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Charter schools raise question of cost

By Brian Reed

Point Park News Service

Referring to statewide controversy involving charter school funding formulas, public school lobbyist Ron Cowell likes to point to disparities in educational costs that, in some cases, have resulted in a difference of over $12,000 per year in spending on a single child.

CAH Lincoln1123 3That issue and others caused former State Auditor General Jack Wagner to claim in 2012 that taxpayers could be wasting as much as $365 million annually.

“There is a clear absence of any sort of alignment between what many charter schools are paying to educate their students and what they are actually getting from our home districts,”  said Cowell, president of the Education Policy and Leadership Center, a Harrisburg-based organization that lobbies for the interests of school districts.

These issues have been well known to legislators as well as school district and charter school officials for years.

While numerous Harrisburg legislators have proposed bills in efforts to resolve the problems, none has been enacted – leaving parties on all sides saying there will be no quick end to the disparities.

“It will be an uphill battle, and I have watched many previous efforts to reform charter schools and many other areas of education in Pennsylvania that have never materialized,” said Paul Schott, Gateway School District business manager and board treasurer. “I don’t react to any new legislation until it is finalized.”

Long-term Problems

Although the charter school concept got its start nationally during the late 1980s and early 1990s, charter schools have been legal in Pennsylvania since just 1997. Pennsylvania now hosts over 170 charter schools – 16 of which are cyber charters – with an enrollment of approximately 105,000 students statewide.

Current parameters for charter school funding formulas were established with the founding of the state’s first charter schools. That, according to Wagner – now a candidate for Pittsburgh mayor – is where the problem began. Wagner did not respond to attempts to contact him for this story.

According to Wagner’s report, the commonwealth has been funding its charter schools and cyber charter schools using an “inefficient statutorily set formula.”

The formula sets a per-student tuition rate based on the estimated cost to educate the student in his or her home district rather than estimating the actual amount the charter organization would pay to educate.

Wagner explained that without a correct statewide formula, all of Pennsylvania’s 500 districts will continue to pay varying tuition rates to the same charter organization. This issue is in addition to problems with funding for special needs programs, and it is what the former Auditor General deemed a “double-dipping” loophole.

The loophole involves charter schools’ ability to receive two forms of funding for the same expense.

Cowell, a former Democratic member of the State House of Representatives, says the issue could be resolved by setting a statewide rate for charter tuition.

“Using the current system, two students from different districts can attend the same charter school in Pennsylvania and that charter school can get $8,000 per year for one student and $20,000 per year for the other,” Cowell said. “There is simply no relationship between the funding provided by the districts and how much charter schools are actually spending to educate their students.”

Many legislators and public school officials are concerned that any funding that exceeds what it actually costs charter schools to educate their students can result in huge budget surpluses for charter organizations.

Jeremy Resnick, the founder and dxecutive director of Propel Schools—a nonprofit charter organization that operates nine schools in the greater Pittsburgh area—said that fiscal efficiency has always been a hallmark of his charter school organization.

“We spent $12,500 per student last year and we delivered, what we believe to be, a much higher quality education to our students,” said Resnick. “Compare that to the Pittsburgh Public Schools who paid $21,000 per student.”

Amanda Hartle, a spokeswoman for the North Hills School District, said that her district pays $10,436 per student specifically for ordinary cyber charter tuition, and $19,952 for cyber charter students with special needs.

“It obviously costs us more to educate our students than it does at a cyber charter school,” said Quaker Valley School District spokeswoman Tina Vojtko. “I think that much is clear.”

Vojtko explained that her district pays among the highest charter school tuition rates in that state at $13,466 per student; that number increases to $23,274 for students with special education needs.

These numbers do not change regardless of whether the student attends a brick-and-mortar charter or a cyber charter school.

“[Cyber Charter Schools] don’t have the same costs for things like transportation,” Vojtko said. “They don’t have to heat their schools, keep the lights on, things like that.”

Double-Dipping Costs More

Wagner’s report also claims the current formula creates a loophole that allows for “double-dipping” related to retirement benefit withholdings.

Currently, retirement benefit payments are included in the tuition payments districts make to charter schools, but Wagner’s report says that charter school laws also allow them to collect direct payments from the state for the exact same purpose, hence “double-dipping.”

Wagner explained that closing this loophole could result in an estimated savings to taxpayers of at least $50 million annually.

The report also states that, compared to the national average, Pennsylvania spends approximately $3,000 more per student to educate in a brick-and-mortar charter school and $3,500 more per student for cyber charters.

Wagner believes that creating a consistent tuition rate based on actual costs to educate at the charter level would bring rates closer to that of similar-sized states; the report estimated that doing so could save taxpayers approximately $315 million annually.

Coupled with the $50 million savings resulting from fixing the loophole, Pennsylvania taxpayers could be saving a total of $365 million annually.

