Author:Geheb, Phillip

INTRODUCTION 73 I. CHARTER SCHOOL MOVEMENT AND THE FUNDING GAP 76 A. The History and Legal Challenges to the Charter School Movement 76 B. Money Matters: The Public Charter School Funding Gap 82 II. NEGOTIATING FOR A CHARTER: AUTHORIZERS AND SCHOOL FORMS 88 A. Charters and Authorizers 88 B. Charter School Forms 91 III. CHARTER SCHOOL FUNDING SOURCES 95 A. Operations 96 1. Percentage of APPC 97 2. Administrative Fees and Impact Aid 98 3. Funds Flow 100 B. Start-Up Funding 102 1. Public Charter Schools Program 102 2. State Categorical Grants 103 C. Facilities 104 1. Federal Programs 105 2. State Programs 108 3. Local Programs 110 D. At-Risk Youth Programs 111 E. Special Education 113 F. Transportation 118 IV. PROPOSALS 119 A. Drafting Stronger Charter School Laws: Statutory Language, Withholding Clauses, and Impact Aid 120 B. Improving Funds Flow: Local Education Agency Status 122 C. Strengthening the Role of Authorizers 124 D. Categorical Grants: Start-Up and Facilities Funds 126 E. Allow Local School Tax Revenues to Flow to Charter Schools 126 F. Litigate Under State Charter School Authorization Laws and State Constitutions 127 CONCLUSION 128 INTRODUCTION

Charter schools are the fastest growing form of public education in the United States. Since the first charter school opened in Minneapolis, St. Paul in 1992, the charter school movement has grown to include forty-two states and the District of Columbia, (1) with over 6,004 charter schools educating 2.2 million students. (2) While school choice measures, such as vouchers and education tax credits, are often hotly debated, (3) the dramatic growth of charter schools over the past twenty-six years reflects a bipartisan acceptance of charter schools as a viable and successful method for education reform in the United States. (4)

Notwithstanding this bipartisan support, there remains a powerful barrier to charter school formation and success: inequitable funding between charter schools and traditional public school. (5) The Center for Education Reform reports that charter schools receive on average roughly thirty percent less funding than local public schools. (6) In a 2005 report titled Inequity's Next Frontier, the Thomas B. Fordham Foundation found that charter schools in twenty-six out of twenty-seven communities received between $1,000 to $5,000 less per pupil than district-run public schools. (7) This funding disparity continued following the economic recession of 2007-2008, reaching roughly $4,352 per pupil in 2011. (8) Coalitions of charter schools in several states have successfully sued local school districts under state education finance laws for inequitable distribution of federal and state funds. (9) Recent commentators also suggest that charter schools may have a claim under state constitutional "education clauses" (10) and the federal Equal Protection Clause. (11)

There are myriad sources of the charter school funding gap. Charter schools tend to have greater non-educational expenses related to transportation, facilities, and other administrative costs. (12) Using ambiguously worded state statutes, school districts have increasingly withheld funds to charter schools allowing for "administrative fees" or used their bargaining power to reduce funds and services to charter schools. (13) Unlike public schools, charter schools are often unable to access "top up" funds provided by local tax revenue and are barred from accessing public debt markets. (14) Additionally, in most states, charter schools cannot organize as their own Local Education Agency (LEA) and must therefore rely on the local school board, which could be hostile to the charter school, to appropriate funds. (15) Despite these challenges, charter schools flourished with the support of philanthropic foundations, corporate funding, and community support. However, donations, grants, and corporate funding are an unreliable source of revenue, and several charter school managers cite this reliance as a source of concern for charter school future operation and growth. (16) Lack of adequate funding and fiscal mismanagement are the primary reasons charter schools close--not failure to improve student achievement. (17)

This Article examines the current public sources of charter school finance, explores the systemic reasons for the charter school funding gap, and proposes initiatives for narrowing this gap. (18) Part I gives a brief overview of the charter school movement and describes the charter school funding gap and its sources. Part II examines the process of charter school formation and maintains that authorizers and charter school models are determinative effects of funding disparities. Part III discusses the limited federal, state, and local education finance programs that charter schools are eligible for, and Part IV explores initiatives to narrow the charter school public funding gap.


    Charter schools are a fairly recent phenomenon, gaining popularity in the early nineties and steadily gaining momentum in the public domain through the early 2000s and, in the present, surviving existential threats in the form of legal challenges and hostility from local, state, and federal officials. Ever present throughout the history of the charter school movement are conversations surrounding educational funding for public schooling generally, and, within such conversations, a debate as to whether charter schools ought to be funded at the same level as traditional public schools.

    1. The History and Legal Challenges to the Charter School Movement

      Charter schools are independent, non-sectarian, tuition-free public schools that operate pursuant to a limited-duration charter, or contract, granted by a statutorily designated sponsoring organization (an "authorizer"). (19) Charter schools are a form of school choice program designed to give parents and students the ability to attend publicly funded alternative schools rather than traditional public schools. (20) A charter is a "performance contract" whereby a school receives "regulatory freedom in exchange for increased accountability." (21) The charter outlines the goals of the school, how student performance will be measured, what levels of achievement the school will attain, and the length of the charter (typically five years). (22) If a school succeeds in meeting its stated goals, it may be relieved from regulations concerning student recruitment, curriculum, budget, and staffing. (23) If at the end of the charter period the school fails to attract students and to abide by its governing rules, regulations, and procedures, violates other provisions of its charter, or generally fails to raise achievement among its students, it can be closed. (24)

      The charter school concept appeals to the education reform community because it emphasizes choice, accountability, equity, and systematic change. (25) The relatively limited regulation that charter schools are subject to allows the schools to offer a wider array of educational programs for students, which can serve as new and innovative educational models, especially for at-risk youth. (26) Unlike traditional public or private schools, charter schools typically admit students on a lottery system whereby students who apply are admitted at random rather than through the results of a test, expanding student access to the schools. (27) The ability of an authorizer to close a school provides a strict mechanism for controlling the quality of the school--deficient schools that consistently fail to meet educational standards are removed from the educational marketplace. This quality control mechanism also provides a unique market exit strategy within the educational marketplace for schools by providing turnover for charter school managers and a means by which educational investors may "cash out" their investment.

      The charter school movement developed in the early 1980s, in part as a response to a federal government study--A Nation at Risk (28)--that condemned the state of American public education. The charter school idea was also the product of several intersecting education reform principles that emphasized devolution of school control from central school districts to local schools and their communities, accountability based on measurable outcomes and universal academic standards, and the creation of an education marketplace that would empower parents through choice and improve schools through competition. (29) In 1988, former president of the American Federation of Teachers, Albert Shanker, first used the phrase "charter school" to describe publicly funded alternative independent schools. (30) Shanker contemplated an arrangement that would "enable any school or any group of teachers... within a school to develop a proposal for how they could better educate youngsters and then give them a 'charter' to implement the proposal." (31)

      The charter school movement is based on four core assumptions that emphasize choice, accountability, equity, and systemic change. First, that charter schools allow communities to create new public schools outside traditional structures. Second, charter schools strengthen accountability by giving sponsoring organizations the power to withdraw the charter based on measurable performance goals. Third, that charter schools maintain principles of equity and excellence in public education by providing tuition-free, non-sectarian education available to all students, including those with special needs. Finally, that charter schools drive broader change by serving as "educational laboratories" for innovative forms of teaching and by stimulating traditional schools to make positive changes. (32) These core assumptions are reflected in state enabling statutes whose wording determines the vitality of the charter school movement in a particular state. (33)

      The success of the charter school movement can be measured in several ways. First, state courts...

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