Charter School Reform

Testimony of Nathan Benefield

Vice President of Policy Analysis
Commonwealth Foundation for Public Policy Alternatives
PENNSYLVANIA AUDITOR GENERAL SPECIAL HEARINGS
March 14, 2014
Good morning, my name is Nathan Benefield; I am the vice president of policy analysis for the
Commonwealth Foundation. I wish to thank Auditor General DePasquale for the opportunity to testify
today.
Charter school reform remains a critical policy challenge facing the commonwealth, and I appreciate the
Auditor Generals efforts to tackle this issue.
In my remarks, I will look at three major aspects of proposed charter school reformsaccountability,
authorization and growth, and funding.
Accountability
There have been several anecdotal cases of fraud and abuse by charter school operators (the same
could be said of school district administrators and staff). But such abuses should not be used to
demonize charter schools or eliminate charter schools as an option for families.
Rather, lawmakers should enact charter school reforms that strengthen ethics rules and accountability
measures for charter school operators. Conflicts of interest between charter school staff and board
members and outside contractors should be prohibited.
Moreover, as public schools, charter schools should be subject to the same transparency rules governing
school districts, including complete compliance with the state Right-to-Know Law.
Lawmakers should also improve school spending transparency by passing legislation that would put all
school spendingcharter and school districtin an online searchable database, similar to PennWATCH,
which provides voters with information about state spending. Such transparency would make charter
school operators more accountable to taxpayers.
Authorization
Since charter schools were established in Pennsylvania in 1997, their enrollments have skyrocketed,
demonstrating their popularity among families. Parents value the ability to choose where to educate
their children. Today, there are 174 charter schools serving 119,465 students.

Yet despite this growth, another 44,000 students currently are on waiting lists to get into charter
schools, according to the PA Coalition of Public Charter Schools.
Recent stories out of Pittsburgh and Philadelphia illustrate the tragedy of this situation. The Pittsburgh
Tribune-Review reported from the scene at Environmental Charter School, where more than 500
students applied for admission, but only 28 openings were available. The school, as required by law,
held a lottery to determine the lucky winners and 472 unfortunate families who would be denied the
opportunity to enroll this year.
The same storyeven magnifiedtook place on the other side of the state. Philadelphias Math and
Science Technology charter schools (MaST) received an incredible 5,000 applications for 98 slots on the
schools waiting list. MaST was so popular because the school earned a 90 on the new School
Performance Profile, which NewsWorks reports as the highest score for a non-magnet school in
Philadelphia.
Why are so many students dependent on a lottery to determine whether they get into a charter school?
Currently, charter schools must apply to a local school district for approval to operate. Because many
school districts view charters as unwanted competition, this can be a difficult process. Indeed, it is akin
to requiring McDonald's to approve any new Wendy's in the same area.

The Pittsburgh school district is currently reviewing Environmental Charters application to expand,
while the School District of Philadelphia is trying to impose enrollment caps on charter schools like
MaST. None of the states other 499 school districts are legally allowed to impose enrollment caps on
charter schools.
A better option would be to allow alternative authorizers, either independent organizations or a
statewide entity, to alleviate this logjam. One solution is to give universities the ability to authorize new
charter schools.
At least 16 states allow multiple authorizers, including 13 states that empower universities to approve
charter schools applications.
By ending the conflict between school districts and charter schools, we would enable more families to
select the best school for their children, while allowing successful schools to expand and grow. We
shouldnt limit childrens opportunities to attend a top-notch school based on how a lottery ping pong
ball bounces.
Finances
Much of the debate about charter schools centers around their funding. Unfortunately, much of the
controversy is based on misinformation. I want to highlight a few key facts.
First, charter schools receive less funding per student than district schools. Charter schools only receive
funding when students choose to attend them rather than a district-run school. For each student
attending a charter school, school districts send a payment equaling the districts per-student spending,
excluding all expenditures for adult education programs, community/junior college programs, student
transportation, facilities acquisition, construction and improvement services, other financing uses (i.e.,
debt payments), and all federal funds received.
As a result of this formula, charter schools receive, on state-wide average, $1,500 less per student than
school districts, as the table below shows. This differencethe amount school districts keep for children
they are no longer educatingresults in increased district spending per student.
Pennsylvania K-12 Spending & Revenue, 2011-12

Public Schools (ADM)

School Districts, Less Charter Payments
Public Charter (all)
Cyber Charter
Brick and Mortar Charter

Spending
Total Spending
Enrollment per Student
Total Revenue
$24,761,443,033 1,755,040 $14,109 $25,030,564,337
$23,616,194,079 1,660,291 $14,224 $23,885,315,383
105,036 $12,598 $1,353,020,529
$1,323,281,065
$372,712,883
32,322 $11,531
$377,633,339
$950,568,181
72,714 $13,073
$975,387,190

