Money for Ohio s Charter Schools More than Meets the Eye

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1 Summary of key findings Money for Ohio s Charter Schools More than Meets the Eye Charter school proponents in Ohio have recommended that more taxpayer dollars be made available to fund charter schools, despite the sector s overall woeful performance and that some local revenues are currently being used to subsidize charters. 1 In calling for more equitable funding, they claim the state needs to allow both state and local money to flow to charter schools not just state money. A new analysis by the Ohio Charter School Accountability Project undercuts their case for greater access to local money that they currently lack 2. The findings show that charter schools: Spend significantly less on classroom instruction than local school districts; Spend more per pupil on administrative costs than districts spend on administration, professional development and programs to support pupils combined; Pay their teachers 40 percent less than districts even though they incur savings by not having to pay to bus students. Those costs are covered by local school districts; Do not directly receive local revenues, but do receive far more per-pupil, in-state revenue than their local public school counterparts and, in some cases, receive substantial private donations. If charter schools spent the same amount per pupil as school districts spend on administration, charters would have enough money to spend about the same amount of money in the classroom as local school districts. 1 Ohio Charter School Accountability Project, How Local Tax Revenues Subsidize Ohio Charter Schools, December, Online at 2 A few charters in Cleveland do receive local property tax revenue.

2 Sources of Revenue According to newly-released data from the Ohio Department of Education 3, charter schools received 84% of their funding from the state last year, while the state s local school districts received 44% from the state and another 44% from local revenues, with federal funding and other non-tax making up the remaining 12%. 4 Figure 1: Revenue by Source Table 1 shows how much districts and charters receive on a per pupil basis from these sources. 5 In total, children in Ohio s school districts typically receive about $2000 more in taxpayer revenue than children in charter schools. 3 The data for this report comes from the Ohio Report Card Advanced Reports section (the old Power User report). The report included some districts and charters without any reported expenditures or revenues. Those districts and charters were not included in this analysis. The analysis in this report is of districts and charters that had revenue or expenditures to report. The data analyzed for this report is from the school year. 4 Previous analyses have only looked at state and local revenues, not the other two options. So when looking at state vs. local shares, the Ohio Charter School Accountability Project only looks at the state and local funding. Historically, though, since other non-tax sources were rolled into the local funding category, we added that category to the local funding amount to make historical comparisons. 5 The Ohio Department of Education now uses Per Equivalent Pupil to describe its per pupil funding. Per Equivalent Pupil takes into account that some categories of students require additional services that increase the district s expenditure per pupil. The expenditure per equivalent pupil is adjusted to reflect these additional costs. When used here to refer to the state s revenue and expenditure data, per pupil is equivalent to ODE s Per Equivalent Pupil, unless noted otherwise.

3 Table 1: Revenue, by Source (per pupil) School Type Local Revenue State Revenue Federal Revenue Other (local) Non- Tax Total Revenue (all sources) School District $3,681 $4,625 $668 $866 $10,097 Charter School $0 $6,730 $1,127 $84 $8,176 * Local revenues are part of the state money for charters The difference in funding between charters and districts charters receive 23.5% less total funding than districts is significantly less than it should be given that charters pay their teachers 40% less than districts 6 and don t have to pay for transportation (see following section). Figure 2: Per Pupil Revenue: Districts vs Charters, By Source 30.0% State Revenue Federal Revenue Total Revenue (all sources) 20.0% 10.0% 0.0% -10.0% -20.0% -30.0% -40.0% -50.0% Because children in charters receive far more per pupil funding from the state than children in school districts, districts are forced to rely more on revenues from local property taxpayers an unconstitutional situation that the Ohio Charter School Accountability Project examined earlier and that sometimes increases reliance on property tax revenues by as much as 60%. Some Charters Receive Large Private Contributions For the first time, data for the school year breaks out Other Non-Tax revenue, a category that includes local funds that are not derived from taxpayers. For 6 Ohio Report Card Teacher data report.

