Frederick Classical Charter Sch., Inc. v. Frederick Cnty. Bd. of Educ.

454 Md. 330

164 A.3d 285

FREDERICK CLASSICAL CHARTER SCHOOL, INC.

v.FREDERICK COUNTY BOARD OF EDUCATION

No. 25, Sept. Term, 2016

Court of Appeals of Maryland.

July 14, 2017

Reconsideration Denied August 24, 2017

Argued by F. William DuBois (Venable LLP of Baltimore, MD) on brief, for Petitioner.

Argued by Andrew W. Nussbaum (Nussbaum Law, LLC of Clarksville, MD) on brief, for Respondent.

Argued before Barbera, C.J., Greene, Adkins, McDonald, Watts, Hotten, Getty, JJ.

Getty, J.

How many times have you heard someone say

"If I had his money, I could do things my way?"

But little they know that it's so hard to find

One rich man in ten with a satisfied mind

Porter Wagoner, Satisfied Mind (RCA Records 1955).

When the Maryland General Assembly passed a state enabling statute in 2003 to create a charter school program, it expressed its intent for the program in the statutory findings that charter schools "provide innovative learning opportunities and creative educational approaches to improve the education of students." 2003 Md. Laws, ch. 358. See also Md. Code, Educ. ("ED") 9–101. However, the enabling statute created a statutory scheme under which such schools would be "public" schools overseen by the school board of the local jurisdiction. See ED § 9–102.

Moreover, the General Assembly did not create a separate funding stream for these public charter schools but instead provided that charter funding would come from other people's money, i.e. , the local school board's budget. See ED § 9–109. The autonomy of a public charter school is further limited by the statute's other provisions that give local school boards the "chartering authority" to approve applications to form a public charter school, and by a requirement that, for those counties that have entered into a collective bargaining agreement with a teacher's union, only members of the union that is a party to that agreement can be assigned as staff for a public charter school. See ED §§ 9–103 ; 9–104; 9–108(b).

Under this statutory organization, there is a natural and inherent conflict with the local school board's role in supervising charter schools and approving charter school applications and its own self-interest; to the extent that the local school board authorizes the creation or expansion of a charter school, there is a concomitant reduction in funds available for the education of the non-charter students in the local public system. This tension in the funding stream for public charter schools has left dissatisfied minds on both sides and has led to appeals from local school board funding decisions that have come before Maryland's appellate courts. See, e.g., Balt. City Bd. of Sch. Comm'rs v. City Neighbors Charter Sch. , 400 Md. 324, 929 A.2d 113 (2007) ; Frederick Classical Charter Sch., Inc. v. Frederick Cty. Bd. of Educ. , 227 Md.App. 439, 134 A.3d 376 (2016) ; Monarch Acad. Balt. Campus, Inc. v. Balt. City Bd. of Sch. Comm'rs , 231 Md.App. 594, 153 A.3d 859, cert. granted sub nom., Monarch Acad. Balt. Campus v. Balt. City Bd. of Sch. Comm'rs , 452 Md. 523, 157 A.3d 809 (2017).

This case involves a dispute between Frederick Classical Charter School, Inc. ("Frederick Classical"), the Petitioner, a charter school located in Frederick, Maryland and the Frederick County Board of Education ("the Local Board"), the Respondent. The parties' dispute focuses on whether the Local Board's annual funding allocation to Frederick Classical in its first year of operation satisfied ED § 9–109. Under that statute, a local school board is required to disburse to a public charter school "an amount of county, State, and federal money for elementary, middle, and secondary students that is commensurate with the amount disbursed to other public schools in the local jurisdiction." ED § 9–109.

In this case, Frederick Classical was not satisfied with its annual commensurate funding allocation as determined by the Local Board because it did not include a proportional share of funds which the Local Board had budgeted for student transportation. The funds withheld amounted to $544.26 per-pupil and $135,926.22 in the first year of the school's operation, and more in subsequent years. Frederick Classical challenged the allocation, first in a letter to the Local Board and, when the Local Board summarily refused to amend the allocation, in an appeal to the State Board.