Revenue per
Student
$14,262
$14,386
$12,881
$11,683
$13,414

Sources: PA Department of Education, Summaries of Annual Financial Report Data; Public School Enrollment Reports,
http://www.portal.state.pa.us/portal/server.pt/community/data_and_statistics/7202

Second, while charter schools serve about 6 percent of all public school students, they only represent
5.3 percent of public school spending. Total spending by charter schools reached $1.3 billion in 201112. This total is less than what school districts spent just on administration or operation and

maintenance of plant. Charter schools total spending is less than half of what school districts spent on
construction and debt.
In fact, school districts debt payments increased by $1.8 billion over 16 years. This is during a period
when student enrollment declined.
The financial struggles school districts are facing, requiring teacher layoffs, are largely due to this
massive increase in spending outside the classroom, not because students are choosing charter schools.
Pennsylvania Public School Expenditures, 2011-12
Percent of Total Public
Total Spending
School Spending
Charters
$1,323,281,065
5.34%
Brick and Mortar
$950,568,181
3.84%
Cyber
$372,712,883
1.51%
School Districts
Construction and Debt
Administration
Business & Central Support
Operation and Maintenance of Plant

School Districts

$3,014,596,806
$1,374,673,428
$597,901,033
$1,982,000,803

12.17%
5.55%
2.41%
8.00%

Total General Fund Percent of Total Public

Balances
School Spending
$3,538,705,609
14.29%

Source: PA Department of Education, Summaries of Annual Financial Report Data,

http://www.portal.state.pa.us/portal/server.pt/community/data_and_statistics/7202

Further, there has been an argument that charter schools have built up excessive fund balances, and
that these should be capped. But the same could be said of school districts.
In 2011-12, school districts increased their reserve funds by $300 million to $3.5 billion. More than half
of all school districts (255 to be precise) have Unassigned Fund Balances in excess of 8 percent of their
spending, and 112 have Unassigned Fund Balances greater than 12 percent of annual expenditures.
These are supposedly the limits on reserve funds, but these limits are only enforced in certain
circumstances when school districts issue new bonds.
The fact is that it makes sense for charter schools and school districts to have reserve funds. Charter
schools often have to wait for school districts to make payments, forcing them to dip into reserve funds
to pay bills while fighting with districts.
Moreover, both charters and districts will face a massive increase in annual pension contributions.
Prudence suggests they should put money away to prepare for this day of reckoning.
We believe one way to help alleviate both the coming pension crisis and reduce these seemingly
excessive fund balance is to let schools prepay their pension costs. That is, school districts and charter
schools should be allowed to invest some or all of their fund balances with the Public School Employees

Retirement System (PSERS) and either receive a credit (with interest) for that payment, or keep separate
accounts that grow with PSERS investment growth.
Finally, I want to point out a flawed comparison in the last Auditor General report on charter schools
conducted under the supervision of the previous Auditor Generalwhich claimed Pennsylvania could
save money on charter schools if the state spent the same per student as selected other states. This
comparison has led critics of charter schools to call for cuts for charter school funding to spend that
money on school districts.
This conclusion was based on a comparison of Pennsylvania with four other states with high charter
school enrollment, all of which spend less than Pennsylvania per student.
However, these other states didnt just spend less on charter schools, they spend significantly less per
student on all public schools. In these states, spending per student was 12 to 39 percent less than
Pennsylvania.
Average Per-Student Spending: PA vs. Comparison States
State
Total*
Difference from PA Percent Difference
Pennsylvania
$14,956
Ohio
$13,130
($1,826)
-12%
Michigan
$12,041
($2,915)
-19%
Texas
$10,611
($4,345)
-29%
Arizona
$9,183
($5,773)
-39%
*Total and current expenditures per pupil in fall enrollment in public elementary and secondary
education, by function and state or jurisdiction: 2010-11, Digest of Education Statistics, National
Center for Education Statistics, http://nces.ed.gov/programs/digest/d13/tables/dt13_236.75.asp

I make this comparison not to say that we should cut school spending in order match other states, but to
point out the flaw in making this comparison just for charter schools, and not for other schools.
The major problems we need to address with charter school funding arent specific to charter schools
but are inherent in our system of education funding and spending. We should look to eliminate the state
reimbursement for charter schools pension costssince pension costs are included in the payment
coming from school districtsand move to direct state payments to charter schools to avoid conflict
with districts.
But we must also avoid punitive cuts to charter schools just to divert more funds to school districts. I
suggest that instead of singling out charter schools we reexamine our entire system of funding public
education.
That process should result in some sort of weighted student funding, where public dollars follow
students on a per-pupil basis, with a set amount of funding for all students, for low-income and
students, for English-Language Learners, and for the various categories of special needs students. Such a
weighted funding formula would ensure that dollars go where they are most needed and take politics
out of funding decisions.
Thank you again for the opportunity to testify, and I look forward to any questions you may have.