In the midst of its continuing financial crisis, the School District of Philadelphia has lowered the boom on charter schools in the city.

Using new powers unleashed by the School Reform Commission's recent decision to suspend part of the state school code, the district is threatening to begin revocation proceedings against schools that have refused to sign their charters because they include enrollment caps. The district has also warned charters not to seek payment for extra students from the state.

"The SRC . . . has the responsibility to act in a fiscally responsible manner in reviewing and approving charter school enrollment growth," Deputy Superintendent Paul Kihn wrote in Oct. 16 letters to charter officials. "Such growth can be responsibly managed only in accordance with a planning process that gives the SRC and the School District the ability to avoid financial disaster, which is a certainty in the absence of managed enrollment growth."

He said the SRC would move against charter schools that were not in compliance by Dec. 15. He urged the leaders to meet with the district to discuss the issues.

Kihn said Monday that the letters targeted "a minority" of the district's 86 charter schools. He said he does not expect the SRC will move to revoke any of those charters.

"We are anticipating we're going to have signed agreements," he said.

Kihn said the district was close to reaching understandings with 17 of the 28 schools without signed charters.

His letters are the latest twist in the district's long-running battle to manage charter costs. The saga includes several court cases.

Charter operators said the district's new step is unprecedented and has caused turmoil as charter leaders scramble to weigh their legal options.

"I felt completely blindsided," said Larry Jones, CEO of Richard Allen Prep in Southwest Philadelphia and president of the state Coalition of Public Charter Schools.

"We understand that if the district crumbles, public education in the city crumbles," said Jones, who was one of the city charter leaders who went to Harrisburg last summer to lobby for more state funding for the district.

"But how do you work consistently with someone who is going to go nuclear?" he asked. "I think people are trying to make sense of exactly what this means."

Stacy Gill-Phillips, CEO of West Philadelphia Achievement Charter Elementary School, has organized a meeting of charter leaders for Tuesday night. She said the district's actions endangered all city charters - not just those without signed agreements.

"The SRC action will eventually get around to affecting and eliminating all of us!!" she wrote in an e-mail to charter leaders.

The district's $2.39 billion budget includes $674.8 million to pay charters for their 55,000-plus students this fiscal year.

In the spring of 2012, Commonwealth Court ruled that the district violated a 2008 law when it limited enrollment at two charter schools and refused to pay for additional students. The court said that under state law, enrollment could not be limited - unless the school had agreed to a cap in its signed charter.

The state Supreme Court has agreed to review a narrow portion of the ruling. In the meantime, several schools have refused to sign their charters because they include enrollment maximums.

When the district refused to pay for extra students, several charters took advantage of a provision in the charter law that allows them to send the bill to the state Department of Education. The state deducts that amount from the district's share of state aid and sends the money to the charters.

Kihn said six charters collected about $7 million from the state in this way in the last school year.

Citing its financial emergency and what was then a $302 million deficit, the SRC in August voted to suspend that part of the code as well as the section barring caps.

Kihn said in his letter that schools that had not signed their agreements were out of compliance with state law and were jeopardizing the financial stability of the district.

He also said that because city charters are funded almost entirely with district money, schools that are out of compliance not only undermine the financial stability of district schools but "the many charter schools that operate in compliance with their signed charter."

West Philadelphia Achievement's unsigned charter limits the school to 400 K-5 students. But the school has more than 600 students and has been receiving money from the state for the additional students, Gill-Phillips said.

"I think the School District's mind-set is to pull these children back - just because of the dollars," she said. "That is fundamentally wrong."

She said her school has been responding to demand from families. "It's the push from the community," she said, adding that even with the additional students, 260 are on the school's waiting list.

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