He said a state hearing officer had determined that the Philadelphia School Reform Commission had violated a provision of state law enacted July 1, 2008, that said school districts could not cap enrollment at a charter school unless the charter agreed to it.
The district had maintained that caps were permitted because the charters agreed to the maximums when they signed the agreements. The Palmer charter, however, contended that the district had unilaterally imposed the cap.
"This is a big victory for education in general and for school choice in particular," said Walter D. Palmer, founder and board chairman of the charter school, whose main campus is at 910 N. Sixth St.
The school has 925 students from kindergarten through twelfth grade.
Jamilah Fraser, a district spokeswoman, said the district disagreed with the decision and would appeal in Commonwealth Court.
The acting secretary's ruling stems from administrative hearings in Harrisburg in December over the state funds that were withheld.
The state's charter law permits the department to divert money to charter schools when districts refuse to pay for their charter students.
The Pennsylvania Coalition of Public Charter Schools had backed Palmer's fight, and other city charter schools that have objected to the enrollment maximums viewed Palmer's dispute as an important test case.
"This will have a significant impact not only on Walter Palmer and other charters in Philadelphia, but on charters across the state," said Kevin McKenna, an attorney for Walter Palmer and several other charters.
Joseph T. Doyle, who also represented the charter school, said the ruling makes clear that caps could not be imposed after the law was changed in 2008.
Six other Philadelphia charters have suits pending in Common Pleas Court challenging their caps.
If the district appeals the secretary's ruling to Commonwealth Court, Doyle said, the charter would have no choice but to file a cross-appeal.
The cost to the district could be significant.
The district is facing a reported $40 million shortfall in its $3.2 billion budget for the fiscal year ending June 30 and a potential gap of between $400 million and $500 million after July 1.
At a SRC meeting two weeks ago, administrators cited the possible elimination of charter caps as one factor that would determine the size of next year's shortfall.
In his order, Tomalis said that the state would send the charter $1.3 million of a $1.7 million in state funds the department had withheld from the School District as a result of the enrollment dispute.
The remainder of the funds - for additional students that the charter school enrolled in 2007-08 - will be returned to the School District.
Palmer said he would have preferred to receive the entire contested amount but added, "A win is a win. You can't look at it any other way."
Lawsuits that both his charter school and the district had filed in state courts over the enrollment cap were put on hold, pending the outcome of the secretary's ruling.
"I think this would have significant impact on that litigation." Doyle said.
In June, the SRC allowed 17 charters to add a total of 1,042 students. At that time, commission members said they were trying to balance the needs of charters with the district's finances. The additional students cost the district $7.3 million this year.
The schools had requested approval for 9,000 additional students. More than 40,000 students are enrolled in 74 charter schools in the city.
Contact staff writer Martha Woodall at 215-854-2789 or firstname.lastname@example.org.