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The Board of Education of Rich Township v. Illinois State Board of Education; Jesse H. Ruiz

December 30, 2011

THE BOARD OF EDUCATION OF RICH TOWNSHIP
HIGH SCHOOL DISTRICT NO. 227,
PLAINTIFF-APPELLANT,
v.
ILLINOIS STATE BOARD OF EDUCATION; JESSE H. RUIZ, BOARD CHAIR;
CHRISTOPHER J. WARD, VICE CHAIR;
VINNI M. HALL, BOARD SECRETARY;
JAMES W. BAUMANN, MEMBER; ANDREA S. BROWN, MEMBER; DAVID L. FIELDS, MEMBER;
STEVEN R. GILFORD, MEMBER;
LANITA J. KOSTER, MEMBER;
MELINDA A. LABARRE, MEMBER;
CHRISTOPHER KOCH, STATE SUPERINTENDENT OF EDUCATION;
AND SOUTHLAND COLLEGE PREP CHARTER SCHOOL, INC.,
DEFENDANTS-APPELLEES.



Appeal from the Circuit Court of Cook County No. 10 CH 27012 Honorable Stuart E. Palmer, Judge Presiding.

The opinion of the court was delivered by: Justice Garcia

JUSTICE GARCIA delivered the judgment of the court, with opinion.

Presiding Justice R. Gordon and Justice Lampkin concurred in the judgment and opinion.

OPINION

¶ 1 The defendant Southland College Prep Charter School, Inc. (Southland) submitted an application to the plaintiff The Board of Education of Rich Township High School District No. 227 (District 227) to open a charter school within its boundaries in the fall of 2010. District 227 rejected Southland's proposal in February 2010. Pursuant to the Illinois Charter Schools Law (105 ILCS 5/27A-1 et seq. (West 2008)), Southland appealed the denial to the defendant Illinois State Board of Education (ISBE). In June 2010, the ISBE ruled Southland's proposal was both in compliance with the requirements of the Charter Schools Law and in the best interests of the students it was designed to serve and reversed the decision of District 227. District 227 filed a complaint for administrative review, which the circuit court of Cook County rejected. In the fall of 2010, the students of the first class at Southland College Prep Charter School began their studies.

¶ 2 Before this court, District 227 contends Southland's proposal did not satisfy three of the statutory requirements to win approval from the ISBE. It also contends the establishment of the charter school is not in the best interests of the students of the district. Finally, District 227 asserts the ISBE did not comply with procedural rules in the Illinois Administrative Code during Southland's appeal, which it contends supports a constitutional due process claim. We affirm.

¶ 3 BACKGROUND

¶ 4 In November 2009, Matteson School District 162 (District 162), which has 3,500 students in seven "feeder" elementary schools that enroll in District 227's three high schools, sent correspondence to the ISBE about establishing a charter high school for its students. On December 14, 2009, Southland, formed by educational leaders of District 162, submitted an application to District 227 to establish a charter high school. Southland planned to open the doors of the new high school in the fall of 2010.

¶ 5 The proposal stated, "[The] metamorphosis of the student population and student achievement in Matteson School District No 162 *** during the past several years has served as the catalyst for the movement to ensure that the rigorous, college preparatory curriculum to be provided at Southland College Prep Charter High School will become a reality for students in District 162 and surrounding elementary school districts that matriculate into Rich Township High School District 227." According to the proposal, the vast majority of the 3,500 students in District 162 are African-American and more than 68% of its students are economically disadvantaged, as measured by participation in the federal free and reduced lunch program. The proposal asserted, "[The] leaders in District 162 have concluded that the proposed Southland College Prep Charter High School is needed so that area students will have the opportunity to attend a small, academically rigorous, college preparatory charter high school that will provide a necessary educational option for those students who will achieve their full academic potentials only in such an environment."

¶ 6 Southland contended its proposal to establish the charter high school was economically sound because in fiscal year 2010, District 227 had direct revenues totaling $61,724,196, with an operating fund balance of $42,443,406. The proposal averred that in light of the $42 million fund balance, "the maximum financial impact the Southland College Prep Charter High School would have on the District would be approximately 6% of the amount of the District's current operating fund surplus." The proposal contended District 227's expenses would be mitigated by a reduction in the number of students attending District 227's three high schools.

