Important New Study Shows How Charter School Expansion Ruins School District Budgets

Across West Virginia, Oklahoma, Kentucky, Arizona and Colorado, school teachers have been striking all spring to call attention to their miserably low salaries and consequent teacher shortages in their states. Teachers have also been showing us the deplorable conditions in their schools—elimination of librarians and nurses—swelling class sizes and outrageous caseloads for school counselors.

The teachers’ mass walkouts have alerted us to the impact of the great recession on states’ revenues and especially to the all-Red states that have continued to cut taxes even as their state education budgets collapsed.

But there are other contributing factors to the crisis to which teachers have been calling our attention. This morning, In the Public Interest (ITPI) released Breaking Point: The Cost of Charter Schools for Public School Districts, an important and very readable report on another primary contributor to school districts’ financial woes: the massive growth of charter schools in the past two decades.  The report’s author, political economist Gordon Lafer is familiar with attacks on public education and the promotion of privatization across many of the all-Red states.  He authored the notable 2017 book: The One Percent Solution: How Corporations Are Remaking America One State at a Time.

Here is the pithy summary blurb by which ITPI introduces its new report, which explores charter school growth in three California school districts as examples of a much wider problem for school districts across the country: “In a first-of-its-kind analysis, this report reveals that neighborhood public school students in three California school districts are bearing the cost of the unchecked expansion of privately managed charter schools. In 2016-17, charter schools cost the Oakland Unified School District $57.3 million, the San Diego Unified School District $65.9 million, and Santa Clara County’s East Side Union High School District $19.3 million. The California Charter School Act currently doesn’t allow school boards to consider how a proposed charter school may impact a district’s educational programs or fiscal health when weighing new charter applications. However, when a student leaves a neighborhood school for a charter school, all the funding for that student leaves with them, while all the costs do not.”

What stand out in this report is the perfectly lucid explanation about exactly how charter school funding depletes the budgets of local school districts and what it means for the students left in the traditional public schools when some students carry their per-pupil funding away to a charter school: “To the casual observer, it may not be obvious why charter schools should create any net costs at all for their home districts. To grasp why they do, it is necessary to understand the structural differences between the challenge of operating a single school—or even a local chain of schools—and that of a district-wide system operating tens or hundreds of schools and charged with the legal responsibility to serve all students in the community.  When a new charter school opens, it typically fills its classrooms by drawing students away from existing schools in the district. By California state law, school funding is based on student attendance; when a student moves from a traditional public school to a charter school, her pro-rated share of school funding follows her to the new school. Thus, the expansion of charter schools necessarily entails lost funding for traditional public schools and school districts. If schools and district offices could simply reduce their own expenses in proportion to the lost revenue, there would be no fiscal shortfall. Unfortunately this is not the case.”

The report continues: “If, for instance, a given school loses five percent of its student body—and that loss is spread across multiple grade levels, the school may be unable to lay off even a single teacher… Plus, the costs of maintaining school buildings cannot be reduced…. Unless the enrollment falloff is so steep as to force school closures, the expense of heating and cooling schools, running cafeterias, maintaining digital and wireless technologies, and paving parking lots—all of this is unchanged by modest declines in enrollment. In addition, both individual schools and school districts bear significant administrative responsibilities that cannot be cut in response to falling enrollment. These include planning bus routes and operating transportation systems; developing and auditing budgets; managing teacher training and employee benefits; applying for grants and certifying compliance with federal and state regulations; and the everyday work of principals, librarians and guidance counselors.” As other studies have shown, the greatest fiscal burden for local school districts is for special education, because traditional public schools continue to serve the children with the most serious disabilities, the children who require expensive services most charters elect not to provide.

What about the problems in school districts where the school population is already shrinking?  In recent years charters have somehow been prescribed in places like Chicago and Detroit and Cleveland as a way to attract families to the district. But ITPI’s report explains why such thinking is flawed: “It is true that shrinking student populations cause a fiscal crisis for school districts. However, charter schools exacerbate this problem in unique ways. First, charter schools make it extremely difficult for districts to consolidate schools in the face of falling enrollment… When the creation of new schools is no longer tied to student population growth but rather is open to any number of entrepreneurs aimed at competing for market share, the inevitable result is an increased number of schools for the same population of students. In Albany, New York, over the course of a decade the district went from serving 10,380 students in 17 schools to serving just slightly more students—10,568—but in 24 schools…. And the New York Times reported that in the city of Detroit, ‘the unchecked growth of charters has created a glut of schools competing for some of the nation’s poorest students, enticing them to enroll with cash bonuses, laptops, raffle tickets for iPads and bicycles…’  The problem is particularly destructive in communities whose total school population is already shrinking…. In such districts school systems already struggling to meet student needs with diminishing resources are faced with additional dramatic cuts in funding.”

