No one was more surprised than Eric Premack to learn last week that the federal Department of Education had docked California $11.5 million from an expected $51.5 million in critical grants for new charter schools this year – and may whack up to $40 million next year. Premack, the executive director of the Charter Schools Development Center in Sacramento, said that 13 years ago, he drafted the language creating the program for its sponsor,  former Sen. David Durenberger of Minnesota. The law didn’t include the requirement that federal officials are now using to cut the state’s funding.

California, easily with more charter schools than any other state – 900 and growing –  had been in compliance with the law in past years, Premack said, and had  benefited when President Obama expanded the program. In the latest round, California got a five-year, $300 million award, which should have been enough to fund at least 100 to 150 new charter schools each year.

Now, much of that money appears in jeopardy, and state officials don’t know what they can do to fix the problem. The 39 charter schools opening now and anticipating federal money – anywhere from $350,000 to more than $500,000 for large charters – shouldn’t be affected. But the cut and uncertainty about future funding will be a damper on charter expansion at a time when charters in particular already have been squeezed by late state reimbursements  and by a freeze on funding for  special programs like class-size reduction that excludes new schools entirely. Especially for small, stand-alone charters, the startup grants are essential to tide the schools over for the first few years.

Federal officials had indicated since November that the state was out of compliance with the requirement that charter authorizers – usually local districts – keep track annually of the academic progress of all subgroups of students (by race, ethnicity and income levels, English learners, and special education students) in charter schools and make this the  primary factor when considering charter renewals and revocations.

Premack said that Congress inserted this  requirement in the appropriations bill for the program in 2010. He blamed “hyper-vigilant” federal auditors’ interpretation of the vague language for the problem. And he surmised, as did Jed Wallace, CEO of the California Charter Schools Association, that the feds may have overcommitted the money nationwide and are looking for a rationale to cut California’s allocation to spread the money to other states.

“The feds are struggling for funding to support charters across nation,” Wallace said, “so they are having o make hard choices.”

What do the feds want?

Charter schools receive annual standardized test scores, as do all public schools, breaking down proficiency results for every subgroup. This month, they will soon receive their annual Academic Performance Index score as well, with subgroup information. Charter authorizers clearly have that data, but there’s no state requirement that they do anything with it or report the information to the state. They presumably use the information every five years when charters are up for renewal. But again, there’s no requirement that they certify to the state that they treated this as the primary factor, including subgroup data, in deciding whether to renew or revoke a charter.

However, as state officials pointed out to the feds in their response, charters must meet minimum growth in API scores to have their charters renewed. Their scores also cannot be among the bottom 30 percent of similar district schools to remain in business. Last year, the State Board strengthened its oversight of poorly performing schools, allowing it to revoke charters whose API scores are in the bottom 10 percent of schools before their charters up  for consideration. State officials also pointed to AB 440 (formerly SB 645), which the California Charter Schools Assn. helped write, setting minimal API growth and scores, for renewal. The bill may face a final vote in the Assembly this week or next.

Federal officials, in several rounds of letters, insisted that the state laws and AB 440 don’t address the subgroup question or don’t apply to all charters.

Lupita Cortez Alcalá, a deputy state superintendent, said it was unclear whether the federal decision can be appealed, whether the sanction is a deferral or actual cut, and what can be done next. It’s also unclear whether the State Board of Education can adopt emergency rules to address the problem or whether a fix from the Legislature is necessary. The state must have a plan of action to address the problem by Jan. 31 or risk further loss of money, she said.