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Charter Funding in New York: An Update

The debate over fiscal equity between district and charter schools in New York is as old as the state’s charter school movement. Charter advocates point to funding shortfalls and other discrepancies while skeptics argue that charters are over-funded. With the state’s current fiscal crisis and next year’s funding freeze on both district foundation aid and charter school per capita funding, the topic has a renewed energy.

As this debate has always contained more heat than light, Robin Jacobowitz (then with New York University’s Institute for Education and Social Policy) and I set out to understand the issue with some methodological vigor (at the time, I served as Director of Charter Schools for the New York City Department of Education). The result was this 2004 paper that has survived the test of time, as some charter advocates will attest. For charter schools in New York City, we found some modest funding gaps that varied by grade level and student ability. Moreover, with the recent shift of “categorical funds” into state “foundation aid” and the placement of many City charter schools in Board of Education facilities, any inequities are further reduced and in no way consistent across the City’s charters.

As we scratched beneath the surface we exposed some analytical challenges. If we had compared charter expenditure to district expenditure, we might have over-estimated charter resources due to the private philanthropy they receive. Had we compared district budgets (i.e. revenue) to charter revenue, we might have missed changes in district expenditure due to mid-year budget modifications.

In the end, we compared New York City school district expenditure (year-end and audited) to charter public revenue during the same fiscal year. This comparison allowed us to test our central question of equity: how does public support for City charter schools compare to what the school district actually spends?

Given that support to charters comes in many forms, we took care to account for local, state, and federal dollars and to also include the value of in-kind services provided by the school district to charters. Once we had a handle on this bundle of charter resources, we still had to identify an apples-to-apples comparison group within the school district, with good reason. A school district typically spends more to educate a student who requires full-time special education services than on other students. Districts also have different spending patterns across elementary, middle, and high school grades. Moreover, the composition of any one charter school’s student population, in terms of disability and grade level, may or may not reflect the system-wide demographics.

To be sensitive to these very real differences, we posed a series of questions: how does the bundle of charter school resources for general and part-time special education compare to the district’s system-wide average expenditure on similar students?[1] How does the bundle compare for full-time special education? And across grade levels?

The results were interesting. Although we determined that “charter schools have fewer public resources than traditional public schools,” the disparities were not as great as many had claimed. For general and part-time special education, we identified a 4.8 percent gap in operating dollars, meaning that the public resources provided to a charter to educate these types of students was about 5 percent less than expenditure in district schools. Interestingly, there was virtually no gap for full-time special education, where we found a mere .3 percent difference. We also ran the analysis across grade levels and student type. The largest charter shortfall was a 9.3% gap for elementary, full-time special education. Surprisingly, and after accounting for the provision of local special education dollars, charters had a 17.9% advantage when compared to high school, full-time special education operating expenditure in district schools.

Although our paper is now five years old, we believe it’s still a sound approach to bring clarity to an important and at times complex issue. Moreover, we’ve learned some new things since we first wrote. For example, we had originally identified state categorical funds as a central cause of fiscal disparities. These were special purpose dollars to fund such programs as early-grade class size reduction and to educate English language learners. At the time, charters were unable to access these resources, which we estimated at about $360 per pupil. But in the recent settlement of the Campaign for Fiscal Equity, the strings came off these funds and they now make their way into a district’s state foundation aid, onto the City’s expense reports, through the charter funding formula, and into a charter school’s coffers.

Although a full accounting for these newly accessible funds requires a new analysis with updated figures, we can estimate their impact by adding the categorical dollars into the bundle of charter resources from our original paper. Doing so further reduces the funding gap for charter school general education to an inconsequential 0.6 percent. For full-time special education across all grade levels, charters gain a modest 1.1 percent advantage over district schools.

The flow of categorical funds to charters appears to erase the operating discrepancies we first identified. Importantly, these gaps are narrowed without any other adjustments to the funding formula. Nonetheless, questions of equity remain. For example, some charter school funding streams (such as state excess cost aid for special education and Title 1 dollars) are sensitive to actual student populations. But the transfer of state categorical funds to district foundation aid suggests that charters now receive a system-wide per-pupil average of these funds, regardless of whether charters educate more or fewer of such students (as a percentage) than the district. The low numbers of English language learners enrolled in City charter schools may indicate that some charters are over-funded in this area.

Another issue that we set to the side was a comparison of specific kinds of district and charter expenditures. This was intentional, as we defined equity merely as a charter and district school having comparable resources that might be spent in different ways. We felt this was in keeping with a charter’s autonomy and ability to innovate. But there are at least two topics here that merit discussion.

The first pertains to a school’s major “cost factors,” meaning those big categories of spending such as salaries, benefits, administrative overhead, supplies, and materials. As the charter funding formula passes along the school district’s average expenditure in each area, charter schools may have higher or lower costs, depending on the factor. For example, an unaffiliated, “mom and pop” charter may have higher administrative costs than the school district average, simply because it does not have any economies of scale; the recent growth of Charter Management Organizations and other service cooperatives may be a response to this expense. By comparison, some charter schools may not offer health and retirement benefits that are as costly as those provided by the city—and in the process realize a comparative savings.