In reviewing Frederick Classical's appeal, the State Board regarded the issue as one of local policy, and thus applied a deferential standard of review, in which it assumed that the Local Board's decision to withhold transportation funds was "prima facie correct" unless proven to be "arbitrary, unreasonable, or illegal." See Md. Code Regs. ("COMAR") 13A.01.05.05(A)–(C). On the merits, the State Board determined that "it does not appear that [Frederick Classical] provides any transportation services" to its students. The State Board concluded that, under ED § 9–109 and its own precedent, "a charter school is not automatically entitled to funds for services it does not provide," and that "if [Frederick Classical] received funds for services it did not provide, it would be receiving more than its commensurate share of [ ] funds."

The State Board also focused on language in the charter agreement between Frederick Classical and the Local Board, which stated that transportation of students "shall be the responsibility of [Frederick Classical] families," with certain narrowly defined exceptions. The State Board interpreted that provision to mean that Frederick Classical had "agreed it is not entitled to [transportation] funds by virtue of having parents take on the responsibility for transportation." For those reasons, the State Board upheld the Local Board's decision to withhold transportation funding from Frederick Classical's annual funding allocation.

Frederick Classical petitioned for judicial review of the State Board's declaratory ruling before the Circuit Court for Frederick County, which upheld the State Board's ruling. Then, Frederick Classical appealed to the Court of Special Appeals which, in a reported opinion, likewise affirmed the State Board's decision. Frederick Classical Charter Sch., Inc. v. Frederick Cty. Bd. of Educ. , 227 Md.App. 439, 134 A.3d 376 (2016). Frederick Classical thereafter petitioned this Court for a writ of certiorari, which we granted on July 11, 2016. 448 Md. 724, 141 A.3d 135 (2016).

We hold that the State Board erred by applying the deferential standard of review for decisions of a local school board on a matter involving a local policy or a local dispute, as defined in COMAR 13A.01.05.05(A)–(C), instead of the "independent judgment" standard for the "explanation and interpretation of the public school laws and State Board regulations" defined in COMAR 13A.01.05.05(E). We further hold that the State Board's conclusion that Frederick Classical was not entitled to transportation funds when it did not provide transportation services is contrary to its own precedent as well as the statutory purpose and legislative history of the statute. Hence, the State Board's decision to deny transportation funds to Frederick Classical on that basis was arbitrary and capricious and an abuse of discretion. And, we hold that the State Board erroneously determined that Frederick Classical agreed, in its charter agreement, that it was not entitled to transportation funds. Therefore, we shall reverse the judgment of the Court of Special Appeals, and remand the case to the intermediate appellate court with instructions to remand to the circuit court, and with further instructions for the circuit court to remand the case to the State Board, for further proceedings before the State Board consistent with this opinion.

I.BACKGROUND

A. Charter Schools and Commensurate FundingCharter Schools

Charter schools are a statutorily created alternative to traditional public schools that are "in the nature of semi-autonomous public schools," operating "under a contract with a State or local school board." Balt. City Bd. of Sch. Comm'rs v. City Neighbors Charter Sch. , 400 Md. 324, 328, 929 A.2d 113 (2007). "The contract, or charter [agreement], defines how the school will be structured, staffed, managed, and funded, what programs will be offered, and how the school will operate and account for its activities." Id. The first charter school law was passed in Minnesota in 1991, and currently forty-two states and the District of Columbia have public charter school laws, with more than 6900 charter schools currently in operation, enrolling an estimated 3.1 million students.¹

Maryland's Charter School Statute

The legislative struggle to establish a publicly funded charter school program in Maryland was a long and arduous one, lasting over six years. City Neighbors , 400 Md. at 348–54, 929 A.2d 113. Ultimately, in 2003, the Maryland General Assembly passed the Maryland Public Charter School Program ("Charter School Program"). See ED §§ 9–101 et seq. ; see generally City Neighbors , 400 Md. at 329–31, 929 A.2d 113 (summarizing the provisions of the Charter School Program). The General Assembly subsequently significantly revised the Charter Schools Program in 2015, with the passage of the Public Charter School Improvement Act. 2015 Md. Laws, ch. 311. More than a decade after the enactment of the program, there are an estimated forty-nine public charter schools in Maryland, with 19,370 students enrolled in those schools.²

The Charter School Program statute sets forth a process for establishing new charter schools as well as monitoring, oversight, and accountability standards for charter schools once they are established. Section 9–101(b) states that the purpose of the Charter School Program is to "establish an alternative means within the existing public school system in order to provide innovative learning opportunities and creative educational approaches to improve the education of students." Section 9–102 defines a public charter school as one...