The Chester Upland School District has been declared financially distressed by state Education Secretary Ron Tomalis, a step leading to increased state oversight, possible sweeping changes to operations, and the loss of power by the elected school board.

In a sharply critical declaration signed Tuesday and made public Wednesday, Tomalis wrote that the struggling 3,400-student Delaware County district has "alarming deficiencies in [its] financial management and operations."

The district, which almost closed its school doors in January after running out of money, "is plagued by serious, systemic, and aggregating financial problems," he added, and the school board "lacks a concrete plan" to handle them.

School board and administration officials have disputed Tomalis' statements, saying they are acting responsibly and many shortcomings are being addressed.

The distress designation was made possible by legislation enacted in June that gives the state new powers to oversee financially troubled districts. Four school systems - Chester Upland, Harrisburg, York City, and Duquesne - are the first to go under state oversight.

Tomalis' declaration came just a day before the state Education Department and Chester Upland finalized a federal court settlement that earmarks $20.5 million in state funds to pay off district debts and commits to beefing up special-education offerings.

The district sued in January, asking that U.S. District Judge Michael Baylson order the state to pay enough to keep schools open until June and saying that because of budget shortfalls, special-education students were not getting services to which they were entitled.

The settlement also gives $12 million to the Chester Community Charter School, which educates about half of Chester Upland's students.

Chester Upland board member Anthony Johnson said he feared the distressed designation would open the door to turning district schools into charters and might create chaos if a recovery plan brings big changes during the school year. "This is a sad day. It's about politics and not about helping the children," he said.

Acting Assistant Superintendent Thomas Persing said it was too soon to say what the distress declaration would mean for the district. He added that the court settlement and additional state budget funding will give Chester Upland newfound financial stability. "It puts us on the right track," he said.

In the next few days, Tomalis will appoint a chief recovery officer with the power to recommend sweeping changes in the district, including closing schools or turning them into charters, renegotiating the teachers' contract, and cutting staff.

Within the next two weeks, the elected school board must vote on whether it will cooperate with the chief recovery officer; if it does not, Tomalis would go to court to ask for the appointment of a receiver who would have all of the powers of the elected board.

If the board accepts the appointment of a chief recovery officer but rejects that officer's recovery plan, Tomalis would go to court seeking the appointment of a receiver to implement the plan.