On Feb. 4, the NJ Appellate Division ruled against the Piscataway Board of Education in its effort to reduce the student tuition paid to charter schools, where those charter schools had large budget surpluses.

The case, Piscataway Board of Education v. Hespe, which dates back to 2012, appealed a rejection by the education commissioner (at that time, Chris Cerf) of the district’s request to reduce the tuition rate that it paid in 2010-2011 to four charter schools for district students attending those schools. Piscataway argued that because the district was underfunded that year, and the charter schools had an “excess surplus,” the commissioner should reduce the tuition rate Piscataway paid to the charters.

In denying the original request, the commissioner said that the charters had not inappropriately retained the funds. Charters do not operate under the same constraints as public schools in retention of excess funds.

The district appealed, and the appellate court remanded the matter back to the commissioner for consideration. At issue in the case were several points, including whether the commissioner of education had the discretion to disallow the charters from holding surplus funds.

The commissioner (now, David Hespe) issued a second decision rejecting Piscataway’s request, and the district again appealed.

The appellate court’s most recent decision ruled against Piscataway, finding that while an older version of the statute gave the commissioner the discretion to adjust charter school tuition, a 2000 amendment to the charter school act removed that authority. Despite that, state board regulations continued to grant the commissioner discretion to reduce the tuition rate.

The court also determined that “the fact that the district’s funding has been recognized as ‘under adequacy’ is not sufficient by itself to create a power for the commissioner that the Legislature chose to remove.”

The decision also provided a rationale for allowing charters to retain surplus funds: “As the Attorney General has pointed out, there are countervailing policy arguments that weigh in favor of allowing charter schools to retain surplus funds, given their inability to incur long-term debt and the possibility that they may experience sudden drops in enrollment that might affect their ability to meet fixed expenses.”

The court concluded that Piscataway’s proper avenue in seeking an appropriate remedy was to seek legislative changes to the statute, or to pursue and appeal to the state Supreme Court.

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