A r c h i v e d  I n f o r m a t i o n

Finance and Fundraising

Finance issues pose some of the greatest challenges to policymakers and charter school operators. As with traditional schools, charter schools are financed in complex ways. Unlike traditional schools, many charter schools have authority over their entire budget. In addition, charter schools often draw students from outside their home district's attendance boundaries and are sometimes treated as a school district or a separate entity. These distinctions are beginning to shake up well-established school finance systems and are raising questions about funding levels, funding sources and the distribution of federal, state and local dollars.

Like all other public schools, charter schools can be eligible for federal program funding, especially under Title 1 of the Elementary and Secondary Education Act and the Individuals With Disabilities Education Act (IDEA), which appropriate more than $10 billion nationally. Although there has been concern that charter schools have not received an equitable share of these funds, a recent Government Accounting Office survey⁴ shows that more than two-thirds of charter school operators believe they received an equitable amount.

Barriers created by state funding based on prior year's enrollment, problems in formulating student eligibility data, the costs of accessing funds relative to the amounts that charter schools receive and other time constraints, however, limit charter schools' ability to pursue or receive funds from these programs. Further, the legal designation of charter schools has some influence on the allocation of Title 1 and IDEA funds. If a charter school is legally part of the local school district, then the local education agency has some discretion in allocating these funds to individual schools within the district, and funding amounts are dependent upon the local school board's formula. If the charter school is treated as an independent school district or chartered by the state education agency, however, this money goes directly to the charter school.

When developing or redefining charter legislation, state policymakers should consider the following finance factors.

Considerations:

Funding Approach

Typically, state education dollars are distributed to districts and then allocated to schools. With charter schools, policymakers must determine whether charter schools will receive money directly from the state, another sponsoring agency, the local district or a combination of these approaches. The flow of funding usually is determined by what agency or entity sponsors the charter school. In Connecticut, for example, a state-sponsored charter school receives direct funding from the state; a locally sponsored charter school receives its funds from the district.

Options to consider include the following:

1. Receive funding directly from the state.

• If charter schools are to be autonomous, funding should be allocated directly to the school.

2. Receive funding from the sponsoring agency (district or otherwise).

• Charter schools are experimental and need funding oversight from the sponsoring agency.

Per-Pupil Expenditure

State leaders must decide how to and who will determine the per-pupil expenditure for charter schools. Charter schools receive either the average district (or state) expenditure or less. Some charter schools supplement their basic funding with grants or donations and money from federal categorical programs (e.g., special education, compensatory or bilingual), although some charter school operators question whether they receive their full and fair share of these dollars.

1. Per-pupil expenditure level set by state (based on state average).

• Basing per-pupil expenditure on the state average furthers equivalence with other schools in the state.

2. Per-pupil expenditure equals district average.

• If charter schools are to be compared to other public schools and held to the same standards, they should be given equal resources to achieve their goals.

• Less funding and fewer resources provide students and parents with a disincentive to attend a charter school, or for a public school to convert to charter school status.

3. Per-pupil expenditure is a set percent of the district average.

• If charter schools can produce more with less, important lessons can be transferred from the charter school experience to district public schools.

• Districts should retain a percentage of per-pupil expenditure for administrative services to charter schools.

4. Per-pupil expenditure is negotiated between the district and the charter school.

• To reflect the varying financial constraints facing districts, funding levels should be negotiated between each charter school and district.

Start-Up Costs and Planning Grants

In several surveys, charter school operators (especially in new schools) indicate that funding for start-up and planning activities would greatly improve the viability of their schools. To date, only a few states have earmarked funds for these purposes and provide grants or low-interest loans. The federal government has established a fairly significant grant program to give charter schools a "strong start."

Options to consider include the following:

1. Start-up and planning grants should be available to charter schools.

• Planning grants help strengthen charter school petitions, setting a stronger foundation from the onset and increasing the chance for the school's overall success.

• Lack of start-up funds has been cited by charter school initiators as the most difficult obstacle to overcome in the creation of a charter school.

2. No start-up or planning money should be provided in statute.

• All schools are able to raise money (except through tuition) to supplement their budgets. Charter schools should not be given special consideration.

