(Updated Feb. 21 with an additional comment from the PDE)

The Philadelphia School District's losing fight to limit enrollments at individual charter schools has a new price tag: $8.7 million and counting.

Over the past 18 months, the Pennsylvania Department of Education (PDE) has withheld that amount from the district, redirecting the money to six area charter schools that enrolled more students than the district called for in their contracts.

The state's policy is to send the money to the charters first, then allow traditional school districts to ask questions later.

This makes Philadelphia school officials furious.

"The critical issue here is that withholdings are being done without giving us the opportunity to review the payments that the charters are requesting," said district spokesman Fernando Gallard.

Despite the district's complaints, charter operators say state law is on their side. The Pennsylvania Department of Education agrees.

PDE has given the largest chunk of money - $5.5 million – to the Walter D. Palmer Leadership and Learning Partners Charter in Northern Liberties. The school's founder has won a series of court cases challenging the School District's right to unilaterally impose so-called "enrollment caps" on charters.

Other cases are more problematic.

Two of the charters – Mariana Bracetti Academy and Discovery – agreed to caps on their enrollment, then turned around and asked the state for more money anyway. They got it, to the tune of $800,000.

District officials also believe – without yet detailing their evidence – that some charters are receiving money for students who aren't actually on their attendance rolls.

"We are concerned that some of these payments are being made unnecessarily," said Gallard.

And what really has Philadelphia officials outraged is that millions of dollars are being taken out of its coffers and given to charters without any due diligence by the state.

"We believe that the Pennsylvania Department of Education has not even reviewed the charter requests themselves," said Gallard.

State officials say that is in fact the case.

Timothy Eller, the press secretary for the state department of education, said Pennsylvania charter school law requires the department to automatically reimburse any charter school that claims it has not been paid by a traditional school district.

"The department's role is to work to make that charter school whole, and then have the district object to that ruling," said Eller.

UPDATE: Eller pointed to a 2010 Commonwealth Court ruling that PDE "has a mandatory, non-discretionary duty to withhold subsidies to a school district based upon the estimated amount documented by the charter school."

Any district objections are supposed to be considered in administrative hearings.

To date, though, PDE has declined to schedule any of the hearings that the Philadelphia district has requested.

Lori Shorr, the city's chief education officer, said the current system is untenable.

"We need clear policies and predictable financial transactions if we're going to make all the public schools in the city stable," said Shorr.

"It worries me when this much responsibility is out of the hands of the people who are closest to what's happening in the city."

Enrollment caps the issue

Charter schools are publicly funded but independently managed.

In Philadelphia, the School Reform Commission gets to decide whether a new charter to form a school should be granted. The SRC also decides whether to renew existing charters that are expiring. But it has limited say over what charter schools do in the interim.

In Philadelphia, charters receive about $8,100 for every regular-education student and $19,700 for every special education student on their rolls. That money comes from the School District of Philadelphia, which gets more than half of its per-pupil spending from the state.

Seeking to contain its charter costs, the district has tried to manage the growth of existing charter schools. Despite a string of courtroom losses, the district has refused to pay charters who enroll students over their caps.

In response, six city charter schools have gone directly to the state to receive payment. The state has paid the charters, withholding a corresponding amount from its basic education subsidy to the Philadelphia district.

Broadly speaking, that's how the state's charter school law says it should happen.

No one knows that law better than Pennsylvania charter school pioneer Walter Palmer.

Since the beginning of the 2011-12 school year, his school, the Walter D. Palmer Leadership and Learning Partners Charter in Northern Liberties, has received $5.5 million directly from PDE. That money has been deducted from the state subsidy to the district.

Palmer, whose school currently enrolls roughly several hundred students more than his charter agreement spells out, says he's entitled to every penny:

"The legislation states very clearly that charters cannot be capped."

He also says that other charters are starting to catch on:

"Many schools are starting little by little to add on students."

That's what has district officials so concerned.

Each month, they get another letter from the state, saying they've lost hundreds of thousands more dollars to charters exercising their right to unfettered expansion.

Palmer says the push from charters to keep growing is necessary to counter the forces – the teacher's union, white liberals, and the media – he believes are invested in maintaining an status quo that denies educational opportunities to poor students of color.

"We're supposed to be a threat to the school district," said Palmer.

"The whole idea of charters was to try to create a free market, competition, to force an improved situation."

Going over the cap

Despite their string of courtroom defeats, district officials are holding out hope that the state Supreme Court will hear their latest appeal on the broader issue of charter school enrollment caps.

In the meantime, they're fuming about the actions of charters like Mariana Bracetti Academy in Kensington.

While state charter school law prohibits a district from imposing caps, it also says that contractual limits on student enrollment are valid if they were mutually agreed to by a district and a charter after July 1, 2008.

That's apparently what happened in November 2011, when then-interim School Reform Commission Chairman Wendell Pritchett and Bracetti CEO Angela Villani each signed Bracetti's renewal agreement.

The document reads:

"The charter school may enroll students in grades 6 through 12 with a maximum of 1,155 students. Under no circumstances may the charter school enroll more students or enroll students in different grades without SRC approval by resolution."

Months later, though, Bracetti began petitioning PDE for payment for 96 students enrolled over that limit. Between July 2012 and February 2013, PDE deducted $435,617.90 from its payments to the district, instead sending that money to Bracetti.

Villani declined to comment.

The city's Shorr said it "goes against the spirit of that agreement" for a charter to commit to an enrollment cap, then go to the state for additional funds anyway.

Gallard said the deductions are hampering the district's ability to budget and plan. The SRC already had to borrow $300 million this year just to pay its bills.

And it's not just Bracetti.

Officials from Discovery Charter in West Philadelphia signed a charter renewal agreement in September 2008 that called for a "maximum of 620 students." In the first few months of this year, Discovery enrolled 73 students over that cap. The charter successfully petitioned PDE for $360,160.72 in direct payments between July 2012 and February 2013.

Discovery officials also declined to comment.

'Ghost' students alleged

Gallard said the district also believes that some charters have sought reimbursement for students they do not actually enroll.

In a preliminary review, he said, the district found a number of instances in which it is being billed for the same student by two different charter schools. In other cases, the district believes it is being billed for students whom it's already paying to educate in its own schools.

The district has so far declined to release specifics.

"We're still doing the analysis, but we are preserving the right to the [administrative] hearings," said Gallard. "That's why we have filed the appeals."

For the time being, however, that will mean more waiting.

Philadelphia is the only district in the state dealing with the issue of charters going over their caps. But it's not the only school system that thinks it's being wrongly assessed for charter students.

The state Department of Education has a backlog of 136 such cases pending. Ninety-nine of those have yet to be docketed or assigned to a hearing officer.

"The department is committed to having these hearings held," said Eller, the PDE spokesman.

No timetable has yet been set.

And Eller didn't offer much in the way of encouragement for traditional school districts hoping to recoup their losses.

According to the state department of education, the law is clear:

Elle said PDE's role is "to prevent the possibility of a charter school being bled dry from a school district not wanting to pay its bills."

This story was reported through a partnership in education coverage between WHYY/NewsWorks and the Philadelphia Public School Notebook.