4 districts, it tends to come from pay-to-play and other locally-generated fees, while for charters, it tends to come from private donations. What this data demonstrates is that many Ohio charter schools receive substantial private infusions of money. Below are the top 25 charter schools that receive private funding. Table 2: Top 25 Charter Private Donations School Private Donations KIPP Columbus $843,235 Toledo School For The Arts $787,277 Stepstone Academy $767,694 Believe to Achieve-Canton $712,909 Believe To Achieve-Cleveland $548,546 SunBridge Schools $233,939 Horizon Science Academy Toledo $219,057 Dayton SMART Elementary School $207,500 Constellation Schools: Old Brooklyn Community Middle $200,000 Intergenerational School, The $190,937 Youngstown Community School $177,023 Langston Hughes High School $176,017 Entrepreneurship Preparatory School - Woodland Hills Campus $153,370 Accelerated Achievement Academy of North Cincinnati $146,296 Dayton Early College Academy, Inc $120,610 Citizens Academy East $113,114 Citizens Academy $113,114 Constellation Schools: Stockyard Community Middle $110,000 Graham School, The $101,987 Cornerstone Academy Community $99,807 Citizens Leadership Academy $97,283 Columbus Collegiate Academy $83,875 Columbus Preparatory Academy $80,757 Polly Fox Academy Community School $76,736 Constellation Schools: Westpark Community Middle $75,000 Most charter schools in Ohio do not receive private funding only 116 reported any private donations on their state disclosures and, of those, only 53 received $10,000 or more. So, while overall private funding of charters isn t great, it is concentrated within these 53 schools, where the average amount is a little more than $137,000. Students in the charter schools that reported receiving private funding on average received about $172 per pupil. Local Ohio school districts reported private donations as well, with some being quite substantial, such as $6 million in Cleveland. In all, 507 districts reported receiving more than $10,000, and the average donation was about $152,000. However, the per pupil amount was far less than in charter schools about $140 less per pupil on average.

5 There were only 22 districts with a higher per pupil private donation amount than the average charter school. If districts received the same $172 per pupil in private donations as charters, there would have been another $214 million in school districts. Busing: Hidden Charter School Revenue While the state report card data tracks direct revenue going into charter schools and school districts, it does not directly track the indirect revenue, the largest of which is busing. Ohio school districts are required to bus children to charter schools at district expense. The share of the statewide cost to transport charter school students in the school year works out to more than $1,000 per pupil. That money is effectively paid for by local school districts for the benefit of the state s charter schools. That sum $1,000 represents nearly half of the entire difference in median total revenue for charters. However, in the Big 8 urban districts (where the vast majority of charters are located and kids are bused), that number is far higher in many cases. Table 3: Impact of Charter Transportation on Big 8 Urban Districts District Charter School Busing Cost Charter School Per Pupil Busing Subsidy Akron $ 1,926,794 $ 1,768 Canton $ 142,416 $ 414 Cincinnati $ 3,605,528 $ 985 Cleveland $ 1,096,384 $ 1,852 Columbus $ 8,117,454 $ 1,118 Dayton $ 2,500,492 $ 1,556 Toledo $ 467,488 $ 454 Youngstown $ 831,296 $ 838 Overall, the transportation costs incurred by the Big 8 urban districts subsidize charter schools by $1,127 per pupil. Those per pupil subsidies apply only to charter school students who are bused. But that subsidy is substantial in many cases making up a significant portion of the district-charter funding differential in some of those cities. So while these transportation costs are hidden, they should not be ignored, for they are significant costs absorbed by districts and avoided by charter schools.

6 Expenditures State expenditure data which looks at how districts and charters spend all their revenue also demonstrates some stark contrasts both in how much districts and charters spend and how they spend it. First, we ll examine how much is spent in each sector. The state breaks down school expenditures by group (classroom instructional, nonclassroom and non-operational), then breaks those groups into types (administration, building operations, instructional, pupil support and staff support). The median expenditure in a brick-and-mortar charter school is about 14% less than its school district counterpart again, it should be noted that charters pay their teachers 40% less than local school districts and charters don t have to pay to bus students. Figure 3: Charter Spending vs. Districts 0% -5% -10% -15% -20% -25% -30% -35% -40% -45% Actual Spending Difference % Teacher Salary Difference But it is how districts and charters spend their money that is most striking. Charters spend far more on non-classroom administrative costs than districts.

