Article Last Updated: 1/29/2006

Charter school funding tight

State's not keeping pace with migrating students
By Celia R. Baker
The Salt Lake Tribune
Salt Lake Tribune
It sounds almost irresistible: a free public education that skips the bureaucracy of gigantic school districts and dodges the possibility that your child will be just a face in the crowd at a warehouse-like megaschool.
   Want innovative, personalized instruction for your child? Parental involvement? Localized decision-making? Maybe even smaller classes? At a charter school, you might get all those things. But as the number of charter schools increases, administrators are having more trouble paying their bills.
   If charter schools don't get a healthy infusion of state dollars - a $23 million increase is suggested - their future could be in jeopardy. But can the state's school budget sustain funding increases if the number of charter schools continues to grow?
   Projections indicate that nearly 19,000 Utah kids - that's 4 percent - will start the 2006 school year at a charter school, yet only a few hundred kids attended charter schools five years ago.
   All that growth has exposed cracks in the foundation of the charter-school funding system.
    Financial disadvantage: With increased numbers of schools, money sources are spread more thinly. Certain federal funds that support charter schools today will dry up in the next few years. Administrative costs are climbing, and schools are having a hard time financing facilities.
   Now, a new study by the Utah Foundation confirms what charter school administrators already knew: Current funding formulas put charter schools at a financial disadvantage when compared with traditional public schools.
"Utah struggles with the lowest funding in the nation, but charter schools receive even less [proportionally] than other public schools," said Stephen Kroes, executive director of Utah Foundation, a nonprofit research organization. "Nevertheless, charter schools are attracting an ever-growing student population, showing that many parents must be satisfied with their performance."
    Funding breakdown: There is general agreement that per-pupil funding for charter schools is too low, and that additional money is needed to address growth issues. But what are the long-term consequences of giving charter schools the fix they need? There isn't a simple answer.
   According to Kroes, charter schools received about $1,500 less per pupil than district schools in 2004, though a portion of that amount is justified by the nature of the schools.
   About $226 of the difference occurs because Utah's charter schools enroll so few disadvantaged students, exempting those schools from federal aid. The schools would qualify for the funds if they drew more students from disadvantaged groups - as charter schools in many other states do. But in Utah, charter schools tend to thrive in high-income, low-diversity areas such as Eagle Mountain, Alpine and Draper. Even schools that try to draw minority students in more diverse areas are having a hard time enrolling them, said state school board member Tim Beagley.
   Charter schools bypass another $100 in per-pupil funding because they choose not to offer applied technology programs and $115 per pupil because, by definition, they don't receive transportation funding - they have no school boundaries.
   But more than half of the disparity in per-pupil funding has to do with the state's formula for charter-school replacement funds, and that is where a genuine inequity exists, Kroes said.
   Charter schools receive replacement funds from the state because they cannot levy local property taxes, as districts can. A formula created by the 2003 Legislature determines the amount of such funding. Kroes says the formula is flawed, and officials in the state school office, such as state associate superintendent Patrick Ogden, say he is right.
   "The formula excludes over $100 million in district property taxes that should be counted in providing parity to charter schools," Kroes' study says. "In 2004, including these taxes would have provided $267 per pupil to charter schools."
   That's not the only problem with the formula. There is another shortfall because the replacement formula doesn't count state guarantees used to supplement local property taxes in districts with low property values. If the leeway guarantees were included in the replacement formula, $229 per pupil would have flowed to charter schools in 2004. Including Capital Outlay Foundation Funds - another source tapped by districts - would have provided another $56 per pupil to charter schools. And since the study was completed, other inequities have emerged, Kroes said. The formula counted donations received by the charter schools, but not those to district foundations.
   Finding a fix: To create parity in funding charter and traditional schools, the state school board is suggesting an annual increase of about $1,500 per student. A new formula for figuring the replacement funding will be presented to the Public Education Appropriations Subcommittee on Monday.
   The per-pupil increase will cost about $9 million, and money to offset next year's projected growth raises the request to $16 million. Add increases for start-up funding, reimbursement of property taxes paid indirectly by schools that rent buildings and growth-related administrative expenses, and this year's increase in funding for charter schools hovers around $23 million.
   It's not such a big number when you consider the total school budget is around $1.2 billion, Kroes says. He believes charter school students deserve parity with those in traditional public schools. Julie Adamic, director of Pleasant Grove's John Hancock Charter School, couldn't agree more.
   Adamic, a new member of the State Charter School Board, said that charter schools have had to compete for funding from a shrinking pot, making it hard to pay bills and creating an unhealthy spirit of competition.
   "I advocate more charters," Adamic said. "But every time I help one get started, it takes money from existing schools" - including her own.
   However legitimate the needs of charter schools may be, some feel that satisfying them will create problems within school districts. A previous Utah Foundation study raised the question of whether charter schools create "an inefficient parallel education system" that precludes economies of scale and duplicates expense for facilities.
   Also, students who leave districts to attend charter schools take money from districts when they leave, and force a general reduction in state revenue for all districts by taking money from the Uniform School Fund to finance the local revenue replacement fund.
   The revenue schools lose when a student leaves for a charter school is not entirely offset by reduced costs in most cases. As the number of students choosing charter schools increases, that could change, Kroes said.
   "Once the numbers get big enough and there's been a few years' time elapsed, the costs can wash out and the districts can adjust," Kroes said. Districts might even benefit: "Now we are seeing charters popping up in fast-growing districts and taking off pressures of growth," he added.
    Democratic Rep. Carol Spackman Moss, a schoolteacher from Holladay, thinks state funds are best used to improve the traditional public schools attended by most Utah students. She is not sure all charter schools are living up to their mission of educational innovation, and she worries about elitism at the schools.
   "Why should we create a small special class of students that get to have smaller schools and classes?" she asks. "Don't we want those things for all of our students?"
   Moss is sponsoring a bill to reduce class sizes to 20 in kindergarten through third grade, at a cost to the state of about $36 million for the extra teachers. Districts would be responsible for funding classrooms to house the extra teachers.
   Legislative fiscal analysts have raised the question of whether charter-school funding increases can be maintained if the number of schools continues to skyrocket. Associate superintendent Ogden isn't worried.
   "I don't see any need to slow the growth artificially," Ogden said. "I think we're coming to the end of the initial rush; the pent-up demand in the system will be satisfied soon. Our traditional schools are good, and there is no huge demand to flee them for something else."
   Kroes isn't worried either, but his reasons are different.
   "I don't see evidence that the demand is slowing down," Kroes said. "But monies in the Uniform School Fund are meant to help kids in the system. Charter school students are still public school students, and the money should follow them."
   Asking for more money
    Requests for increases in annual funding for charter schools totals $23.4 million:
   l $9 million to correct the replacement fund formula
   l $7 million to offset growth
   l $3.1 million to supplement federal start-up grants
   l $1.36 million to reimburse schools for property taxes passed on by landlords
   l $2.4 million to help schools with administrative costs
   l $0.6 million to Utah State Office of Education for additional staff and training programs
   l One-time request $2.1 million to help three science and technology charter high schools with costs of specialized equipment
    What is a charter school?
   Charter schools are alternative, taxpayer-funded public schools that are meant to offer unique learning experiences for students. Since Utah lawmakers authorized parents and others to organize and manage the specialized schools in 1998, 52 charters have been approved. Growth has been especially rapid since a cap on the number of charter schools was removed by the Legislature in 2004.