned by Opportunities for Learning and its private management company.

State officials declined to comment Wednesday on the lawsuit.

School officials say they have since reduced the amount spent on administrative costs while boosting money spent on teachers and students during the 2002-03 school year. Budenholzer said about 62% of the schools’ budget now goes to teacher salaries and students.