Pocono Mountain School District v. Pennsylvania Department of Education ( 2016 )

[J-67-2016]
IN THE SUPREME COURT OF PENNSYLVANIA
MIDDLE DISTRICT
SAYLOR, C.J., BAER, TODD, DONOHUE, DOUGHERTY, WECHT, JJ.
POCONO MOUNTAIN SCHOOL : No. 87 MAP 2015
DISTRICT, :
: Appeal from the Order of the
Appellant : Commonwealth Court dated July 8,
: 2015, at No. 2052 CD 2014 Affirming
: the Order of the Pennsylvania
v. : Department of Education dated October
: 23, 2014 at No. EDU-2014-SLAP-
: 000176.
PENNSYLVANIA DEPARTMENT OF :
EDUCATION, DIVISION OF SUBSIDY : ARGUED: May 11, 2016
DATA AND ADMINISTRATION, :
:
Appellee :
OPINION ANNOUNCING THE JUDGMENT OF THE COURT
JUSTICE DONOHUE DECIDED: December 28, 2016
In this discretionary appeal, we are asked to determine whether, pursuant to
section 8327(b)(2) of the Public School Employees’ Retirement Code, 24 Pa.C.S.A.
§ 8327(b)(2), the school district that originally approved the creation of a charter school
is financially responsible, after the revocation of the charter, for the charter school’s
prior failure to make payments to its employees’ retirement fund. This question hinges
upon whether unpaid retirement contributions constitute an outstanding obligation of a
closed charter school. We conclude that the deficiency resulting from the failure to
make the payments is an outstanding financial obligation of a closed charter school and
therefore, pursuant to section 17-1729-A(i) of the Charter School Law, 24 P.S. § 17-
1729-A(i), the school district cannot be held liable for the amounts owed.
A charter school is “an independent public school established and operated
under a charter” that is authorized by the school board of the school district in which the
charter school is located. 24 P.S. § 17-1703-A. Charter schools are governed by the
Charter School Law, 24 P.S. §§ 17-1701-A – 17-1751-A, which the General Assembly
added in 1997 to the Public School Code of 1949. See S.B. 123, Act 1997-22, Reg.
Sess. (Pa. 1997).
Like the employees of a traditional public school, all charter school employees
must be enrolled as members in the Public School Employees’ Retirement System
(“PSERS”) unless they are enrolled in another retirement program. 24 P.S. § 17-1724-
A(c); see also 24 Pa.C.S.A. § 8301(a). PSERS is a defined benefit pension plan that is
funded by three sources: (1) member contributions; (2) employer contributions; and (3)
investment returns. The Commonwealth and the school district are each responsible for
paying a portion of the employer contribution. See 24 Pa.C.S.A. § 8328(a) (explaining
the employer contribution rate). The Commonwealth pays the school district directly an
amount equal to at least fifty percent of the employer contribution.1 24 Pa.C.S.A.
§ 8535(2)-(3). The Commonwealth provides this payment to the school district on a
quarterly basis. 24 Pa.C.S.A. § 8535(3). The school district generally then has five
days from the receipt of the money from the Commonwealth to make the full payment
due to PSERS. Id. The school district must send PSERS 100 percent of the employer
contribution and the member contributions, the latter of which are collected by the
1
The reimbursement provided by the Commonwealth to school districts may be greater
than fifty percent for those employees who were hired after June 30, 1994. See
24 Pa.C.S.A. § 8535(1).
[J-67-2016] - 2
school district and submitted on its employees’ behalf. 24 Pa.C.S.A. §§ 8327(a),
8506(c), 8535(3).
A charter school receives its funding, on a monthly basis, from the school
districts that encompass the residence of each child that attends the charter school.
24 P.S. § 17-1725-A(a)(2), (3), (5). The amount required for the charter school’s
employer contribution to PSERS is included in the monthly payments sent to the charter
school by the school districts. See 24 P.S. § 17-1725-A(a)(2), (3). A charter school,
however, remits its own payments to PSERS, as it is considered to be a “school district”
for this purpose.2 24 P.S. § 17-1724-A(c). If a charter school fails to make the requisite
PSERS payments, section 8327(b)(2) sets forth a mechanism “to facilitate the payments
of amounts due” to PSERS, instructing that
the Secretary of Education and the State Treasurer shall
cause to be deducted and paid into the fund from any funds
appropriated to the Department of Education for basic
education of the chartering school district of a charter school
and public school employees’ retirement contributions
amounts equal to the employer and pickup contributions
which a charter school is required to pay to the fund, as
certified by the [PSERS] board, and as remains unpaid on
the date such appropriations would otherwise be paid to the
chartering school district or charter school.
