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? 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.
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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.
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 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.