IN THE SUPREME COURT OF OHIO : Case No. 2017-0913 …supremecourt.ohio.gov/pdf_viewer/pdf_viewer.aspx?pdf=... · EMERGENCY MOTION OF PLAINTIFF-APPELLANT THE ELECTRONIC CLASSROOM OF

IN THE SUPREME COURT OF OHIO

The Electronic Classroom of Tomorrow, : : Case No. 2017-0913

Plaintiff-Appellant, : : On appeal from the

vs. : Franklin County Court : of Appeals, Tenth District

Ohio Department of Education, : : Court of Appeals

Defendant-Appellee. : Case No. 16AP-863

EMERGENCY MOTION OF PLAINTIFF-APPELLANT THE ELECTRONIC CLASSROOM OF TOMORROW FOR (A) INJUNCTION PENDING APPEAL AND/OR

(B) TO EXPEDITE THE COURT’S CONSIDERATION AND RULING UPON THE MERITS OF THIS APPEAL

Marion H. Little, Jr. (0042679) John W. Zeiger (0010707) Christopher J. Hogan (0079829) ZEIGER, TIGGES & LITTLE LLP 3500 Huntington Center 41 S. High Street Columbus, Ohio 43215 (614) 365-9900 (614) 365-7900 (facsimile) [email protected] [email protected] [email protected]

Counsel For Plaintiff-Appellant The Electronic Classroom of Tomorrow

Douglas R. Cole (0070665) Erik J. Clark (0078732) Carrie M. Lymanstall (0084393) ORGAN COLE LLP 1330 Dublin Road Columbus, Ohio 43215 614.481.0900 614.481.0904 (facsimile) [email protected] [email protected] [email protected]

Special Counsel to Attorney General Mike DeWine

Counsel for Defendant-Appellee Ohio Department of Education

Supreme Court of Ohio Clerk of Court - Filed October 05, 2017 - Case No. 2017-0913

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EMERGENCY MOTION OF PLAINTIFF-APPELLANT THE ELECTRONIC CLASSROOM OF TOMORROW FOR (A) INJUNCTION PENDING APPEAL AND/OR

(B) TO EXPEDITE THE COURT’S CONSIDERATION AND RULING UPON THE MERITS OF THIS APPEAL

Because of significantly changes circumstances, the Electronic Classroom of

Tomorrow (“ECOT”) renews its request for emergency relief, either in the form of an

injunction and/or expedited treatment of this Appeal. Those changed circumstances

include: (1) this Court’s acceptance of jurisdiction over ECOT’s proposition of law

that the Ohio Department of Education (“ODE”) lacks statutory authority to impose an

actual participation or duration-based requirement for funding; and (2) ODE’s new effort,

which was announced on September 28, 2017, to impose on ECOT significant

additional monthly funding cuts based on its continued application of the challenged

durational standard.

Absent emergency relief, ECOT—which, unlike traditional public schools, has no

local tax dollars to provide any type of safety net—now faces closure no later than

January 2018—in the middle of the 2017-2018 school year. Among other things, that

would result in the loss of more than 800 jobs and force nearly 12,000 students across

Ohio to either find a new school, or in the case of older students taking high school

courses, to potentially drop out altogether. On the other hand, if emergency relief is

granted, ODE will face no harm. If ECOT prevails, then ODE’s unilateral funding claw

backs are unlawful, and thus, ECOT would be entitled to full funding for all school years

in question. But, even if ODE prevails, its claw back of funds (at least until ECOT is

forced to close) will simply be delayed.

As a result, and pursuant to Rule 4.01(A) of this Court’s Practice Rules, ECOT

moves for an emergency injunction, pending appeal, enjoining ODE, its agents,

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employees, attorneys, and anyone acting in concert or participation with them who

receive notice hereof from taking any action to reduce, adjust, and/or recover or “claw

back,” or otherwise reduce any of ECOT’s Full-Time Equivalency (“FTE”) funding for the

2015-2016 and 2016-2017 school years and/or taking any further action to implement

any reduction, adjustment, and/or “claw back” of such FTE funding, based on any type

of participation-based or “durational” standard, pending a final resolution of the instant

Appeal on the merits. In addition and/or in the alternative, ECOT requests that the

Court issue an order expediting its consideration and determination of the merits of this

Appeal (including the scheduling of oral argument) as much as reasonably possible so

that a resolution is reached prior to the January closure. The basis for this Motion is

discussed more fully in the attached Memorandum in Support.

Respectfully Submitted,

/s/ Marion H. Little, Jr. Marion H. Little, Jr. (0042679) John W. Zeiger (0010707) Christopher J. Hogan (0079829) ZEIGER, TIGGES & LITTLE LLP 3500 Huntington Center 41 South High Street Columbus, Ohio 43215 (614) 365-9900 (614) 365-7900 [email protected]@[email protected]

Attorneys for Plaintiff-Appellant The Electronic Classroom of Tomorrow

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MEMORANDUM IN SUPPORT

At this point, the existence of ECOT is completely dependent upon relief from this

Court—recent events make clear that ECOT needs immediate relief.

Everyone agrees ECOT was entitled to its full funding based upon the

enrollment-based formula ODE utilized for 13 years. Indeed, during that 13 year period:

• The funding formula prescribed by the General Assembly in R.C. 3314.08(H)(3) remained the same.

• ODE funded eschools based upon student enrollment—just like ODE does for every other public school.

• In an effort by both parties to achieve compliance with the law, ODE and ECOT entered into a written Funding Agreement that expressly established student enrollment as the funding methodology. ODE then utilized this Funding Agreement for auditing all other eschools.