24 Pa.C.S.A. § 8327(b)(2). Thus, pursuant to section 8327(b)(2), upon receiving
notification from PSERS that a charter school failed to make the required PSERS
2
Prior to the 2014-2015 fiscal year, a charter school received 100 percent of its
employer contribution from school districts that had students attending the charter
school plus fifty percent of its employer contribution from the Commonwealth --
something commonly referred to as the “charter school double dip.” Charter School
Subsidies, PSERS Employer Bulletin, Vol. 5, at 1, 4 (2014). In the 2014-2015 Budget
Implementation, the General Assembly eliminated the “double dip” by precluding
payments from the Commonwealth to charter schools for PSERS contributions.
72 P.S. § 1722-J(9).
[J-67-2016] - 3
payments, the Department of Education (the “DOE”) withholds money from the
chartering school district’s basic education subsidy to cover the charter school’s PSERS
deficiency (for the employer and/or member contributions). See id. Any deduction from
the chartering school district’s basic education subsidy used to cover the charter
school’s failure to make PSERS payments, however, “shall be deducted from the
amount due to the charter school” from the chartering school district. Id.
Section 1714-A of the Charter School Law sets forth a non-exhaustive list of a
charter school’s powers.3 See 24 P.S. § 17-1714-A(a), (b). Neither the Commonwealth
nor any school district is responsible for debts incurred by a charter school in its
exercise of any of the specified powers. 24 P.S. § 17-1714-A(c). The chartering school
district is, however, responsible for annually assessing the charter school’s performance
3
The powers enumerated in section 1714 are those that are “necessary or desirable
for carrying out [the school’s] charter,” including the power to:
(1) Adopt a name and corporate seal; however, any name
selected shall include the words “charter school.”
(2) Sue and be sued, but only to the same extent and upon
the same condition that political subdivisions and local
agencies can be sued.
(3) Acquire real property from public or private sources by
purchase, lease, lease with an option to purchase or gift for
use as a charter school facility.
(4) Receive and disburse funds for charter school purposes
only.
(5) Make contracts and leases for the procurement of
services, equipment and supplies.
(6) Incur temporary debts in anticipation of the receipt of
funds.
(6.1) Incur debt for the construction of school facilities.
(7) Solicit and accept any gifts or grants for charter school
purposes.
24 P.S. § 17-1714-A(a).
[J-67-2016] - 4
to ensure it is “meeting the goals of its charter[.]” 24 P.S. § 17-1728-A(a). To facilitate
this assessment, the charter school is required to submit an annual report to the school
board of the chartering district, and the school board is further provided “ongoing access
to the records and facilities of the charter school to ensure that the charter school is in
compliance with its charter and this act and that requirements for testing, civil rights and
student health and safety are being met.” 24 P.S. § 17-1728-A(a), (b). A
comprehensive review is conducted prior to the school board granting a five-year
renewal of the charter. 24 P.S. § 17-1728-A(c).
A charter may be revoked or not renewed for a variety of reasons. See 24 P.S.
§ 17-1729-A(a). The revocation, termination or non-renewal of the charter results in the
dissolution of the charter school. 24 P.S. § 17-1729-A(i). Following dissolution, the
charter school’s liabilities and obligations are settled, and any assets that remain are
divided and given proportionally to the school entities4 that had students enrolled in the
charter school in the year immediately preceding its closure. Id. Under no
circumstances, however, do its “outstanding liabilities and obligations,” fall upon either a
school district or the Commonwealth. Id. (“In no event shall such school entities or the
Commonwealth be liable for any outstanding liabilities or obligations of the charter
school.”) (emphasis added).
Against this legislative backdrop, we turn to the uncontested facts of this case. In
2003, Pocono Mountain School District (the “School District”) granted a three-year
charter for the creation of Pocono Mountain Charter School (the “Charter School”). In
4
A “school entity” is defined by statute as “[a] school district of any class, intermediate
unit or an area vocational-technical school, as provided for under … the Public School
Code of 1949.” 24 Pa.C.S.A. § 8102.
[J-67-2016] - 5
2006, the School District renewed the charter for an additional five years. In 2008, the
School District initiated revocation proceedings, delineating twenty-seven reasons for
revoking the charter. The school board held a number of public hearings over the
course of two years, primarily focused on concerns of financial improprieties by the
Charter School’s Chief Executive Officer, Dennis Bloom, and “religious entanglement”
between the Charter School and the Shawnee Tabernacle Church, of which Bloom was
the founder and senior pastor. Pocono Mountain Charter Sch., Inc. v. Pocono Mountain
Sch. Dist., 88 A.3d 275, 279 (Pa. Commw. 2014).5 Following a series of appeals, the
Charter School Appeal Board ultimately affirmed the School District’s decision to revoke
the Charter School’s charter, effective June 21, 2014.
On August 28, 2014, the DOE deducted $87,700.32 from the School District’s
basic education subsidy for the 2014-2015 school year. The DOE made this deduction,
without prior notice to the School District, because of the Charter School’s failure to
make the mandatory payments to PSERS during the 2013-2014 school year.