The second topic that we gave brief mention to in our paper is the issue of facilities costs. Throughout our paper and in this update, we’ve diagnosed equity in terms of operating revenue, meaning those programmatic dollars and expenses related to classroom instruction, management, salaries and supplies. For some, this made our story incomplete. How could we discuss equity if we did not explain how a charter school was to put a roof over its head?

In fairness, we acknowledged that the district’s expenditure on leases and capital debt service “is not passed on to charter schools as part of their per pupil resources.” This left charters with a choice of using operating funds or private philanthropy to cover facilities costs. But since the time we wrote, a third option has presented itself—the use of publicly-provided space. At present, two-thirds of the City’s charter schools are located in Board of Education buildings or are participating in the City’s charter school capital grant program. More charters are proposed to move into public space next year. Arguably, this option effectively levels the charter-district playing field, in a manner that should avoid misspending capital dollars in neighborhoods with relatively little capital need.

* * * * *

Given the dire fiscal crisis facing our state and nation and the recent actions taken by the New York State legislature to freeze school district foundation aid and charter school per-pupil funding, policymakers cannot avoid questions of equity. There are frequently calls to revise the charter funding formula, provide charters with access to building aid, and other suggested changes all made under the banner of equity. It was and remains our interest to see policies that give all public school students—district and charter—a fair chance at a meaningful education and the current fiscal constraints demand resource allocations that don’t steal from Peter to pay Paul. We have no doubt that our analysis can and should be improved and submit this update to prompt a thoughtful and methodologically rigorous discussion.

* * * * *

[1] At the time of the analysis, the New York City Department of Education did not disaggregate spending on students receiving general education services from those receiving part-time special education services.

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5 Comments:

  • 1 Sevangelista
    · Apr 9, 2009 at 8:03 am

    Thanks for your thoughtful update, Jonathan, but I’m concerned that you gloss over some critical facts at the end.

    I wouldn’t quibble with the finer details of your analysis, as I don’t know how to assess what has been added to state categorical aid and what taken away. Of course, knowing you personally, my bias is to believe you.

    However, your update smooths over the fact that charters will be taking a “double hit” thanks to this budget. Freezing the charter funding formula that you faithfully parse here for 2009-10 is not tantamount to freezing district school foundation aid not in 2009-10, but instead removing 100% of the gains made between fiscal year 2007 and fiscal year 2008, which probably includes a lot of the categorical changes you describe as benefiting charters.

    What the legislature has done is not (as you seem to characterize) freeze funding for all schools, but stop charters in time while actually increasing the overall state aid to district schools (as I understand it) thanks to the federal stimulus funds. The result is the certainty of teacher layoffs at charter schools across the state, and (at least, hopefully, but at this point likely) the preservation of jobs in district schools. Doesn’t sound like equity to me.

    More clarity on federal stimulus funds would help; will they eventually flow to charter schools as well as district schools? You would seem to argue that they should, but I’m not seeing evidence of that, not knowing how those funds are distributed to districts and unsure what the future looks like for the charter formula.

    On that note, what does this year’s arbitrary charter formula freeze mean for its future? Will it now be a 3-year lag instead of a 2-year lag from district spending? Will there be any opportunity to catch up the missing funding?

    When thinking of the legislature’s action this year, sometimes we charters, especially faculties represented by UFT members like Renaissance who don’t seem to have a voice in the union, feel like the wizarding community in Harry Potter when the Death Eaters are taking over the Ministry of Magic. It’s supposed to be helping us, but it’s trying to kill us!

    Thanks,
    Steven Evangelista
    Harlem Link Charter School

  • 2 leoniehaimson
    · Apr 9, 2009 at 10:43 am

    Are you aware of the fact that the DOE provides not only facilities for free to most charter schools, but energy, food, transportation and a host of other services as well — over and above their per pupil funding?

    Here is a list provided by DOE of the services and expenses provided free of charge to charter schools:

    School facility
    Utilities- heat/electricity
    Student transportation
    Food services
    District for Committee on Special Educations (CSE) Evaluations & Referrals
    Assessment & testing accommodations
    Safety & health services
    Technology integration and infrastructure
    Student placement and transitional services
    Human resources (limited)
    Integration policy (e.g. such as middle & HS choice process, promotion, shared space, etc..)
    Public hearings
    Serve as authorizing entity

    This combined with the fact that charter schools receive more than $12,000 per pupil , compared to an average of about $8000 per gened student that is sent to school level for traditional public schools, might lead one to conclude that charter schools actually receive a higher level of public support than traditional public schools.

    for more on this see our NYC public school parent blog, “Charter School Funding Per Child Much Higher Than Public Schools”

  • 3 Phyllis C. Murray
    · Apr 10, 2009 at 6:24 pm

    Notes from a Chapter Leader’s Journal

    By Phyllis C. Murray

    “Teaching is a difficult, demanding craft. Under optimum conditions of meaningful teacher education, good mentoring, strong supervisory supports, appropriate professional development and a safe, orderly school, it takes a minimum of three years to master the fundamental skills of teaching.”Leo Casey UFT

    Leo Casey is right. However, after three years, many of our gifted teachers leave with their master degrees and the incalculable skills and abilities which they have honed while working in our Hunts Point school. They leave and… off they go into the wide horizon. Several of the teachers have become assistant principals, law students, or teach in charter schools or the suburban schools of Westchester County. We wish them well. And we cheer them on because others will benefit from their skills and abilities and talents. All is not lost.