• ODE repeatedly informed the State Auditor’s Office, which audited ECOT every year, that the proper methodology for determining funding under R.C. 3314.08 was enrollment. ODE never claimed otherwise until 2016.

• ODE never sought any change in R.C. 3314.08, which is the community-school funding statute, nor did it proceed through the Joint Committee on Agency Rulemaking (“JCARR”) to promulgate a new rule as required by Sections 3301.13 and Chapter 119 of the Revised Code.

We submit that everyone can also agree that it is dangerous precedent for an

administrative agency to turn a blind eye toward governing statutory language, its long-

standing practice, and its repeated statements to the Auditor’s office, by imposing new

standards on the basis of its own public policy determinations.

But ODE has done just that. And as result of ODE’s imposition of a new,

retroactive testing methodology, ECOT is doomed. We have already described it as a

“death spiral” because of the discrepancy between funding coming in and expenses

going out, coupled with decreased enrollment (and, thus, further reduced funding). This

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inevitable shut down has only been temporarily delayed because ECOT’s Board had

prudently created a reserve fund for ECOT’s operations. Yet, that reserve is quickly

being eliminated by ODE’s imposition of a $60-million claw back based on its

application of the challenged durational funding standard for 2015-2016, ODE’s

unilateral imposition of an additional, 13-percent monthly funding reduction for 2017-

2018 following public comments from the state Auditor (based on the same, challenged

standard), and additional enrollment losses ECOT has suffered since ODE began to

impose that standard.

Now because of additional events that have occurred since the Court denied

ECOT’s initial motion for emergency injunctive relief in July 2017, ECOT will run out of

funds even faster and faces closure in January 2018. Therefore, the Court should now

grant emergency relief, either in the form of an injunction pending appeal, expedited

consideration and adjudication of the merits of ECOT’s appeal, or both—to ensure that

any relief ultimately awarded is not meaningless for ECOT and its nearly 12,000 largely

“at-risk” students.1 Otherwise, even before this Court is able to render a decision,

ECOT faces closure, and thousands of Ohio students will be forced—in the middle of a

school year—to find a new school at which to continue their studies.

A. Circumstances Have Changed Significantly Since The Court Denied ECOT’s Initial Motion For Injunction Pending Appeal—Such Circumstances Demonstrate That Emergency Relief Is Urgently Needed.

On July 12, 2017, the Court denied ECOT’s initial motion for emergency

injunctive relief pending appeal. At that time, however, this Court had not yet accepted

1 “At risk” students include those who face various challenges, whether they be special needs, high mobility rates, low socioeconomic status, and even in some instances, homelessness.

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jurisdiction over ECOT’s appeal. Since July 12, however, two significant events have

changed the landscape for ECOT, thereby necessitating this Motion and demonstrating

the need for emergency relief.

• The Court Accepted ECOT’s Appeal As To The Legality Of ODE’s Imposition Of A Durational Funding Standard—The Standard ODE Has Used As The Basis For Clawing Back Tens Of Millions Of Dollars From ECOT.

First, on September 13, 2017, the Court accepted jurisdiction of this Appeal as to

the following proposition of law: that ODE is barred from imposing a durational funding

requirement on eschools under the community school funding statute, R.C. 3314.08.

Thus, the ultimate question of the legality of ODE’s challenged action in unilaterally

imposing such a durational standard—after more than 13-years of basing all community

school funding on enrollment—now rests squarely with this Court.

For the reasons discussed in detail in ECOT’s Amended Merit Brief filed on

October 4, 2017, ECOT has a substantial likelihood of succeeding on the merits of its

instant appeal. Ohio’s community school funding statute—R.C. 3314.08—contains an

express delegation of authority to ODE to fund all community schools, including

eschools, based on enrollment. The same statute, likewise, makes clear that ODE’s

ability to “adjust” (i.e., reduce) an eschool’s funding is limited to the context of

enrollment See R.C. 3314.08 (“The department of education shall adjust the amounts

subtracted and paid under … this section to reflect any enrollment of students in

community schools for less than the equivalent of a full school year.”) (emphasis

added).

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ODE, as an administrative agency, may not extend its statutory authority and/or

engage in public policymaking by imposing a durational funding standard that goes

beyond its express statutory grant.

It is well settled that an administrative agency has only such regulatory power as is delegated to it by the General Assembly. Authority that is conferred by the General Assembly cannot be extended by the administrative agency. …

In construing such grant of power, particularly administrative power through and by a legislative body, the rules are well settled that the intention of the grant of power, as well as the extent of the grant, must be clear; that in case of … doubt that doubt is to be resolved not in favor of the grant but against it.

[D.A.B.E., Inc. v. Toledo-Lucas County Bd. of Health, 96 Ohio St.3d 250, 2002-Ohio-4172, 773 N.E. 2d 536, ¶ 38-40 (emphasis added).]

The undisputed facts, during the relevant time period of at least January 2003

through the first quarter of 2016—literally 13 years—further confirm this enrollment-

based funding methodology:

If ECOT prevails on this issue of statutory construction, as framed by the doctrine

of separation of powers and ODE’s undisputed course of conduct over 13 years, then

ODE’s implementation of a durational standard for funding and the resulting “claw back”

of tens millions of dollars in ECOT’s funding has been necessarily unlawful. Moreover,

it is undisputed that, had ODE not employed its new durational standard during the

middle of the 2015-2016 school year and instead, applied the enrollment-based

approach that it had historically utilized (consistent with the language of R.C. 3314.08),

ECOT would have been entitled to its full, claimed funding for 2015-2016.

