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Universal, Kenny Gamble's charter school company, in financial hot water?

The company recently laid off some school staff and central office workers amid a fiscal crunch prompted, it said, by a Philadelphia School District action. It also proposed amending employees' pay schedule to save money.

Universal Companies, the Kenny Gamble-founded firm that runs seven charter schools in Philadelphia, appears to be in financial trouble.

Two months before the end of the school year, Universal laid off school staff and central office workers. And it recently sent a memo to employees saying that it needed to alter remaining employees' pay schedule, pushing back a week's salary with a promise to repay it before the end of the summer.

Company officials later rescinded the memo, which cited a recent Philadelphia School District edict withholding payments to all 86 charter schools in the city, and said changes were necessary to "ensure the stability of company operations" and "avoid greater near-term disruptions to employees."

Devon Allen, a Universal spokesman, said the memo was "an accident" that was "issued in error."

Officials confirmed the layoffs, but declined to specify the number of workers let go. They also would not disclose how employees' pay would be adjusted.

Eve Lewis, a Universal vice president, said in a statement that the company "has made the necessary adjustments to staff based on the district's recovery of funds. Classroom instruction was not affected by staff adjustments."

Universal also abruptly stopped running a school it had been managing in Milwaukee, months after it ceased operating two other charter schools there.

Allen, the spokesman, said the Milwaukee decision had nothing to do with finances, and that Universal pulled out of that charter because it was unable to implement a "community school model" at Universal Academy for the College Bound Webster Campus.

Its contract for Webster was up at the end of the school year, but Universal and the Milwaukee School District agreed to make the change before the end of the term, Allen said, to ease the transition. A Milwaukee schools spokesman referred a reporter to Universal for comment about the details of Universal's withdrawal.

A Universal school staffer, who declined to be identified, citing a  fear of retaliation, said the layoffs occurred before and during Universal's spring break earlier this month. School-based staff and teachers from each of the system's schools were let go, as were a significant number of central office administration, said the staffer, who was not laid off.

Universal employees were "outraged" at the proposed payroll changes; some had attempted to start protests and planned sickouts, the staffer said. Most of that has died down now that the memo has been rescinded, the staffer said.

All 86 charter schools in the city have been feeling a pinch since Uri Monson, the School District's chief finance officer, told them in February that the district's monthly payments would be reduced for the rest of the academic year.

State law contains a formula that determines the rate charter schools receive based on how much the district spent to educate its students the previous year.

An audit of the district's books showed that the district had been overpaying charter schools more than $340 per student in regular classes and more than $1,000 for every special education student.

The district is reducing monthly payments to recover the money.

Among other things, Monson said, the rates changed because the district did not spend $30 million it had budgeted for new teacher and principal contracts in 2015-16, because there were no labor agreements.

Other charter school operators also were upset by the news and said they were working to adjust their budgets to compensate for the financial squeeze.  Mastery Charter Schools, which has 14 schools in the city with 11,000 students, said it would use emergency funds to cover projected cuts totaling $5 million.

Universal operates seven charter schools in the city, including its original Universal Institute Charter School in Southwest Center City. The other six are former district schools that the School Reform Commission turned over to Universal to operate as Renaissance charter schools.

Universal educates 4,700 students in Philadelphia.

Last spring, the district's charter school office recommended that the SRC not renew the operating charters of two of the schools: Universal's Vare Promise Neighborhood Partnership Charter in South Philadelphia and its Audenried Promise Neighborhood Partnership Charter in Grays Ferry, for academic shortcoming and shaky finances.

Both schools were supposed to achieve dramatic academic improvements during their five-year operating agreements but had not.

The charter office said that during Universal's first year managing Audenried, math proficiency dropped 12 percentage points to 10 percent and reading 14 percentage points to 16 percent.

According to the office review, neither school had enough cash on hand each year to handle unexpected costs.  The SRC has postponed several votes, and the status of the schools' operating agreements is in limbo,

City Controller Alan Butkovitz also issued a report on charter school operators last year that flagged concerns about Universal's financial management and charter school payments to related companies. The  schools  paid Universal Community Homes a total of $7.4 million for fiscal years 2011 to 2014 and $12 million over the same period to the related Universal Education Cos., the report said.

His report also questioned overlapping memberships of among Universal boards.

Universal, the company says on its website, aims "to provide an unparalleled high-quality education to all students in a safe and nurturing environment, which prepares scholars to attend higher institutions of learning and/or the globalized workforce. We work with the most academically challenged scholars to ensure their success."