The School District appealed this deduction to the head of the DOE. See 1 Pa.
Code § 35.20. The agency head found that the School District was not entitled to a
hearing on this matter, as the deduction was a mandatory, ministerial act conducted
pursuant to section 8327(b)(2).
The School District disputed that it was the Charter School’s chartering school
district on the date the DOE made the deduction from its basic education subsidy
(August 28, 2014) because, as of that date, the Charter School was no longer in
5
A more detailed recitation of the bases for revocation and the procedural history of
that segment of the case appear in the 2014 Commonwealth Court decision. See
Pocono Mountain Charter Sch., Inc., 88 A.3d at 280-82.
[J-67-2016] - 6
existence. The agency head found, however, that the relevant time was not when the
DOE made the deduction, but when the deficiency arose, and there was no question
that the School District was the chartering school district at the time the Charter School
failed to make the contribution to PSERS. As it was uncontested that the Charter
School was required to make payments to PSERS for the 2013-2014 school year, see
24 P.S. § 17-1724-A(c), the agency head concluded that the DOE did not exercise any
discretion in making the deduction. As such, the School District was not entitled to a
hearing on the propriety of the deduction, and the agency head granted the DOE’s
motion to dismiss the School District’s appeal. Agency Head Opinion and Order,
10/23/2014, at 2-3 (citing Fricchione v. Dep’t of Educ., 287 A.2d 442, 443 (Pa. Commw.
1972), for the proposition that “an exercise of discretion would appear to be the starting
point in determining whether an agency’s adjudication is an adjudication”); see also
2 Pa.C.S.A. § 504 (requiring “reasonable notice of a hearing and an opportunity to be
heard” only for an “adjudication of a Commonwealth agency”) (emphasis added).
The School District filed a petition for review, and a three-judge panel of the
Commonwealth Court affirmed in an unpublished opinion.6 The court recognized that
the action by the DOE is only ministerial, and thus nonadjudicative, “as long as it is
undisputed that a school district is the proper entity from which funds are to be deducted
and that amount is not in dispute.” Pocono Mountain Sch. Dist. v. Pa. Dep’t of Educ.,
2052 C.D. 2014, 2015 WL 5457139, at *2 (Pa. Commw. July 8, 2015) (unpublished
memorandum) (citing Council of Phila. v. Street, 856 A.2d 893, 896 (Pa. Commw. 2004)
6
Then-President Judge Dan Pellegrini authored the majority decision, which Judge
Bernard L. McGinley joined. Judge P. Kevin Brobson concurred only in the result.
[J-67-2016] - 7
(defining a ministerial act as “one which a public officer is required to perform upon a
given state of facts in a prescribed manner in obedience to the mandate of legal
authority and without regard to his own judgment or opinion concerning the propriety or
impropriety of the act to be performed”) and Flinn v. Pittenger, 338 A.2d 735, 757 (Pa.
Commw. 1975) (stating that a ministerial act is “nonadjudicative and not subject to
judicial review”)).
Like the agency head, the Commonwealth Court found that because it was
undisputed that the School District was the chartering school district during the 2013-
2014 school year (when the Charter School failed to satisfy its obligation to make
retirement contributions to PSERS), section 8327(b)(2) mandated that the DOE deduct
the amount of the deficiency from the School District’s basic education subsidy. Id. at
*3. Notably, the Commonwealth Court stated that the timing of the deduction was of no
moment because “[n]owhere in the language of [s]ection 8327(b)(2) does it explicitly or
implicitly indicate that a chartering school district is cleared from having to pay a
deficient payment if the charter school ceases to operate as one.” Id. The
Commonwealth Court therefore concluded as a matter of law that “[a]lthough the
deduction was taken after the Charter School's charter was revoked, the School District
was the chartering school district during the period in which the deficiency arose and,
thus, it is on the hook for the amount of the deficiency.” Id.We granted allowance of appeal to determine whether the Commonwealth
Court’s decision makes the School District responsible for the Charter School’s
liabilities, in violation of the Charter School Law. See Pocono Mountain Sch. Dist. v. Pa.
Dep’t of Educ., Div. of Subsidy Data & Admin., 127 A.3d 1289 (Pa. 2015) (per curiam).
[J-67-2016] - 8
This question requires that we interpret several statutory provisions. Therefore, our
standard of review in this matter is de novo and our scope of review is plenary. Cent.
