SACRAMENTO – Two of California's largest and oldest charter schools are suing the state after the Department of Education asked them to pay back millions of taxpayer dollars.

State education officials cut funding to the schools in April, citing concerns that the Southern California-based charters weren't spending enough money on their teachers and students while the schools' founders pocketed more than $4 million.

But Options for Youth, a nonprofit school, and Opportunities for Learning, a for-profit charter, allege in their lawsuit that the state hasn't set clear enough guidelines on how they should spend their money.

"It's like changing the rules in the fourth quarter," said John Hall, who runs both charters with his wife, Joan.

The schools, which offer independent-study programs for high school dropouts at about 60 school sites throughout the state, are asking a judge to block the cutback.

The lawsuit, filed yesterday in Sacramento County Superior Court, alleges that the State Board of Education failed to set up regulations required by law outlining how much money should be spent on teachers and students.

Charter schools are public schools run by private organizations. They don't have to follow many of the rules that govern regular schools, giving them more flexibility on how they spend their money.

In recent years, the charter operators have tried unsuccessfully to open charter schools in San Diego County, including in the Vista and San Diego Unified school districts, and Grossmont Union in East County and Sweetwater in South County.

Until a few years ago, independent-study and home-school charters received the same amount of money that regular schools did – about $5,000 per student.

That changed, however, in 2001, when the Legislature passed a bill by Superintendent of Public Instruction Jack O'Connell. The idea was that independent-study programs don't have the same overhead costs as traditional schools, so they shouldn't get as much money.

Now, independent-study schools that want state dollars have to turn in financial records showing why they deserve the money. While the majority of such schools – about 91 of about 119 schools – received full funding this year, the state Board of Education voted to cut funding for Opportunities for Learning and Options for Youth by 40 percent.

Those retroactive cuts mean the schools must repay nearly $15.4 million. Joe Budenholzer, the schools' chief financial officer, said the schools expected a 30 percent cut because their costs are lower.

Now, he said, the additional cuts will force them into a deficit.

To justify the cutback, state education officials point to the schools' high administrative costs during the 2001-2002 school year.

Of the nearly $37 million given to both schools, more than 55 percent went toward administrative costs. The Halls took home $122,000 each in annual pay plus more than $4 million in profits earned by Opportunities for Learning and its private management company.

State officials declined to comment yesterday.

School officials say they have since reduced the amount of money spent on administrative costs while boosting money spent on teachers and students during the 2002-2003 school year. Budenholzer said the schools now spend about 62 percent of their budget on teacher salaries and students.