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THE STATE OF SOUTH CAROLINA

In The Supreme Court

Beaufort County Board

of Education, Respondent,

v.

Lighthouse Charter

School Committee and

State of South Carolina

ex rel. Charles M.

Condon, Attorney

General, Appellants.

Appeal From Beaufort County

Howard P. King, Judge

Opinion No. 24950

Heard April 20, 1999 - Filed June 1, 1999

AFFIRMED AND REMANDED

Dalton L. Oldham, of Southeastern Legal

Foundation, of Columbia; and George E. Mullen, of

Mullen Law Firm, of Hilton Head Island, for

appellant Lighthouse Charter School Committee.

Attorney General Charles M. Condon, Deputy

Attorney General Treva G. Ashworth, and Assistant

Deputy Attorney General J. Emory Smith, all of

Columbia, for appellant State of South Carolina.

Kenneth L. Childs, William F. Halligan, and John

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CHARTER SCHOOL COMMITTEE, et al.

M. Reagle, all of Childs & Halligan, P.A., of

Columbia; and David T. Duff and Charles J.

Boykin, both of Duff, Dubberly, Turner, White &

Boykin, L.L.C., of Columbia, for respondent.

MOORE, A.J.: This appeal involves the denial of a charter

school application. We affirm and remand to the circuit court for further

proceedings.

FACTS

On December 10, 1996, appellant Lighthouse Charter School

Committee (Lighthouse) applied to respondent Beaufort County Board of

Education (Beaufort Board) for approval of a local charter school under the

recently-enacted South Carolina Charter Schools Act of 1996. The

Beaufort Board found Lighthouse's application failed to meet several

requirements of the Act and denied the application. Lighthouse appealed

to the State Board of Education (State Board) which reversed the Beaufort

Board's denial.

The Beaufort Board filed an appeal in circuit court.1 The parties

consented to the intervention of the Attorney General who challenged the

constitutionality of a provision of the Act requiring that a charter school's

enrollment cannot deviate more than ten percent from the racial

composition of the school district. S.C. Code Ann.§59-40-50(B)(6) (Supp.

1998). The circuit court declined to address this constitutional question

and reversed the State Board's order on the remaining issues. Lighthouse

and the Attorney General appeal.

State Board's order and denied Lighthouse's motion to dismiss on the ground

the State Board was a necessary party to the appeal. We dispose of

appellants' appeal of these rulings under Rule 220(b), SCACR. See South

Carolina Tax Comm'n v. Gaston Copper Recycling, Corp., 316 S.C. 163, 447

S.E.2d 843, 844 n. 1 (1994) (appeal of a stay pending appeal is moot upon

disposition of the appeal on the merits); Owen Steel Co. v. South Carolina

Tax Comm'n, 281 S.C. 80, 313 S.E.2d 636 (1984) (ordinarily, absent a

statutory provision, an administrative review board is. not a necessary party

for purposes of judicial review).

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CHARTER SCHOOL COMMITTEE, et al.

DISCUSSION

LIGHTHOUSE APPEAL

1. Standard of review

An appeal of a local board decision regarding a charter school

application is to the State Board whose decision may then be appealed by

any party to the circuit court. S.C. Code Ann. §59-40-90(C)(2) (Supp.

1998). In the circuit court, the State Board's order, as the final agency

decision, is subject to review under the Administrative Procedures Act

(APA), S.C. Code Ann. §1-23-380(A)(6) (Supp. 1998), which provides for

reversal only if its findings are:

(a) in violation of constitutional or statutory provisions;

(b) in excess of the statutory authority of the agency;

(c) made upon unlawful procedure;

(d) affected by other error of law;

(e) clearly erroneous in view of the reliable, probative and

substantial evidence on the whole record; or

(f) arbitrary or capricious or characterized by abuse of

discretion or clearly unwarranted exercise of discretion.

This Court then reviews the circuit court's order to determine whether it

properly applied the APA standard of review.

In this case, the circuit court cites § 1-23-380(A)(6) as the

appropriate standard of review. Lighthouse complains, however, it did not

apply this standard of review and improperly gave deference to the

Beaufort Board's decision rather than the State Board's decision. We

disagree.

