Friday, September 26, 2014

Who owns the equipment in charter schools? Ohio Supreme Court will decide

By Maggie Thurber | Franklin Center School Choice Fellow

Photo by Derek Bruff
via Flickr Creative Commons
Who owns the equipment in charter schools?

We’re talking the computers, desks, supplies – all the things that go into the structure of a charter school. It seems like the common sense answer would be the school.

But most charter schools in Ohio are public, which means they’re funded with public dollars much the same way as traditional public schools.

In which case, your answer to the question would probably be “the taxpayer, ultimately.”

And again, that makes sense.

But there’s an odd twist to this question and it’s playing out in the Ohio Supreme Court.

You see, there are management companies who are contracted to run the day-to-day operations of charter schools, and when you add these private companies into the mix, things get a bit muddled.

The case is Hope Academy Broadway Campus et al. v. White Hat Management, LLC, et al. and oral arguments were heard Tuesday.

The case pits 10 charter schools against White Hat Management.

According to the schools, White Hat refused to allow their financials to be inspected by the schools who wanted to see how the money paid by the state was used. The schools sued, asking to recover roughly $100 million that was spent on property and equipment.

White Hat maintains that it owns the equipment, but offered to let the schools keep the desks, computers and other items if they paid the current value for them.

The trial court and the 10th District Court of Appeals agreed with White Hat, saying that the public money paid by the state on a per-pupil basis became private funds as soon as White Hat, the private company, received them.

Just like when the state pays a private contractor to pave a road, the public funds are no longer public, though there is an obligation for the contractor to actually complete the project according to the terms of the contract. But how the contractor spends those specific dollars is not public.

The relationship with the charters is the same, White Hat attorneys argue. They say White Hat is a private entity performing a service for the public entity.

But the charters say White Hat is acting like the “functional equivalent” of a public entity because it is accepting and using public dollars to perform the function of a public school. They maintain that White Hat was supposed to act as the purchasing agent for the schools and since the company is just the agent, the money remains public and the purchased items are owned by the school.

The charters also say that because it is public money, it can at least be audited. And there is some case law in Ohio that says when a private entity receives a substantial amount of public funds, it can be audited, but only when they are serving as the functional equivalent of a public office.

"Would you agree that White Hat is the functional equivalent of a public office?" Chief Justice Maureen O’Conner asked during the oral arguments.

"If you're doing a public function with public funds, aren't you the functional equivalent of that public official?” Justice BillO’Neill asked.

No, White Hat attorneys argued. They were a private company providing a service to the charter schools which are the public entity.

The Supreme Court will decide – and the decision will have implications for more than just the 10 charter schools in the suit.

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