Westmoreland Career & Tech. Ctr. Educ. Ass’n, PSEA/NEA v. Penn-Trafford Sch. Dist.,
131 A.3d 971, 976 (Pa. 2016).
The crux of the School District’s argument (and that of its amicus, the
Pennsylvania School Boards Association (“PSBA”)) is that section 8327(b)(2) cannot be
interpreted to permit the deduction of money from its basic education subsidy to cover
the Charter School’s PSERS delinquency for the 2013-2014 school year because the
Charter School was closed at the time the DOE made the deduction. According to the
School District, the Commonwealth Court ignored the plain language of section
8327(b)(2), which states its purpose as allowing for the “exchange of credits” between
the employer and the Commonwealth, and the last sentence of the statute, which is a
“mandatory pass through provision” that can only be effectuated if the charter school is
still in operation at the time the DOE deducts the charter school’s unpaid PSERS
contributions from a school district’s funding. School District’s Brief at 12-13;
24 Pa.C.S.A. § 8327(b)(2); see also PSBA’s Brief at 5, 11-12 (referring to section
8327(b)(2) as “a subsidy intercept” that is permitted “only if and to the extent that there
are amounts due to be paid from the chartering school district to the charter schools
against which the intercepted subsidy amounts can be offset”) (emphasis omitted).
The School District further contends that withholding payments from its basic
education subsidy to fund a closed charter school’s delinquent PSERS payments is
proscribed by several provisions of the Charter School Law, which clearly and
unambiguously indicate that a school district is not financially responsible for a charter
[J-67-2016] - 9
school’s debts, liabilities and obligations. School District’s Brief at 10-12 (citing 24 P.S.
§§ 17-1714-A(c), 17-1724-A(c), 17-1729-A(i)); see also PSBA’s Brief at 7-8. The
School District asserts that section 8327(b)(2) and the cited sections of the Charter
School Law are in pari materia and must be read as one statute, because together, they
all “address the operations of charter schools.” School District’s Brief at 14. In the
alternative, the School District states that sections 1714-A(c) and 1729-A(i) of the
Charter School Law, which expressly preclude a school district from being responsible
for a charter school’s debts and liabilities, are more specific and were enacted after
section 8327(b)(2),7 and are therefore controlling. Id. at 15-16 (citing 1 Pa.C.S.A.
§ 1933); School District’s Reply Brief at 6-7; see also PSBA’s Brief at 11. Thus, the
School District and its amicus maintain that section 8327(b)(2) only permits the DOE to
withhold money from a school district to cover a charter school’s PSERS delinquencies
in amounts that can be recouped by the school district through its own withholding of
payments from the charter school. School District’s Brief at 18; PSBA’s Brief at 11-12.
The DOE, on the other hand, contends that the Commonwealth Court’s decision
is fully supported by applicable law and the rules of statutory construction. 8 The DOE
7
Section 1714-A(c) and the pertinent language of section 1729-A(i) were added to the
Charter School Law by the General Assembly in July 2004. H.B. 564, Act 2004-70,
Reg. Sess. (Pa. 2004). Subsection (b)(2) was added to section 8327 of the Public
School Employees’ Retirement Code in 2001. H.B. 26, Act 2001-9, Reg. Sess. (Pa.
2001).
8
In its brief before this Court, the DOE also asserts that its deduction of funds from the
School District pursuant to section 8327(b)(2) was ministerial, and the School District
thus was not entitled to pre-deprivation notice and an opportunity to be heard pursuant
to 2 Pa.C.S.A. § 504. DOE’s Brief at 9-11. The School District refutes this contention in
its reply brief. School District’s Reply Brief at 3-5. We do not address this argument, as
it is beyond the scope of our allocatur grant.
[J-67-2016] - 10
and its amicus, the PSERS Board, argue that the provisions cited to by the School
District and the PSBA are inapplicable and irrelevant, as section 8327(b)(2) sets forth a
payment mechanism for PSERS, not a means for recovering a debt or liability. DOE’s
Brief at 17-18, 20-21, 23, 26, 27; PSERS Board’s Brief at 9-15. According to the DOE,
section 1714-A(c) only precludes school districts or the Commonwealth from being
responsible for a charter school’s debt incurred as a result of a charter school exercising
the powers enumerated in that section. DOE’s Brief at 19; see supra, note 3. As
contributing to PSERS is not a power specified in section 1714-A, the DOE asserts that
section 1714-A(c) has no bearing on this case. DOE’s Brief at 19-20; PSERS Board’s
Brief at 12-13.
Section 1729-A(i), the DOE argues, applies only to “the contractual liabilities that
may exist at the time of closure,” and is likewise inapposite to the circumstances in
question.9 DOE’s Brief at 21. Alternatively, the DOE states that while 1729-A(i)
9
The PSERS Board argues that section 1729-A(i) is inapplicable because under
section 8327(b)(2), it is the Commonwealth’s money, not the school district’s money,
that is used to cover a charter school’s failure to make the required PSERS
contributions, and therefore, a school district is not being held responsible for the
charter school’s outstanding liabilities or obligations. PSERS Board’s Brief at 16-18.
Justice Dougherty, in his Dissenting Opinion, adopts a variation of this argument,
contending that section 8327(b)(2) is “intended to facilitate the Commonwealth’s
obligation as guarantor [of PSERS contributions],” requiring only the transfer of
“Commonwealth monies” to PSERS to cover a charter school’s missed payments.
