3Stt tfje^§ttpieme Court of ®fjio

RICHARD CORDRAY, OHIOATTORNEY GENERAL, et al.,

Plaintiffs-Appellants,

V.

THE INTERNATIONALPREPARATORY SCHOOL, et al.,

Defend ants-Appel lees.

CASE NO. 2009-1418

On Appeal from the Cuyahoga CountyCourt of AppealsEighth Appellate District

Court of AppealsCase No. 91912

BRIEF OF AMICUS CURIAE OHIO EDUCATION ASSOCIATIONIN SUPPORT OF APPELLANTS

SUE A. SALAMIDO (0068043)Cloppert, Latanick, Sauter & Washburn225 E. Broad St.Columbus, OH 43215(614) 461-4455; FAX: (614) 621-6293ssalamidop_cloppertlaw.com

Counsel for Amicus CuriaeOhio Education Association

RICHARD A. CORDRAY (0038034)Attorney General of OhioBENJAMIN C. MIZER* (0083089)Solicitor General*Counsel of Record

TODD R. MARTI (0019280)Assistant Solicitor30 East Broad Street, 17th FloorColumbus, OH 43215614-466-8980614-466-5087 faxbenjamin.mizer(d)ohioattorneygeneral.govCounsel for Appellants

Richard Cordray and the Ohio Departmentof Education

EARLE C. HORTON (0010255)BRETT E. HORTON (0064180) (Counsel ofRecord)Tower at Erieview, Suite 14101301 East Ninth StreetCleveland OH 44114(216) 696-2022; FAX: (216) 696-1995bhorton(abgraveshorton.comAttorneys for Defendants-Appellees Estate ofDa'ud Abdul Malik Shabazz and HasinaShabazz

TABLE OF CONTENTS

TABLE OFAU'I'IIORITIES ......................................................................................................... ii

1. INTERESTS OF"I'HE AMICUS CURIAE ............................................................1

11. S"I'A'I'EMENTS OF THF, FAC'I'S ..................... ......................................... ..............I

III. LF,UAI, ARGUMENT .............................................................................................................2

PROPOSITIONS OF LAW NO. I ..................................................................................................2

Fiscal mismanagement by connnunity schools has imposed very real costs on otherschools ................................................................................................................................................2

PROPOSI'I'ION OF LAW NO. 2 .....................................................................................................5

Treating community school treasurers as "Public Officials" would itirther the purposeof R.C. 9.39 in an area where it is sorely needed .........................................................................................5

TV. C.ONCLUSION ........................................................................................................................7

8CERTIFICATF, OF S ERV IC.E ........................................................ ....'................... .........................

TABLE OF AUTHORITIES

CASES

Firth Tliird Union Trust Co. v. Peck (1954), 161 Ohio St. 169, 174 ...............................................6

Greater Heights Acadenay v. Zelman (C.A.6 (Ohio), 04-18-2008) 522 F.3d 678 . .........................2

State v. Gaul (1997), 117 Ohio App.3d 839 ....................................................................................6

State v. Herbert (1976), 49 Ohio St.2d 88, 96,.. ..............................................................................6

State ex rel. Bolsinger v. Swing (1936), 54 Ohio App. 251 ............................................................6

State ex rel Ohio Congress of Parents & Teachers v, State Bd of Educ. (2006), 111 Ohio St.3d568. ...................................................................................................................................................2

State ex red. Smith v. Maharry (1918), 97 Ohio St. 272, 119 N.B. 822 ...........................................6

State ex rel. Villctge ofLinndale v. Mczsten (1985), 18 Ohio St.3d 228, 229 . .................................6

STATUTES

R.C. §9.38 ........................................................................................................................................5

R.C. §9.39 ................................................................................................................................5, 6, 7

R.C. §117.01 ................................................................................................................................5, 6

R.C. §135.01(K) ..............................................................................................................................6

R.C. Chapter 1702 ........................................................................................................................... 2

R.C. Chapter 3314 ........................................................................................................................1, 2

R.C. §3314.01(B) ............................................................................................................................2

R.C. §3314.03(A)(1) .......................................................................................................................2

OTHER

Community Schools in Ohio: Final report on Student performance, parent Satisfaction,Accountability (LORO), 48 . ...........................................................................................................3

ii

Montgomery asks lawniakers to regulate charter schools, The Colu nbus dispatch, Dec. 6,2005, at 03D. ...................................................................................................................................3

OEA Research Bulletin, October 2009wwwohce,org/GDITemplateSlF?ages/OBA/oEADetail as}?x7pa^e=3&TopicRelarionID 110&,Content 16;314. ....2

Reclaiming the Education Charter, Ohio's Experiment with Charter Schooling, EducationVoters Institute 2006, 24-25 . ..........................................................................................................3

