The California Department of Education has held since at least 1997 that districts may not charge tuition for summer school classes (see Web Link). In 2012, the state legislature adopted AB 1275 codifying existing law and court rulings, as part of a settlement with the ACLU.
The law requires that the district make a reasonable effort to send refunds to all parents once it has determined that the tuition charges were illegal. The law does not contain a provision allowing the district to keep tuition payments unless parents explicitly request their return.
The legal issues ensnaring summer school tuition have been known to the district for at least a year. On April 10, 2012, Skelly sent the Board of Education a memo informing them that the City of Palo Alto had "concerns about charging for summer school"(see the file of "regular weeklies" at the PAUSD Public Records Act disclosure page). The City collects summer school tuition as a "fiscal agent" on behalf of PAUSD. As a result of the City's protest, the district stopped charging last year for high school classes bearing credit. That decision, Skelly estimated cost $200,000 in foregone tuition.
The 2012 summer school had $368,000 in tuition revenue, according to a report to the school board in October 2012 (see Web Link). There were 2,686 students, of whom 733 were elementary school students and 929 middle students. All of those students were charged tuition, except for those qualifying for fee waivers because of low income.