A “stop payment” order has been issued for the $45 million in gambling revenue proceeds that were to be released to charter schools across the state today.
The action came late Wednesday when state Treasurer Timothy Reese announced he would comply with a request from Senate Democrats to halt the diversion of the funds from school districts to charter schools.
At about the same time Mr. Reese made his decision, the Pennsylvania School Boards Association announced that it had filed suit in Commonwealth Court against the treasurer and the state Department of Education over what it termed the “unlawful diversion” of the property tax relief funds that come from gambling proceeds.
Robert Fayfich, executive director of the Pennsylvania Coalition of Public Charter Schools, called the treasurer’s decision a “reaction to political pressure.”
“At this point, the Department of Education and the governor’s office have decided they have a real obligation to send [gaming funds] to the charter schools. We think that any public official who is elected, part of the oath they take is to uphold the laws of the Commonwealth. It’s our perception that the treasurer is not doing that in this case,” Mr. Fayfich said.
Treasurer’s spokesman Scott Sloat said the office is withholding the payments “as we review the issues raised.”
The state budget impasse has prevented school districts from receiving their state subsidies, which they usually use to pay their charter school bills. As a result, some districts have not paid the charter school tuition, prompting the schools to appeal to the state Department of Education.
Last week, the Education Department said it would divert gaming revenues earmarked for property tax relief in school districts to charter schools, a move that prompted outrage among school district officials and some legislators. The Education Department’s plan would have affected 312 of the state’s 500 school districts.
The Education Department said it had, under state law, an obligation to pay charter schools out of any available state funds and determined that the gaming money was the only state money available.
Gaming revenue comes from the state’s share of casino gambling taxes and is distributed to school districts to help reduce property taxes for homeowners. School districts base their budgets and property tax rates in part on the amount of gaming revenue.
Districts found out about the diversion last week when they checked on the status of their gaming revenue payments, which were due today.
In McKeesport, it meant the district was losing all but $41,000 of its expected $1.2 million payment.
The discovery enraged school district officials, who quickly contacted legislators. In addition to filing its suit, the PSBA last week called on the state auditor general and attorney general to investigate the legality of diverting the funds.
Auditor General Eugene DePasquale said he believes the charter school law requires that charters be paid. However, he questioned whether it was legal to use the gaming revenues to do so. He promised a review of the issue.
In calling for the treasurer to halt the payments on Wednesday, state Sen. Jay Costa, D-Forest Hills, said other public officials also questioned the legality of the diversion.
“The treasurer should not release one dime until there is legal clarity and outstanding issues have been resolved,” Mr. Costa said in his letter to the treasurer.
Among the first legislators to call for a halt to the payments were state Sen. Jim Brewster, D-McKeesport, and state Reps. Marc Gergely, D-White Oak, and Bill Kortz, D-Dravosburg.
The PSBA, in its suit, asked that the payments to charter schools be halted and the gaming funds be returned to the school districts.
The suit argues that the diversion of the gaming money is unlawful because “it is held in trust in the Property Tax Relief Fund for the benefit of taxpayers and is not subject to the subsidy interception provisions of the Charter School Law.”
The argument is based on the fact that the funds are not state funds allocated to districts for the education of children but rather payments of gaming revenues made for the benefit of taxpayers.
Mr. Fayfich disagrees with that interpretation.
“Our position is regardless of the source, it’s money being paid to the district by the state to educate the children of the district and the children of the charter schools are in that district and entitled to a portion of that money,” he said. “We have districts that are trying to starve the charters and that is unconscionable from our perspective.”
Mary Niederberger; mniederberger@post-gazette.com; 412-263-1590. On Twitter @Marynied.
First Published: October 21, 2015, 6:06 p.m.
