Adithya Sambamurthy/The Bay Citizen

Shelley Lobell, founder and executive director of the Erikson School, works with her students to move school supplies into storage on Wednesday, June 15, 2011

A plan to close a small school for children with severe behavioral problems is mushrooming into a larger battle over how the San Francisco Unified School District treats special-education students.

In recent months, the district signaled that it intended to end its 31-year partnership with the nonprofit Erikson School in the Bayview neighborhood of San Francisco and eventually reassign its 16 students to mainstream programs.

That would be just one of many such moves. Facing a $25 million budget deficit, the district intends to transfer all of its 6,000 special-education students into mainstream programs in the public schools over the next several years. The district spends about $122 million a year on special-education services.

The battle over Erikson, which has received $2.5 million during the last five years while operating rent-free out of buildings owned by the district, illustrates the challenges the district faces as it tries to put the controversial policy in place.

Representatives of at least eight students have taken legal action to prevent the district from placing their children in other schools, according to Shelley Lobell, the school’s founder and its executive director. Erikson administrators argue that district officials based decisions about the school on budget concerns, although a federal law requires districts to put students’ needs above all other priorities.

The dispute has grown increasingly ugly. Sylvia Hewlett, whose son attends Erikson, accused the district of falsifying a document used to determine her child’s education plan. The document provided details of a meeting with district representatives — including school placement recommendations — that Hewlett and a school administrator said never took place.

“I’m not going to take it lying down,”  Hewlett said. “This is my son. We’re talking about a child that needs these services.”

Cecelia Dodge, assistant superintendant for special education, said she could not discuss Hewlett’s allegations because the assessment reports, known as Individualized Education Programs, contain confidential student information.

Officials said that the district’s plans for Erikson were not based on budgetary concerns and that the district needed the space for a charter school.

But Dodge said it would be unrealistic to think that officials could ignore finances.

“If there ever has been any perception in the past that money is no object and that special education can make decisions without cost in mind, that should no longer be the way we operate,” Dodge said. “We need to be good stewards of the taxpayer’s money.”

Last summer, independent researchers hired by the district produced a highly critical audit of the district’s special-education programs. It found that many parents believed that the district was more concerned with controlling costs than with providing services. Officials pledged at the time to introduce sweeping reforms and begin integrating special-education students into mainstream classrooms, which they said would leave the students less isolated and would provide more support.

Erikson’s students, on average, attended seven schools before arriving at Erikson, according to Lobell. The staff is trained to restrain students when they become a danger to themselves or others.

In February, the district informed Lobell that Erikson would have to vacate its building this summer.

In April, the district said it would no longer provide a space for her program, according to Lobell.

The Hewlett assessment report, dated June 6 and reviewed by The Bay Citizen, states that Erikson’s contract will not be renewed. Lobell said the contract’s expiration would force her to close the school.

Still, Erikson administrators said they had found a tentative new location because they continued to receive conflicting signals over whether the district would renew the contract.

“One minute they say they are not going to do an agreement, then they backtracked when they realized that some of the parents were going to take legal action,” said Gregory Trevigne, Erikson’s principal.

On May 9, Ms. Lobell and Trevigne met with Dodge; Carlos Garcia, the district superintendent; and Maribel Medina, the district’s general counsel, to discuss Erikson’s future. They said they were stunned when Medina said the district was making student placement decisions based on budget concerns.