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Thus, this Court’s decision on the merits will necessarily determine whether

ODE is entitled to, and thus, whether it has properly begun clawing back many millions

of dollars from ECOT. It will also determine whether the school will even remain open.

• ODE’s Unilateral Effort, Announced On September 28, 2017, To Impose An Even Larger “Claw Back” Based On Its 2016-2017 FTE Review Of ECOT Means That ECOT Now Faces Closure As Soon As January 2018.

Second, on September 28, 2017, ODE provided ECOT with its “final full-time

equivalency” determination following an FTE Review of the school for the 2016-2017

school year (the “Final Determination Letter”). [Exhs. A, and A-1, Affidavit of

Christopher R. Meister (“Meister Aff’d”) and Final Determination Letter.] Again

employing its challenged durational standard, ODE indicated through the Final

Determination letter that it intends to seek an additional claw back of 18.5-percent of

ECOT’s FTE funding for 2016-2017, which totals approximately $19.2-million. [See

Meister Aff’d; Final Determination Letter.] But, on top of that, ODE also indicated its

intent to begin reducing ECOT’s monthly funding for the 2017-2018 school year by

18.5-percent per month—an increase of more than 40-percent above the approximately

13-percent monthly reduction ODE unilaterally imposed in August and September 2017,

following public comments made by the state Auditor. [Id.]

This newly-increased funding reduction will have a fatal impact on ECOT’s

continuing viability, in the short term. Based on the existing 13-percent decrease in

monthly funding for 2017-2018 (coupled with the two-year claw back already in place

based on ECOT’s 2015-2016 FTE Review), ECOT projected that it could possibly

continue to operate throughout the 2017-2018 school year (barring further negative

events), without facing a negative monthly cash balance, but by only continuing to make

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severe cuts, including personnel cuts. [Meister Aff’d ¶ 3; Exh. A-2.] And if ECOT

somehow survived until then, it would have funds available for just closing the school.

However, the changed circumstances reflected in the Final Determination Letter

significantly change the analysis. Now, assuming that: (1) the monthly funding

reduction for 2017-2018 is increased to 18.5-percent beginning in October 2017; and (2)

ODE begins clawing back an additional $19.2-million for the 2016-2017 school year in

December 2017, amortized over 24 months (a reasonable assumption given the

“appeal” timeframes under R.C. 3314.08(K) and the amortization period imposed by

ODE for the 2015-2016 claw back), ECOT projects that, even with additional

reductions in its personnel-related expenditures, the school will face the spectre of

a negative cash balance as soon as January 2018. [Meister Aff’d ¶¶ 5-7; Exh. A-4.]

Given that a public school, like ECOT, cannot operate with a negative cash

balance, that means ODE’s stated intent to impose a heightened monthly reduction will

force ECOT to close by January 2018. Such a result would disrupt the education of

12,000 students across the state:

• In some instances, the students will have no choice but to return to the traditional school where, for one reason or another (including special needs, bullying, etc.) they were originally unable to find success.

• Even then, families—many of them with children who have special needs—will face the difficulty of having to complete enrollment paperwork and other items necessary to enroll in a new school mid-year.

• In other instances, the students, particularly the adult students, will simply discontinue their efforts to achieve a high school diploma.

• In all instances, a mid-year shut down will be disruptive.

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Moreover, the paperwork requirements that would be imposed on ECOT as a

result of such a closure are mind-boggling. Specifically, ECOT estimates that it would

require a minimum of 50,000 hours to prepare the files for all students who have ever

attended ECOT—at any time—which it would be required to deliver to such students’

former schools and/or districts. [Exh. B, Affidavit of Brittny Pierson.]

B. Emergency Relief, Either By Way Of An Injunction Pending Appeal And/Or Expediting The Court’s Consideration And Ruling On The Merits Of This Appeal Is Necessary To Ensure The Prospect Of Meaningful Relief For ECOT (And Its 12,000 Students).

If this Appeal proceeds in the Court’s normal course, and absent injunctive relief,

the changed circumstances described above mean that ECOT will likely be forced to

close before this Court has an opportunity to hear, let alone decide, the merits of

ECOT’s Appeal. In other words, absent emergency relief, ECOT (and its students and

staff) face imminent irreparable harm, in the form of closure, that could render

meaningless any decision by this Court in ECOT’s favor.

Relief is, thus, necessary to preserve the status quo—i.e., ECOT’s ability to

continue operating and serving its students—pending a final decision as to the

merits of the statutory question before the Court. Such relief could take the form of an

injunction enjoining ODE from continuing to reduce ECOT’s funding pending a final

decision on the merits, or it could take the form of expedited consideration and issuance

of a such decision (or both). But, whatever the Court decides, it should act to ensure

that ODE does not—in the interim—continue on a course of conduct that will result in

ECOT’s closure, based on ODE’s application of the very durational standard at the

heart of this case.

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CONCLUSION

“It is axiomatic that under our system of justice a litigant is entitled to his day in

court,” Archacki v. Regional Transit Authority, 8 Ohio St.3d 13, 14-15, 455 N.E.2d 1285

(1983), and to have its case resolved not based upon media reports or the arbitrary

actions of administrators but, rather, “solely by the facts and circumstances in each

case coming before [the court] presented in court as provided by law.” State v. Markos,

88 Ohio Law Abs. 26, 179 N.E.2d 397, 400 (C.P. 1961). This axiom would be rendered

hollow if a victim of alleged unlawful conduct is faced with imminent closure, as a direct

result of such conduct, before the Court is able to rule on the legality of the same.

