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Frederick Classical Charter School, Inc. v. Frederick County Board of Education

Court of Appeals of Maryland

July 14, 2017

FREDERICK CLASSICAL CHARTER SCHOOL, INC.
v.
FREDERICK COUNTY BOARD OF EDUCATION

          Argued: November 3, 2016

         Circuit Court for Frederick County Case No. 10-C-14-001818

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

          OPINION

          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 (2007); Frederick Classical Charter Sch., Inc. v. Frederick Cty. Bd. of Educ., 227 Md.App. 439 (2016); Monarch Acad. Balt. Campus, Inc. v. Balt. City Bd. of Sch. Comm'rs, 231 Md.App. 594, cert. granted sub nom., Monarch Acad. Balt. Campus v. Balt. City Bd. of Sch. Comm'rs, 452 Md. 523 (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 (2016). Frederick Classical thereafter petitioned this Court for a writ of certiorari, which we granted on July 11, 2016. 448 Md. 724 (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 Funding

         Charter 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 (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. 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. 329-31 (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 that meets the thirteen conditions set forth in the section, including that a charter school must operate "in accordance with its charter."

         The public chartering authority, or the charter school authorizer, is "the county board of education." ED § 9-103. Thus, charter school advocates must submit applications to establish a new charter school to the local school board. For a new charter school, that application must be in compliance with the requirements of § 9-104, whereas existing charter schools may seek to renew their charter school agreements under a process set out in § 9-104.1.

         At issue in this appeal is § 9-109, which provides a mandate for public funding of public charter schools:

A county board shall 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.

         The statutory interpretation of this provision and deciphering the meaning of "commensurate" in this context has required extensive administrative deliberations and left most parties dissatisfied.

         City Neighbors Charter School

         The first case in which this Court addressed a dispute between a charter school and a local school board over the meaning of the funding provision of ED § 9-109 was Baltimore City Board of School Commissioners v. City Neighbors Charter School, 400 Md. 324 (2007). Judge Alan M. Wilner, writing for the majority, provided an extensive analysis of the General Assembly's passage of the Charter Schools Program and, in particular, the legislative history of the "commensurate" funding provision in ED § 9-109.

         At issue in City Neighbors were three cases before the State Board-two appeals from local board actions, and one request for a declaratory ruling-all stemming from charter school disputes with local county boards of education over the allocation of "commensurate" funds pursuant to ED § 9-109. Id. at 334. The disputed local school board actions included "excluding certain categories of its system-wide spending when calculating the charter school allocation, " and "requiring the charter schools to accept other categories of [funds] in the form of services rather than cash." Id. at 332.

         The State Board proceeded to issue three declaratory rulings based on those cases, in which it "addressed three basic subjects-the standard of review to be applied by [the State Board], the application process, [3] and the proper interpretation of ED § 9-109(a)."[4]Id. at 335. "The three opinions obviously attracted considerable comment, some of it critical, in the news media and among the educational establishment, " which prompted the State Board to hold an open meeting and thereafter issue revised opinions in each of the three cases on May 26, 2005 (hereinafter, "the City Neighbors declaratory rulings"). Id. "Those opinions, which were both clarifying and substantive in nature, constitute[d] the final decisions of the [State] Board." Id.

         As to the appropriate standard of review in cases involving funding disputes for a charter school under ED § 9-109, the State Board determined that, under ED § 2-205(e), "it was empowered to 'explain the true intent and meaning' of the provisions of the Education Article that were under its jurisdiction and to decide 'all controversies and disputes under [those] provisions.'" Id. Furthermore, the State Board determined that "COMAR 13A.01.05.05[(E)] directed that the [State] Board 'exercise its independent judgment on the record before it in the explanation and interpretation of the public school laws and State Board regulations.'" Id.

         The "main issue" in the City Neighbors declaratory rulings was "funding and the meaning of ED § 9-109(a), in particular the phrase 'commensurate with the amount disbursed to other schools in the local jurisdiction.'" Id. at 336. The State Board concluded that ED § 9-109(a) "expressed a legislative intent that a charter school 'receive federal, State, and local funding in an amount proportionate to the amount of funds expended for elementary, middle, and secondary level students in the other public schools in the same system.'" Id. Furthermore, the State Board determined that the calculation of commensurate funds must include "'funding for services for which students in the public charter schools are eligible such as free and reduced price meals, pre-kindergarten, special education, English-language learners, Perkins, Title I, and transportation.'"[5] Id. (emphasis added). The Board further specified that the commensurate funding was to be calculated by starting with the local school system's total annual operating budget that includes all federal, State, and local funding, [6] and dividing by enrollment for the previous year[7] to reach an average per-pupil figure, overall and for each major category of spending. Id. at 336-37. Then, after deducting two percent for central office administrative costs, the State Board directed that local boards multiply the average per-pupil figure "by the student enrollment of the charter school to determine the total funding amount for the charter school." Id. at 337.

