Posted by Ed 

I've managed to like Joe Williams, despite the fact that he blogs for a union busting organization. But he is pushing a button with this "charters don’t drain school district" stuff. Hence the length of this post.

Any given charter school may or may not be a drain on its host district’s budget. It’s also true that in high-growth states like Arizona or Nevada, there is often no felt effect from charters, and they may in fact relieve districts of a capital finance burden. (That this burden too often goes into the ether and charter kids end up in schools with poor infrastructure is another issue--where I am sympathetic to charterific complaint.) But in a district with a stable or declining population, there is tremendous potential for financial drain from charter schools, which can be as simple as the lost economy of scale. But if the charter finance system is based on the weights in the state funding formula rather than on actual costs (i.e. if it isn’t Minnesota’s funding system--and Minnesota’s isn’t perfect), or if the system gives out lump sums no matter the pupil--as used to be done and may sort of still be done in Massachusetts–-there can be real harm.

Harm is particularly likely if the charter school has a lower enrollment of higher-cost students than the host district(s). Many charter schools have good and large special education programs, but on average they have fewer special ed students with less severe IEPs than the districts they draw from. The same goes for English Language Learners (ELL) and, to a lesser extent, low income kids. These are programs that can draw extra dollars in finance formulas, but those extra dollars are typically not enough to cover the actual costs districts incur when really working to provide adequate educational services. That means that money from the basic per pupil allotment for everyone else covers those costs. (See how Seattle’s weighted student formula works for a sense of this).

To the extent charter schools don’t mirror the district, they are affecting this balance. Given the state of many inner city communities, a charter could serve what we would all agree is a high number of special ed, ELL and low-income student enrollment and still not match the host district. And we can all agree that there are some cases where the charter school serves a more at risk population, and in those cases it is actually relieving the district of some financial burden. Yes, that happens, but it is rare.

Harm is done not because charter schools are evil (the people I’ve met who actually work in them--including one yesterday from here--can be very impressive), but because the school finance assumptions that went into them were unrealistic. Charter schools are typically small. And as such, they are more costly. Research shows running a small district high school can cost $400 more per pupil more than a typical school, and that’s deosn't include the addtional overhead of district level responsibilities. Charter schools’ per pupil administrative spending is typically higher than that of neighboring schools (yes, charter schools create a net shift to administration--such that, in an effort to gain scale, we are seeing the rise of parallel virtual school districts in the charter world). So charter schools are running an inherently more expensive educational model at the same cost as a larger district. And, the school finance system penalizes charter schools for taking on high cost kids, because they don’t have the scale to absorb the excess out of their regular education per pupil allotments. It instead rewards them for taking on regular education kids.

When you shoehorn a model that, all things being equal, will be inherently more expensive into the current school finance system, all things won’t be equal. And when your funding system gives clear incentives to start to solve the problem by building a program to attract lower cost kids and penalizes you for the higher cost ones, stuff happens. I’m quite sympathetic to this problem. I don’t know how I’d handle it if I were running a charter school. But the fact of the matter is it means that charter schools often choose missions and hence enrollments that do drain resources from districts, and this is a serious issue in the context of declining or low growth enrollments. Just because it isn’t likely to be the charter school founder’s intent, doesn’t mean that it isn’t real and doesn’t cause problems for students in the districts that are feeling the effect. The technical term for this is "adverse selection," and the net result is that many charter schools have an effect that is analogous to that of HMOs on other insurance pools. Within this context, talk about how "a school that loses kids deserves to be closed" strikes me as either stupid or ignorant.

If you really want to dig into what I and my wonderful co-authors think about the policy on this issue, I’d suggest reading Venturesome Capital: State Charter School Finances and Paying for the Vision: Charter School Revenue and Expenditures. A shorter, but less rich discussion, can be found here.