Dissenting Op. (Dougherty, J.) at 2-3. Although it is true that the money withheld from a
school district to pay PSERS for a charter school’s delinquency comes directly from the
Commonwealth, it is money that the school district is otherwise entitled to receive as
part of its funding from the Commonwealth. The amounts used to pay PSERS for the
charter school’s delinquency is deducted from the chartering school district’s funding.
See Letter Filing Petition for Appeal, 9/2/2014 (Attachment). Put another way, while
PSERS is paid by the Commonwealth for a charter school’s delinquencies, the payment
is made with money that would otherwise be allocated to the school district for its
general use. As such, these arguments pervert the reality of the funding mechanism.
[J-67-2016] - 11
generally prohibits a school district from being responsible for a closed charter school’s
liabilities and obligations, section 8327(b)(2) sets forth a specific exception, making a
school district financially responsible if a charter school, now closed, has failed to make
its PSERS contributions. Id. at 22, 27-29.
According to the DOE, because sections 1714-A(c) and 1729-A(i) also absolve
the Commonwealth from being responsible for a charter school’s debts and liabilities,
the School District’s interpretation of section 8327(b)(2) would lead to the invalidation of
another provision of the Retirement Code, section 8531. As a result, the DOE
continues, “the Commonwealth would no longer be the guarantor for the unfunded
benefits of a closed charter school’s employees[,] resulting in the rescission of the
credited service earned.” Id. at 23-24; see 24 Pa.C.S.A. § 8531. In other words, the
DOE contends that employees of the charter school will not be credited for retirement
benefits for the period of the charter school’s default.
The DOE states that its interpretation of the statutory provisions in question
effectuates the intent of the General Assembly in enacting section 8327(b)(2), which
was to protect the charter school’s employees by providing PSERS with a way to
ensure that the employees will not lose credited service. DOE’s Brief at 25. The DOE
argues that the provisions of the Charter School Law relied upon by the School District
and its amicus should not be interpreted as invalidating or nullifying that objective or the
operability of the statute. Id. at 25, 28-30.
Further, the DOE disputes that section 8327(b)(2) requires that a school district
be able to recover from the charter school the amount deducted for the charter school’s
PSERS delinquency. The recoupment provision is not stated as a prerequisite to the
[J-67-2016] - 12
DOE’s obligation to withdraw the funds from the school district’s basic education
subsidy. Id. at 31-32 & n.11. Additionally, in some circumstances, students from
several school districts attend a single charter school. The DOE points out that every
school district that has students attending the charter school must provide funding to the
charter school (which, inter alia, includes money for the charter school’s employer
contribution to PSERS). Nonetheless, section 8327(b)(2) requires only the chartering
school district to cover the charter school’s delinquent PSERS contributions and,
depending on the number of the chartering school district’s students attending the
charter school, this amount may not be recoverable by withholding the monthly
payments that it must make to the charter school. Thus, according to the DOE, the
contention of the School District and PSBA that section 8327(b)(2) operates solely as a
“pass through” is unsupportable. Id. at 32-34. The DOE asserts that its interpretation of
section 8327(b)(2) is just, as the School District is in the best position to oversee the
financial dealings of the Charter School and is able to ensure payments to PSERS are
timely made. Id. at 18 n.3, 25.
We begin by addressing the last contention raised by the DOE regarding the
School District’s supervisory role, which position Justice Dougherty adopts in his
Dissent. See Dissenting Op. (Dougherty, J.) at 4-5. In Justice Dougherty’s view, the
School District “failed in its supervisory duties” by not ensuring that the Charter School
made its PSERS payments during the 2013-2014 academic year. Id. at 5. Generally
speaking, a chartering school district is able to access the charter school’s records “to
ensure that the charter school is in compliance with its charter and this act.” 24 P.S.
[J-67-2016] - 13
§ 17-1728-A(a). In this case, the School District fulfilled this obligation and reacted to its
findings, as evidenced by its petition to revoke the Charter School’s charter in 2008.
Moreover, the Monroe County Court of Common Pleas appointed a custodian
(assisted by a forensic auditor and educational professionals) to oversee the Charter
School’s operations in April 2013. Pocono Mountain Charter Sch., Inc., 88 A.3d at 279;
Pocono Mountain Charter Sch., Inc. v. Pocono Mountain Sch. Dist., 2013 Pa. Commw.
