NJ Supreme Court Clarifies Standard for Approving or Expanding Charter Schools

In In re Renewal Application of TEAM Academy Charter School, (A-45-19/083014) (Decided June 22, 2021), the Supreme Court of New Jersey upheld the Commissioner of Education’s grant of seven Newark charter school expansion applications. However, the court held that in considering future applications for new or expanded charter schools, the Commission must address “the racial impact that a charter school applicant will have on the district of residence in which the charter school will operate”; and the potential effect of the charter expansions on the percentage of charter school students and students in District-operated schools who are English language learners or students with disabilities.

Facts of In re Renewal Application of TEAM Academy Charter School

In Fall 2015, seven Newark charter schools submitted applications to either renew or amend their charters. All seven sought to increase their enrollments. In accordance with N.J.A.C. 6A:11-2.3(b)(9) and -2.6(c), the Newark Public Schools (District), then operated under State supervision, provided individualized comments and/or recommendations to the Commissioner regarding six of the charter schools’ applications. The District, however, did not raise a challenge or make a showing that the proposed charter school expansions would prevent it from providing to its students the “thorough and efficient” education that the Constitution requires.

The Education Law Center (ELC) objected to the applications. It argued that any expansion of Newark’s charter schools would worsen the District’s financial crisis, thus impeding the District’s effort to deliver a “thorough and efficient” education, and that further growth in charter school enrollment would exacerbate segregation in the District’s schools. ELC asked the Commissioner to hold a hearing and develop an evidentiary record on the issues that it raised.

In February 2016, the Commissioner issued seven letters granting the applications of the charter schools to renew or amend their charters. None of the seven letters addressed the impact of the proposed expansions on the student composition of the charter school or the potential segregative effect of those expansions on the schools or the District. None made any reference to ELC’s assertion that any expansion of Newark charter school enrollment would impose fiscal harm on the District. Pursuant to the Commissioner’s decisions, all seven charter schools expanded their enrollments. The Appellate Division upheld the Commissioner’s determinations.

NJ Supreme Court’s Decision in In re Renewal Application of TEAM Academy Charter School

The New Jersey Supreme Court affirmed. In reaching its decision, the court reiterated its holding in In re Englewood on the Palisades Charter Sch. (Englewood), 164 N.J. 316, 334-35 (2000) that if a charter school’s “district of residence demonstrates with some specificity

that the constitutional requirements of a thorough and efficient education would be jeopardized” by the diversion of district funding to a charter school, the Commissioner must “evaluate carefully” the question of fiscal harm. The court also declined to depart from the governing standard simply because the District is a former Abbott district or because the District was State-operated at the time of the charter school applications.

The New Jersey Supreme Court also found that the Commissioner did not address “the racial impact that a charter school applicant will have on the district of residence in which the charter school will operate,” as mandated in Englewood. It held that in determining future applications to open new charter schools or to expand charter school enrollment or facilities, the Commissioner should thoroughly address the potential effect of the charter expansions on the percentage of charter school students and students in District-operated schools who are English language learners or students with disabilities.

The New Jersey Supreme Court first considered whether the Commissioner was required to analyze the fiscal harm to the District as a result of the proposed charter school expansions. It agreed with the Appellate Division that there is no reason to exempt former Abbott districts from Englewood’s general requirement of a preliminary showing of fiscal harm.

“Given the Legislature’s reform of the school funding formula and its amendment to the charter school funding mechanism in the Act, there is no reason to exempt former Abbott districts from the general rule requiring a district to preliminarily demonstrate fiscal harm, or to impose on the Commissioner the burden to demonstrate the absence of such harm in every charter application in those districts,” the court wrote.

The New Jersey Supreme Court also refused to remove the requirement because the District was State-operated at the time of the charter school applications. “Any holding by this Court dispensing with the requirement of a preliminary showing of fiscal harm by State-operated districts would be inconsistent with the Legislature’s expectation that a State-appointed superintendent will effectively represent a district’s interests with respect to charter schools,” the court added. Because the District made no such showing, the Commissioner was not required to address the question of fiscal harm before approving the seven charter school applications.

The New Jersey Supreme Court agreed with ELC that the Commissioner’s decisions granting renewals or amendments to the seven respondent charter schools “did not include any reference to the charter schools’ potential impact on racial segregation in the district schools, much less the careful consideration of that issue that Englewood requires.” Accordingly, it found the decisions were deficient.

“In future determinations of applications for approval of charter schools pursuant to N.J.S.A. 18A:36A-4.1 and -5 and N.J.A.C. 6A:11-2.1, applications for renewals of charters pursuant to N.J.S.A. 18A:36A-17 and N.J.A.C. 6A:11- 2.3, and applications for amendments of charters pursuant to N.J.A.C. 6A:11- 2.6, the Commissioner should address the impact of the charter school’s approval, renewal or amendment on racial segregation in the district of

residence,” the court instructed. “The Commissioner should also address the impact of the charter school’s approval, renewal or amendment on the demographic composition of the district of residence with respect to two groups of students of particular concern to the Legislature, students with disabilities and students who are English language learners.”

Even though the New Jersey Supreme Court determined that the Commissioner failed to conduct the segregative-impact analysis that Englewood required, it concluded that remanding the matters to the Commissioner five years after the decisions “would not serve the interests of Newark’s charter school students or their families.” As the court explained:

Were we to remand for reconsideration of the seven applications, and were ELC to prevail on remand or in a subsequent appeal, the normal remedy available to the Commissioner would be a retroactive denial and unwinding of the expansion applications granted to the seven charter schools in 2016. The charter schools would have no alternative but to remove students from their enrollment and rescind commitments to students for the next school year. Such a remedy would severely impact Newark’s charter school students and their families, and would subvert the Legislature’s policy to expand educational opportunities. It would also undermine the Commissioner’s intervening and future decisions on charter school expansion applications, which were premised on post-2016 enrollment data.

The New Jersey Supreme Court also declined to instruct the Commissioner to prospectively deny or limit pending and future applications to expand Newark charter schools so that the schools’ collective enrollments return to pre-2016 levels. “We decline to play such an active role, in which the Court would interfere with educational determinations that are imbued with the expertise of the Commissioner and the Department’s staff,” the court wrote. “Such a global and prospective order would not be an appropriate remedy in the seven renewal and amendment applications at issue here.”

In light of the foregoing, the New Jersey Supreme Court left the Commissioner’s decisions granting the seven charter school applications undisturbed.

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