This case involves two levels of review. The State Board reviewed

the Beaufort Board's findings under Reg. 43-600.2 This regulation mirrors

decision regarding a charter school application to determine if it:

1. violated constitutional or statutory provisions;

2. exceeded the authority of the local board;

3. was based upon an error of law;

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CHARTER SCHOOL COMMITTEE, et al.

the APA's limited standard of review. On review of the State Board's

order, the circuit court concluded the State Board should not have

reversed the Beaufort Board's findings under its limited standard of

review because those findings were supported by evidence in the record.

In determining whether the State Board's findings were erroneous, the

circuit court properly applied §1-23-380(A)(6).,

2. Grounds for denial of application

The Charter Schools Act provides for a privately organized school to

be sponsored and funded by the local school district. S.C. Code Ann. §§

59-40-70(E) and -140 (Supp. 1998). A charter school is exempt from the

laws and regulations applicable to public schools except it must:

(1) adhere to the same health, safety, civil rights, and disability

rights;

(2) meet or exceed student attendance requirements;

(3) adhere to the same financial audits and procedures;

(4) be considered a school district for purposes of tort liability

(specifying that tort immunity shall not include acts of

intentional racial discrimination);

(5) hire non-certified teachers only in specified ratios;

(6) admit all children eligible for public school in that school district

providing (a) that the charter school's racial composition cannot

differ from that of the school district by more than ten percent

and (b) if applications exceed capacity, students shall be accepted

by lot;

(7) show no preference in admission except to siblings and children

of employees;

(8) elect a governing body annually by specified procedure;

(9) be subject to the Freedom of Information Act.

See º 59-40-50(B).

A charter school application constitutes a proposed contract with the

sponsor school district. S.C. Code Ann. § 59-40-60(F) (Supp. 1998).

Subsections 59-40-60(F)(1) through (15) specify exactly what information

record; or

5. was arbitrary or capricious.

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CHARTER SCHOOL COMMITTEE, et al.

must be included in a charter school application.

Finally, S.C. Code Ann. § 59-40-70 (Supp. 1998) specifies grounds for

denial of an application and provides in pertinent part:

(C) A local school board of trustees shall only deny an

application if the application does not meet the requirements

specified in section 59-40-50 or 59-40-60, fails to meet the

spirit and intent of this chapter, or adversely affects other

students in the district.

Lighthouse submitted an application outlining plans for a year

round, eight-hour-per-day school program. The school would be located on

Hilton Head Island and would accommodate 400 students in grades K-8.

At the Beaufort Board's request, Lighthouse also submitted answers to

eighty-four questions.

a) Section 59-40-50(B)

The Beaufort Board found Lighthouse's application did not meet the

health, safety, and civil rights requirements of § 59-40-50(B)(1) and the

racial composition requirement of (13)(6). The State Board reversed,

finding as a matter of law the requirements of § 59-40-50(B) need not be

met before an application is approved because this section does not specify

that the applicant must provide evidence of compliance in its application.

The circuit court reversed. Lighthouse contends this was error. We

disagree.

Section 59-40-70(C) specifically states that an application may be

denied if "the application does not meet the requirements specified in § 59-

40-50 or 59-40-60 Since the plain language of this statute provides

that denial of an application may be predicated on the failure to comply

with § 59-40-50, we affirm the circuit court's ruling that the Beaufort

Board properly considered the requirements of § 59-40-50(B) in denying

Lighthouse's application.

Further, as discussed below, the record indicates the Beaufort

Board's findings on the merits are not clearly erroneous or arbitrary

which, under Reg. 43-600, is the applicable standard of review on appeal

to the State Board.

1) Health and safety

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CHARTER SCHOOL COMMITTEE, et al.

The Beaufort Board denied Lighthouse's application on the ground it

did not meet the health and safety requirement specified in § 59-40

50(B)(1) which requires that a charter school shall:

adhere to the same health, safety, civil rights, and disability

rights requirements as are applied to public schools operating

in the same school district.

Specifically, the Beaufort Board found the schematic drawing of the

proposed building and the description supplied by Lighthouse3 were not

sufficient to determine that an adequate facility would be in existence by

the school's projected start-up time. When the Beaufort Board requested

assurance that Lighthouse facilities would meet state specifications,

Lighthouse responded simply: "Facilities for the Lighthouse Charter School

will be comparable to those of other Beaufort County Schools and will

meet all state health and safety specifications."