As such, ECOT must necessarily seek, and this Court should issue, an injunction

pending appeal and/or an order expediting its consideration and determination of the

merits of this Appeal as much as reasonably possible, to prevent ECOT’s January 2018

closure.

Respectfully submitted,

/s/ Marion H. Little, Jr. Marion H. Little, Jr. (0042679) John W. Zeiger (0010707) Christopher J. Hogan (0079829) ZEIGER, TIGGES & LITTLE LLP 3500 Huntington Center 41 South High Street Columbus, Ohio 43215 (614) 365-9900 (614) 365-7900 [email protected]@[email protected]

Attorneys for Plaintiff-Appellant The Electronic Classroom of Tomorrow

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CERTIFICATE OF SERVICE

The undersigned hereby certifies that a copy of the foregoing was filed with the

Court’s electronic filing system on October 5, 2017, and served via email upon the

following:

Douglas R. Cole, Esq. Erik J. Clark, Esq. Carrie M. Lymanstall, Esq. ORGAN COLE LLP 1330 Dublin Road Columbus, Ohio 43215

Counsel for Defendant-Appellee Ohio Department of Education

/s/ Marion H. Little, Jr. Marion H. Little, Jr. (0042679)

1036-002:715741

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IN THE SUPREME COURT OF OHIO

The Electronic Classroom of Tomorrow, : : Case No. 2017-0913

Plaintiff-Appellant, : : On appeal from the

vs. : Franklin County Court : of Appeals, Tenth District

Ohio Department of Education, : : Court of Appeals

Defendant-Appellee. : Case No. 16AP-863

AFFIDAVIT OF CHRISTOPHER R. MEISTER

STATE OF OHIO : : ss

COUNTY OF FRANKLIN :

Christopher R. Meister, being first duly sworn, deposes and states on personal

knowledge as follows:

1. I am a Deputy Superintendent/Vice President of Finance for the Electronic

Classroom of Tomorrow (“ECOT”). In that role, I am charged with overseeing and

projecting ECOT’s revenues and expenses for, among other things, the 2017-2018

school year. As a result of the steps taken by the Ohio Department of Education

(“ODE”) in connection with its FTE reviews of ECOT for the school years 2015-2016

and 2016-2017, I have completed projections of ECOT’s ending, monthly cash balances

based on various assumptions.

2. Initially, I calculated ECOT’s month-end and cash balances using the

following assumptions. First, I assumed that ODE will continue applying a 24 month

claw back of more than $60-million, which ODE has determined ECOT was “overpaid”

via its implementation of a “durational” funding standard for the 2015-2016 school year.

In addition, I assumed that ODE will continue, for the foreseeable future, to apply an

thompson

E-Sticker

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additional approximately 13-percent reduction to ECOT’s monthly funding, first initiated

by ODE in August 2017, following public comments made by state Auditor Dave Yost.

Based on these calculations, and assuming that ECOT makes no additional cuts to its

current expenses (which would primarily have to come from personnel-related

expenses), ECOT will run out of funds by no later than January 2018. A true and

accurate copy of a spreadsheet reflecting this projection is attached as Exhibit 1. A

public school, like ECOT, cannot operate with a negative cash balance.

3. Using the same assumptions (including the continued application of an

additional monthly funding reduction of approximately 13-percent), with the additional

assumption that ECOT makes further cuts to its personnel-related expenditures, I

separately projected ECOT’s ending monthly cash balances. Based on that calculation,

my projection reflects that ECOT could maintain a positive ending cash balance

potentially through the end of the 2017-2018 school year. That projection, however,

assumes no further negative events in terms of ECOT’s revenues or expenditures. A

true and accurate spreadsheet reflecting this projection is attached as Exhibit 2.

4. My assumptions changed, however, on September 28, 2017, when ODE

sent ECOT a letter containing the department’s “final” determination following ODE’s

FTE review of ECOT for the 2016-2017 school year. A true and accurate copy of that

letter is attached as Exhibit 3 (the “Final Determination Letter”).

5. In the Final Determination Letter, ODE indicated its conclusion that ECOT

was unable to provide durational documentation to support approximately 18.5-percent

of the full-time equivalency or “FTE” funding ECOT claimed for 2016-2017. As a result,

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ODE now seeks to claw back from ECOT an additional approximately $19.2-million on

top of the $60-million it has already begun clawing back. Further, in the Final

Determination Letter, ODE indicated its apparent intent to increase its additional

withholding from ECOT’s monthly payments for 2017-2018 from 13-percent to 18.5-

percent.

6. Based on this statement from ODE, I re-calculated my projections using

new assumptions that: (1) ODE begins withholding 18.5-percent of ECOT’s monthly

funding for 2017-2018 beginning in October 2017 (the next monthly payment), on top of

the $60-million claw back for 2015-2016; and (2) ODE begins clawing back the $19.2

million for 2016-2017, amortized over 24 months, beginning in December 2017 (a date

that allows time for the statutory “appeal” process under R.C. 3314.08(K)). Using

these assumptions, I re-calculated ECOT’s monthly cash balances, including additional

reductions in personnel-related expenditures. Using that calculation, I project that

ECOT’s cash balance will turn negative beginning in January 2018. A true and accurate

copy of this projection is attached as Exhibit 4.

7. The result is that, with the additional funding cuts and additional claw back

ODE intends to make, as stated in the Final Determination Letter, ECOT faces closure

by as soon as January 2018.

