The Impact of Charter Schools on the Finances of the School District of Philadelphia October 2014

Audit Date: October 21, 2014
Audit Categories
  • Other
Controller: Alan Butkovitz
Audit Tags
  • Charter Schools,
  • Children and Families,
  • Education,
  • School District

Executive Summary

For Immediate Release
Oct. 21, 2014

Contact: Brian Dries

Butkovitz Says Charter School Funding Unfair, Damaging to Philadelphia
City Controller finds special education allocations do not meet students’ needs
& urges a tiered system for both public and charter schools

The Impact of Charter Schools on the Finances of the School District of Philadelphia

PHILADELPHIA – City Controller Alan Butkovitz today released a financial analysis of the School District of Philadelphia’s charter schools that indicated the current funding formula for tuition reimbursements and special education has led to the charter sector accumulating a $117 million positive fund balance.

While the charter sector’s balance was in the black in 2013, the School District was $68 million in arrears at the close of the same year.

According to Butkovitz, the charter sector’s large fund balance is a result of Pennsylvania’s current funding formula, which doesn’t account for the School District’s real costs and bears little relationship for what the charter schools actually spend.

“The funding structure is unfair and financially damaging to Philadelphia’s education system,” said Butkovitz. “The School District has been operating with multi-million dollar deficits for almost a decade, whereas charters have had substantial fund balances.”

In Pennsylvania, the special education supplement is a flat sum, which is not adjusted for level of need. Because Philadelphia’s traditional public schools educate the vast majority of students with greater special education needs and while the majority of special education students in charter schools have lesser needs, the charters garner the financial benefit of the one-size-fits-all funding.

“Allocations for special education must take into account varying levels of student need,” said Butkovitz. “Pennsylvania needs to adopt a tiered special education formula for both public traditional and charter schools.”

Additionally, under Pennsylvania law, funding levels to calculate per-pupil tuition rates for charter schools are determined by a formula derived from the School District’s previous year’s expenditures and it doesn’t take into account for what the charter schools actually need. It results in a per-pupil tuition rate that does not accurately account for demographics and student populations.

“The Commonwealth and the School District need to examine funding formulas that other states and school districts have adopted which take into account demographics and student need,” said Butkovitz. “Pennsylvania is the only state in the nation without some sort of weighted formula.”

In school districts within Chicago, New Orleans and Washington D.C., their respective states have adopted funding formulas that are based on student need and accurately account for different levels of special education costs.

While there is a significant portion of the District’s education funding going to its charter sector, charter schools spend, on average, 38 percent less on instruction and support than the traditional public schools on a per student basis. In addition, charter schools spend more than twice as much on administrative services than the traditional public schools on a per student basis.

“The School District needs to make accountability over charter schools a top priority,” said Butkovitz. “The existing Charter School Oversight Office needs to be strengthened. Six employees to oversee 86 charter schools are not sufficient.”

The Controller also recommends developing a Collaborative Council under the support of the School District and creating a joint budget process that includes the Charter Schools. In addition, The Controller recommends that the School District should be required to complete a five-year financial plan which includes charter schools, similar to the City’s budget approval process. This would include the creation of an independent fiscal review board, similar to the Pennsylvania Intergovernmental Cooperation Authority.

The Controller’s Office has focused considerable attention on the public education sector in the past several years, and has exposed much waste, fraud and abuse in both the Charter and Traditional Public Schools. The Controller’s latest analysis is part of his Office’s ongoing efforts to ensure fiscal accountability within Philadelphia’s education system.