Denise Amos, For Some Charter Schools, Money is the 77ardest Subject, The Cincimiati

Enquirer, .ian. 5, 2009, at 1 A . .........................................................................................................3

1974 Op. Att'y Gen. No. 74-102 . ....................................................................................................6

1989 Op. Att'v Gen. No. 89-002 ......................................................................................................6

1993 Op. Att'y Gen. No. 93-004 .................................................................................................5, 6

http^,auditor.state.oh.us/publications/issues/iJnauditableList.pdf .........................................3

http://www.ode.state oh.us/GD/TeniplateslPa-es/OI)E/ODEDetail.aspx?pa-,e=3&TouicRelationID=1 168& ContentID=9473&Contcnt=77952 ..............................................................3, 4

iii

1. INTERESTS OF THE AMICUS CURIAE

The Ohio Education Association (OEA) supports tlie appeal of the Ohio Attorney

General and the Oliio Department of Education and urges this Court to reverse the decision of

the Appellate Court in this case. OFA represents over 130,000 teachers, faculty members and

support employees in Ohio's public schools, colleges and universities. OEA's mission is to lead

the way for continuous improvement in public education while advocating for members and the

students that they serve. Since the OEA is dedicated to the strengthening of Ohio's public school

system, it is obligated to advocate for adequate oversight and strict accountability in community

schools so that these schools may eventually have the potential to become a viable option for

stud'ents with unique and special needs. Accordingly, OEA's interest in this case arises from the

interests of their members in public education and finance. To that end, the OEA agrees with the

Attorney General that protection and integrity of public fiinds in the context of public education

is of paramount importance and as a result, community school treasurers must be held strictly

and personally liable for the loss andlor mismanagement of public funds.

II. STATEMENT OF FACTS

Ohio Revised Code Chapter 3314 contains Ohio's Community Schools Law. In 1997,

the Ohio General Assembly decided to experiinent with the community schools concept by

establishing a "pilot" progi-am in Lucas County, Ohio. In August, 1997, only two months after

the Community Schools Law became effective, and before any community school had even

opened, the area in which start-up community scliools could be opened was expanded.

Subsequent legislation further expanded the areas in which such schools could be opened and

who could sponsor such schools.

1

According to the Ohio Revised Code, a coimnunity school created under Chapter 3314

"is a public school, independent of any school district, and is part of the state's program of

education."l Community schools2 must be organized as either non-pro6t or public benefit

corporations under Chapter 1702 of the Revised Code.3 These schools have been declared by the

Oliio General Assembly and this Court to be "public schools" and part oP Ohio's system of

common schools.4 Courts have also found the comniunity schools are political subdivisions of

the state.5 As a result, to secure and protect the public funds that Ohio's conimunity schools

receive, community school treasurers must be held to the same standards as all other Ohio public

officials, including the treasurers of traditional public school districts.

Since the inception of community schools in 1997, community schools liave received

nearly $3.5 billion in state foundation aid payments. 1'hat amount will exceed $4 billion by the

end of 2009-2010 school year.6 As of the close of the 2008-2009 school year, there were

approxiniately 88,000 students attending eommunity schools, and with thosc students,

approximately $648,000,000.00 of state education funds.7

111. LEGAL ARGUMENT

1. Fiscal mismanagement by community schools has imposed very real costs onother schools.

Since tlseir inception, comtnunity schools have struggled with the fiscal managernent of

public funds. Early on in this educational experiment, it became apparent that many of these

R.C. 3314.01(B).2 Other states i-efer to community schools as charter schools.

R.C. 3314.03(A)(1).State ex rel Ohio Congress of Parents & Teachers v. Slate Bd of Educ. (2006), 111 Ohio St.3d

568.s Greater Heights Academy v. Zelinan (C.A.6 (Ohio), 04-18-2008) 522 F.3d 678.6 OEA Research Bulletin, October 2009.www.ohea.org/GD/Templates/Pages/OEAIOEADetail.aspx?page- 3&TopicRelation]D=110&Content=163147 1d.

2

schools were incapable of exercising fiscal responsibility in the operation of these schools. In

2003, a comprehensive investigation and review by the Legislative Office of Education

Oversight resulted in a finding that many community schools lacked adequate financial controls

and almost all of the schools examined "had serious financial problems(.1"8 Despite knowledge

of the concerns, the problems continued and in 2005 the State Auditor noted that the sarne

finaucial problems persisted and that "the same audit findings are often made year after year."9

Years later, the concerns remained the same. Independent analyses in 2008 and 2009 again

noted the prevalence of fiscal problems in Ohio's corninunity schools.10 The most recent list of

entities that have been declared unauditable by the auditor of the State of Ohio contains 30

names. Of those 30 entries, almost half are community schools." Since the pattern of financial

misinanagement continues unabated, the ramifications to public education are devastating.