         The State Board determined that "[b]ecause the total school system operating budget encompassed all funds, " including funds for specific services, "the average per[-]pupil amount derived from [the total operating budget] figure would be sufficient for the charter school to deliver the services for which its students were eligible." Id. The State Board noted, however, that charter schools "would have to make budgetary allocations in light of the students' eligibility requirements" under federal or state law "and in doing so must comply with all applicable Federal and State requirements." Id. "For the special services that must be provided to eligible students, " the State Board determined that "[a] charter school could elect either to provide the services directly or have them provided by the school system, but if it opted for the latter, it would be required to reimburse the school system for the proportionate cost of those services." Id. at 337-38. A charter school would also need to reimburse the local school board "'for salary, local retirement, and other fringe benefit costs for the public school employees working in the charter school as well as for regular services and supplies that the charter school requests the local school system to provide.'" Id. at 338.

         "As 'further guidance' on the implementation of that funding methodology, [the State Board] adopted and incorporated by reference 'guidance documents' . . . that had been discussed at the Board's open meeting[.]" Id. at 338. One of those documents, Exhibit 2, "Use of Average Per Pupil Funding and Central Support, " noted that "[t]he calculation of average of cost does not mean that the funding mix of each fund source" in a local county board's budget "must be duplicated at the [c]harter [s]chool level, " and that "[t]here is reason neither to assume nor expect that [a local county board] would create a mirror image of itself within the [c]harter [s]chool." City Neighbors Charter Sch. v. Balt. City Bd. of Sch. Comm'rs, MSBE Op. No. 05-17 (May 26, 2005). That document also stated that "[t]he actual funding sources that would be provided to [a charter] school would be dependent on the specific school's eligibility for those restricted funds." Id. Another document, Exhibit 4, "Charter Schools and Special Education, " stated the following regarding transportation:

As a part of the contract agreement between the [local school system] and Charter School, transportation should be addressed for all students including students with disabilities attending the charter schools. This may include the Charter School returning to the [local school system] the portion of funds provided for transportation or the Charter School providing the transportation service for the student. . . .

Id.

         Notably, the State Board also stated that "its opinions should be used as 'guidance and direction' to [ ] other charter school applicants and local school systems 'for the refinement of their working relationships on behalf of the public school children throughout this State.'" City Neighbors, 400 Md. at 339.

         This Court began our analysis in City Neighbors by considering whether the State Board's rulings amounted to a "regulation" as defined in the State Administrative Procedure Act, codified in Maryland Code, State Government Article § 10-101 et seq., and were thus invalid because they were not issued in conformance with the requirements of that statute for formal rulemaking through regulations. Id. at 344. We noted that "administrative agencies have discretion to establish policy either through the adoption of regulations or through ad hoc contested case adjudications and that it would [be] patently unreasonable to conclude that every time an agency explains the standards through which it applies a statute in a contested proceeding it is promulgating rules." Id. at 345 (citations and internal quotation marks omitted). We therefore concluded that the State Board "was well within its discretion to proceed in the manner it did-adjudicating the cases before it and offering 'guidance' to other applicants, rather than proceeding with more formal and binding regulations." Id. at 346.

         Turning to the principal question of whether the State Board "had properly construed and applied ED § 9-109, " we discussed the text of the statute, concluding that it was "patently ambiguous, " explaining that,

[Local] school boards do not disburse funds to the other public schools in the local jurisdiction. The school boards do not send checks, wire funds, or deliver wads of cash to the principals for the payment of teachers' salaries or the salaries of anyone else, or for the purchase of textbooks, other instructional materials, or incidental supplies and equipment, or for the maintenance of their respective facilities, or to provide transportation, lunch, or health or guidance services for the students. The phrase "disbursed to other public schools in the local jurisdiction" [in the statute] therefore cannot be read literally. No one can calculate a precise dollar amount disbursed to the X Middle School in order to determine a "commensurate" amount that should be disbursed to the Y Public Charter Middle School, because there is no such disbursement. The whole comparative framework, therefore-what the disbursement to the public charter schools should be commensurate with-requires interpretation. It is not even close to being clear on its face.

Id. at 346-47. We therefore discussed in detail the legislative history of the "commensurate" funding requirement in § 9-109(a). Id. at 348-54. We concluded from our review of the legislative history that the General Assembly had clearly intended "that the determination of commensurate funding would necessarily be on a per[-]pupil basis." Id. at 355. However, we also concluded that the General Assembly had also "left some room for interpretation" as to "what was commensurate and how [ ] the amount disbursed to other public schools [was] to be determined[.]" Id. Furthermore, we concluded that the General Assembly "must have envisioned" that the primary authority to interpret that provision would rest in the State Board, "the body [the General Assembly] has consistently vested with the ultimate administrative authority to interpret, explain, and apply the public education laws." Id.

         We determined that the State Board's interpretation of ED § 9-109 and the "commensurate" funding requirement was well within its discretion. We found "no legal error in the [State] Board's use of the average per[-]pupil funding approach." Id. at 356. And, we determined that the State Board did not err in interpreting the provision to require local school boards to disburse money, as opposed to services, unless a charter school elects to "negotiate for the provision of services, if they would rather have the services, for which [it] would be required to reimburse the county board[ ]." Id. We concluded that under the statute, services "cannot be forced on the charter schools at the whim of the county boards." Id. Furthermore, we held that the State Board was "clearly entitled" to conclude that "commensurate" funding to charter schools must include funding for Title I and special education funds "to the extent that students in the charter school are eligible for those services." Id.