¶ 7 The proposal set forth a list of goals, objectives, and pupil performance standards, as well as a description of Southland's educational program, school days, and hours of operation. The proposal provided: "Each family at Southland College Prep Charter High School must sign a contract with Southland College Prep Charter High School setting forth the parents' and students' commitment to work with Southland College Prep Charter High School to achieve maximum student outcome."

¶ 8 Charter Schools Law

¶ 9 The Illinois General Assembly enacted the Charter Schools Law in 1996 in response to "mounting calls for public education reform." Comprehensive Community Solutions, Inc. v. Rockford School District No. 205, 216 Ill. 2d 455, 458 (2005). The intent of the Charter Schools Law is to "promote new options within the public school system and [to] provide pupils, educators, community members, and parents with the stimulus to strive for educational excellence." 105 ILCS 5/27A-2(a)(3) (West 2008).

¶ 10 The Charter Schools Law aims to, inter alia, (1) "improve pupil learning by creating schools with high, rigorous standards for pupil performance," (2) "increase learning opportunities for all pupils, with special emphasis on expanded learning experiences for at-risk pupils, consistent, however, with an equal commitment to increase learning opportunities for all other groups of pupils in a manner that does not discriminate on the basis of disability, race, creed, color, gender, national origin, religion, ancestry, marital status, or need for special education services," (3) "encourage the use of teaching methods that may be different in some respects than others regularly used in the public school system," (4) "provide parents and pupils with expanded choices within the public school system," and (5) "hold charter schools accountable for meeting rigorous school content standards and to provide those schools with the opportunity to improve accountability." 105 ILCS 5/27A-2(b) (West 2008). To achieve these aims, the legislature has declared that the Charter Schools Law "should be interpreted liberally to support the findings and goals [of the Charter Schools Law] and to advance a renewed commitment by the State of Illinois to the mission, goals, and diversity of public education." 105 ILCS 5/27A-2(c) (West 2008).

¶ 11 The Charter Schools Law provides for student matriculation similar to other public schools. "Enrollment in a charter school shall be open to any pupil who resides within the geographic boundaries of the area served by the local school board." 105 ILCS 5/27A-4(d) (West 2008). In the event "there are more eligible applicants for enrollment in a charter school than there are spaces available, successful applicants shall be selected by lottery." 105 ILCS 5/27A-4(h) (West 2008).

¶ 12 Funding would come from the local school district. "[T]he charter school and the local school board shall agree on funding and any services to be provided by the school district to the charter school." 105 ILCS 5/27A-11(b) (West 2008). The Charter Schools Law sets forth funding guidelines: "In no event shall the funding be less than 75% or more than 125% of the school district's per capita student tuition multiplied by the number of students residing in the district who are enrolled in the charter school." Id. The General Assembly provided "that funding and service agreements under this subsection *** shall be neither a financial incentive nor a financial disincentive to the establishment of a charter school." Id.

¶ 13 The Charter Schools Law contemplates the state contributing to charter school funding. The ISBE is authorized to provide "transition impact aid" to "school districts that approve a new charter school or that have funds withheld by the State Board to fund a new charter school that is chartered by the State Board." 105 ILCS 5/27A-11.5 (West 2008). However, the General Assembly did not appropriate transition impact aid for 2010 or 2011.

¶ 14 A charter school proposal is initiated by the individuals or organizations "that will have majority representation on the board of directors or other governing body of the corporation or other discrete legal entity that is to be established to operate the proposed charter school." 105 ILCS 5/27A-7(b) (West 2008). A proposal must satisfy 15 requirements set out in section 27A-7(a) of the Charter Schools Law to win approval. 105 ILCS 5/27A-7(a) (West 2008).

¶ 15 Within 45 days of receipt of a charter school proposal, the local school board must convene a public meeting to solicit information on whether to grant or deny the proposal. 105 ILCS 5/27A-8(c) (West 2008). In evaluating the charter school proposal, the local school board must give preference to proposals that (1) "demonstrate a high level of local pupil, parental, community, business, and school personnel support," (2) "set rigorous levels of expected pupil achievement and demonstrate feasible plans for attaining those levels of achievement," and (3) "are designed to enroll and serve a substantial proportion of at-risk children." 105 ILCS 5/27A-8(a) (West 2008). Within 30 days of the initial public meeting, a second public meeting must be held where the local school board votes on the proposal. 105 ILCS 5/27A-8(e) (West 2008). Following its decision, the local school board must submit a report to the ISBE within seven days. 105 ILCS 5/27A-8(f) (West 2008).