Further, without strict liability iniposed upon connnunity school treasurers, there is no incentive

for the treasurer to properly manage and police the public funds so the losses will continue.

According to the Ohio Department of Education, sixty-five commmiity schools have closed

after beginning operation.'2 Of these 65 schools, 16 were closed specifically for financial

reasons. Of these 16 schools, 5 received the majority of their students from the Cleveland

Municipal School District, 4 received the majority of their students ftom Colunibus City

Schools, 3 received the majority of their students from the Cincimiati School District, and the

s Community Schools in Ohio: Final report on Student performance, parent Satisfaction, andAccountability (LOEO), 48.s Montgomery asks lawmakers to regulate charter• schools, The Columbus dispatch, Dec. 6,

2005, at 03D.10 Reclaiming the Education Charter, Ohio's Experiment with Charter Schooling, Education

Voters Institute 2006, 24-25; Denise Amos, For Sorne Charter Schools, Money is the Hardest

Subject, The Cincinnati Enquirer, Jan. 5, 2009, at 1A.11 http:/Iwww.auditor.state.oh.us/publications/issues/UnauditableList.pdf12 http://www.ode.state.oh.us/GD/TemplateslPages/ODI's/ODEDetail.aspx?page=3&'I'opicRelationlD=1168& ContentlD=9473&Content=77952

3

remaining 4 received the majority of their students from Akron, Plain Local, Toledo and Minister

schools. 13 A chart outlining the primary feeder districts of these now-closed conmrunity schools,

along with the public funds received by these schools from the 2002-03 school year to the

present, is attached as exhibit A.

As indicated above, according to ODE, five comri2unity schools 14 liave closed in the

Cleveland area as a result of financial reasons, including TIPS, the community sclrool whose

treasurer is at issue in the present case. Since the 2002-2003 school year, the Cleveland

Municipal School District lost $27,390,637.49 to these fmancially mismanaged schools.

Accord'nig to ODE, four commuiiity schools'5 have closed in the Columbus area as a result of

financial reasons. Since the 2002-2003 school year, the Columbus City School District lost

$5,305,278.54 to these financially mismanaged schools. "t'hree community schools'^'have closed

in the Cincinnati area as a result of financial reasons. Since the 2002-2003 school year, the

Cincinnati City Schools lost a staggering $30,082,510.39 to these financially mismanaged

schools. Ol'that figure, $13,887,543.74 was diverted to TIPS. The remaining four community

schools" caused their local districts to lose a total of $9,046,009.83 to fnancially mismanaged

community schools. In sum, since the 2002-2003 school year, traditional public sclrool districts

have lost a total of at least $71,824,436.25 to community schools that were specifically closed

due to financial niismanagement.

13 jd.

14 Greater Achievement Coinmunity School, Imani Institute, International preparatory School,Weenis School and Wilson Military Academy1' Colunibus Youth Etitrepreneurship, Harte Crossroads Academy Columbus, harte Crossroadshigh School, and W.C. Handy16 Cincinnati Academy of Excellence (a.k.a. A.B. Miree Fundamental Academy), InternatiotialCollege preparatory Academy, and Maud Booth Academy.17 Ida B. Wells Commcmity School, Golden Eagle Digital, Performing Arts School of Toledo,and Minster Community School.

4

It is coinmon knowledge that urban districts are facing hardships and cut-backs due to lack

of funds. Such hardships include larger class sizes as a result of less teachers, requiring pay-to-

play prograxns, reduced or eliminated transportation, and so forth. Had these traditional districts

had the nioney that was diverted to these linancially inisinanaged cormnunity schools perliaps

the hardsliips would have been lessened or even ameliorated. Moreover, had the treasurers of

these community schools been held strictly liable, fiscal mismanagement would not have ran

rampant for years and thousai-ids of students would not have been left stranded.

2. Treating community school treasurers as "Public Officials" would furtherthe purpose of R .C. 9.39 in an area where it is sorely needed.

A finding that a community school trcasurer is a publie official and as such, is strictly liable

for the public funds the school receives, is in furtherance of the purposc of R.C. 9.39. Pursuant

to R.C. 9.38, the definition of "public official" found in R.C. 117.01 is applicable to R.C. 9.39.

"Public official" is defined in R.C. 117.01(E) as "any officer, employee, or duly authorized

representative or agent of a public office." In ttmi, "public office" is defined as "any state

agency, public institution, political subdivision, or other organized body, office, agency,

institution, or entity established by the laws ol' this state for the exercise of any ftinction of

goverimient."18 As clearly articulated in the Attorney General's brief, a community school

treasurer is a public official in a public ofGce and the point need not be belabored further herein.

