Six years on, OC School of the Arts and Santa Ana Unified continue in court over special ed funding

Orange County School of the Arts leaders say the charter school could be looking at bankruptcy if it has to pay $16 million the Santa Ana Unified School District says is owed for special education services.

The school that caters to middle and high school students interested in a variety of arts, from theater to cooking, opened in 2000 under the umbrella of the Santa Ana district. As part of the arrangement, the charter school, OCSA, hired its own special education staff and provided services to its students, invoicing the district for those costs. But the district is arguing the school should have also paid toward districtwide special education programs, per state law, and in 2019 sent the school — and three other charters under its umbrella — a $20 million bill.

Trish Sweeney, left, a parent of a OCSA student, distributes “I Stand with OCCA” T-shirts to supporters of the Orange County School of the Arts gather outside the Santa Ana Unified School District to protest SAUSD in Santa Ana on Tuesday, March 25, 2025. OCSA supporters protested SAUSD’s demand of $16 million from the school. (Photo by Leonard Ortiz, Orange County Register/SCNG)

Michael Ciecek, center, principal at Orange County School of the Arts and OCSA board of trustees member Halim Dhanidina, right, listen as Teren Shaffer, president and CEO of OCSA is interviewed by a local television station outside the Santa Ana Unified School District in Santa Ana on Tuesday, March 25, 2025. OCSA supporters protested SAUSD’s demand of $16 million from the school. (Photo by Leonard Ortiz, Orange County Register/SCNG)

OCSA parent Anamara Ritt-Olson holds up a photo of her daughter Lila Olson as she speaks during the public comments portion of the Santa Ana Unified School District Board meeting to protest SAUSD in Santa Ana on Tuesday, March 25, 2025. “I was told to bring a sign but I decided to bring a photo of my daughter,” Ritt-Olson tells the board. OCSA supporters protested SAUSD’s demand of $16 million from the school. (Photo by Leonard Ortiz, Orange County Register/SCNG)

1 of 21

Expand

The charter balked at that, ultimately it ended up in the court system in a six-year legal battle that continues with OCSA appealing the most recent judge’s ruling that it should have to pay the district $16 million with interest and seeking mediation with SAUSD.

Tuesday night, more than 250 supporters of the arts school, including several students, attended the SAUSD board meeting, asking district leaders to revisit mediation.

OCSA educates more than 2,350 students – 1,938 from O.C., 282 of whom reside in Santa Ana. In 2020, the arts school left SAUSD and moved under the umbrella of the Orange County Board of Education.

The district is legally obligated to make sure charter schools are contributing their fair share of district-wide expenses, SAUSD Superintendent Jerry Almendarez said in a statement Wednesday. Not on the agenda, the school board did not address Tuesday night’s protest during its meeting.

“Unfortunately, state and federal funding for special education instruction and services is inadequate, and that is the reality that all schools and school districts must face,” Almendarez said. “Charter schools are not exempt from paying their fair share.”

Teren Schaffer, president and CEO of OCSA, said as its home district, SAUSD was responsible for collecting and holding onto state and federal dollars intended for OCSA’s special education program and the district was allowed to keep any excess revenue.

“OSHA would then run its special education program, incurring the cost of paying employees and serving the needs of students, and then we would issue quarterly invoices to Santa Ana Unified to reimburse us for real expenditure,” Schaffer said. “It was agreed upon that if ever they collected more money from the government on OSHA’s behalf — intended for OSHA students — than we needed to operate our program for special ed, they were able to keep that extra leftover money.”

According to OCSA officials, the charter school was reimbursed about $8.8 million for special education services provided to students, and SAUSD kept more than $11 million in additional revenue.

“When Santa Ana Unified came to us in 2010 and finally started saying, 10 years into our relationship, that they thought they might have to start billing us for a portion of their deficit, we said, time out,” Schaffer said. “You’re collecting way more money on our behalf from the government than we’re actually billing you and utilizing, and you get to keep all that leftover money. So our contribution, our equitable share of your deficit, is the fact that we’ve contributed a ton of money.”

SAUSD and OCSA then agreed to update the school’s charter to include language indicating that if SAUSD were to ever bill the charter school, it would be at least 15 months in advance.

“In 2019, they issued a surprise invoice, dropped it on our desk, and the invoice represented nearly $20 million that they said was due in 30 days, which would have bankrupt the school within a matter of just a couple of months,” Schaffer said. “The invoice demonstrated that they were billing us backward, regardless of the language in the charter, for 17 years past due.”

Halim Dhanidina, a member of the OCSA board of trustees and a parent, added that SAUSD reviewed the arts school’s budgets every year.

“Year after year after year, in addition to not invoicing us, they were looking at our budget, seeing that we did not set aside any extra money for this type of assessment, and approving it,” Dhanidina said. “They were billing us for that service, saying, your budget is fine every single year until 2019 when they said, well, actually you have 17 years worth of past due assessments.”

Fermin Leal, a SAUSD spokesperson, said per state law, charter schools are required to provide funding to offset their home district’s cost of special education.

“We are just following state law and asking for these funds to be provided by the charter school to offset the cost of special education,” Leal said, adding that the district is not expecting funds to be paid the next business day. “If the ultimate ruling is that they have to provide that funding to the district, it does not have to be paid all at once. There are parameters for them to pay over time, I believe up to 10 years.”

As part of the litigation, he added, the district reviewed the school’s financial documents and determined that bankruptcy would not be the case for OCSA.

The cost of litigation is already affecting the OCSA operations, Schaffer said.

“OCSA and Santa Ana Unified have collectively spent more than $6 million of public dollars, taxpayer dollars, fighting this,” Schaffer said. “We don’t have $350 million cash reserves like the school district. We’re completely hamstrung from a cash position because we’ve had to take all of our available cash reserves, plus we had to go borrow additional money from a bank, to put it into appellate bonds while we’re fighting this litigation.”

“We’ve been forced into a position of needing to go throughout our entire organization and look at efficiency and operations and cost-cutting measures,” he added. “We’re fully committed to doing it in such a way that it’s not going to reach the classroom and have a direct impact on students, but that’s getting increasingly more challenging by the day.”

OCSA officials said three judges have weighed in on the legal dispute so far, two of which sided with the charter school. SAUSD moved the case out of Orange County and into Los Angeles County, where it remains today, Schaffer said. Dhanidina said that could be called “forum shopping.”

Leal said he thinks the change of courts was a procedural issue.

“Regardless of the judge, we believe that our case is firmly supported by state law,” Leal said.

On appeal, three judges will weigh in on the case, with a majority deciding the ruling. OCSA officials expect oral arguments to be scheduled for early April or May.

Leave a Reply Cancel reply