8. Such a closure would force ECOT’s nearly 12,000 students, and their

families, to find a new school in the middle of a school year.

9. However, if ODE is enjoined from continuing to implement its funding claw

backs and additional funding reductions, my calculations indicate that ECOT will be able

to survive for the foreseeable future.

Updated: 9/24/17 7.2% 8.2% 5.0% 12.6% 5.7% 5.6% 4.7% 9.1% 6.0% 5.0% 3.3% 22.0% 94.5%

Enrollment Rate: 2.1% 8.4% 21.7% 14.3% 10.8% 8.1% 5.5% 9.1% 7.9% 8.9% 5.9% 1.0% 103.8%

REVENUE: Projected FTE Growth: -10.8%

ECOT Budget 2017-2018 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 2017-2018

TOTAL REVENUE 7,863,508$ 6,539,908$ 6,125,721$ (865,099)$ 2,841,806$ 5,660,913$ 5,784,556$ 4,039,596$ 5,285,733$ 5,411,930$ 5,327,345$ 5,168,597$

Running Revenue 7,863,508$ 14,403,415$ 20,529,137$ 19,664,038$ 22,505,844$ 28,166,757$ 33,951,313$ 37,990,909$ 43,276,641$ 48,688,572$ 54,015,917$ 59,184,513$

Projected Paid FTE 14,240 14,283 13,543 11,312 12,030 12,098 12,357 12,558 12,367 12,489 12,611 12,696

EXPENSES:Total Entitlement Expenses 1,137,689$ 712,343$ 814,805$ 514,805$ 514,805$ 514,805$ 514,805$ 514,805$ 514,805$ 514,805$ 514,805$ 514,805$ 7,298,085$

Total K-12 Expenses 1,622,170$ 1,673,113$ 1,448,644$ 1,126,291$ 1,115,742$ 1,128,192$ 1,115,742$ 1,116,216$ 1,115,742$ 1,118,781$ 1,239,991$ 1,115,742$ 14,936,366$

Career Tech Non-Salaried Expenses 119,422$ 154,282$ 48,538$ 57,065$ 51,000$ 51,000$ 51,000$ 51,000$ 51,000$ 51,000$ 51,000$ 51,000$ 787,307$

Total Exceptional Children Expenses 1,729,888$ 1,482,550$ 1,390,563$ 889,846$ 1,049,794$ 1,259,850$ 1,183,989$ 1,161,041$ 1,200,364$ 1,182,346$ 1,159,677$ 1,171,668$ 14,861,577$

Hardware/Software Expenses 403,087$ 292,847$ 242,543$ 242,249$ 119,548$ 118,234$ 137,142$ 106,874$ 112,388$ 72,630$ 79,933$ 89,933$ 2,017,410$

Total Technical Services Expense 531,264$ 523,195$ 490,801$ 440,801$ 440,801$ 386,801$ 386,801$ 386,801$ 386,801$ 386,801$ 386,801$ 386,801$ 5,134,467$

Total Connectivity Expenses 383,958$ 720,554$ 393,645$ 412,753$ 414,227$ 420,385$ 425,118$ 417,518$ 422,923$ 430,260$ 434,568$ 435,862$ 5,311,770$

Total Asset Management & Logistics 98,042$ 377,188$ 323,831$ 341,688$ 430,701$ 337,091$ 373,920$ 360,600$ 340,690$ 391,718$ 357,531$ 358,004$ 4,091,005$

Total Engagement Expenses 125,140$ 120,482$ 120,817$ 111,073$ 111,073$ 111,073$ 111,073$ 111,073$ 111,073$ 111,073$ 111,073$ 111,073$ 1,366,100$

Total Regional Education and Testing Expenses 61,808$ 82,753$ 90,626$ 90,626$ 90,626$ 90,626$ 90,626$ 90,626$ 90,626$ 90,626$ 90,626$ 90,626$ 1,050,819$

Total Facilities and Mall Security Expenses 84,796$ 114,440$ 72,472$ 72,472$ 72,472$ 72,472$ 84,972$ 84,972$ 84,972$ 72,472$ 72,472$ 72,472$ 961,458$

Total Accounting and Finance Expenses 73,848$ 82,494$ 129,116$ 70,116$ 70,116$ 72,616$ 72,616$ 70,116$ 70,116$ 70,116$ 70,116$ 70,116$ 921,504$

Total Legal / Insurance Expense 21,739$ 61,542$ 722,722$ 219,222$ 217,722$ 217,722$ 217,722$ 217,722$ 67,722$ 67,722$ 67,722$ 67,722$ 2,167,005$

HR / Benefits Expense 572,342$ 520,477$ 668,581$ 628,271$ 598,958$ 575,058$ 555,138$ 540,802$ 529,333$ 487,458$ 487,458$ 489,458$ 6,653,331$

Total Communications & Events 72,219$ 111,978$ 88,830$ 88,080$ 88,830$ 88,080$ 55,873$ 52,080$ 52,080$ 52,080$ 55,295$ 55,295$ 860,722$

Total Educational Administration Expense 1,643,313$ 1,657,307$ 1,277,063$ 600,722$ 982,055$ 1,254,799$ 1,322,999$ 1,089,337$ 1,263,026$ 1,314,814$ 1,252,227$ 1,271,724$ 14,929,386$

Total Administrative Expenses 419,274$ 918,424$ 648,212$ 213,700$ (2,186,198)$ 467,930$ 640,474$ 235,625$ 376,002$ 362,604$ (191,575)$ 389,199$ 2,293,672$

