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New charter report has stark financial implications for Philadelphia

The School District has so far declined to comment.

This article was originally published in The Notebook. In August 2020, The Notebook became Chalkbeat Philadelphia.

The implications are stark for Philadelphia in a new report from Research for Action that analyzes the financial impact of charter schools on Pennsylvania school districts.

The 55-page report, which studied the effect of charter school growth in Philadelphia and five other Pennsylvania districts, found that if charter schools grew at an annual rate of 4 percent over five years, the School District would have to close 47 schools and lay off 1,200 teachers and 500 administrators. That’s if no changes are made in the existing charter law or in the state education funding formula.

“The report documents and explains in detail what we’ve known for years, that the absurd charter law and inequitable funding system means that this unfettered charter school growth is unsustainable,” said City Councilwoman Helen Gym. “It’s a system that cannibalizes public school districts at the expense of all students.”

RFA made available on its website the tool that it used to study charter growth. It was designed with the input of groups on many sides of the charter issue, from the Pennsylvania Coalition of Public Charter Schools to the Pennsylvania Association of School Business Officials.

It seeks to gauge both the short-term and the long-term impact on the six districts of various scenarios, ranging from minimal to more robust charter growth, and shows that although "stranded costs" associated with each charter seat diminish over time, they are still significant after five years.

Now, about one-third of students in the city who attend publicly funded schools are enrolled in charters.

Despite the enormous implications for Philadelphia of RFA’s analysis, District officials declined to return calls seeking comment. The five-member School Reform Commission has been split on the issue of whether charter school expansion is good or bad for Philadelphia.

But although the District has not issued a response to this particular study, Superintendent William Hite recently offered criticism of how charters are funded in Pennsylvania and the impact on Philadelphia of that method.

At a panel discussion last week in which author David Osborne touted his book highlighting benefits of charter expansion in three cities, Hite injected a note of skepticism about whether that could happen here, given the current conditions in Pennsylvania.

Hite described the current state education formula under which Harrisburg disburses money to each district as a “block grant” that is not affected by per-pupil costs or fluctuations in enrollment. At the same time, he said, the charter law requires that the District reimburse its charter schools at a fixed rate. That rate is calculated according to a formula that hasn’t been changed in 20 years.

That funding process reduces the amount per pupil available to students in District schools for every student that enrolls in a charter, Hite said.

“The money doesn’t follow the children,” he said.

Although the District’s block grant might yield $8,500 per student for its schools, he said, “we have to send charters $10,500.” And he complained that “our ability to close [charter schools is harder than to authorize or open one.” That’s because appeals of any SRC decisions to close a charter school proceed to the state-run Charter Appeals Board, and then to the courts.

Hite also brought up another issue that has been in the forefront of the charter debate: access and the equitable distribution of students who have the most expensive learning needs. “We have to talk about who’s educating who, who has the majority of children who need more services, the English learners, special education students,” he said.

Prior research has indicated that most charter schools have lower percentages of English learners and special education students, who are more expensive to educate, than the District as a whole. (One exception is the Renaissance charters – converted District schools that must observe the original District schools’ attendance zones. Another is the charters that were set up specifically to serve non-English speaking or immigrant populations.)

“It doesn’t have to be this way,” said the report’s main author, David Lapp of RFA. He was reluctant, however, to suggest any policy changes. He did say that restoring a charter reimbursement line item to the state budget would help address the problem.

“The state, at one point, was providing a significant amount of revenue to offset the fiscal impact and has since zeroed that out and not replaced it with anything meaningful,” Lapp said.

Current law says that districts cannot consider the financial implications of opening another charter when evaluating whether to approve one, but must instead evaluate the application on its merits. And there have been numerous legal battles over the years relating to a district’s authority to impose caps on charter growth within its borders.

The debate over the actual cost of charters has been intense since the start. When the charter law was originally being debated before its passage in 1997, lawmakers and then Gov. Tom Ridge, a Republican, argued strongly that, as they saw it, charter schools would save districts money by relieving them of many of their students and educating them more inexpensively.

When that proved not to be the case, a charter reimbursement line item was added to the budget during the administration of Gov. Ed Rendell, a Democrat.

But the appropriation was zeroed out in 2011 under Republican Gov. Tom Corbett and never restored. At the time, with about half the charter students in the state, Philadelphia was receiving $109 million of the $219 million appropriation. If the reimbursement had continued at the 2010-11 rate, according to the RFA report, districts across the state would be receiving $320 million under the line item.

That total amounted to about $2,400 per student. The RFA study estimates a $3,800 per student impact when a charter is created.

Restoring that line item wouldn’t completely offset the cost, but “would go a long way” toward alleviating the problem, Lapp said.

Gym’s point of view was similar: "At a minimum, restore the charter school reimbursement into the state budget. It needs to come back; otherwise, the stranded cost of charters is going to do harm to all students’ learning."

Mark Gleason of the Philadelphia School Partnership – which has advocated for charter growth and gives money to charter, District and parochial schools – said that the new education funding formula does include a "charter weight" as it calculates district needs, but it’s small and only applies to new money, not the total pot of education aid. (This year, new education spending – the portion that the formula covers – is about 3 percent of the budget allocation.)

RFA calculated that this charter weight sent just $567,120 to Philadelphia this year.

"I support restoration of a more substantial charter reimbursement mechanism, with a preference for reimbursing each new seat on a gradually declining basis since ‘stranded’ costs per seat do decline over time," Gleason said.

He also said that if charter reimbursement is restored, charter schools should get more funding for their facilities as part of a tradeoff.

Although there seems to be a sliver of overlap on the issue of charter reimbursement in the positions of Gym and Gleason, who have been antagonists when it comes to charter schools, Gym would change different areas of the current charter law than Gleason would.

"We need enrollment caps, full transparency and disclosure, accountability that charters spend special education funding on special education students," Gym said. She also wants to "eliminate or overhaul" the Charter Appeals Board.

In regard to the study overall, Gleason said that it is necessary to analyze more than costs when evaluating the benefits of charter schools.

"Charter schools do come with a cost, as everything worth doing does, but they also increase educational opportunities," he said.

He said that among the highest-performing schools in the District’s own School Progress Reports, "low-income enrollment in charter schools is nine points higher than in District schools, many of which are magnets (70 percent to 61 percent). A major benefit of charters in Philadelphia is that they have created more access to high-quality schools for low-income students."

Gym, however, said that "each additional student in a charter school drives the District further into debt, to the tune of $8,000 per student a year at the start and more than $4,000 per student a year even by year five. The report shows that those stranded costs never go away and are disastrous for school district finances. … The problem cannot be resolved by ‘belt-tightening.’"

That includes school closings, she said. Philadelphia has closed dozens of schools since charters came on the scene due to declining enrollment in its schools.

Besides restoring the reimbursement line item to the budget, Gym said, legislators should "fully fund the school equity formula they enacted in 2016. This benefits both charters and public schools."

"Right now we’re driving public school systems right off the edge of a cliff," Gym said. "That is not going to benefit anybody."

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