         Monocacy Montessori Communities, Inc.

         In Monocacy Montessori Communities, Inc. v. Frederick County Board of Education, MSBE Op. No. 06-17 (May 24, 2006) (hereinafter, "Monocacy"), the State Board decided an appeal by a public charter school, Monocacy Montesori Communities, Inc. ("MMCI") from a "commensurate funding" decision of the Frederick County Board of Education that, according to MMCI, deprived it of funding to which it was entitled by statute. Monocacy is thus very similar to Frederick Classical's appeal to the State Board from a "commensurate funding" decision of the same local school board.

         In Monocacy, the State Board noted that the Local Board used a formula in calculating MMCI's per-pupil allocation that differed from the one the State Board had endorsed in the City Neighbors declaratory rulings. Id. at 3. The State Board described the formula used by the Local Board as follows:

The formula used by the local board had three steps. First, it subtracted from the total budget all restricted budget amounts targeted for specific programs and services. That resulted in the "unrestricted budget." Second, it adjusted the total unrestricted budget proportionally [by] subtracting the value of the services it provided in-kind and directly to MMCI. It divided that amount by the number of students enrolled. . . . Finally, the local board would add on to that per[-]pupil amount any restricted funds for which [the] charter school or its students were eligible.

Id. The State Board determined that the Local Board's formula was "not consistent with the State Board's formula" set forth in the City Neighbors declaratory rulings. Id. at 4. Nonetheless, the State Board did not deem that an error of law, stating that it had not intended to require that the formula for per-pupil funding stated in the City Neighbors declaratory rulings must be used "without deviation[ ] by every local school system in calculating a charter school's funding allocation, no matter what the circumstances." Id. at 5.

         However, the State Board did not stray far from the formula put forth in the City Neighbors declaratory rulings. It stated that the City Neighbors formula "results in a bottom line amount of money that this Board considers proportionate/commensurate funding." Id. Although a local school board may apply a different formula, "that formula must result" in the same "bottom line amount of money" so that the State Board could "conclude that the school system was providing proportionate/commensurate funds to the charter school." Id.

         Applying that standard, the State Board determined that, after taking into account the value of the in-kind services that the Local Board was providing to MMCI, the per-pupil allocation figure reached under the Local Board's formula was $932 lower than that under the State Board's formula. Id. at 8. However, one of the main reasons for that difference was that "[the Local Board] put no money into the charter school budget for transportation." Id.

         The State Board determined that the withholding of transportation funding was justified by the charter agreement between MMCI and the Local Board. That agreement was entered into on January 14, 2005-after the General Assembly had enacted the Charter Schools Program statute and ED § 9-109, but before the State Board had clarified the meaning of "commensurate" funding in the City Neighbors declaratory rulings. Id. The MMCI charter agreement contained a provision stating that "transportation shall be the responsibility of MMCI except for students who live along [an] established [bus] route and for special education students." Id. The State Board interpreted that language to mean that that "MMCI essentially has agreed that it is not entitled to the transportation dollars contained in [the Local Board's] Total Operating Budget, " and consequently, that "the cost of transportation services per[-]pupil should be deducted" from MMCI's per-pupil allocation. Id. at 9. The State Board therefore reduced its "bottom line" per-pupil figure by $420 "to reflect the transportation agreement." Id. at 10.

         With little discussion, the State Board also made a final adjustment to its "bottom line" per-pupil amount, by following the lead of the Local Board and subtracting all restricted budget amounts targeted to specific programs and services from the total operating budget figure. Id. at 11. Consequently, the State Board further reduced its "bottom line" per-pupil figure by an additional $500. Id. After making the adjustments for transportation funding and restricted funds, the difference between the State Board and the Local Board's figures was $12. Id. The State Board therefore found that "to provide commensurate funding . . . [the Local Board] must provide an additional $12 per[-]pupil to MMCI." Id. at 12. And, although it had approved removing restricted funds from the per-pupil allocation formula, it also found that the Local Board must also add to the per-pupil amount "any restricted funds to which MMCI is entitled." Id.

         B. Current Proceedings

         Frederick Classical Charter School

         Frederick Classical is an educational nonprofit corporation created to establish, organize, and operate a charter school. On April 6, 2011, the Local Board approved Frederick Classical's application to form and operate a charter school with amendments and conditions. On February 3, 2012, Frederick Classical and the Local Board executed a charter agreement, which commenced on July 1, 2013. The charter agreement authorizes Frederick Classical to operate a charter school for four school years, from July 1, 2013 until June 30, 2017, but permits Frederick Classical to request an extension of the term of the agreement at any time. Prior to the expiration of the term of the charter agreement on June 30, 2017, Frederick Classical may also request a renewal of the agreement.

         The charter agreement outlines the relationship, rights, and obligations between Frederick Classical and the Local Board. The pertinent provisions relevant for this appeal are the funding and transportation provisions. The funding provision of the agreement states, in pertinent part

In accordance with ED § 9-109 and further clarified in corresponding State Board rulings, the [Local] Board shall disburse to [Frederick Classical] 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. [Frederick Classical] may seek and receive other funds through local, state or federal government sources and/or from private sources without a reduction in its annual commensurate allocation.