Total Expenses 9,099,999$ 9,605,969$ 8,971,810$ 6,119,781$ 4,182,272$ 7,166,735$ 7,340,011$ 6,607,211$ 6,789,664$ 6,777,308$ 6,239,721$ 6,741,501$ 85,641,982$

Running Expenses 9,099,999$ 18,705,968$ 27,677,778$ 33,797,559$ 37,979,832$ 45,146,567$ 52,486,577$ 59,093,788$ 65,883,451$ 72,660,760$ 78,900,481$ 85,641,982$ TOTAL ACTUAL REVENUE 7,863,508$ 6,539,908$ 6,125,721$ (865,099)$ 2,841,806$ 5,660,913$ 5,784,556$ 4,039,596$ 5,285,733$ 5,411,930$ 5,327,345$ 5,168,597$ 59,184,513$

TOTAL ACTUAL RUNNING REVENUE 7,863,508$ 14,403,415$ 20,529,137$ 19,664,038$ 22,505,844$ 28,166,757$ 33,951,313$ 37,990,909$ 43,276,641$ 48,688,572$ 54,015,917$ 59,184,513$

Monthly Surplus (Deficit) (1,236,491)$ (3,066,061)$ (2,846,089)$ (6,984,880)$ (1,340,466)$ (1,505,822)$ (1,555,455)$ (2,567,615)$ (1,503,931)$ (1,365,378)$ (912,376)$ (1,572,905)$ (26,457,468)$

Running Surplus (Deficit) (1,236,491)$ (4,302,552)$ (7,148,642)$ (14,133,521)$ (15,473,988)$ (16,979,810)$ (18,535,265)$ (21,102,879)$ (22,606,810)$ (23,972,188)$ (24,884,564)$ (26,457,468)$

Ending Cash Balance 16,996,158$ 13,930,097$ 11,084,008$ 4,099,128$ 2,758,661$ 1,252,839$ (302,616)$ (2,870,230)$ (4,374,161)$ (5,739,539)$ (6,651,915)$ (8,224,819)$

Change in Cash

(26,457,468)$

Assumptions:

1. Cash Balance as of June 30, 2017: 18,232,649$

2. July and August reflect Actual results;

3. Revenue reduced by clawback and 13% hold each month.

4. Staff - Admin cuts made in November: 0

5. Staff - Teacher cuts made in November: 0

6. Staff - Admin pay reduction: 0%

7. Technical consulting estimated at $130k Sep through Nov, then drops to $76k.

8. To get to June 2018, results reflect receipt of Security Deposits from PNC in November and May.

9. FY 2018 expenses: 85,641,982$

10. To make it to June 2018, reduce expenses by: 8,304,719$

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Updated: 9/24/17 7.2% 8.2% 5.0% 12.6% 5.7% 5.6% 4.7% 9.1% 6.0% 5.0% 3.3% 22.0% 94.5%

Enrollment Rate: 2.1% 8.4% 21.7% 14.3% 10.8% 8.1% 5.5% 9.1% 7.9% 8.9% 5.9% 1.0% 103.8%



TOTAL REVENUE 7,863,508$ 6,539,908$ 6,125,721$ (865,099)$ 2,841,806$ 5,660,913$ 5,784,556$ 4,039,596$ 5,285,733$ 5,411,930$ 5,327,345$ 5,168,597$

Running Revenue 7,863,508$ 14,403,415$ 20,529,137$ 19,664,038$ 22,505,844$ 28,166,757$ 33,951,313$ 37,990,909$ 43,276,641$ 48,688,572$ 54,015,917$ 59,184,513$



Total K-12 Expenses 1,622,170$ 1,673,113$ 1,448,644$ 1,126,291$ 489,044$ 501,494$ 489,044$ 489,519$ 489,044$ 492,084$ 613,294$ 489,044$ 9,922,785$














Total Educational Administration Expense 1,643,313$ 1,657,307$ 1,277,063$ 600,722$ 667,174$ 939,918$ 1,008,118$ 774,457$ 948,145$ 999,933$ 937,346$ 956,844$ 12,410,339$

Total Administrative Expenses 419,274$ 918,424$ 648,212$ 213,700$ (2,186,198)$ 467,930$ 640,474$ 235,625$ 376,002$ 362,604$ (191,575)$ 389,199$ 2,293,672$

Total Expenses 9,099,999$ 9,605,969$ 8,971,810$ 6,119,781$ 3,241,464$ 6,188,302$ 6,331,477$ 5,574,597$ 5,737,786$ 5,742,720$ 5,110,788$ 5,612,568$ 77,337,263$

Running Expenses 9,099,999$ 18,705,968$ 27,677,778$ 33,797,559$ 37,039,024$ 43,227,326$ 49,558,803$ 55,133,400$ 60,871,187$ 66,613,907$ 71,724,695$ 77,337,263$ TOTAL ACTUAL REVENUE 7,863,508$ 6,539,908$ 6,125,721$ (865,099)$ 2,841,806$ 5,660,913$ 5,784,556$ 4,039,596$ 5,285,733$ 5,411,930$ 5,327,345$ 5,168,597$ 59,184,513$


Monthly Surplus (Deficit) (1,236,491)$ (3,066,061)$ (2,846,089)$ (6,984,880)$ (399,658)$ (527,389)$ (546,922)$ (1,535,001)$ (452,054)$ (330,790)$ 216,557$ (443,972)$ (18,152,749)$


Ending Cash Balance 16,996,158$ 13,930,097$ 11,084,008$ 4,099,128$ 3,699,470$ 3,172,080$ 2,625,159$ 1,090,157$ 638,104$ 307,314$ 523,871$ 79,900$

Change in Cash

(18,152,749)$

Assumptions:



3. Revenue reduced by clawback and 13% hold each month.

4. Staff - Admin cuts made in November: -65

5. Staff - Teacher cuts made in November: -175




9. FY 2018 expenses: 77,337,263$

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John R. Kasich, Governor Paolo DeMaria, Superintendent of Public Instruction

25 South Front Street Columbus, Ohio 43215 education.ohio.gov

(877) 644-6338 For people who are deaf or hard of hearing, please call Relay Ohio first at 711.