Unpub. LEXIS 775, at 7 (Pa. Commw. Aug. 13, 2013); see also Bansa v. Boxley, 9280
CV 2012 (C.P. Monroe, Apr. 19, 2013). This occurred in the midst of the School
District’s ongoing attempt to revoke the Charter School’s charter. The custodian was
given authority over the Charter School’s finances, which he was, in part, appointed to
stabilize. He was required to report to the court on his progress monthly. Pocono
Mountain Charter Sch., Inc., 88 A.3d at 279; Pocono Mountain Charter Sch., Inc. 2013
Pa. Commw. Unpub. LEXIS 775, at 7. In the memorandum decision granting the
Charter School’s request for a stay pending the outcome of its appeal of the CAB’s
revocation of its charter, Judge Robert Simpson relied, inter alia, upon the appointment
of the custodian, finding that this “mitigates the alleged threat to public interest in
permitting the Charter School to operate in the 2013-2014 academic year because the
court [of common pleas] ensures the current public funds are spent appropriately.”
Pocono Mountain Charter Sch., Inc. 2013 Pa. Commw. Unpub. LEXIS 775, at 7-8.
Nonetheless, it was while the Charter School was under the custodian’s supervision and
control, monitored by the Monroe County Court of Common Pleas, that the Charter
School failed to make its PSERS payments. We therefore respectfully disagree with the
[J-67-2016] - 14
DOE and Justice Dougherty that the failure to discover the Charter School’s PSERS
delinquencies was the result of any lack of diligence by the School District.
Justice Dougherty seemingly imposes an additional duty upon a chartering
school district that was never contemplated under the law. He fails to explain what the
School District could have done if it had known that the Charter School failed to make
its PSERS payments. Our research reveals no provision, in the Charter School Law or
otherwise, that permits a chartering school district to prospectively withhold payments to
a charter school based upon its own investigation of a charter school’s financial
improprieties. The School District’s relief from the consequences of a financially
irresponsible Charter School is to seek revocation of the charter. See 24 P.S. § 17-
1729-A(a)(3) (permitting a chartering school district to revoke or refuse to renew a
charter based upon fiscal mismanagement by the charter school). This was the remedy
sought by the School District in 2008. Justice Dougherty seems to suggest that the
School District could have avoided the lengthy legal proceedings involved with revoking
the charter because the School District simply could have withheld payments from the
Charter School. The Charter School Law does not allow a school district to starve a
charter school out of existence.
Instead, decision in this case rests upon our interpretation of the interplay
between two statutes -- section 8327(b)(2) of the Public School Employees’ Retirement
Code and section 1729-A(i) of the Charter School Law.10 When interpreting a statute,
10
As previously stated, the School District also relies upon 1714-A(c) in support of its
position that it cannot be responsible to cover the Charter School’s PSERS delinquency.
We agree with the DOE, however, that this provision has no applicability to the
circumstances before us. Section 1714-A(c) states: “Any indebtedness incurred by a
(continued…)
[J-67-2016] - 15
the object is to “ascertain and effectuate” the intent of the legislature. 1 Pa.C.S.A.
§ 1921(a). When possible, we must give effect to every provision of a statute, as “the
legislature ‘is presumed not to intend any statutory language to exist as mere
surplusage.’” Id.; Commonwealth v. Chester, 101 A.3d 56, 63 (Pa. 2014) (quoting
Commonwealth v. Ostrosky, 909 A.2d 1224, 1232 (Pa. 2006)). If the language of a
statute is clear and unambiguous, “the letter of it is not to be disregarded under the
pretext of pursuing its spirit.” 1 Pa.C.S.A. § 1921(b). “Words and phrases shall be
construed according to the rules of grammar and according to their common and
approved usage[.]” 1 Pa.C.S.A. § 1903(a).
Statutes or parts of statutes that are in pari materia, meaning “they relate to the
same person or things or to the same class of persons or things,” are to be construed
together, if possible, as one statute. 1 Pa.C.S.A. § 1932. Conflicting provisions must
be construed, if possible, to give effect to both provisions. 1 Pa.C.S.A. § 1933. If the
conflict is irreconcilable, we construe the more specific or “special” provision “as an
exception to the general provision,” unless the legislature enacted the general provision
later and it was “the manifest intention of the General Assembly that such general
provision shall prevail.” Id.
(…continued)
charter school in the exercise of the powers specified in this section shall not
impose any liability or legal obligation upon a school entity or upon the Commonwealth.”
24 P.S. § 17-1714-A(c) (emphasis added). While subsection (a) is not an all-inclusive
list of the powers a charter school has, these are “the powers specified” in section 1714-
A. See supra, note 3. As payment to PSERS is not a “specified” power under this
section (rather, as stated herein, that requirement is stated in section 17-1724(c)),
section 17-1714-A(c) does not preclude the actions taken by the DOE here.