         The student transportation provision states:

Transportation shall be the responsibility of [Frederick Classical] families with the following exceptions:
1. Students who live along an established bus route that passes the School facility; and
2. Special education students with transportation on their [Individualized Education Plans].
If [Frederick Classical] subsequently determines to provide transportation during the term of this Charter, it may contract with an approved provider for transportation services within provisions allowable under the negotiated agreement.

         Frederick Classical 2014 Fiscal Year Funding Allocation

         On June 26, 2013, Leslie Pellegrino, the Executive Director of Fiscal Services for the Local Board, sent an email to representatives of Frederick Classical advising them of their financial information for the 2013-2014 school year ("2014 Fiscal Year"), which was Frederick Classical's first year of operation. The email stated that Frederick Classical's 2014 Fiscal Year per-pupil allocation would be $8818.54, resulting in the school receiving approximately $2.4 million in total funds based on an enrollment of 280 students. Attached to that email were several charts, including a chart showing how the Local Board had reached the per-pupil allocation for the 2014 Fiscal Year:[8]

[LOCAL BOARD]

STATE BOARD

TOTAL OPERATING BUDGET

$532, 697, 886

$532, 697, 886

RESTRICTED BUDGET

($75, 454, 769)

($75, 454, 769)

TOTAL UNRESTRICTED BUDGET

$457, 243, 117

$457, 243, 117

FURTHER ADJUSTMENTS FOR IN-KIND SERVICES

($99, 192, 999)

$0

TOTAL BUDGET AFTER ADJUSTMENTS

$358, 050, 118

$457, 243, 117

ESTIMATED ENROLLMENT

40, 668

40, 668

PER[-]PUPIL AMOUNT

$8, 804.22

$11, 243.31

2% ADMINISTRATIVE COSTS

$0

($224.87)

INITIAL PER[-]PUPIL AMOUNT (CASH)

$8, 804.22

$11, 018.44

IN-KIND ADD-INS

$1, 655.64

$0.00

TRANSPORTATION DEDUCTION

$0.00

($544.26)

AVERAGE PER PUPIL[-]AMOUNT ADJUSTED

$10, 459.86

($10, 474.18)

[DIFFERENCE BETWEEN LOCAL BOARD AND STATE BOARD]

($14.32)

         In the first column of that chart, the Local Board broke down how it had calculated the per-pupil allocation under its own preferred approach. The Local Board started with the county's total education operating budget for the 2014 Fiscal Year ($532, 697, 886). The first step in its calculation process was to deduct all funds targeted for specific programs and services that it placed in a "restricted budget" ($75, 454, 769) to reach a "total unrestricted budget" figure ($457, 243, 117). Then, the Local Board further deducted additional funds for "further adjustments for in-kind services" ($99, 192, 999).[9] The "total budget after adjustments" ($358, 050, 118) was then divided by the estimated enrollment of all students in the system (40, 668), reflecting both students in traditional public schools as well as charter schools. This resulted in an initial per-pupil amount of $8804.22.

         The second column of the chart, according to the Local Board, showed its calculations applying a different formula, which it regarded as approved by the State Board in Monocacy.[10] Applying that alternate formula, the Local Board employed the same first step as in its own formula: taking the county's total education operating budget for the 2014 Fiscal Year ($532, 697, 886) and deducting all funds targeted for specific programs and services placed in a "restricted budget" ($75, 454, 769) to reach a "total unrestricted budget" figure ($457, 243, 117). However, instead of deducting for in-kind services, the Local Board divided the total unrestricted budget figure ($457, 243, 117) by total estimated enrollment (40, 668) to reach a figure of $11, 243.31. Then, it deducted two percent for administrative costs from that figure to reach an "initial per[-]pupil amount" of $11, 018.44. As a final step, the Local Board further reduced the "initial per[-]pupil amount" by a "transportation deduction" ($544.26) to reach an "average per[-]pupil amount adjusted" of $10, 474.18. Although not clearly stated in the chart, the "transportation deduction" appears to be a per-pupil figure for transportation costs.[11]

         Even after deducting restricted funds and the "transportation deduction, " the $10, 474.18 figure reached under the alternate formula based on Monocacy was substantially greater than the $8804.22 per-pupil figure reached under the Local Board's own preferred approach. But, in a final adjustment, the Local Board increased its own figure by $1655.64, to reflect "in-kind add ins, " apparently meaning the average per-pupil cost of the in-kind services it provided to Frederick Classical. Thus the Local Board's final figure under its own formula was $10, 459.86, which was $14.32 less than the $10, 474.18 figure it reached applying the alternate formula drawn from Monocacy.

         Because the Local Board's average per-pupil amount reached under its own formula was $14.32 less than that reached under the formula based upon Monocacy, it increased the initial per-pupil amount reached under its own figure ($8804.22) by $14.32 in order to reach Frederick Classical's 2014 Fiscal Year per-pupil allocation of $8818.54.