Special Needs Issues Change

Critics of the current formula, including Wagner, also cite issues with the way expenses for educating special needs students are established.

Once a student leaves a traditional district school for a charter school, they are often “reclassified” according to Wagner’s report, and can be deemed in need of special education services. The charter school is solely responsible for making that determination.

After it has been determined that additional services are needed, the home district is fully responsible for the additional expenses regardless of whether the student used any such services prior to attending the charter school.

“If a student doesn’t require special services in a district school, then he or she is later determined to need special services or an IEP [Individualized Education Program] on the charter level, the district is simply sent a bill,” Cowell said.

In states such as Arizona and Michigan, debate over validity of special needs expenses on the charter level is nonexistent due to the fact that charter and cyber charter school funding rates are set statewide.

Cowell does say that despite the relevance of the issues in question, he is not at all suggesting that all charter schools determine their expenses in the same manner.

“You simply can’t apply or assume the same labels or criticisms across different schools,” he said.

John Wilson, business manager for the Norwin School District, said he agrees that various special needs can occasionally go undiagnosed for a period of time—dyslexia being a common example—at one school then discovered upon a second look, but he sees his district suffering from these additional financial demands.

“I’m sure some kids benefit from services charter schools provide,” he said. “Sometimes the environment might be better for their individual needs, but I think the burden on our entire district is unreasonable.”

Wilson explained that his district paid out approximately $850,000 in charter school tuition last year. Between one and two percent of Norwin’s students attend a charter program.

The cost of educating special needs students amounts to a disproportionately large expense in many districts in Western Pennsylvania.

The Wilkinsburg School District ranks the highest in actual expenditures for a child with special needs at $34,863 per special needs student, according to the Pennsylvania Department of Education.

This cost is incurred regardless of whether the student is “severely disabled” or only in need of more basic special services such as speech therapy.

Cyber Schools Rise Along With Costs

Although nonprofit organizations like Propel operate a number of brick-and-mortar schools, many districts have had significant numbers of students migrate to cyber charter schools such as the Pennsylvania Cyber Charter School (PA Cyber)—the largest of its kind in the state.

PA Cyber is differentiated from organizations like Propel, not only in the fact that the cyber organization does not operate brick-and-mortar schools, but also because PA Cyber is not a nonprofit organization.

Regardless of its organizational status, PA Cyber has been paid about $100 million annually from districts throughout the state, which has left the organization with annual budget surpluses as high as $13 million in 2009-2010, according to Wagner.

PA Cyber is by far the largest of the state’s charter schools with approximately 11,000 students.

PA Cyber and individuals closely connected to the organization were linked to a grand jury investigation in 2007, and as recently as July of 2012, federal agents searched the organization’s Beaver County offices in connection with an unspecified, on-going investigation.

Officials at PA Cyber did not respond to multiple attempts to reach them for comment.

Reform Efforts Languish

A number of different wide-ranging bills have been proposed to address charter school funding issues. Although the proposed pieces of legislation address many of the same issues, the manner in which they address them varies drastically.

A bill proposed on Feb. 25 by Republican State Rep. Mike Reese, R-Mt. Pleasant Township, calls for a number of changes, including direct payment from the state to charter schools—rather than the current system which has tuition payments coming from home districts—extending the length of actual school charters, certain deductions for home district-provided cyber-programs, and other funding deductions based on the concept that cyber charters do not incur many of the same expenses as brick-and-mortar schools.

District leaders support many of the proposed deductions but do not support the direct-pay proposal as the district would not receive monthly reports on student enrollment, which they believe would diminish their ability to determine that charter tuition costs are accurate.

A bill proposed by Rep. James Roebuck, D-Philadelphia also includes deductions—namely for programs like extracurricular activities, district pupil services (e.g. health, food, and library services), and district-offered cyber-programs.

Additionally, Roebuck’s bill provides for a stipulation limiting a charter school’s ability to carry a surplus budget balance: Maximum surplus would be 8-12% of their total budget. Any surplus beyond the proposed limits would be refunded to the district.

Charter school officials oppose all of the measures of Roebuck’s bill, whereas district officials generally support it.

Personally Resnick, of Propel, said he supports measures that would take the burden of education funding off of local districts all together and place it on the state.

“I’m in favor of no local tax. I believe funding should come entirely from the state level,” Resnick said. “I don’t believe that Fox Chapel should have more money to educate their children than Wilkinsburg. We should be committed to working with all levels of public schools. Charter or traditional district, they should all be better.”

When asked about his expectations for the proposed legislation, Resnick was not optimistic.

“I hope the legislature does something. I hope they have some sense of social justice, but I’m not very optimistic,” he said.

Cowell shared Resnick’s lack of optimism about the proposed bills.