[J-67-2016] - 16
We are unpersuaded by the DOE’s argument that money owed to PSERS by a
charter school is not a liability or obligation. As the DOE’s amicus recognizes, Black’s
Law Dictionary defines the word “liability,” in relevant part, as “[a] financial or pecuniary
obligation in a specified amount; debt.” Black’s Law Dictionary (10th ed. 2014); PSERS
Board’s Brief at 15. “Obligation” is defined, in relevant part, as “[a] legal … duty to do …
something.” Black’s Law Dictionary (10th ed. 2014). The Charter School Law clearly
and unambiguously mandates that a charter school remit payments to PSERS for its
employees. 24 P.S. § 17-1724-A(c) (“The charter school shall be considered a school
district and shall make payments by employers to the Public School Employees’
Retirement System[.]”) (emphasis added). When a charter school fails to comply with
its legal duty to make PSERS payments, section 8327(b)(2) operates to allow PSERS to
recover the amount owed. Thus, a charter school’s PSERS payments are
unquestionably its financial obligation.
To reiterate, section 8327(b)(2) provides:
To facilitate the payments of amounts due from any charter
school, as defined in … the Public School Code of 1949, to
the fund through the State Treasurer and to permit the
exchange of credits between the State Treasurer and any
employer, the Secretary of Education and the State
Treasurer shall cause to be deducted and paid into the fund
from any funds appropriated to the Department of Education
for basic education of the chartering school district of a
charter school and public school employees’ retirement
contributions amounts equal to the employer and pickup
contributions which a charter school is required to pay to the
fund, as certified by the board, and as remains unpaid on the
date such appropriations would otherwise be paid to the
chartering school district or charter school. Such amounts
shall be credited to the appropriate accounts in the fund. Any
reduction in payments to a chartering school district made
pursuant to this section shall be deducted from the amount
[J-67-2016] - 17
due to the charter school district pursuant to the Public
School Code of 1949.
24 Pa.C.S.A. § 8327(b)(2) (footnote omitted). Section 1729-A(i) states:
When a charter is revoked, not renewed, forfeited,
surrendered or otherwise ceases to operate, the charter
school shall be dissolved. After the disposition of any
liabilities and obligations of the charter school, any remaining
assets of the charter school, both real and personal, shall be
distributed on a proportional basis to the school entities with
students enrolled in the charter school for the last full or
partial school year of the charter school. In no event shall
such school entities or the Commonwealth be liable for
any outstanding liabilities or obligations of the charter
school.
24 P.S. § 17-1729-A(i) (emphasis added).
Sections 8327(b)(2) and the relevant portion of section 1729-A(i) both address
the same subject -- unpaid obligations of charter schools11 -- and therefore are in pari
materia. 1 Pa.C.S.A. § 1932(a); see also Phila. Fire Officers Ass'n v. Pa. Labor
Relations Bd., 369 A.2d 259, 261 (Pa. 1977) (finding two statutes that both address
collective bargaining to be in pari materia). Section 8327(b)(2) facilitates the payment of
a charter school’s outstanding obligations to PSERS by withholding those amounts from
the funding due to the chartering school district. Section 1729-A(i) precludes, under any
circumstance, making a school district responsible for a closed charter school’s
outstanding obligations. Reading these two statutes as one, and giving effect to every
11
There is no support for the DOE’s contention that the language in subsection 1729-
A(i) prohibiting a school district from being held responsible for a charter school’s
obligations and liabilities following its closure is limited to the charter school’s
“contractual liabilities that may exist at the time of closure.” DOE’s Brief at 21. Section
1729 concerns the nonrenewal or termination of a charter, with subsection (i)
addressing the closing of the charter school and disposition of the school’s assets,
liabilities and outstanding obligations. See generally 24 P.S. § 17-1729-A(i).
[J-67-2016] - 18
provision, we conclude that it was the intent of the General Assembly that the directive
in section 8327(b)(2) is only operative if the charter school remains open and
operational at the time the DOE withholds the money from the chartering school district.
The result is the same without engaging in a statutory interpretation based upon
in pari materia principles. Section 8327(b)(2) generally provides that a charter school’s
unpaid PSERS obligations are to be deducted from the chartering school district’s
funding. The relevant portion of section 1729-A(i), on the other hand, addresses the
more narrow question of who is responsible for the unpaid obligations of a closed
charter school. It specifically instructs that “[i]n no event” can a school district be
financially responsible for a closed charter school’s outstanding liabilities and
obligations. 24 P.S. § 17-1729-A(i). As noted above, section 1729-A(i) was enacted
three years after section 8327(b)(2). See supra, note 7. The legislature was therefore
aware of the dictates of section 8327(b)(2) and deliberately included the pertinent
language in section 1729-A(i) absolving the chartering school district from responsibility
for a closed charter school’s outstanding financial obligations, which would include a
charter school’s outstanding payments owed to PSERS. A conflict between the
provisions arises when a charter school has closed prior to the DOE withholding funding
from the school district. Therefore, section 1729-A(i), the more specific statutory
section, operates as an exception to the general rule set forth in section 8327(b)(2).
