Insight PA Cyber Charter School v. Department of Education
162 A.3d 591
| Pa. Commw. Ct. | 2017Background
- Insight PA Cyber Charter School (Insight), a Pennsylvania nonprofit, applied (2014) for a K–12 cyber charter and proposed a services agreement with for‑profit K12 Virtual Schools LLC (K12) to provide curriculum and management services through 2020.
- The Pennsylvania Department of Education denied the application citing lack of trustee control, technology, special‑education and English‑learner readiness, assessment/accountability understanding, and financial planning.
- Insight appealed to the Charter School Appeal Board (CAB); the CAB overturned most Department grounds but upheld denial, finding Insight’s board lacked “real and substantial authority” over staffing, budgeting, and curriculum and that financial planning was insufficient.
- On judicial review, the Commonwealth Court applied the Collegium “real and substantial authority” test (whether a nonprofit board retains ultimate control despite contracting with a for‑profit manager) and examined the parties’ Agreement, the 2015 Amendment, and Insight’s bylaws.
- The majority concluded the Agreement (including oversight, CEO/CFO roles, termination and dispute‑resolution provisions, corrective‑action process for academic issues, and budget authority) left ultimate control with Insight’s board and satisfied statutory requirements; CAB’s findings on staffing, budgeting, curriculum, and financial plan were reversed.
- The court remanded with direction that the Department issue a charter to Insight; a dissent argued Section 1716‑A requires the board itself to employ necessary professional staff and therefore the organizational plan violated the statute.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Insight’s board retains "real and substantial" authority despite contracting with K12 | Insight: Board and bylaws reserve ultimate authority (budget, curriculum, personnel); teachers will be Insight employees; Agreement provides oversight and termination rights | Dept/CAB: Organizational chart and K12‑roles (principals, many staff, curriculum control) show board ceded control; budget and termination provisions give K12 leverage | Held: Board retains ultimate control; Agreement complies with Collegium test — CAB erred to deny on this ground |
| Staffing — can K12 employ and supervise many on‑site administrators while board retains legal authority to employ teachers | Insight: CEO (Insight employee) oversees day‑to‑day; principals become Insight employees within two years; K12 staff report operationally to CEO; contractual discipline/ arbitration rights protect board control | Dept/CAB: Reporting layers and K12 employment of principals create detachment and undermine board’s power under §1716‑A | Held: Contractual oversight, CEO authority, and specific provisions give board real and substantial control; CAB erred; no statute requires all staff be direct employees of the board |
| Budgeting — does K12’s termination right for nonpayment and lack of explicit fee‑reduction clause strip board budget authority | Insight: Board has final budget adoption power; Agreement requires cooperation on budget and contains notice periods, dispute resolution, and protections for students; K12 may terminate for nonpayment but board may adjust budget | Dept/CAB: K12 can force budget choices by threatening termination; no contractual requirement K12 absorb deficits or reduce fees | Held: Board has final budget authority; termination right for nonpayment is commercially reasonable and does not remove ultimate control; CAB’s concerns insufficient to deny charter |
| Curriculum and academic accountability — does K12’s role and right of first refusal limit board’s curricular control or ability to terminate for poor performance | Insight: Agreement requires collaborative corrective plans, K12 funds interventions (in many cases), and Agreement allows termination for material breach or failure to perform corrective plans; right of first refusal does not bind board if K12 cannot or will not provide affordably | Dept/CAB: Agreement lacks a one‑year terminable clause tied to failure to make progress and gives K12 exclusivity/right of first refusal, limiting Insight’s autonomy | Held: Agreement provides mechanisms for corrective action and termination for cause; right of first refusal is limited; CAB erred to treat these terms as relinquishing board control |
| Financial plan sufficiency under §1719‑A(9) — did Insight fail to demonstrate necessary financial support and planning | Insight: Submitted financial plan and budget process adequate to show capacity to provide comprehensive learning experience | Dept/CAB: Multiple confusing budget items and unclear CFO role meant plan was deficient | Held: Statute requires only a plausible financial plan based on reasonable assumptions; CAB applied an improper, stricter standard and erred to deny on this basis |
Key Cases Cited
- West Chester Area School District v. Collegium Charter School, 571 Pa. 503, 812 A.2d 1172 (Pa. 2002) (establishes that boards may contract with for‑profit managers so long as trustees retain real and substantial authority)
- Lincoln‑Edison Charter School v. School District of City of York, 798 A.2d 295 (Pa. Cmwlth. 2002) (approving management agreement that allowed managerial involvement so long as board retained ultimate approval and termination rights)
- Carbondale Area School District v. Fell Charter School, 829 A.2d 400 (Pa. Cmwlth. 2003) (applies Collegium test to reject challenge where corporate documents preserved board’s ultimate control)
- Brackbill v. Ron Brown Charter School, 777 A.2d 131 (Pa. Cmwlth. 2001) (endorses Collegium framework in assessing management agreements)
- New Hope Academy Charter School v. School District of the City of York, 89 A.3d 731 (Pa. Cmwlth. 2014) (discusses standards for revocation/nonrenewal tied to academic performance)
- Richard Allen Preparatory Charter School v. School District of Philadelphia, 123 A.3d 1101 (Pa. Cmwlth. 2015) (addresses employment status of teachers/administrators in charter‑management contexts)