¶ 16 If the local school board approves the proposal, the ISBE has 14 days to review the decision for compliance with the Charter Schools Law to issue its certification. Id.

¶ 17 If the local school board denies the proposal, the charter school may appeal to the ISBE within 14 days. 105 ILCS 5/27A-9(e) (West 2008); 23 Ill. Adm. Code 650.60(a) (2011). Once an appeal is filed, the ISBE may direct the parties to provide additional information. "The parties shall submit to the State Board such additional information as the State Board determines is necessary to decide the appeal." 23 Ill. Adm. Code 650.60(b) (2011). A charter school proposal may be subject to revision before the ISBE. "The [ISBE] shall provide technical assistance to persons and groups preparing or revising charter applications." 105 ILCS 5/27A-11(f) (West 2008).

¶ 18 The Illinois Administrative Code provides the opportunity for the charter school and the local school board to address the ISBE, either by oral or written presentations. The ISBE may require such a presentation even in the absence of a presentation request by the charter school or the local school board. 23 Ill. Adm. Code 650.60(c) (2011).

¶ 19 The ISBE may reverse the local school board's denial of a charter school proposal when two conditions are met: (1) the proposal is in full compliance with the Charter Schools Law; and (2) the proposal is in the best interests of the students it is designed to serve. 105 ILCS 5/27A-9(e) (West 2008). If the ISBE adopts the charter school proposal against the wishes of the local school board, the ISBE "shall act as the authorized chartering entity for the charter school." 105 ILCS 5/27A-9(f) (West 2008). As the authorized chartering entity, the ISBE must approve and certify the charter, and "shall perform all functions under [the Charter Schools Law] otherwise performed by the local school board." Id.

¶ 20 Final decisions of the ISBE are subject to judicial review under the Administrative Review Law. 105 ILCS 5/27A-9(e) (West 2008).

¶ 21 Southland's Proposal

¶ 22 On January 20, 2010, at the first public meeting before District 227, public officials and residents were given the opportunity to comment on the merits of Southland's proposal. On the day of the public meeting, Southland hand delivered a revised proposal to District 227, modified to enroll "200 to 250 students in the Southland College Prep Charter High School each year, with maximum total enrollment of 1000 rather than 800 students, based upon the overwhelming response from parents in the District 227 community indicating that a 1000-student school is required in order to serve the needs of area students." The revised proposal also included petitions signed by residents of District 227 in support of the charter school.

¶ 23 On February 16, 2010, District 227 held the second public meeting to issue its decision. The District denied the charter school proposal by resolution. District 227 submitted a report to the ISBE delineating the proposal's deficiencies. According to its written report, District 227 denied the proposal for three reasons: (1) its "devastating financial impact," (2) "the complete lack of an appropriate plan for special education needs," and (3) "impermissible admissions criteria."

¶ 24 To support its overriding reason to reject the proposal, District 227 asserted that approving the proposal at 1,000 students at 125% per capita tuition would result in a net loss to District 227 of approximately $35 million over the four years, even when a reduction of 40 teachers was considered (1 for every 25 students that would matriculate at the charter school, each at a salary of $70,000 per year). The report asserted that establishing the charter high school would be "ruinous to District 227, virtually depleting all of its operating fund balances in [a] few short years." District 227 noted that no transition impact aid was available from the state for 2010 and 2011. District 227 claimed that at a reduced 100% per capita tuition rate, the financial soundness of the charter school was questionable. District 227 claimed the charter school "would spiral deeper in debt each year until it would have to close or seek a bailout from the State." District 227 also asserted the proposal failed to satisfy other requirements of the Charter Schools Law, including (1) serving at-risk students, (2) demonstrating a broad level of support across District 227's feeder districts and municipalities, (3) a description of pupil performance standards, (4) adequate identification of the location of the charter school, (5) addressing the transportation needs of charter school pupils, and (6) a plan to address minor violations of the charter contract.