See 1 Pa.C.S.A. § 1933. Because delinquent PSERS contributions are an outstanding
obligation and liability of a charter school, a school district cannot be financially
[J-67-2016] - 19
responsible for the unpaid PSERS payments after the charter is revoked or
terminated.12
The legislature’s choice of language in section 8327(b)(2) is also significant. It
requires the withholding of funds from “the chartering school district” of amounts that are
unpaid as of “the date such appropriations would otherwise be paid to the chartering
12
Our holding does not, as the DOE claims, “invalidate [s]ection 8531 of the Retirement
Code.” See DOE’s Brief at 24. Section 8531 states:
Statutory interest charges payable, the maintenance of
reserves in the fund, and the payment of all annuities and
other benefits granted by the board under the provisions of
this part are hereby made obligations of the Commonwealth.
All income, interest, and dividends derived from deposits and
investments authorized by this part shall be used for the
payment of the said obligations of the Commonwealth.
24 Pa.C.S.A. § 8531. This statute speaks solely to the Commonwealth’s role as the
guarantor of payments due to annuitants and beneficiaries for deficiencies in the
PSERS fund. Once payments are owed from PSERS to an annuitant or beneficiary, the
obligation to pay is PSERS’ obligation, not that of any particular school district. See, cf.,
United Brokers Mort. Co. v. Fid. Phila. Trust Co., 363 A.2d 817, 820 n.3 (Pa. Commw.
1976); Blake v. Kline, 612 F.2d 718, 725 (3d Cir. 1979).
Further, we will not address the bald assertion by the DOE and the PSERS Board that
our holding here results in the Charter School’s employees losing credited service for
the 2013-2014 school year. DOE’s Brief at 24; PSERS Board’s Brief at 21. To
determine whether the teachers will in fact lose a year of credited service because of
the Charter School’s failure to remit the required PSERS payments involves the
synthetization and interpretation of several statutory provisions (not briefed or argued);
denial of benefits by PSERS; and, in that eventuality, factual determinations (not of
record) regarding the teachers’ remittance of their member contributions; consideration
of whether teachers can be held responsible for the Charter School’s default when the
law, as written, does not permit teachers to make payments directly to PSERS; and
countless other issues potentially implicated by the Charter School’s financial
defalcations -- none of which are before our Court. See, e.g., 24 P.S. § 17-1724-A(c);
24 Pa.C.S.A. §§ 8102, 8302, 8303, 8306(a), 8321(a), 8322.1, 8323, 8326, 8327(a),
8506(c), 8507(d), 8522. We agree with Justice Wecht that there are a myriad of
problems and gaps in the Charter School Law. See generally Concurring Op. (Wecht,
J.). Speculating on the outcome of issues not joined, however, does not correct the
problem.
[J-67-2016] - 20
school district or charter school.” Id. A charter school without a charter, however, is
dissolved and ceases to exist. No money “would otherwise be paid” to a charter school
that no longer exists and a closed charter school likewise has no “chartering school
district” at the time the DOE would withhold funds from that school district.13
Furthermore, the opening sentence of section 8327(b)(2) establishes the
payment system as a means to “facilitate” payments from a charter school to PSERS,
but does not, as the PSERS Board contends, guarantee the amounts due. By using
the word “facilitate” instead of “guarantee,” the General Assembly clearly contemplated
circumstances in which the DOE would not be able to withhold funding from the school
district that originally approved the charter to obtain delinquent PSERS payments owed
by a charter school. It codified one such circumstance in section 1729-A(i), effectively
prohibiting the withholding of funding from the school district to cover a now-closed
charter school’s outstanding liability to PSERS.
For the foregoing reasons, we hold that following the dissolution of a charter
school, the school district that originally approved the charter is not financially
responsible for the charter school’s prior failure to remit the mandatory payments to its
employees’ retirement fund. Here, the DOE withheld money from the School District’s
basic education subsidy on August 28, 2014, two months after the Charter School lost
its charter. This is prohibited by section 17-1729-A(i) of the Charter School Law. As the
13
The operative date of section 8327(b)(2) is the date the appropriations would be paid
to the school district, not the date of the missed PSERS payments. The Commonwealth
Court’s contrary holding was not accompanied by any analysis of the language of
section 8327(b)(2) (or any other statutory provision), and is not supportable under the
law. See Pocono Mountain Sch. Dist., 2015 WL 5457139, at *3
[J-67-2016] - 21
School District was not the chartering school district on the date the DOE withheld the
School District’s funding, section 8327(b)(2) was inapplicable.14
The order of the Commonwealth Court is reversed.
Justices Todd and Wecht join the Opinion Announcing the Judgment of the
Court.
Chief Justice Saylor and Justice Wecht file concurring opinions.
Justice Baer files a dissenting opinion in which Justice Dougherty joins.
Justice Dougherty files a dissenting opinion.
14
Based upon our conclusion that section 1729-A(i) prohibits the DOE’s actions in this
case, we need not address the argument advanced by the School District and its
amicus that section 8327(b)(2) only permits the DOE to withhold funds from the
chartering school district if it can recover the full amount from the charter school.
[J-67-2016] - 22