Facilities

Although some charter schools are able to lease buildings at a fairly low cost, locating and paying for adequate facilities can be a significant barrier. Adding to the problem is the fact that new charter schools rarely have a financial track record or assets that enable them to secure loans to lease or buy a building. Further, many charter schools do not have access to local district funds levied for capital purposes and must use a portion of their operating funds for facilities. One of the only states to designate funding, Arizona passed a major school facilities bill in 1997, which includes $4 million to assist charter schools. In addition, Minnesota became the first state to designate funds for yearly lease assistance. Arizona, Delaware and others have tried to ease the facilities problem by publishing a list of vacant district buildings that may be suitable for charter schools.

Consider the following options:

1. Funds to secure facilities should be provided to charter schools just as they are provided for other public schools.

• Charter schools generally are forced to pay facilities costs out of operating budgets. Public schools have separate budgetary provisions to address these costs.

• If charter schools are provided with assistance to secure an adequate building, the schools can spend more time and money on teaching and learning.

2. Assistance to secure facilities should not be provided.

• Providing facility assistance to charter schools will substantially increase the cost of implementing charter school legislation.

• Charter schools would have a distinct advantage over local schools in competing for students if they had assistance to acquire modernized facilities.

Temporary Financial Assistance for Loss of Students to Charter Schools

The financial effect of students entering and exiting local districts may provide a disincentive to districts to accept charter school petitions. Temporary financial assistance (provided by Massachusetts, Ohio and Pennsylvania) attempts to rectify this problem by alleviating the costs of students entering and exiting a district's public schools for the first year. This is accomplished through per-pupil allotments and grant programs for local school districts to offset their per-pupil expenditure losses when students transfer to charter schools.

Consider the following options:

1. Provide temporary financial assistance to districts.

• Districts suffer financially due to the budgetary effect caused by the shift of any student to a charter school.

• Without this assistance, districts have a financial disincentive for accepting charter school petitions.

2. No temporary financial assistance should be provided.

• A temporary assistance program raises the costs of implementing charter school legislation.

• The financial assistance would be better used to provide resources directly to charter schools.

Noninstructional Services

Many states do not specify how charter schools will provide such services as school lunches, payroll, transportation or custodial work. Since districts typically have not determined a per-pupil cost for these services, price negotiation with charter schools is somewhat complicated. Florida's charter bill, for example, specifies that districts cannot charge charter schools a rate greater than actual cost. If necessary, Rhode Island's commissioner of education can settle price disputes between districts and charter schools.

Consider the following options:

1. No special provisions should be made to provide charter schools with services.

• Because charter schools have the power to negotiate and test the market, the district should be able to price itself as it sees fit.

2. Special provisions regarding services should be specified.

• As public schools, charter schools should not be charged more than other local schools.

Fundraising

Charter schools in all states can accept gifts, donations and grants. Documenting the amount charter schools receive beyond general funding allocations is somewhat difficult because charter schools may not be required to report all of this funding. For example, Washington, D.C. requires that charter schools report only donations of $500 or more. Wyoming specifies that charter school fundraising efforts be compatible with the mission of the district.

Consider the following options:

1. No restrictions on charter school fundraising should be legislated.

• Given the financial constraints charter schools face for start-up costs and facilities, any assistance private or public should be allowed.

• Public schools have the ability to raise funds; charter schools should have the same option to increase their total budgets.

2. Some restrictions on fundraising are necessary.

• If charter schools can raise unlimited funds, the transfer of innovations may be difficult to replicate in regular public schools that have fewer financial resources.

Transportation

In Massachusetts and several other states, charter schools must provide the same transportation as other public schools to children in the district where the charter school is located. Other states, however, do not address student transportation or require that this responsibility be included in the charter school petition. Transportation is less likely to be a problem in conversion schools because of the existing district infrastructure.

Consider the following options:

1. Transportation for children residing in the district where the charter school is located should be provided by the district.

• To provide equal opportunity for all students to attend a charter school, fair and accessible transportation must be made available.

• By making transportation the district's responsibility, funds a charter school might have to spend on transportation can be used for instruction.

2. A transportation plan should be outlined in the charter school application.

• Given the variability in number and type of students served by charter schools, each school should negotiate its own transportation concerns with the sponsoring entity.

• If other entities can sponsor charter schools (e.g., state boards of education, colleges), the responsibility for transportation should fall on the sponsoring entity, not the district where the charter school is located.

[Appeals]

[Autonomy]

This page was last updated January 9, 2002 (jca)