In California, ITPI estimates, “the net impact of each student who transfers from a traditional public school to a charter school to be approximately $5,000 in San Diego, $5,700 in Oakland, and $6,600 in the East Side (Santa Clara) district.”

In addition to reporting on this study’s investigation of three California school districts, ITPI reviews studies of charter growth across the country: “Because school funding formulas differ from state to state, and because the studies were conducted at different points over the past decade, the results vary significantly. Yet in every case, studies found that charter growth has caused school districts to suffer much more in lost revenue than they are able to make up in reduced expenses—resulting in large net shortfalls for district students.  In the smaller cities of Buffalo, New York and Durham, North Carolina, the net impact of charter schools was estimated at a loss of $25 million per year to each school district.  In Nashville, Tennessee, the loss is approaching $50 million per year.  And in Los Angeles—the nation’s second-largest school district—the net loss is estimated at over $500 million per year… While the magnitude of charter schools’ impact obviously varies by size of district, we can control for district size by converting the findings into impacts per charter students.  In that case, all of the studies described above found the net loss to school districts for each student who moves from a district to charter school to be somewhere between $3,100 and $6,700.”

Lafer, the report’s author, painstakingly explains his methodology for determining the financial losses to the school districts in Oakland, San Diego, and Santa Clara County, and the effects of California state law to deny local school districts the capacity to control their budgets even as more and more charters are approved. But for the purposes of this blog, what is most significant is the warning about the very idea of creating charters to introduce marketplace school choice even while causing fiscal distress for already underfunded school districts: “If a school district anywhere in the country—in the absence of charter schools—announced that it wanted to create a second system-within-a-system, with a new set of schools whose number, size, specialization, budget, and geographic locations would not be coordinated with the existing school system, we would regard this as the poster child of government inefficiency and a waste of tax dollars. But this is indeed how the charter school system functions.”

Please read this fine report from In the Public Interest: Breaking Point: The Cost of Charter Schools for Public School Districts.


After 17 Years, Local School Board to Replace State Oversight in Philadelphia

What will happen in  Philadelphia as Pennsylvania releases the school district from 17 years of badly bungled state control?

In a piece this week for Our Future, Jeff Bryant marks the emergence of the School District of Philadelphia from state oversight: “State control of Philadelphia’s schools came to an end in November 2017, when the state-imposed School Reform Commission (SRC), which governed the schools, voted itself out of existence…. The transfer of governing power is expected to be completed by June 30.”

The School District of Philadelphia has been a centerpiece of corporate school reform for years and years. The issues have always been money and the myth that privatization would relieve the state budget by establishing efficiencies to lower the expenses in the state’s largest and among its poorest school districts.

In 2000-2001, the state seized control of the district, established an appointed School Reform Commission to replace the locally elected board of education, and forced the resignation of Superintendent David Hornbeck. Reformers wanted test scores raised and deficits obliterated without having to increase the state budget to compensate for outrageous school funding inequity. At the time, writes Samuel Abrams in his fine book, Education and the Commercial Mindset: “The differences in per-pupil expenditure in Pennsylvania were indeed striking. While Philadelphia, for example, spent $7,944 per student in 2000-2001, the five school districts along the Paoli/Thorndale Line—traditionally known as the Main Line—of the region’s commuter rail system, taking suburbanites southeast into Philadelphia and back, spent, on average, $11,437 per student…. Philadelphia was, in other words, expected to educate its children spending 70 percent as much per pupil as the school districts of Great Valley, Haverford, Lower Merion, Radnor, and Tredyffrin-Eastown.  Making matters worse, children in Philadelphia came to school with many more needs than their peers in the leafy Main Line suburbs…. Over the previous five years for which data are available, Philadelphia spent, on average, 68 percent as much per pupil as its neighboring Main Line school districts.” (Education and the Commercial Mindset, pp. 100-101)

The state then contracted with Edison Schools, the private management company, to evaluate the future of the School District of Philadelphia. Edison prescribed abolishing the elected board of education, replacing it with an appointed School Reform Commission of which one of the five members would be appointed by Philadelphia’s mayor and the other four by the governor. The new SRC imposed turnaround plans on many schools. Edison Schools, according to the recommendation in its own study of the district, eventually took over management of 20 of the city’s public schools. Ironically Edison almost went broke trying to run schools while cutting costs to try to live up to what it had promised in an underbid. Education often costs more than privatizers promise. (Education and the Commercial Mindset, p. 136)

The School Reform Commission’s implementation of the plan has been problematic for two reasons. First, Philadelphia’s schools were drastically underfunded under state leadership by the tax slashing Governor Tom Corbett, and the rapid expansion of parasitic charter schools has undermined the host public school district.

