Reversal: Appeals court strips charter schools of $8.5M tuition judgment

Several Indiana charter schools couldn’t convince an Indiana Court of Appeals panel that they are entitled to a semester’s worth of tuition support funding, as a trial court had ruled.

Indiana Connections Academy Inc. and various other state charter schools sued the state of Indiana, seeking to recover tuition support they alleged the state failed to pay for the public education supplied to students enrolled during the 2012-13 school year.

The Marion Superior Court had previously granted summary judgment in favor of the charter schools, ordering the state to pay a total of more than $8.5 million in tuition support to Indiana Connections Academy, Andrew J. Brown Charter School and Aspire Charter Academy, as well as Rural Community Schools and National Heritage Academies.

On appeal, the state alleged the pre-2013 statutory scheme meant that charter schools were wholly unfunded for the first semester they are open. Instead of the tuition support funds covering the first semester, they would be real-time payments. But the charter schools argued that system created a six-month funding lag.

The Indiana Court of Appeals agreed with the state that there was no statutory authority suggesting that the funding lag existed. It also agreed that the trial court’s determination that the charter schools were entitled to receive the funds was a fundamental misunderstanding of the prior funding formula. The appellate court then pointed out that a six-month funding lag would not fit into Indiana’s budgeting process.

“Because there was no so-called funding lag, it is apparent that the Charter Schools received tuition support funding on a real-time basis,” Judge John Baker wrote for the panel. “The DOE distributed those funds continuously throughout the transitional period. Therefore, the evidence undisputedly shows that they have received all funds to which they are entitled.”

The appellate court also found that the General Assembly never made a suggested policy change that the legislature provide funding for a charter school’s first semester of operations.

“But regardless of whether the process and result are fair or unfair, it is solidly within the wheelhouse of the legislature to create a statewide budget and to decide how to fund charter schools, which are a creation of the General Assembly to begin with,” the panel wrote. “The General Assembly has the discretion to decide how to allocate State funds.

“In sum, while the Charter Schools may argue that it is bad public policy for the legislature to have decided that charter schools should not be funded for their first semester of operation, that does not change the language of the relevant public law, which does not provide for the so-called funding lag. There is no statute providing that the tuition payments beginning in January paid for public education provided the previous fall,” it concluded.

In a last note, the appellate court observed that even if charter schools had to be self-funded for their first semester or had to close their doors as a result, Hoosier children “were always going to be able to obtain a tuition-free education at traditional public schools.”

It therefore concluded that it was within the purview of the Legislature to structure its budgets, and nothing in the case at hand suggested that it exceeded its discretion. The trial court thus erred by determining that the charter schools were entitled to a semester’s worth of tuition support, the appellate court held.

The case of State of Indiana; Indiana Department of Education; Eric Holcomb, in his official capacity as Governor of Indiana; et al. v. Indiana Connections Academy, Inc.; Rural Community Schools; et al., 18A-PL-2634, was thus reversed and remanded with instructions to enter judgment in the state’s favor.