The Walter D. Palmer Leadership Learning Partners Charter School announced Wednesday that it would hold a lottery this week to begin cutting its student enrollment nearly in half.

The action came on the same day that the Philadelphia School District opened proceedings to revoke the school's charter.

The K-12 charter has been operating with 1,290 students on its campuses in Northern Liberties and Frankford, though the district maintains it is not allowed to enroll more than the 675 it agreed to when it signed its charter in 2005.

And this summer, the Pennsylvania Department of Education cut off funding for the additional students after a state Supreme Court decision in favor of the district, causing the already financially strapped charter to plunge into greater fiscal peril.

The charter has not announced when the students who lose the lottery, scheduled for K-8 students on Thursday, will be forced to leave. High school enrollment is to be dealt with later. The School District already has sent letters to Palmer parents and held informational sessions to inform them how they can transfer their children to other schools.

Walter Palmer, a lecturer at the University of Pennsylvania and founding board president of the school that bears his name, did not mention the lottery as he left the charter revocation hearing, which started Wednesday and is expected to continue into November.

Asked if the school would remain open this year, he said, "It's going to be touch and go. We're talking to friends and associates."

Wednesday's hearing was scheduled after the Philadelphia School Reform Commission voted in the spring to revoke Palmer's charter on multiple grounds, including shaky finances and a history of poor academic performance. Palmer contested the move. The sparsely attended hearing was the first charter revocation hearing to be held by the district, which operates 86 charters, enrolling more than 67,000 students.

The hearing officer will issue findings and conclusions to the commission, and after a 30-day comment period, the commission will decide whether to accept the report.

In a blistering opening statement, the School District said the charter is among the lowest-performing schools in the state academically and its test scores are on the decline. The charter also has failed to pay vendors for services, has run a $3.6 million deficit, and has not filed required audit reports on time, said Allison Petersen, the lawyer representing the district.

The charter also has failed to pay required contributions to the state education retirement system, resulting in School District subsidies being withheld by the Education Department - $291,000 in August.

Petersen said the charter has overbilled the School District and has not repaid the money.

Commonwealth Court year ordered the charter to repay the district $1.5 million it had received in payments for the students it was not authorized to have. Earlier this month, the School District filed documents in Common Pleas Court to enforce that order and make the charter repay funds.

Robert Gamburg, the lawyer for Palmer, said in his opening statement that many of the problems cited by Petersen have been remedied.

"This revocation hearing is nothing more than an attempt by the School District to sully the name of one of the most foremost civil-rights and educational leaders that our city has ever known and will ever know," he said.

ssnyder@phillynews.com

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Inquirer staff writer Martha Woodall contributed to this article.