7 Figure 4: Spending by Charters and Districts, Per Pupil $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $- Classroom Instructional Non-Classroom Non-Operational Charter District The only reason local school districts end up spending more per pupil overall is because they commit so much more to classroom instruction than charter schools, not because they spend lavishly on administrators. In fact, charters spend about 24% more on non-classroom costs, even though the state includes transportation funding in calculating district expenditures. So it is fair to say that charters spend more on administration than districts spend on administration and transportation. Meanwhile, districts spend 24% more per pupil on classroom instruction. Gov. John Kasich has said the state needs to put more money into classrooms 7, and according to state data, it is local public school districts that are accomplishing that goal, not charter schools. The types of expenditures made by each sector show marked differences resources%20to%20classrooms.pdf

8 Figure 5: Spending By Charters and Districts, by Type as % of Total 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% Administrative Expenditures Building Operations Expenditures Instructional No Type Pupil Support Staff Support Expenditures Charter District As can be seen, Ohio charter schools spend more than twice the money on administration as Ohio school districts spend. Districts spend 14% more than charters on building operations, and twice as much on pupil support 8 and staff support 9 services. In addition, the typical 10 district spends about $730 per pupil on a category called no type, which is made up of construction expenses, adult educational services, community services and debt on interest among other things. The typical charter spends nothing on these types of expenses. There are several possible reasons for the increased administrative spending. Among them is the much larger commitment charter schools make to advertising, typified by the recent revelation that the Electronic Classroom of Tomorrow spends $2.7 million annually on advertising expenses. There have also been several instances of charter administrators receiving lavish salaries and perks. Whatever the reason, if charter schools spent the same amount on administrative expenses that districts 8 Guidance counseling, help in the media center or library, college advising, field trips, and psychological testing. Pupil support may be operated out of the district office, though these functions must ultimately serve the child in the building. Source: Funding/Finance-Related-Data/Expenditure-and-Revenue/Expenditure-Revenue-Data 9 Support, staff development, training, retraining, additional college courses, and advice. Teacher support may be handled in the Central Office, where planning for staff development activities goes on, or it may occur in the building, where direct support for teachers and other staff is primarily handled. Source: 10 Typical is this report s short hand to describe median.

9 do, they would have the same amount of money to spend on instruction that districts currently spend. The bottom line is this: Charters spend exponentially more on administrative costs and significantly less on classroom instruction than school districts, at the same time that Gov. Kasich and others are urging school districts to commit more resources to the classroom. So that begs the question: Do charters really need more money, especially given their overall dismal performance on student achievement measures? Or do they need to refocus their spending priorities to the classroom and away from administrative costs? Now What? The current funding of local school districts and charter schools in Ohio is not meeting the needs of children in either sector, often forcing one sector s funding to adversely impact the other. This is especially true in districts that have to rely more heavily on property taxes to make up for lost state revenue to charters both in direct payments and indirect transportation costs. And charters have to figure out how to fund capital projects and other expenses for which they don t receive any money. In addition, they are entirely beholden to the General Assembly for funding because while some of them have access to external revenue streams through private donations or local revenue- the majority of them don t. The Ohio Charter School Accountability Project recommends that the Ohio General Assembly apply a rational approach to funding in both sectors creating formulas that accurately reflect a school s needs so that charter and public school children receive what they need to succeed. And funding for charters should be based on actual expenses, including lower teacher salaries, rather than a per pupil funding formula derived from local districts whose expenditures are far higher due to additional requirements. While questions remain about the way in which many charter schools currently spend their money, if the legislature does decide to find additional resources for them, the money should be directed toward the state's few high performing charter schools. Giving modest increases to every charter school, regardless of success, does not further the cause of creating a better-performing charter sector.