¶ 25 ISBE Proceedings

¶ 26 On March 5, 2010, Southland appealed District 227's denial of the charter school proposal to the ISBE and requested an opportunity to make an oral presentation to the ISBE's staff. Southland submitted its original proposal, along with documents previously not presented to District 227, which included letters in support of the charter school from municipal leaders including the village presidents of Olympia Fields, Richton Park, and Matteson, and the mayor of Park Forest. Southland also submitted a letter from the local state representative supporting the charter school proposal.

¶ 27 In correspondence dated March 17, 2010, District 227 objected to the ISBE considering material not submitted to District 227 with the original charter school proposal. District 227 claimed, "if the charter group wishes to present new information, it should do so in a new proposal to the District 227 Board rather than for the first time in an appeal to the State Board." District 227 offered no authority for its contention that the ISBE should not consider this "new information" from Southland.

¶ 28 On April 30, 2010, the ISBE sent correspondence to Southland, with a copy to District 227, memorializing a meeting on April 29, 2010, between the ISBE staff and members of Southland's development team. According to the correspondence, the ISBE staff had reviewed the charter school proposal, District 227's report detailing the denial of the proposal, and Southland's appeal documents "to obtain clarification of information contained in the proposal." Citing section 650.60 of the Administrative Code, the ISBE correspondence listed issues that needed to be addressed "in order to ascertain whether or not the proposal is in compliance with the provisions of the Charter Schools Law and its implementing regulations and to determine whether or not the charter proposal is in the best interests of the students it is designed to serve."

¶ 29 The ISBE sought additional documentation regarding the goals, objectives, pupil performance standards, and Southland's possible outside funding, including from the federal government. The ISBE explained, "[I]t is not clear whether or not the 'terms of the charter as proposed are economically sound for both the charter school and the school district.' " The ISBE noted the proposed budget for the charter school "displays large excesses of revenues over expenditures: $1 million in year two of operation, $2.7 million in year three, and $4.5 million for several years thereafter." The ISBE expressed concern that the charter, "on the one hand, request[s] 125% of the per capita tuition and, on the other, display[s] such excesses." The ISBE directed Southland to submit documentation showing that the terms of the proposal were economically sound for both Southland and District 227.

¶ 30 On May 7, 2010, Southland submitted documentation addressing each of the issues raised by the ISBE. Southland submitted a revised financial model, seeking funding at 100% of the per capita tuition charge for District 227 students. According to Southland, the modification "reflects a change to which Southland would have agreed if requested by District 227, but District 227 did not engage in any dialogue with Southland before rejecting the Proposal for the creation of the Southland High School." Southland insisted "the financial documents reflecting the change to funding at the level of 100% of the per capita tuition charge demonstrate that Southland's projected revenues will support the operation of the Southland Charter High School, despite the reduction from the prior funding level of 125% of the per capita tuition charge." Southland asserted District 227 would realize significant cost savings from the anticipated migration of 1,000 students to the charter high school. According to the revised proposal, District 227 would realize a cost savings of $14,560,950, based on an operating expense per District 227 pupil of $14,560.95.

¶ 31 The ISBE sent a copy of Southland's filings of May 7, 2010, to District 227. No response from District 227 to Southland's filings appears in the record. The record reflects additional communications between the ISBE staff and Southland that addressed other portions of the proposal.

¶ 32 On May 18, 2010, Dr. Christopher Koch, the ISBE superintendent, issued a recommendation to reverse District 227's denial of Southland's proposal. Dr. Koch recommended that a charter high school be established with 500 students at 100% per capita funding for five years, subject to Southland resolving certain concerns over the terms of the charter agreement. As to the financial feasibility of a proposal for a smaller charter school, Dr. Koch explained:

"Given a 500 student enrollment cap, the State Superintendent and ISBE staff believe that the proposal leaves the charter school and the District financially secure and solvent and able to withstand the charter's establishment:

* The District maintains positive fund balances in its major operating funds and, according to its FY10 budget, the District will have a combined fund balance in the major operating funds of $26.5 million and a working cash balance of $3.3 million as of June 30, 2010;

* No short term debt has been issued by the District;

* The District's large fund balance provides a buffer for the District; and,

* Once students migrate, the District will adjust its staffing and expenditure levels to reflect the reduced number of students it serves in order to mitigate the financial ...


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