         A separate funding calculation document was also included that divided all of the major categories in the Local Board's budget into smaller categories of funding, which were then designated as one of the following:

In-Kind Services are services provided to the Charter School based on specific service related determinates;
Buy Backs are services purchased back from the Charter School after the distribution of the allocation; and
Per[-]Pupil Allocation (PPA) indicates funds distributed to the [Charter [S]chool.

         That document listed the following as "in-kind services:" the costs of employing a superintendent, a deputy superintendent, a Chief Operating Officer, other mid-level management, and the Local Board members; the costs for the Human Resources, Legal, Communication Services, Budget, Finance, Purchasing, Technology Services, and Curriculum Instruction, Assessment & Innovation departments; special education services; non-public placement for disabled students; a pupil personnel worker; the CASS program;[12] a school therapist; student health, including health room technicians and workers; and, food services.

         Transportation was a category in the funding calculation document. Transportation was divided into two subcategories-student transportation and athletic transportation. Student transportation was explained as "[b]us services for students to and from schools, field trips, extracurricular activities[, ] and state approved nonpublic and state institutions and schools." The Local Board did not include a designation of in-kind services, buy backs, or per-pupil allocation for student transportation, but rather stated that student transportation was "[n]ot included in [Frederick Classical's] allocation, except In-Kind for [Individualized Education Plan] identified students and budgeted curricular field trips." Athletic transportation was explained as "[b]us services for athletic events[.]" Similarly, athletic transportation was "[n]ot included in [the] allocation" to Frederick Classical.

         Funding Dispute

         In the June 26, 2013 email that provided Frederick Classical's 2014 Fiscal Year per-pupil allocation figure and supporting documents, Ms. Pellegrino requested that Frederick Classical use the documents to submit a detailed operating budget by August 15, 2013. In response, Frederick Classical submitted to the Local Board a budget based on the Local Board's funding calculation and the $8818.54 per-pupil allocation figure.[13] However, in correspondence accompanying that budget proposal, Frederick Classical stated that "our submission of this budget does not constitute our assent to the per[-]pupil allocation formula [the Local Board] uses." Frederick Classical claimed that the Local Board's allocation formula was not consistent with Maryland law because it did not include transportation funding. And, Frederick Classical contended that the formula applied by the Local Board based on Monocacy "should not apply to charter schools generally." Finally, Frederick Classical asserted that based upon the Local Board's funding formula, "our charter school is being denied over $135, 926.22 in real dollars over our first year, and increasing amounts in the second and third years."

         For those reasons, Frederick Classical requested that the Local Board provide funding "in accordance with the law and include, at least, the Transportation category of funding in the calculation of [the 2014 Fiscal Year] per-pupil allocation and every year thereafter." Frederick Classical also requested that, if the Local Board did not agree to provide the funding, that it "state its reasoning in writing."

         On September 25, 2013, the Local Board responded to Frederick Classical's request for additional funding. The Local Board stated that the "allocation [of funds was] based on the formula that has been previously accepted and approved by the Maryland State Board of Education as being consistent with Maryland law and the [Local] Board has determined that it is the formula that will be applied here." The denial letter did not provide any further explanation.

         Appeal to the State Board of Education

         On October 25, 2013, Frederick Classical appealed the Local Board's decision to the State Board, pursuant to ED § 2-205 and ED § 4-205[14] and COMAR 13A.01.05.02 (describing the required contents of an appeal to the State Board, and a deadline to file the appeal "within 30 calendar days of the decision of the local board"). In its appeal filing, Frederick Classical asserted that the Local Board's decision to withhold the transportation funds when calculating its allocation denied it commensurate funding for the 2014 Fiscal Year to operate the charter school, as required by ED § 9-109. In support of that contention, Frederick Classical noted that its charter agreement with the Local Board "specifically invoke[d] and incorporate[d] [ED] § 9-109, " by stating that "the [Local] Board shall disburse to [Frederick Classical] an amount of county, state, and federal money for elementary, middle, and secondary students that is commensurate with the amounts distributed to other public schools in the local jurisdictions." And, Frederick Classical cited the City Neighbors declaratory rulings, where the State Board had interpreted the ED § 9-109 "commensurate" funding provision to mean a county board was required to provide a charter school with a proportional per-pupil allocation of funds, including funds budgeted for services such as transportation. Frederick Classical also attempted to distinguish the State Board's ruling in Monocacy, asserting that in that opinion the State Board upheld an exclusion of transportation funds "only because [MMCI] had freely and expressly agreed to forego those funds it was otherwise eligible to receive, " which it asserted was "emphatically not the case here." Frederick Classical requested that the State Board reverse the Local Board's decision and direct the Local Board to provide the appropriate level of funding. In the alternative, Frederick Classical petitioned the State Board for a declaratory ruling directing that the Local Board revise its funding allocation to Frederick Classical.

         The Local Board filed a response to Frederick Classical's appeal and a motion for summary affirmance, with a memorandum in support. The Local Board's supporting memorandum stated that the current method of calculating the per-pupil allocation was "correct and proper" as it was based on the formula that the State Board applied in its decision in Monocacy, which it asserted was "fully dispositive of the issues raised" in the appeal. The Local Board contended-inaccurately-that the charter agreement transportation provision in Monocacy was "exactly the same" as the similar provision in Frederick Classical's charter agreement.[15] Lastly, the Local Board contended that "it would be irrational and unreasonable for the [Local] Board to pay Frederick Classical an amount of money that would represent the per-pupil amount of its Transportation budget in a circumstance where the Charter Agreement expressly provides that the [Local] Board has no general responsibility for transportation."