That being the case, the language of R.C. 9.39 is plain and unambiguous in liolding that all

public officials are strictly and personally for all public money that they or their subordinates

receive or collect.19 In f'act, public officials have historically been held strictly liable for thc loss

^s R.C. 117.01(D).79 1993 Ohio Op. Atty. Gen. No. 93-004, 1993 WI, 349781 (Ohio A.G.).

5

of public funds even if the official did not engage in illegal or otherwise blameworthy acts that

were the proximate cause of the loss of public funds.i20

The nature of the liability set forth in R.C. 9.39 has been described as that of an insurer of

the safety of the public money. . 2'

The terms "public money" and "public inoneys" are defined invarions ways in different statirtes, bnt they are consistently used asbroad terms that include moneys of political subdivisions as wellas moneys of the state. See R.C. 117.01(C) . . . R.C. 135.01(K)(for purposes of portions of the Unifoim Depository Act, defining"[p]ublic moneys" to include moneys in the treasury of the state ora subdivision of the state and nioneys coming lawfully into thepossession or custody of the treasurer of state or a subdivision); seealso R.C. 9.38 (payment or deposit of public moneys); R.C. 9.39(liability for public moneys received); 1989 Op. Att'y Gen. No. 89-002; 1974 Op. Att'y Gen. No. 74-102. See generally State eY rel.Smith v. Maharry, 97 Ohio St. 272, 119 N.E. 822 (1918) (syllabus,paragraph 1) ("[a]ll public property and public moneys, whether inthe custody of public officers or otherwise, constitute a pnblic trustfimd").2

It is well settled that a statute should be construed to effectuate its purposes and not

interpi-eted in ways that thwarts its purpose.23 R.C. 9.39 plainly intended to police and provide

the highest level of protection to public funds. Applying the law of strict liability to community

school treasurers `place[s] final responsibility for public funds on the shoulders of the officials

charged with the collcction and care of such funds."24

The best way to instill fiscal discipline in cormnunity schools is to enforce strict liability

against community school treasurers, especially since community school treasurers are not

20 State v. Iierbert, 49 Ohio St.2d 88, 96, 358 N.E.2d 1090, 1095 (1976).21 State v. Gaul (1997), 117 Ohio App.3d 839 (citing 1993 Ohio Op. Atty. Gen. No. 93-004 at 2-25; accord State cx rel. Bolsinger v. Swing, (1936), 54 Ohio App. 251).12 2004 Ohio Op. Atty. Gen. 2-100, 2004 Ohio Op. Atty. Gen. No. 2004-014, 2004 WL 839673(Ohio A.G.)23 Firth Third Union Trust Co. v. Peck (1954), 161 Ohio St. 169, 174.24 State ex rel. Village qf Linndale v. Masten (1985), 18 Ohio St.3d 228, 229.

6

subjected to the same level of accountability as traditional public school district treasurers who

may be voted out by the local electorate. Given the huge amounts of public money flowing into

community schools -- $677,984,479.00 during the last fiscal year - strict liability is necessary to

protect both the integrity of, and the limited resources afPorded to, public education.

IV. CONCLIJSION

For the reasons set foith above, the Treasurers of Ohio's community schools are subject

to strict liability for the public funds entrusted to them under R.C. 9.39. The Court of Appeals

decision should be reversed.

Respectfully submitted,

1'e A. Salamido (0068043)Cloppert, Latanick, Sauter & Washbum225 B. Broad St.Columbus, OH 43215(614) 461-4455; FAX: (614) 621-6293ssalamido(a^cloppertlaw.com

Counsel for Anaicus CuriaeOhio Educafiion Association

7

CERTIFICATE OF SERVICE

The undersigned certifies that a true copy of the foregoing Brief of Amicus Curiae was

servcd upon the following by regular, U.S. Mail, postage paid, on this 25th day of January, 2010:

RICHARD A. CORDRAY (0038034)Attorney General of OhioBENJAMIN C. MIZER* (0083089)Solicitor General

*Counsei of RecordTODD R. MARTI (0019280)Assistant Solicitor30 East Broad Street, 17th FloorColumbus, OII 43215614-466-8980614-466-5087 faxbeni unin.mizer^cr^ohioattorneygenerat.oav_Counsel for Appellants

Richard Cordray and the Ohio Departinentof Education

Earle C. Horton (0010255)Brett E. Horton (0064180) (Counsel of Record)"1'ower at Erieview, Suite 14101301 East Ninth StreetCleveland OII 44114(216) 696-2022; FAX: (216) 696-1995bhort.on(cr^ graveshorton.couiAttorneys for Defendants-AppeZlees Estate of Da'ud Abdul Malik Shabazz and Hasina Shabazz

8

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