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The future of well-known Orange County School of the Arts is up in the air amid a long running financial dispute with the Santa Ana Unified School District.
A court has ordered the charter school, known as OCSA, to pay $16 million in accumulated special education program costs from over a 20-year period. That amount is about a third of OCSA’s annual budget.
Having to pay the sum may put the school into a restructured bankruptcy, said OCSA Chief Executive and President Teren Shaffer.
“We’re now in a position where the reality is, if OCSA can’t settle this case with the district, that we would be forced into a bankruptcy restructuring,” Shaffer told the Business Journal in an interview.
Whether the school that is supported by some of Orange County’s best-known entrepreneurs and philanthropists will have to go into restructuring remains to be seen.
This month, OCSA offered to pay Santa Ana Unified $4 million to settle the lawsuit during a district board meeting. The $4 million would be paid over four years with the first $1 million payment made by June 30.
The deadline for the district to sign the agreement is May 21.
“While we haven’t been able to reach a solution yet, we are not giving up,” Shaffer said in a May 9 email sent to OCSA supporters.
“We are actively engaging with elected officials, community leaders and educational advocates to push for a reasonable compromise that will end this costly and unnecessary legal conflict and benefit the students and families of both OCSA and SAUSD.”
Popular Business Magnet
The school is a popular magnet in the business community like real estate developer Mike Harrah, who was instrumental in installing the school in Santa Ana in 2000.
Its board members have included Jim Conroy, former chief executive of Boot Barn, and Mohamed El Erian, former top executive at PIMCO who sent his daughter to the school, which created the El-Erian Family Acting Conservatory in 2021.
The school, which began in 1987 and moved to its Santa Ana campus in 2000, has attracted interest from businesses such as Huntington Beach’s McKenna Subaru, which has aired TV ads featuring OCSA students, and the Disneyland Resort, which hires parade performers from the school. It has developed relationships with companies that have donated tens of thousands of dollars of modern equipment to the school, including Buena Park’s Yamaha Corp. of America and Foothill Ranch’s Red Digital Camera.
Its foundation board has included well-known OC philanthropists like Julia Argyros and Susan Samueli. Its current sponsors include F&M Bank and the Balboa Bay Resort Club.
OCSA (pronounced OH-sha) has produced talented artists like Susan Egan, the original Belle in the “Beauty and the Beast” production on Broadway, and Pedro Pascal, the title character in the Disney hit, “The Mandalorian.”
“When I was at OCSA, I decided I could have a career in the arts,” Matthew Morrison, who was the star in the popular TV show “Glee,” says in a promotional video for the school.
Special Education Dispute
The dispute over the cost of special education programs began before Shaffer became CEO and president in 2021 following the retirement of OCSA founder and executive director Ralph Opacic.
Under a charter agreement, the district would quarterly reimburse OCSA for actual costs incurred for special education services and retain the additional funds. Between 2002 and 2020, OCSA was reimbursed for $8.8 million in services provided to students while the school district kept an additional $11 million from the federal government.
“We would incur the expense of running our special education program, and then we would quarterly invoice them for reimbursement,” he said.
“They got to keep whatever was left over to use within the school district, and on the flip side, if there was ever not enough money collected from the government (then) OCSA would be on the hook.”
Then in 2019, OCSA executives said they unexpectedly received an invoice from the Santa Ana school district for $19.5 million, demanding payment within 30 days.
“When informed of its delinquency in making contribution to district wide special education cost that exceed funding, only OCSA responded by steadfastly refusing to make any contribution and confirming they never intended to make any contribution to special education costs in the past, the present or the future,” the district said in a 2019 statement. Santa Ana Unified did not respond to requests for further comment.
Two judges initially agreed with OCSA. Then when the case moved to a court in Los Angeles, Judge Monica Bachner ruled in favor of the school district, which has reduced its demand to $16 million. OCSA, which accused the school district of shopping courts for a “favorable judge,” last year appealed the decision; oral arguments could begin later this month with a decision in the summer.
“We’re asking the court of appeal to reverse that decision, and in fact, say that when a school district makes an agreement, puts it in writing and ratifies it as part of a charter, they have to live up to their own terms,” OCSA boardmember and parent Halim Dhanidina told the Business Journal. “That’s really all we’re asking the court of appeal to say.”
Possible Bankruptcy
OCSA’s operating budget for the 2024-2025 school year was approximately $46 million, supported through a combination of state funding, federal resources and private contributions.
The tuition-free charter school provides regular academics throughout the day combined with pre-professional arts conservatory programs. It has five schools dedicated to music, dance, theater, fine and media arts and applied arts.
OCSA’s academic programs are funded by the state of California while the conservatory programs are entirely dependent on donations. OCSA estimates that it must fundraise more than $13 million every year to support the costs of its conservatory programs.
If OCSA were to lose the appeal, which the school has invested more than $3 million into, it would file for bankruptcy protection to restructure and create a plan that enables the school to remain fully operational.
No one will win if OCSA is forced into bankruptcy, Shaffer said.
“OCSA is the top charter school in the state and one of the top arts schools in the nation,” Shaffer said. “If we go into bankruptcy, it will hurt everyone, and the school district won’t be able to collect anything.”
Renascence Launches Arts Programs
Renascence School International, a relatively new private school that emphasizes learning three of the world’s most important languages—English, Spanish and Mandarin Chinese—has decided to take a page out of the Orange County School of the Arts’ playbook.
Renascence, which opened with 17 students in Irvine in 2011, has expanded its offerings to include arts conservatory programs in writing, performing arts, visual arts and integrated arts.
“We recently realized that language is a form of art,” Renascence founder and President Carrie Mizera told the Business Journal. “As we spend more time in Orange County, exposed to the arts and music, we realized that we can actually expand what we’re offering.”
Renascence recruited a five-person team to help develop the program, including Ralph Opacic, founder of OCSA.
The programs will add to Renascence model that aims to teach students subjects in different languages.
There will be an exploratory program for K-5 students with pre-professional conservatories for grades 6-8 and high school conservatory pathways for grades 9-12.
Renascence has already begun testing out the first two programs this year and plans to launch the high school conservatories in the 2026-27 school year. The school held auditions for the conservatories last month and accepted around 100 students across all five disciplines.
The school is at a temporary location in Irvine and has secured a new permanent building in Tustin. Mizera said there will be enough space for a dance studio, music room, library, media lab and more.