         Frederick Classical filed a Reply to the Local Board's Response, claiming that the Local Board mischaracterized the Monocacy opinion and that the only relevant ruling in Monocacy was "that a charter school may agree that it is 'not entitled to transportation dollars contained in the [local board's] [Total] Operating Budget.'" See Monocacy, MSBE Op. No. 06-17 at 9. Frederick Classical contended that Monocacy was not dispositive because, unlike the charter school in that case, it had never agreed that it was not entitled to transportation dollars. Frederick Classical also noted the discrepancy described above between the transportation provision in its charter compared with the provision at issue Monocacy. It claimed that the language in its charter that Frederick Classical families would be responsible for transportation did not reflect a voluntary agreement to surrender transportation funding, because those parents were not parties to the contract. And, it also highlighted additional language in its charter agreement that provides that "[i]f [Frederick Classical] subsequently determines to provide transportation during the term of this Charter, it may contract with an approved provider for transportation services . . ." Frederick Classical maintained that language indicates that it "clearly [had] contractually retained the right to provide transportation to its students." Finally, Frederick Classical asserted that because it had not contractually surrendered the transportation funding, it was entitled to that funding even if it was not providing transportation, as in its view "[c]harter schools are entitled to funding commensurate with other public schools, which they may allocate as they see fit."

         On May 20, 2014, the State Board issued its opinion in this matter, without holding a hearing. Frederick Classical Charter Sch., Inc. v. Frederick Cty. Bd. of Educ., MSBE Opinion No. 14-21 (May 20, 2014). The State Board's opinion summarized the standard of review that it was applying:

This appeal concerns a controversy or dispute regarding the rules and policies of a local board. Accordingly, the local board's decision "must be considered prima facie correct" and upheld unless [Frederick Classical] proves that the local board's decision was arbitrary, unreasonable, or illegal. See COMAR 13A.01.05.05; Kitzmiller Charter [Sch.] Initiative, Inc. v. Garrett County Bd. of Educ., MSBE Op. No. 13-52 (2013).

Id. at 2. The State Board began its legal analysis by summarizing its previous rulings on the commensurate funding requirement of ED § 9-109 in the City Neighbors declaratory rulings and in Monocacy, as well as the claims raised by the parties in their appeal filings. Id. at 2-4.

         Applying its prior decisions to the facts of the case, the State Board concluded that Frederick Classical was not entitled to transportation funds as part of its per-pupil allocation. The State Board's explanation as to how it reached that conclusion, though at times muddled, made two distinct points. First, the State Board determined that because Frederick Classical did not provide transportation services, Frederick Classical was not entitled to the transportation funding under ED § 9-109 and the State Board's prior ruling in Monocacy. The State Board found that requiring county school boards to "provide charter schools with a lump sum without regard to the services provided" would be contrary to its previous ruling in Monocacy, and that "a charter school is not automatically entitled to funds for services it does not provide." Id. at 4. Rather, it stated that whether transportation costs are among the funds included in calculating a per-pupil allocation "will depend on the nature of the arrangement between the local school system and the charter school" as to those services. Id. Applying that standard to the facts, the State Board found that "if [Frederick Classical] received funds for services [that] it did not provide, it would be receiving more than its commensurate share of county funds, " and that it was "not arbitrary, unreasonable, or illegal for [the Local Board] to consider the actual services provided by [Frederick Classical] to reach a commensurate level of funding." Id. at 4-5. The State Board thus concluded that withholding transportation funds from the per-pupil allocation was "not contrary to state law" and that the formula employed by the Local Board "is consistent with our past rulings." Id. at 5.

         Second, the State Board found that Frederick Classical was not entitled to the transportation funding because of language in its charter agreement with the Local Board. As noted above, the charter agreement provided that transportation "shall be the responsibility of [Frederick Classical] families" with certain limited exceptions. The State Board concluded that, "[i]n our view, a plain reading of the Charter language indicates that [Frederick Classical] is not responsible for providing transportation." Id. at 4. And, the State Board interpreted its decision in Monocacy as standing for a broad proposition that if a charter school "agreed to cover transportation (except for certain students)" then the cost of transportation services per-pupil should be deducted from its per-pupil allocation. Id. at 5. The State Board acknowledged that the language in the Frederick Classical charter agreement differed from the language of the agreement at issue in Monocacy, which provided that transportation generally "shall be the responsibility of [the charter school]." Id. at 4-5 (quoting Monocacy, MSBE Op. No. 06-17 at 9). Nevertheless, the State Board concluded that the charter language at issue meant that "[Frederick Classical] has [ ] agreed that it is not entitled to [transportation] funds by virtue of having parents take on the responsibility for transportation." Id. at 5.

         For those reasons, the State Board denied Frederick Classical's request that it reverse the Local Board's funding decision, and likewise denied its alternative request that it issue a declaratory ruling that the Local Board's ruling was contrary to Maryland law and must be revised. Id. at 5.

