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But is the “Freeze” Fair?

My re-analysis of charter school funding in New York City prompted a number of comments and questions — the theme of which pertained less to the substance of the post and instead focused on the state legislature’s decision to maintain charter school per-capita funding for fiscal year 2010 at 2009 levels. Given what we know about the charter funding formula and the state’s fiscal condition, readers have asked (with varying degrees of urgency) “is the charter funding freeze fair?”

Fundamentally, any freeze is unfair to students, particularly when it translates into program cuts due to rising fixed costs. It’s unfair to students in charter schools and it’s unfair to students in district schools.

Similarly, the lack of facilities financing for charter schools exacerbates this problem for the 26 (or about one-third) of the City’s charters not located in a publicly-provided space (although a handful of these are in private space by choice).

Moreover, decisions that treat district schools differently from charter schools are also unfair. To judge if this occurred in this year’s state budget, some context is required.

The funding freeze forestalled a scheduled 8 percent increase in charter per-capita funding, or about $30 million across the City’s charters. By comparison, state “expense aids” to school districts were increased to cover transportation and building costs. Most — but not all — charter schools will benefit from this increase, as charters’ receive free transportation services and as two-thirds of City charter schools are located in Board of Education buildings.

Although expense aids were increased, next year’s state “foundation aid” to school districts is frozen at its current-year level. In a typical budget, foundation aid increases by at least 3 percent to help defray rising fixed costs; as such, this freeze roughly translates into a $200 million cut to the City school district. Moreover, a remaining $415 million in what was primarily Campaign for Fiscal Equity funding scheduled for New York City was also deferred for at least two years, given reports of declining state revenue.

Unfortunately, it is unlikely that the City can restore these state cuts through its own taxing authority, given its own budget shortfalls. District schools incurred two mid-year budget cuts last year. From January 2008 and into fiscal year 2010, the euphemistically-named “Programs to Eliminate the Gap” (PEGs) total $1.6 billion in additional cuts to city schools.

Are these two sets of circumstances — the charters’ funding freeze and the district’s foundation aid freeze, PEGs, and CFE deferral — comparable? Charter advocates make two dissenting arguments. First, they reason that the time delay embedded in the charter funding formula entitles charters to the 8 percent increase; charters are only now “catching up” to City schools that have already realized this increase in funding.

Although I am inclined to be sympathetic to this argument, my original analysis and update did not find that charters were “lagging behind” the district. In fact, we found little to no operating disparities despite the technicalities of the funding formula. (This may be a result of the formula’s inflation factor.) Moreover, the scheduled 8 percent increase in charter funding does not appear to mirror any exceptional increases in recent district spending (as has been claimed); 8 percent is the average annual increase in charter per capita funding since the first charter opened in 1999.

Charter advocates further argue that anything that happens to the district budget today will wend its way through the charter funding formula and affect charter coffers two years from now. On this I think they’re right, and it is a call to action. Simply, funding for charter schools should be changed to avoid such a redundancy; now that we’re effectively all in the same (fiscal year) boat, we’ve got to stay together. But changes should also achieve greater equity across schools that educate students of varying needs and abilities. And changes should finally level the facilities playing field for the remaining schools in private space (and not there by choice). What follows are some suggestions on places to start and pitfalls to avoid:

1. The percentages of charter school students who are disabled, English language learners, and severely poor differ from the district’s demographics. State excess cost aid for special education services does a good job in adjusting for these differences, but the same cannot be said for English language learners or students in poverty. Limited English Proficiency funding is passed along to charters according to the district-wide average, regardless of a charter’s particular enrollment. Similarly, charter schools receive Title I funding for any student eligible for free- or reduced-price lunch whereas City schools must first exceed a free-lunch threshold to access the same federal dollars. Much like the intention of the City’s Fair Student Funding, steps should be taken to achieve greater financial sensitivity to student needs, within the charter sector and across the City.

2. Not surprisingly, much has been made about rising pension costs (in general) for the eleven charter schools (specifically) that participate in the City’s Teachers Retirement System (TRS). There is no doubt that the cost is sizable; the 2009 employer contribution rate is 30 percent of salaries. But this is not an area of charter-district inequity. Specifically, participating charters contribute at the same percentage rate as the City. These City contributions are recorded as expenditures that make their way through the charter funding formula and on to the charters. By this logic, charter schools are adequately funded to participate in TRS (and those charters that don’t participate in TRS are allowed to re-direct this funding to other purposes).

Nonetheless, improvements should be explored. Might it be preferable for individual charters to have a contribution rate separate from the City’s, to better reflect the actual financial obligations generated by each school’s faculty? Is the state pension system a viable alternative? Should participation in TRS be financed off of a charter’s books, much like the arrangement for New Jersey charters? And as with any changes in a charter’s pension expenses, adjustments to charter revenue may be appropriate. Regardless of such options, we shouldn’t under-estimate the role of the pension in attracting and retaining teachers to the eleven participating charter schools and the value in leveling the benefits playing field.

3. The exclusion of debt service from the charter funding formula and the inability of charters to access state building aid leaves charter without facilities financing. But merely providing charters with building aid is probably not the right way to go. Informed decisions on how to spend public dollars for capital development need to consider a range of factors including demographic trends, population densities and the distribution and upkeep of existing buildings. Such considerations require a centralized analysis that would not occur if a charter were merely given a per-capita allotment for space.

By comparison, the co-location of charter and district schools is a better approach, as it seeks to maximize the use of existing public buildings that have amenities such as a gym, library, and science labs (although there are serious questions about the City’s process for identifying and deciding on these co-locations). Nor is this approach unique to charters or a mere stop gap measure: as Deputy Chancellor Chris Cerf noted in testimony before the City Council, one-half of the city’s 1,500 public schools are located in shared-space. When existing facilities are at capacity, the inclusion of charter schools in the City’s capital plan offers another alternative. And where appropriate, the City could renegotiate and assume those charter school leases that were signed prior to the availability of public space.

None of these ideas is as straightforward as the existing funding formula or a simple per-capita allotment for facilities. But they are necessary considerations if we aim to achieve greater equity across all public schools and for the students they enroll.

For the past ten years of the state’s charter movement, these issues slumbered beneath the surface. Although today’s financial alarm has brought them to the fore, will the debate stay mired in the politics of institutional destruction? It’s my hope that we instead move the state’s charter sector, and the many UFT members working in them, toward an equitable and sustainable future.

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