Jeff Bryant describes the impact of austerity education budgeting by Corbett and his tax slashing legislature: “More budget cuts ensued after the recession of 2008 and the election of Republican Governor Tom Corbett in 2010, who cut about $860 million from public education in his first budget… By 2014, the condition of Philadelphia schools had become a national scandal.  Report after report recounted Philly schools with leaky roofs, busted windows, rodent and mold infestation, and no sports or athletic programs and no instrumental music classes.  Schools had to zero-out budgets for extracurricular activities, textbooks, and supplies. Most full-time school nurses, counselors, and librarians were let go, and class sizes ballooned to outrageous levels with 40-plus students in elementary classes and over 60 students in high school classes.”

And in 2012, the School Reform Commission hired the Boston Consulting Group to develop a Portfolio School Reform Plan that focused on closing schools and opening charters instead of increasing funding. Bryant describes the impact of rapid expansion of charter schools: “The booming market for charter schools in Philadelphia worsened the funding situation in the district schools… As public school money followed students moving to charter schools, at a cost of $8,569 per student, the public schools were unable to reduce costs due to staff, building and transportation fixed costs.”  Because the state reimburses schools at a flat rate for special education students, charters were able to skim off students with the least expensive disabilities, stranding blind and deaf students, and students with multiple handicaps in the public schools.

As the School District of Philadelphia emerges from state oversight in June 2018, it will be managed by a local school board appointed by the Mayor Jim Kenney. Bryant describes intense interest by local advocates suggesting names of potential board members: “A 13-member nominating panel made up of parents… educators, public school activists, former school officials, and local business and non-profit leaders has generated a list of 45 school board nominees from which Kenney will select nine appointees by the end of March.  The nominating panel received 500 applications… in less than two months and interviewed about 80 potential finalists.”

Among the challenges for the new local school board, however, will remain state government. While the state will no longer control the governance of the School District of Philadelphia, the state remains responsible for inequity that continues in school funding.  Although voters replaced Governor Tom Corbett with a Democrat, Tom Wolf, and although the legislature finally passed a new funding formula two years ago, the Philadelphia NewsMaddie Hanna reported last November that the state has chronically failed, despite state governance under the SRC, to address massive problems in Philadelphia: “(I)n the last decade, the amount of state money distributed to Philadelphia schools—about $1.5 billion—has remained nearly the same, when adjusted for inflation. In terms of per-pupil subsidy, Philadelphia ranked 225th among the common wealth’s 501 districts in the 2015-2016 school year; in 2010, it was No. 139.”

The new school board will also need to assess the role of Portfolio School Reform—the kind of plan that expands the number of charters even though charter schools in Pennsylvania operate as parasites eating their host.

In Blog Series, Bruce Baker Explores Issues at the Intersection of Money and Reform

Bruce Baker, professor of education finance and education policy and law at Rutgers University, is also the author of the Education Law Center’s annual review of school funding adequacy and equity across the states: Is School Funding Fair? A National Report Card. In his blog, School Finance 101, Baker explores issues of school funding fairness as well as other matters he is investigating for academic research.  At the end of October to launch a connected series of posts, At the Intersection of Money and Reform, he declared, “At times, this blog serves as a palette for testing/sharing ideas.  So… in this, and a rapid fire sequence of follow-up posts, I will share some excerpts of forthcoming, and early stage, in-progess work.”  What makes this series  so interesting is not only Baker’s summary of the history of the current state of school policy but also his dive into the research literature.

In the first post, Baker deftly discounts the often repeated myth that paying teachers based on their earning masters’ and doctors’ degrees and based on their years of experience fails to improve their students’ education and is, therefore, a waste of money. Reviewing the research literature, he concludes:  “To summarize, despite all the uproar about paying teachers based on experience and education… this line of argument misses the point… (T)he average salaries of the teaching profession, with respect to other labor market opportunities, can substantively affect the quality of entrants to the teaching profession, applicants to preparation programs, and student outcomes.  Diminishing resources for schools can constrain salaries and reduce the quality of the labor supply.  Further, salary differentials between schools and districts might help to recruit or retain teachers in high need settings.  In other words, resources used for teacher quality matter.”