    Presently, the debate which surrounds charter schools continues. For example: In the Department of Education’s Evaluation of the Public Charter Schools Program, a Final Report released in 2003, found that, in the five case study states, charter schools were out-performed by traditional public schools in meeting state performance standards, but noted: “It is impossible to know from this study whether that is because of the performance of the schools, the prior achievement of the students, or some other factor.”See Executive Summary-Evaluation of the Public Charter Schools Program: Final Report .

    Furthermore,”A study performed by the American Federation of Teachers, found that students attending charter schools tied to school boards do not fare any better or worse statistically in reading and math scores than students attending public schools.” See.”Nelson, F. Howard; Rosenberg, Bella, and Nancy Van Meter (2004). Charter School Achievement on the 2003 National Assessment of Educational Progress. American Federation of Teachers Institute of Education Sciences (December 2004). And lest we forget…

    Linda A. Renzulli and Vincent J. Roscigno, have reported that Charter Schools actually increase racial segregation.See Renzulli, Linda A.; Roscigno, Vincent J. (Winter 2007). “charter schools and the public good”. Contexts 6 (1): 31–36. ”

    Nevertheless, there are still gifted teachers who remain in our inner city public underfunded schools. These teachers know that they are working under less than optimum conditions than their former colleagues. Yet, they have chosen to remain. And even under the harshest conditions, while fighting to enforce the UFT contract, they take pride in the fact that they can make a difference in the lives of their students as they move many of the students from Point A to Point B. Thus, many of our former students, like our former colleagues, are on a new and different path to success.

    Moving students forward, takes an inordinate amount of energy. And at times, it becomes a constant struggle or hassle in a school complete with over-sized classes, loss prep periods, meager resources, and day-to-day imposed drama and trauma. These teachers know the challenge of being a teacher means:

    1. They must use their personal resources to invest in the lives of the students they serve.
    2. They must also work to enforce the UFT Contract by any means necessary.
    3. They must become New Yorkers: Resilient and Resourceful.
    4. They must press on!

    Our UFTers are truly heroes.

    Phyllis C. Murray

  • 4 But is the “Freeze” Fair? | Edwize
    · Apr 16, 2009 at 5:37 pm

    […] re-analysis of charter school funding in New York City prompted a number of comments and questions — the […]

  • 5 Smith32
    · Jun 26, 2009 at 3:46 pm

    Charter schools have been becoming more and more prevalent in recent years, and with this surge of new schools comes varying levels of successes. One of the reasons for the differing levels of success is the uniqueness of the charter school system. Each school has its own unique practices and principles that determine the focus of education; this causes large discrepancies between successful charter schools and unsuccessful schools. Twenty years after the debate over charter schools started, it is still unresolved. Overall, charter schools are beneficial to the students who attend them, but there needs to be some sort of regulation to ensure that all charter school students are successful.
    Charter schools have more potential to raise student achievement than public schools because they are not bound by the same restrictions as public schools. Some schools pay their teachers extra to work an extended school day, which logically would boost student achievement. If both the students and teachers are willing to put more time into their education, there is no reason why unions or public school guidelines should keep them from doing so. Charter schools can also offer specialized programs that might not otherwise be offered in public schools. This can improve the educational quality because of increased teacher and student investment in subjects that are meaningful to them. Charter schools are also allowed to adopt experimental school reform policies that might otherwise not have been tried. At the TEP charter school in Washington Heights, the designers allocated a majority of their funding towards raising teacher salaries in an attempt to hire only the elite teachers. Their belief is that a classroom with an exceptional teachers and limited resources is better than a classroom with less skilled teachers and more computers, lab equipment, and other resources. Charter schools have the potential to improve the educational system, but it is yet to be determined if they actually do.
    With the increased freedom of charter schools, there is less oversight and accountability. This decreases the amount of money wasted on administrative costs and opens up more efficient spending, but it also allows poor schools to go undetected. There are less regulations for teacher certification and student testing – which enables poor educational practices. Another drawback to this is that it can allow people with hidden agendas (religious, political, etc.) to start schools. In situations where education is not the first priority, students suffer. In order for the charter school system to work, there needs to be some sort of efficient, unbiased, and open-minded oversight and accountability.
    Charter schools can be a great asset to the educational community, however they must be held accountable for student achievement. They provide students with an alternative option to public schools and the decision to choose a school that specifically fits their needs. The freedom that charter schools have allows them to experiment with new educational policies. Unfortunately, this freedom enables dysfunctional schools to be started and to continue to run. Hopefully, the charter schools developed during the Obama administration will be functional, efficient, and most importantly, effective in raising student achievement.