We find Lighthouse's summary assurances of compliance do not

constitute evidence of compliance with the health and safety requirement

of § 59-40-50(B)(1). No specifications were provided about the proposed

building from which to determine compliance with State requirements for

school buildings. Accordingly, the Beaufort Board's finding of non-

compliance is not clearly erroneous in light of substantial evidence that its

request for assurances of compliance were unmet.

2) Civil rights

The Beaufort Board found the Lighthouse application failed to meet

the civil rights requirement of § 59-40-50(B)(1) because it failed to comply

The start-up or initial Lighthouse Charter School building

will consist of modular units comparable to those used by public

school districts in South Carolina and the nation. It's anticipated

that within 3 years, i.e. the school year 2000, the Lighthouse

Charter School building will be a state-of-the-art facility of which

Beaufort and all of South Carolina will be justly proud.

Lighthouse Charter School administrative and classroom

equipment will be comparable to that available in other Beaufort

County Schools.

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CHARTER SCHOOL COMMITTEE, et al.

with the school district's 1970 desegregation agreement which requires

approval for new school facilities from the United States Department of

Education Office of Civil Rights. In response to the Beaufort Board's

request, Lighthouse asserted simply that it was not required to obtain

such approval.

The record contains a letter from the Director of the Office of Civil

Rights informing the local school district that a charter school must

comply with the reporting requirements under the district's voluntary

segregation plan. There is no evidence Lighthouse has satisfied the

mandates of the Office of Civil Rights. Accordingly, the Beaufort Board's

finding that the Lighthouse application failed to adhere to the same civil

rights requirements applicable to public schools as provided under § 59-40

50(B)(1) is not clearly erroneous in light of substantial evidence that

Lighthouse must comply with the desegregation agreement and has not

done so.

3) Racial composition

The Beaufort Board found the Lighthouse application did not meet

the racial composition requirement of § 59-40-50(B)(6) which provides in

pertinent part: "under no circumstances may a charter school enrollment

differ from the racial composition of the school district by more than ten

percent." Since Lighthouse failed to identify its prospective students,

racial composition cannot be determined and the Beaufort Board's finding

of non-compliance is not clearly erroneous. As discussed below, however,

the constitutionality of this provision must be determined on remand.

b) § 59-40-60(F)

The Beaufort Board found Lighthouse's application did not meet the

requirements of § 59-40-60(F)(6) which provides that an application shall

include:

evidence that the plan for the charter school is economically

sound, a proposed budget for the term of the charter, a

description of the manner in which an annual audit of the

financial and administrative operations of the charter school,

including any services provided by the school district, is to be

conducted.

The Beaufort Board found there was no evidence Lighthouse's economic

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CHARTER SCHOOL COMMITTEE, et al.

plan was sound because $248,495 of revenue included in its proposed

1997-98 budget was to come from fund-raising with no specific

commitments provided.

The record includes a proposed budget identifying revenue from

fund-raising of $248,495 in the first year and $143,013 in the second year.

Fund-raising revenue represents 12% of total revenue in the first year and

6% in the second year. These amounts are in addition to fund-raising for

school start-up and a permanent facility. The record also includes a letter

from Lighthouse to the Beaufort Board detailing grant applications for the

first year totaling $442,500. The award of these grants cannot be

determined until charter status is finalized. The letter also indicates

$50,000 for the first year from a fund-raising event.

The State Board, citing the same evidence as the Beaufort Board,

concluded the Lighthouse plan with the specified amount of fund-raising

was economically sound. The circuit court reversed.

Again, under Reg. 43-600, the State Board has a limited standard of

review on appeal from a local board's decision regarding a charter school

application. We find the Beaufort Board's decision rejecting Lighthouse's

reliance on speculative revenue from proposed fund-raising is not arbitrary

and is within the Beaufort Board's discretion. Accordingly, the Beaufort

Board's finding the plan is not economically sound should not have been

reversed under the standard of review set forth in Reg. 43-600. The

circuit court properly reversed the State Board's ruling on this issue.

c) § 59-40-70(C)

The Beaufort Board found denial was appropriate under § 59-40

70(C) which allows for denial of an application if it "adversely affects other

students in the district." It found an adverse effect from Lighthouse's

failure to identify prospective students since the budget impact on public

schools and faculty allocation in the district could not be determined.