September 28, 2017 VIA EMAIL AND CERTIFIED MAIL Brittny Pierson Superintendent Electronic Classroom of Tomorrow (ECOT) 3700 South High Street, Suite 95 Columbus, Ohio 43207 Dear Ms. Pierson, This letter informs you of the statutorily required final full‐time equivalency (FTE) determination that the Ohio Department of Education made for ECOT’s 2016‐2017 school year. Based on the information provided by ECOT to the Department for the 2016‐2017 school year and in accordance with Ohio Revised Code 3314.08(H), the Department has made a final determination that ECOT’s FTE is 11,575.47, which is 18.5 percent less than the 14,203.03 FTE reported by ECOT. The reasons for this determination are outlined below. Pursuant to ORC 3314.08(H), the Department conducted a final FTE review for ECOT July 18‐20, 2017, which included reviewing log‐in and log‐out records and non‐classroom documentation for a sample of ECOT students. During the FTE review, the Department was not able to match the documented computer‐based learning opportunities and non‐computer, non‐classroom learning opportunities to the data reported by ECOT to the Department in EMIS for the students in the sample. Subsequent to the on‐site review, I requested you provide the durational time that ECOT sought to claim for each of its students for funding purposes in a letter dated Monday, July 31. This included: 1) a spreadsheet that showed, for each student, the total computer‐based time and (separately) the total non‐computer based time that ECOT is claiming for funding purposes that each of those students participated in learning opportunities during the 2016‐2017 academic year, as well as the resulting percent of time factor for each student; and (2) more detailed information for the sample of 50 students showing the total time on each day during that student’s enrollment period at ECOT that ECOT is claiming, for funding purposes, that the student participated in learning opportunities. The Department also requested ECOT submit updated EMIS information by Monday, Aug. 14. On Tuesday, Aug. 8, the Department received information from you based on the July 31

request. Following our review of that information, the Department met with you on Friday, Aug. 11 to discuss the files that ECOT provided. As a result of those conversations, and ECOT’s acknowledgement that the manner in which the data was provided did not allow the Department to validate the summary data with the granular student data, ECOT provided revised data on Sunday, Aug.13.

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Correspondence to Brittny Pierson Page 2 of 3 September 28, 2017

While ECOT corrected the calendar for the 2016‐2017 school year prior to the close of the EMIS data reporting window, ECOT was not successful in submitting updated data that could be supported with the durational data provided to the Department. Following a review of the information provided on Aug. 13, the Department, again, met with ECOT on Tuesday, Aug. 22 with additional questions and discussion about the methodology used to compile the data. ECOT agreed to provide additional information about the systems used, the internal controls in place and a revised file with claimed durational time. The Department received that file on Wednesday, Aug. 30 and used the data as the basis for the final determination. Based on the remaining documented time, the Department matched the records for 22,755 unique students to data reported in EMIS. Only seven students were not listed in the data provided by ECOT. As such, the Department extrapolated the final FTE number to determine the overall reduction in FTEs. In the records the Department was able to match, the FTE reported in EMIS totaled 14,197.64 FTEs. After analyzing the records provided by ECOT, the Department determined that this only amounted to 11,574.98 FTEs. The Department then extrapolated the final FTE number to determine the overall reduction in FTEs, as noted in the attached spreadsheet. The FTE review was conducted in accordance with: 1) ORC 3314.08(H)(3), which includes a statutory requirement that the Department determine each

student’s percentage of “full‐time equivalency” based on “learning opportunities” offered to the students;

2) ORC 3314.08(H)(2), which provides that for purposes of that section and (H)(3) and (H)(4) of that section, learning opportunities shall be defined in the contract with the sponsor, which describes both classroom and non‐classroom‐based learning opportunities and shall be in compliance with criteria and documentation requirements for student participation established by the Department;

3) ORC 3314.03(A)(11), which requires schools to provide learning opportunities to a minimum of 25 students for a minimum of 920 hours per year; and

4) ORC sections 3301.08(H)(3) and 3314.27, which prohibit a student from participating in more than 10 hours per day.

Since learning opportunities can come in many forms, the August 2016 FTE Handbook serves as guidance for staff on how to conduct the reviews. As noted on pages 15‐17 of the handbook, it requires the FTE reviewers to verify that an e‐school has maintained student attendance records, as specified in the school’s written policy. Page 16 of the handbook further instructs reviewers to check the individual attendance record for each student whose record was pulled for the review. This final determination was based on the records provided by ECOT to the Department that documented durational participation time for internet‐ and/or computer‐based learning opportunities as well as non‐classroom, non‐computer‐based learning opportunities. In accordance with ORC 3314.08(K), ECOT has ten (10) business days from the receipt of this letter to appeal this determination to the State Board of Education. Upon receipt of notice of appeal, the State Board of Education, or its designee, shall conduct an informal hearing on this matter within thirty (30) days of receipt of the request for an appeal and must then issue a decision within fifteen (15) days of the conclusion of the hearing. Any decision made by the State Board of Education is final. No adjustment will be made for 2016‐2017 until ECOT exhausts its appeal rights.