Baker’s recent series then moves to several posts that explore primary policy concerns about the charter sector.  He begins Part II with a serious investigation of the idea that charter schools are more efficient: “The core assumption is that charter schooling improves efficiency because the flexibility afforded through chartering permits charter schools to engage in more creative teacher compensation strategies and technological substitution, such as trading small class sizes for efficient use of technology through blended and online learning. Further, efficiency improvement yielded by charter innovations creates competitive pressure on traditional public schools to improve.”  Are charters really more efficient?  Evaluating the research literature, Baker cites a study of “efficiency advantages” in Texas charter schools, and concludes: “(W)ork by these authors reveals that the lower overall expenses are largely a function of lower salaries and inexperienced staff… That is, compensation was held lower not because of creative technological substitution, or alternative compensation, but relative inexperience and high turnover.  Epple, Romano and Zimmer (2015) suggest that these patterns are similar across studies of charter school teachers. Thus, estimated efficiency gains, where they do exist, may rely on maintenance of high turnover and relatively inexperienced staff, a questionably scalable and sustainable option… By and large, charter schools that spend more appear to spend more providing competitive compensation for their teachers, offering longer school days and school years, and maintaining smaller classes, while those that spend less do so by maintaining inexperienced staff and high turnover.”

Baker’s next post investigates how the hybridized public/private governance of charters affects the accountability of the schools and impacts their capacity to protect the rights of students, teachers, and taxpayers.  “(T)he U.S. Constitution prohibits the government or its agents from violating individuals’ rights to free speech, due process, and freedom from unreasonable searches. Therefore, students and employees in public schools maintain these constitutional rights.  In contrast, students in schools run by private entities, or employees engaging in contractual arrangements with private entities (the Charter Management Companies) may not enjoy the same protections.  In many of these cases, employment contracts or school discipline policies provide employees or students (and their parents) only the rights guaranteed under private contract law.”  He wonders about weak state laws that fail to prevent conflicts of interest between charter boards and their management companies: “Maintenance of public accountability relies on the presumption that any charter school’s (or any business entity’s) board of directors is sufficiently independent of the contracted private management company that it may sever ties with that contractor and seek alternatives for school management, if necessary.”  “The multiple layers of private school operations and management, governing boards of private citizens, and in some cases, authorization by private entities, presents far greater opportunity to shield documents and avoid constitutional and statutory protections in the charter sector.”

A follow-up post provides Baker an opportunity to explore the difference between two charter models—portfolio and parasite. “In the portfolio model, a centralized authority oversees a system of publicly financed schools, both traditional district operated and independent, charter operated…. A very different reality of charter school governance , however, has emerged under state charter school laws—one that presents at least equal likelihood that charters established within districts operate primarily in competition, not cooperation with their host, to serve a finite set of students and draw from a finite pool of resources.  One might characterize this as a parasitic rather than a portfolio model—one in which the condition of the host is of little concern to any single charter operator…”  Not necessarily won over by the rhetoric of collaboration said to be embedded in a “portfolio” model and condemnatory of the “parasitic” model , Baker explores the damage likely to result when a school district is expected to support a dual system: the traditional  public schools and a growing charter sector.  He describes advocacy organizations like Bellwether Education Partners (which advocates for rapid growth of charters and the subsequent death of traditional public school districts) and other charter school advocates who merely stress that “charter expansion causes no financial harm to host districts.”  Both are mistaken, writes Baker, based on the research from Moody’s Investor Services that “charter schools pose the greatest credit challenge to school districts in economically weak urban areas.” The problem, he writes, is that school districts have fixed costs that cannot be minimized as individual students opt through school choice to leave for charter schools. “In addition, numerous studies find that charter schools serve fewer students with costly special needs, leaving proportionately more of these children in district schools.”

Baker calls the last post in his series a “musing”:  “It is important to acknowledge that charter school market shares are not, in recent years, expanding exclusively or even primarily because of market demand and personal/family preferences for charter schools.  Traditional district public schools are being closed, neighborhoods left without options other than charters, district schools are being reconstituted and handed over to charter operators (including entire districts), and district schools are increasingly deprived of resources, experience burgeoning class sizes, reductions in program offerings sending more families scrambling for their ‘least bad’ alternative.  These are conscious decisions of policymakers overseeing the system that includes district and charter schools.  They are not market forces, and should never be confused as such.  These systems are being centrally managed without regard for equity and adequacy goals or the protection of student, family, taxpayer and employee rights, but instead, on the false hope that liberty of choice is a substitute for all of the above (including, apparently, loss of individual liberties.).”

I hope you’ll read Baker’s posts which summarize academic studies that explode the mythology being circulated by those who promote privatization and seek to undermine traditional public schools and discredit school teachers.  Baker believes that public schools governed by public boards of education are the institutions most likely to serve the needs and protect the rights of our nation’s children.