“The fact is that there are competing bills,” Cowell explained. “Sometimes charter school reform bills are meant to make changes to funding; sometimes their intent is to make it easier to start charter schools. There is an absence of consensus.”

Charter school advocates say low education standards and poor fiscal management are the main culprits for struggling districts.

Heather Rees, a charter school parent, questions the fiscal responsibility of her home district of McKeesport.

“I’m not sure where the money goes,” Rees said.

When asked about how she rates her child’s charter school experience against her former traditional district school, Rees says that she feels that her daughter gets more individualized attention at the charter level.

“I just feel like the quality of education that the kids get is better.”

Resnick, whose organization operates a Propel branch in McKeesport, shares that sentiment.

“It’s a crime that all those public dollars are being pumped into programs and districts that are failing,” he said. “I call it ‘polishing the brass while the Titanic is sinking.’”

Cyber Schools Hit Public Budgets Hard

McKeesport School District paid approximately $4.3 million toward charter tuition last year; among the highest numbers in the state.

“It’s a big problem for us,” said McKeesport School District Business Manager David Seropian.

“Charter school tuition is taking money right out of our system and away from our current students,” he said. “We’ve really had to make cuts—especially combined with decreases in state funding—we’ve had to make significant staffing cuts.”

Norwin has also been forced to make staffing cuts.

“We’ve had to reduce our number of teachers as a result of a combination of charter expenses and other state funding and subsidy cuts,” said Wilson.

Resnick said he understands how difficult budget cuts can be, but he has no sympathy for inefficiencies.

“Like I said, We always strive to be efficient. Substantial cuts are always a challenge. There is nothing easy about running a public school—charter or otherwise,” he said.

In addition to paying tuition for students leaving the district for charter schools, McKeesport School District pays for students switching from parochial schools to charter schools.

“A lot of these students from our district going to charter schools aren’t even leaving our schools,” Seropian explained. “A lot of them were previously home-schooled or went to private or Catholic schools. They have never been part of our schools, so we were never paying for them. Now they switch to charter and we are responsible.”

Seropian explained another aspect of the state’s fiscal policy regarding charter school funding that he refers to as “another double dip”: an accounting stipulation that prevents districts from deducting the amount they pay in charter tuition from their annual expenses.

“It’s not an expense to educate at our institution so it shouldn’t count as one,” he said.

Penn-Trafford Assistant Superintendent Matthew Harris explained that his school district has incurred additional expenses beyond their standard tuition payments to charter schools.

“We haven’t had a lot of kids leave our district, but providing transportation for charter students has become a challenge,” Harris said.

Harris explained that his district was forced to add two additional bus runs to accommodate student transportation to brick-and-mortar charter schools.

These additional bus routes will cost Penn-Trafford an estimated additional $60,000 annually.

According to the U.S. Department of Labor, the average annual salary of a Pittsburgh area elementary school teacher in 2011 was nearly $5,000 less than the additional transportation costs being incurred by the Penn-Trafford district.

“We tried to work the [bus] routes so we could share that cost with other districts but it just didn’t work out that way,” Harris said.

In addition to the additional transportation costs, the Penn-Trafford school district will also pay out almost 12 times that much in actual charter tuition this year.

Governor’s Cuts Exacerbate Problems

Another point often discussed by district officials is the fact that they no longer receive any state reimbursement for charter tuition paid as a result of Gov. Tom Corbett’s decision to do away with the subsidy line item on the state budget in 2011.

“We used to get back almost a third of what we paid in charter tuition. Since Gov. Corbett did away with the reimbursement programs, we get none of it back,” said Seropian. “If they would have kept that program, it would have been an additional $1.3 million to help offset the costs.”

Norwin’s Wilson echoes Seropians concerns.

“We were being reimbursed approximately 29.3% of our charter expenses. Now we get nothing,” said Wilson.

In a prepared testimony to the state House Education Committee on the current legislation, Penn Hills School District Superintendent Thomas Washington explained the elimination of the subsidy.

“In the 2009-2010 school year, the public schools within Allegheny County paid $42 million in charter school expenditures and were reimbursed for $9.6 million from the Pennsylvania Department of Education. In the 2011 budget, the reimbursement line item was eliminated, meaning that the $9.6 million is no longer provided.

Dim Prospects for Fix

While the current proposals will get hearings in various legislative committees, critics say none of them will resolve all of these long-standing issues.

“The proposed changes aren’t even scratching the surface,” said McKeesport’s Seropian. “I know how politics work and this will be a gradual process but they are not going nearly far enough.”

Norwin’s Wilson is only slightly more optimistic.

“Eventually something is going to have to change. It’s going to probably be watered down,” he speculates. “It won’t be best-case-scenario, but hopefully it will clear up some of the technical oversights at least.”

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Brian Reed is a graduate student in Point Park University’s joint Master of Journalism and Mass Communication and Master of Business Administration programs.

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