         Circuit Court for Frederick County

         On June 18, 2014, Frederick Classical petitioned the Circuit Court for Frederick County for judicial review. On December 8, 2014 the circuit court held a hearing and thereafter took the matter sub curia. On February 5, 2015, the circuit court filed a written opinion affirming the decision of the State Board. The circuit court held that the State Board was correct to have cited and applied the deferential standard of review described in COMAR 13A.01.05.05(A)-(C). As to the merits of the State Board's decision, the circuit court held that, under ED § 9-109 and Monocacy, the formula stated in the City Neighbors declaratory rulings "is not mandatory, " and therefore the Local Board was not required to apply it. And, the circuit court found that, pursuant to Monocacy, "a local board is not required to provide [funds] for transportation when [a] charter school does not provide [that] service." Therefore, as Frederick Classical did not provide transportation services, the circuit court found that the State Board had correctly upheld the Local Board's decision to withhold the transportation funds.

         Court of Special Appeals

         On March 6, 2015, Frederick Classical appealed the judgment of the circuit court to the Court of Special Appeals of Maryland. On March 31, 2016, the Court of Special Appeals issued a reported opinion, in which it affirmed the holding of the circuit court and the State Board. Frederick Classical Charter Sch., Inc. v. Frederick Cty. Bd. of Educ., 227 Md.App. 439 (2016). The Court of Special Appeals stated that the appeal presented a single issue for its review, which it had rephrased: "Did the State Board err in finding that the Local Board provided full funding despite the fact that it did not include transportation funding in Frederick Classical's funding allocation?" Id. at 443.

         The Court of Special Appeals considered whether the State Board had erred by applying the deferential standard of review under COMAR 13A.01.05.05(A)-(C). The Court of Special Appeals determined that "[i]n view of the heavy deference that must be accorded to State Board of Education interpretations of the public school laws and its own regulations, " the State Board did not err in applying the deferential standard of review. Id. at 451 n.5.

         The Court of Special Appeals then addressed the State Board's interpretation of the transportation language in Frederick Classical's charter agreement. The intermediate appellate court agreed with the State Board that "the plain language of the charter [agreement] clearly shifts the responsibility for transportation from [the Local Board] to Frederick Classical families." Id. at 454. Therefore, the intermediate appellate court found no error as to the State Board's additional interpretation of that provision as meaning that Frederick Classical was not entitled to transportation funds. Id.

         Then, turning to the issue of whether the State Board had correctly determined that the Local Board could withhold transportation funds from its calculation of Frederick Classical's per-pupil allocation, the Court of Special Appeals determined that the State Board's ruling was consistent with its prior decisions in the City Neighbors declaratory rulings and Monocacy, as well as this Court's holding in City Neighbors. Id. at 454-58. Citing to the guidance documents attached to the City Neighbors declaratory rulings, the Court of Special Appeals stated that the State Board in the City Neighbors declaratory rulings "appreciated that transportation [funds] may, but [do] not have to be, included in the funds provided to a charter school." Id. at 455. Therefore, it determined that the State Board's decision in the instant case "is not inconsistent with its City Neighbors [declaratory rulings decision]." Id. And, the Court of Special Appeals construed this Court's decision in City Neighbors, 400 Md. 324, as standing for the proposition that a county school board could not require "the mandatory exclusion of transportation funds from [a] per[-]pupil allocation amount, " but that this Court did not make an "affirmative holding that transportation funds can never be excluded from the funds disbursed to a charter school." Id. at 455-56 (emphasis in original). In support of its construction of City Neighbors, the Court of Special Appeals cited a 1997 State Department of Education guideline document that stated that "[o]ther fiscal support such as transportation may be part of the negotiations between the charter requestor and the local education authority." Id. at 456 (quoting City Neighbors, 400 Md. at 350 (citing Maryland State Department of Education, Guidelines for Use by Local School Systems in Considering Charter School Applications (July, 1997), at 8)).

         The Court of Special Appeals also determined that the State Board's ruling was in accordance with the State Board's prior decision in Monocacy. The Court of Special Appeals regarded Monocacy as having clarified that the "language [the State Board] used in [the City Neighbors declaratory rulings] should not be strictly construed, and that the formula it announced there was not the only way a local school board could distribute funding to a charter school." Id. at 456. And, the Court of Special Appeals determined that the State Board's position "that if [Frederick Classical] received funds for services it did not provide, it would be receiving more than its commensurate share of county funds" was announced in Monocacy, "albeit using different words." Id. at 457. Specifically, the Court of Special Appeals noted that the State Board had stated in Monocacy that "[i]f MMCI were entitled to the full per[-]pupil amount, however, MMCI would receive an amount greater than an 'equal amount of funds.'" Id. (quoting Monocacy, MSBE Op. No 06-17 at 9).

         Finally, the Court of Special Appeals agreed with the State Board that, even though "Frederick Classical's charter places the responsibility for transportation on Frederick Classical families, " as opposed to the provision at issue in Monocacy that placed responsibility on the charter school itself, "the outcome is the same." Id. In the Court of Special Appeals' view, if a charter agreement "provides that either the charter school or families have a duty to transport the students, the result is that the local school system is not responsible for the transportation or for including funds for transportation in a per[-]pupil allocation." Id. (emphasis in original).