Correspondence to Brittny Pierson Page 3 of 3 September 28, 2017 As indicated in my July 31 letter, because the FTE review did not substantiate the percentage of time ECOT claimed for its students in 2016‐2017 (as was also the case for the 2015‐2016 academic year) but nonetheless continues to claim a percentage of time factor of 100 percent for its students for the current academic year, the Department will continue withholding funds from the going‐forward FTE‐based payments for this academic year. In particular, the Department will withhold 18.5 percent of ECOT’s FTE‐based payments to reflect the amount of funding that ECOT is likely to be able to substantiate for its students for the current academic year. The Department will hold these funding adjustments until the completion of the 2017‐2018 final FTE review, or such earlier time as the Department is able to verify the accuracy of the information (including the percent of time element) that ECOT is reporting in EMIS. This adjustment is separate from, and in addition to, any adjustments made based on findings from FTE reviews for previous academic years. The Department is committed to ensuring that all community schools receive their correct funding and that community schools are providing the educational services and programming for which Ohio taxpayers are paying. Finally, because of the problems identified in the 2016‐2017 FTE review, please be advised that ECOT will receive an FTE review in FY18 for the 2017‐2018 school year. We will continue to work with you and your sponsor to offer technical assistance to address FTE‐related issues as they arise. Please feel free to contact the Department with any questions you may have.

Sincerely,

Aaron Rausch Director, Office of Budget and School Funding cc: Apryl Morin, Director of Community School, ESC of Lake Erie West (letter only)

Paolo DeMaria, State Superintendent of Public Instruction Diane Lease, Chief Legal Counsel Kelly Berger‐Davis, Assistant Chief Acct. and Auditing, Auditor of State (letter only)

Updated: 10/2/17 7.2% 8.2% 5.0% 12.6% 5.7% 5.6% 4.7% 9.1% 6.0% 5.0% 3.3% 22.0% 94.5%

Enrollment Rate: 2.1% 8.4% 21.7% 14.3% 10.8% 8.1% 5.5% 9.1% 7.9% 8.9% 5.9% 1.0% 103.8%



TOTAL REVENUE 7,863,508$ 6,539,908$ 6,125,721$ (2,636,642)$ 2,386,454$ 4,354,749$ 4,474,476$ 2,830,008$ 3,986,535$ 4,103,658$ 4,025,155$ 3,877,822$

Running Revenue 7,863,508$ 14,403,415$ 20,529,137$ 17,892,495$ 20,278,949$ 24,633,698$ 29,108,174$ 31,938,183$ 35,924,718$ 40,028,376$ 44,053,531$ 47,931,353$



Total K-12 Expenses 1,622,170$ 1,673,113$ 1,448,644$ 1,126,291$ 489,044$ 501,494$ 489,044$ 489,519$ 489,044$ 492,084$ 613,294$ 489,044$ 9,922,785$














Total Educational Administration Expense 1,643,313$ 1,657,307$ 1,277,063$ 388,110$ 612,525$ 751,031$ 818,761$ 597,160$ 760,094$ 810,793$ 748,936$ 769,804$ 10,834,897$

Total Administrative Expenses 419,274$ 918,424$ (956,061)$ 131,022$ (2,214,576)$ 393,408$ 565,790$ 165,087$ 301,767$ 287,994$ (265,933)$ 315,312$ 61,507$

Total Expenses 9,099,999$ 9,605,969$ 7,369,001$ 5,941,990$ 3,304,254$ 6,034,247$ 6,149,444$ 5,392,461$ 5,519,017$ 5,508,106$ 4,821,907$ 5,326,142$ 74,072,537$

Running Expenses 9,099,999$ 18,705,968$ 26,074,969$ 32,016,958$ 35,321,212$ 41,355,459$ 47,504,903$ 52,897,365$ 58,416,382$ 63,924,488$ 68,746,395$ 74,072,537$ TOTAL ACTUAL REVENUE 7,863,508$ 6,539,908$ 6,125,721$ (2,636,642)$ 2,386,454$ 4,354,749$ 4,474,476$ 2,830,008$ 3,986,535$ 4,103,658$ 4,025,155$ 3,877,822$ 47,931,353$


Monthly Surplus (Deficit) (1,236,491)$ (3,066,061)$ (1,243,279)$ (8,578,631)$ (917,800)$ (1,679,498)$ (1,674,968)$ (2,562,453)$ (1,532,482)$ (1,404,448)$ (796,752)$ (1,448,320)$ (26,141,184)$


Ending Cash Balance 16,996,158$ 13,930,097$ 12,686,817$ 4,108,186$ 3,190,386$ 1,510,889$ (164,080)$ (2,726,533)$ (4,259,015)$ (5,663,463)$ (6,460,215)$ (7,908,535)$

Change in Cash

(26,141,184)$

Assumptions:



3. Revenue reduced by FY16 clawback, 18.5% beginning October 2017 and 18.5% clawback of FY17 state revenue beginning in December 2017 (24 months).

4. Staff - Admin cuts made in November: -65

5. Staff - Teacher cuts made in November: -175




9. FY 2018 expenses: 74,072,537$ $0 Cash bal at 6/30/18: Cut $7.9 million from FY18 expenses on top of staff cuts.

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