Further, it found Lighthouse would be a "racially identifiable" school in

contravention of the desegregation agreement with the Office of Civil

Rights which would adversely effect other students in the district.

The State Board found it was an error of law to require Lighthouse

to identify its prospective students and there was no evidence it would not

be in compliance with the desegregation agreement. The circuit court

reversed.

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CHARTER SCHOOL COMMITTEE, et al.

We find the circuit court properly reversed the State Board's ruling.

It is not unreasonable to require Lighthouse to offer conditional enrollment

to prospective students if necessary to provide the Beaufort Board with the

required information. Further, there is evidence in the form of a letter

from the Office of Civil Rights requiring the school district to provide

information not supplied by Lighthouse before approval could be given

under the desegregation agreement. This evidence supports the Beaufort

Board's conclusion that Lighthouse's application did not comply with the

desegregation agreement. Although there is no evidence Lighthouse would

be a racially identifiable school as found by the Beaufort Board, the

evidence of non-compliance with the desegregation agreement supports the

finding of an adverse effect since, at a minimum, the school district would

be required to expend funds defending Lighthouse's non-compliance.4

In conclusion, we find the Beaufort Board's decision to deny

Lighthouse's application is not clearly erroneous or arbitrary under the

applicable standard of review. Accordingly, the circuit court properly

reversed the order of the State Board on these grounds.

ATTORNEY GENERAL'S APPEAL

The Attorney General intervened when this case was pending on

appeal to the circuit court in order to challenge the constitutionality of the

racial composition requirement of the Charter Schools Act found in § 59

40-50(B)(6), which provides:

(B) A charter school shall:

(6) admit all children eligible to attend public school in a

school district who are eligible to apply for admission to a

charter school operating in that school district, subject to space

limitations. However, under no circumstances may a charter

school enrollment differ from the racial composition of the

school district by more than ten percent. If the number of

applications exceeds the capacity of a program, class, grade

support for the charter school from African-American parents and students.

The State Board found no such support was required under the Act and

reversed this finding. The State Board's finding was affirmed by the circuit

court and is not challenged here. Accordingly, we do not address it.

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CHARTER SCHOOL COMMITTEE, et al.

level, or building, students shall be accepted by lot, and there

is no appeal to the sponsor.

(emphasis added).

The Attorney General asserted the underscored provision violates

equal protection. See Adarand Constructors, Inc. v. Pena, 515 U.S. 200,

115 S.Ct. 2097, 132 L.Ed.2d 158 (1995); City of Richmond v. Croson, 488

U.S. 469, 109 S.Ct. 706, 102 L.Ed.2d 854 (1989) (classification based solely

on race is subject to strict scrutiny, even when it is a "benign" or

"remedial: racial classification); see also Wygant v. Jackson Bd. of Educ.,

476 U.S. 267) 106 S.Ct. 1842, 90 L.Ed.2d 260 (1986) (applying strict

scrutiny). The circuit court declined to address the issue for two reasons:

1) the issue was not raised below and 2) the issue need not be addressed

because other grounds for denying the application were supported by the

evidence.

An administrative agency must follow the law as written until its

constitutionality is judicially determined; an agency has no authority to

pass on the constitutionality of a statute. South Carolina Tax Comm'n v.

South Carolina Tax Bd. of Review, 278 S.C. 556, 299 S.E.2d 489 (1983).

Accordingly, neither the Beaufort Board nor the State Board could have

addressed the constitutional issue which was therefore properly raised for

the first time in circuit court.

Further, although technically a ruling on the constitutionality of this

provision was not necessary to the immediate disposition of the case before

the circuit court, we find judicial economy dictates otherwise. Lighthouse

joined the Attorney General in contesting the constitutionality of the racial

composition provision. As acknowledged by the circuit court, Lighthouse

may re-apply for a charter upon correcting the deficiencies noted by the

Beaufort Board. Having raised the issue, Lighthouse is entitled to know

whether it must satisfy the racial composition requirement before re

applying. Accordingly, we remand this issue to the circuit court to address

whether § 59-40-50(B)(6) violates equal protection.

AFFIRMED AND REMANDED.

FINNEY, C.J., TOAL, WALLER, and BURNETT, JJ., concur.

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