         The Court of Special Appeals also dismissed additional contract interpretation and policy arguments raised by Frederick Classical. In terms of contract interpretation, the Court of Special Appeals was not persuaded that "the families of [Frederick Classical] are not parties to the [charter], and so cannot be deemed to have voluntarily contracted to surrender portions of [Frederick Classical's] funding, " or that the contract should be construed against the Local Board "because the [L]ocal [B]oard prepared the document." Id. at 458-59. The Court of Special Appeals also discounted Frederick Classical's claim that "by failing to disburse transportation funding, [the Local Board] retained that money in the system-wide budget, 'inevitably redistributing and spending those funds on other students in the school district.'" Id. at 458. Instead, the Court of Special Appeals agreed with the Local Board's assertion that its transportation budget represented a fixed "total cost to actually transport students living in the transportable areas and for special education students needing specialized transportation, " a population that, aside from certain special education students, did not include any charter school students "who are not entitled to transportation." Id.

         Frederick Classical thereafter petitioned this Court for writ of certiorari, which was granted on July 11, 2016. Frederick Classical Charter Sch. v. Frederick Cty. Bd. of Educ., 448 Md. 724 (2016).

         Frederick Classical presents three questions for our review, which we have reordered and restated as follows:

1. Did the State Board err by applying a deferential standard of review to the Local Board's decision to exclude transportation funds when calculating Frederick Classical's per-pupil allocation?
2. Did the State Board err in affirming the Local Board's decision to exclude transportation funds when calculating Frederick Classical's per-pupil allocation on the ground that, pursuant to ED § 9-109 and its own precedent, Frederick Classical was not entitled to those funds when it did not provide transportation services?
3. Did the State Board err in affirming the Local Board's decision to exclude transportation funds when calculating Frederick Classical's per-pupil allocation on the basis of its finding that Frederick Classical had contractually agreed that it was not entitled to transportation funds?[16]

         II.

         STANDARD OF REVIEW

         "When this Court sits in review of an administrative agency decision, we reevaluate the decision of the agency under the same statutory standards as would the circuit court; we do not employ those standards to reevaluate the decision of the circuit or intermediate appellate court." Spencer v. Md. State Bd. of Pharmacy, 380 Md. 515, 523, (2004). Thus, our inquiry "is not whether the Court of Special Appeals erred, but whether the administrative agency erred." Id.

         In this case we are reviewing the decision of the State Board. Section 2-205 of the Education Article enumerates the powers and duties of the State Board including, in § 2-205(e), the State Board's authority to explain the intent and meaning of the Education Article and Maryland education policy. In pertinent part, that section provides,

(1) Without charge and with the advice of the Attorney General, the State Board shall explain the true intent and meaning of the provisions of:
(i) This article that are within its jurisdiction; and
(ii) The bylaws, rules, and regulations adopted by the Board.
(2). . . [T]he Board shall decide all controversies and disputes under these provisions.
(3) The decision of the Board is final. . . .

         Pursuant to § 2-205, the State Board "has very broad statutory authority over the administration of the public school system in this State, [and] that the totality of its statutory authority constitutes a visitatorial power of such comprehensive character as to invest the State Board with the last word on any matter concerning educational policy or the administration of the system of public education." City Neighbors, 400 Md. at 342-43 (2007) (quoting Bd. of Educ. of Prince George's Cty. v. Waeldner, 298 Md. 354, 359-62 (1984)). We have previously explained the scope and purpose of this "visitatorial" power:

We think it beyond question that the power of visitation vested in the State Board is one of general control and supervision; it authorizes the State Board to superintend the activities of the local boards of education to keep them within the legitimate sphere of their operations, and whenever a controversy or dispute arises involving the educational policy or proper administration of the public school system of the State, the State Board's visit[atorial] power authorizes it to correct all abuses of authority and to nullify all irregular proceedings.

Bd. of Educ. of Talbot Cty. v. Heister, 392 Md. 140, 153-54 (2006) (footnote omitted) (quoting Zeitschel v. Bd. of Educ., 274 Md. 69, 81 (1975)).

         "[T]he broad statutory mandate given to [the State Board] requires that special deference be given to its interpretation of statutes that it administers." City Neighbors, 400 Md. at 343. That deference is over and above that generally afforded to other administrative agencies; "[w]hile administrative agencies generally may interpret statutes, as well as rule upon other legal issues, and while an agency's interpretation of a statute which it administers is entitled to weight, the paramount role of the State Board of Education in interpreting the public education law sets it apart from most administrative agencies." Id. (quoting Bd. of Educ. for Dorchester Cty. v. Hubbard, 305 Md. 774, 790-91 (1986) (footnote omitted)).

         However, the discretion that courts afford to the State Board "is not unlimited." Id. We have recognized that there are at least "four instances where judicial review may be more expansive in its inquiry:

(1) the matter involves a purely legal question;
(2) the State Board has contravened state statute;
(3) the State Board exercised its power in bad faith, fraudulently, or in ...

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