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Pa. looks at partial bailout of Chester Upland

The state has proposed to keep Chester Upland schools open until June by releasing $27.7 million to pay expenses but says district management is so dysfunctional that the money should be disbursed directly to creditors.

The state has proposed to keep Chester Upland schools open until June by releasing $27.7 million to pay expenses but says district management is so dysfunctional that the money should be disbursed directly to creditors.

Also on Tuesday, the Department of Education asked a state judge to appoint a receiver for the district who would assume the powers of the school board and administration. A Commonwealth Court filing cited the proposed spending plan's findings that the school district's finances are "in complete disarray." It added that "the District lacks the institutional capacity, skill and business acumen needed to implement the measures necessary to address its financial crisis."

The receiver would run the district until June 2012, with the power to approve expenditures and contracts and to hire and fire personnel.

Chester Upland spokesman Joel Avery said that the district will contest the receivership proposal. "We totally disagree with it," he said.

The proposed $27.7 million state spending plan, filed Monday night with U.S. District Judge Michael Baylson, contains no long-term fix for the Delaware County district's woes. It does not cover millions in debts or obligations that Chester Upland owes to a variety of businesses and educational providers. It also leaves unpaid more millions in funding for the charters that educate almost half of Chester Upland's children - money they would normally receive from the district.

It would pay only for "critical expenses" that are "truly necessary to keep the schools open through June."

The plan, authored by Dilworth Paxson cochairman Stephen Harmelin on behalf of state education secretary Ron Tomalis, said Chester Upland's finances are so poorly managed that it "cannot give a valid account of its financial position."

The 6,800-student district is on track to overspend its budget by about $23 million this year and has few records to show how the money is being spent, the report said.

Chester Upland acting assistant superintendent Thomas Persing said Tuesday that the proposed funding would not be enough to give district students "an adequate education this school year or next." He added that pushing off millions in unpaid debts off until next school year "would be a disaster . . . a nightmare," and would lead to "a repeat of this year."

Persing, who joined the district in November, agreed that district financial records are "a mess," calling that part of the report "positive criticism."

The spending plan is the latest salvo in a long-running debate over the fate of the district.

Chester Upland depends on the state for about 70 percent of its funding. Hammered by state budget cuts, payments to charter schools, and debts owed from prior years, it ran out of money in January and has been on life support.

In January, district officials sued the state, asking Baylson to order that the state provide enough funds to keep the schools open. The state has made several million in interim payments since then; Tomalis' report was ordered in an effort to settle the suit.

The plan is not binding at this point on the district. More federal court hearings are planned; the state courts could also assume jurisdiction over some or all aspects of the dispute.

Harmelin proposed that the charters that educate the district's children get less funding than they would typically receive. They would see a 10 percent reduction in payments, with cyber charters getting 20 percent less. The Chester Community Charter School, which educates about 40 percent of Chester Upland's children, would face additional cuts in funding because its management fee, which accounts for 40 percent of the charter's revenue, "is not, in its entirety, an essential educational expense," he wrote.

In a statement yesterday, Chester Community blasted the proposal, calling it a "dark day for public charter school education." The school said that by proposing to cut charter payments below the amount they would normally receive, Tomalis "deemed himself and the Department of Education above the law" and "is apparently set on punishing" the school and its students.

Only about $1.3 million of the $27.7 million in proposed state payments would be new funding. The state could consider adding $4.5 million in discretionary funds to fill funding gaps, but only if the terms of the proposal are carried out, the report said.

The Education Department report was released just hours before State Sen. Jeffrey Piccola (R., Dauphin) unveiled proposed legislation that would allow state oversight of financially troubled school districts.

Once a recovery plan is in place, a distressed district could get interest-free state loans to keep it afloat while the plan was implemented. The legislation's intent is "not just to bail them out," but to fix their problems, Piccola said. Still, he added "we have to recognize that it is going to take a chuck of money to put these districts back on track, and this legislation provides for that."