SUNBURY - A county judge will reinforce a previous ruling calling for Shamokin Area School District to release hundreds of thousands of dollars to Northwestern Academy's parent company.
Judge Charles Saylor on Wednesday said he would enter an order also calling for the district to continue collecting a controversial lease rental fee on behalf of the juvenile justice facility.
That ruling clashes with the opinion of state Department of Education (PDE). The agency's counsel believes the fees - paid by home school districts of juvenile offenders housed at the facility - are not applicable to Shamokin Area's contractual relationship with Northwestern Academy, according to court documents.
Shamokin Area has deferred to PDE since the agency is its governing body. Its board members must now decide if they want to appeal the decision to state court, and the implications could be costly for the district.
If the ruling were overturned by a state judge, Steve Curran, Shamokin Area business manager, said the district could "be on the hook" to repay millions of dollars already collected and paid to Northwestern Human Services (NHS) Inc.
Should that come to pass, the district could ask a court to have NHS repay the money. However, Curran noted how long such a process could take, saying PDE could decide to take the money directly from the district's yearly state subsidy.
"That's the big liability we have," he said.
The matter of the fees has been a point of contention since early last decade.
School districts statewide are responsible for the education of juvenile offenders remanded to detention facilities, as is the case with Shamokin Area and the juveniles at Northwestern Academy.
The juveniles' home school districts are responsible to pay their tuition costs. They are also required to make the lease rental payments when "it shall be necessary to provide a separate school or to erect additional school buildings," according to public school code.
NHS opened the Academy in 1998. It contends that the buildings it erected fall under the definition allowing for the fees.
PDE sees it differently, with state agency attorneys maintaining that since Shamokin Area did not incur capital expenses for the construction of the juvenile detention facility, it should not collect lease rental fees.
It came to a head in 2008 when Saylor ruled in favor of NHS. That ruling, which was reinforced Wednesday, called for the collection of the fees and dissolution of an escrow account which exceeded $2 million.
Shamokin Area complied with the ruling until May 2010 when Curran wrote PDE again asking for its opinion on the fees. PDE counsel said districts are not obligated to pay them and a second escrow account was created.
That account, the contents of which Saylor ruled belong to NHS, exceeded $800,000 as of Wednesday, Curran said.
The district's solicitor, James Zurick, attempted to convince Saylor on Wednesday in Northumberland County Court that the circumstances on the matter have changed since PDE counsel wrote the May 2010 letter.
PDE is the district's funding source and was stuck in the middle between the agency's opinion and the judge's ruling, Zurick said, adding that the agency recognizes commonwealth court rulings and does not recognize those made on the county level.
Despite the funding again being held in escrow, Northwestern waited more than 1 1/2 years to bring action to court to dispute the move, Zurick said.
He claimed the company failed to take due diligence to recoup the money.
"The petitioner has sat on his rights for too long," Zurick said.
John A. Kane, attorney for NHS, disagreed. He said the company attempted to settle the matter amicably given its long-standing contractual relationship with the district.
More than that, Kane argued that nothing has changed since Saylor's 2008 ruling. It's a ruling that Shamokin Area never challenged with appeal and one that the district had complied with until May 2010.
PDE has long held the opinion that the payments are not applicable, Kane said, pointing out that the agency's letter came only because the district business manager sought an opinion.
"They may have a different opinion, but for the purposes of Shamokin Area ... they're bound by your decision," Kane said.
"They could have chosen to intervene," Kane said of PDE. "They chose not to do that."
Saylor pointed out that nothing in PDE's letter to the district threatens sanctions. To Zurick's claim of lack of due diligence, the judge said the statute of limitations allows for four years for NHS to make its claim for the money.
"I see no reason for me to revisit the issue," Saylor said before reinforcing his prior ruling.
Zurick said by telephone Wednesday that Shamokin Area must decide whether or not to proceed with further court action.