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State v. Indiana Connections Academy, Inc.

Court of Appeals of Indiana

September 24, 2019

State of Indiana; Indiana Department of Education; Eric Holcomb, in his official capacity as Governor of Indiana;and Jennifer McCormick, in her official capacity as Indiana Superintendent of Public Instruction, Appellants-Defendants,
v.
Indiana Connections Academy, Inc.; Rural Community Schools; Andrew J. Brown Charter School, Inc.; Aspire Charter Academy, Inc.;andNational Heritage Academies, Inc., Appellees-Plaintiffs

          Appeal from the Marion Superior Court The Honorable Heather A. Welch, Judge Trial Court Cause No. 49D01-1606-PL-20822

          ATTORNEYS FOR APPELLANTS Curtis T. Hill, Jr. Attorney General of Indiana, Natalie F. Weiss Frances Barrow Deputy Attorneys General Indianapolis, Indiana

          ATTORNEYS FOR APPELLEE INDIANA CONNECTIONS ACADEMY, INC. Wayne C. Turner, Michael R. Limrick, Amanda L.B. Mulroony, Hoover Hull Turner LLP Indianapolis, Indiana

          ATTORNEYS FOR APPELLEE ANDREW J. BROWN CHARTER SCHOOL, INC., ASPIRE CHARTER ACADEMY, INC., AND NATIONAL HERITAGE ACADEMIES, INC. Alan S. Brown Darren A. Craig Alexander P. Will Indianapolis, Indiana

          BAKER, JUDGE.

         [¶1] Indiana Connections Academy, Inc. (INCA), Andrew J. Brown Charter School, Inc. (AJB), Aspire Charter Academy, Inc. (Aspire), and National Heritage Academies, Inc. (NHA) (collectively, the Charter Schools), instituted litigation against the State, seeking to recover six months of tuition support funding that they argue they are owed.

         [¶2] The trial court ruled in favor of the Charter Schools and the State appeals, raising multiple arguments, one of which we find dispositive: that the trial court erroneously determined that the tuition support funding formula resulted in a six-month funding lag. We find as a matter of law that the General Assembly did not intend the statutory funding formula to result in a six-month funding lag, meaning that the Charter Schools are not entitled to recover the disputed amounts. Therefore, we reverse and remand with instructions to enter judgment in favor of the State.

         Facts[1]

         Charter School Funding From 2002-2013

         [¶3] In 2001, the General Assembly enacted the Charter School Act (the Act) to provide an alternative option to traditional public schools. Ind. Code art. 20-24. A charter school is a nonreligious public elementary or secondary school that operates under a charter, which is a "contract between an organizer and an authorizer for the establishment of a charter school." Appellants' App. Vol. VI p. 58. An "organizer" is a nonprofit group that enters into the contract to operate the charter school, id. at 59, and an "authorizer" is an entity enabled under the Act to grant a charter to an organizer to operate a charter school, Ind. Code §§ 20-24-1-2.5, 20-24-3-1.

         [¶4] Because charter schools are considered public schools, which may not charge tuition to their students, the State provides tuition support on behalf of their students. Each two-year budget cycle, the General Assembly determines the amount of tuition support to be divided among and distributed to all public schools, including charter schools. The Indiana Department of Education (DOE) is tasked with the ministerial duty of distributing the tuition support funds. The amount of support is determined annually by the DOE and is based on the Average Daily Membership (ADM) of a charter school.

         [¶5] Before 2013, charter schools conducted their ADM count in September. They received tuition from the State for their students on a calendar year basis, with the first monthly distribution occurring in January and the final distribution occurring in December. Thus, the ADM count conducted in September triggered a payment stream that began in January. Before 2013, the law provided that the DOE would not make the first distribution of state tuition support until "after December 31 of the calendar year in which a charter school begins its initial operation." I.C. § 20-24-7-2(b) (2011). In other words, a new charter school that opened its doors in the autumn of an academic year would receive its first DOE tuition support payment the following January.

         [¶6] This system created financial hardship for new charter schools, which, unlike traditional public schools, do not have the authority to levy local taxes. When the DOE realized that there was a funding gap for new charter schools, it requested an advisory opinion from the Attorney General in 2002 (the Advisory Opinion). In relevant part, the Advisory Opinion states as follows:

. . . It cannot be assumed that the General Assembly intended to have the new public schools operate without state tuition funds absent clear language to that effect in the Charter School Act. Therefore, the [DOE] is required both to distribute tuition support and other state funding upon verification of the required information from the charter school organizer and to make full state tuition payments to public school corporations.
. . . Any analysis of charter school funding requirements must begin with the basic and irrefutable fact that charter schools are public schools, "wherein tuition shall be without charge."
In the absence of a specific legislative directive which indicates that charter schools must operate without state tuition support during the first semester of operation, one may only conclude that charter schools, like all other public schools, are required to be funded with public funds during the first semester of a school year. Indeed, any other reading would require the inference that the General Assembly intended charter schools with inadequate private start-up monies to never open.
. . . Of equal importance is the fact that the General Assembly did not provide that charter schools specifically be required to operate without state tuition funding during the first semester they are in operation.
The fact that an already-existing school corporation must wait until January for funding adjustments based on September's ADM does not support the argument by correlation that a charter school must wait until January for any state tuition support.
. . . [T]he statutory framework established by the General Assembly has an inherent time lag of roughly one semester between the time a public school starts a school year and the time it receives a distribution of state tuition support based on September ADM.
I am fully aware that the General Assembly has created what may be termed an "unfunded legislative mandate." It has created a new variety of public school without either (1) addressing the fiscal impact these schools may have on entitlements to existing school corporations, or (2) expressing an intent that charter schools will not receive state tuition support during the first semester of operations.
It is possible, given current budget projections, that the appropriations cap set by the General Assembly in 2001 may be inadequate. This is an issue that the General Assembly created, and one that may require its action to remedy.
The [DOE] may find in the performance of its ministerial duties that it is impossible to satisfy the State's financial obligations to all public schools as required by the General Assembly. In such an event, the General Assembly must supply the [DOE] with the necessary funds to satisfy these obligations. . . .
Therefore, . . . it is my legal opinion that the Charter School Act obligates the [DOE] to distribute tuition support and other state funding upon verification of the required ...

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