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The Financial Makeup of a Charter School

written by: Mary Beth Adomaitis • edited by: Carly Stockwell • updated: 3/8/2013

The nation's public school system is in financial distress. Cost-per-pupil spending is down, class sizes are up and educational programs are being eliminated. Many communities that struggle with these changes have turned to charter schools for answers. But are they hurting or helping?

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    School Building Since the Charter School Movement began 20 years ago, school districts across the country have questioned the effects they have on public school budgets. Are taxpayers getting their money's worth with charter schools? While the data coming from these schools are hard to measure, it does show that not all charter schools are producing higher achieving students.

    Opponents argue that charter schools are draining public school budgets and spending money that is needed elsewhere in the district. Proponents disagree, stating that the cost to educate children at either type of school is the same. The best way to determine if charter schools negatively impact a public school's budget is to take a closer look at how typical charter school are funded.

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    How Charter Schools are Financed

    Charter schools are the fast-growing educational reform movement to date. Forty states and the District of Columbia have charter school laws on the books that offer students a chance at a wider range of elementary and secondary school choices. However, financing charter schools varies from state to state, as well as from the standard public school protocol.

    Because charter schools are public schools, they receive local and state funding. They both depend on their average daily attendance (ADA) to determine how much they will receive. These public monies follow the student no matter what public school -- charter or traditional -- he or she attends. Some states require that charter schools negotiate their funding with the local school district, while others receive only a fraction of the money that is typically allocated to public school students. It all depends on how each state's charter is written.

    Because this is typically all the public funding charter schools receive, educators have to rely on private loans and donations from outside sources to fill in the financial gaps. In some instances, charter schools can receive federal or state grant money if it is available. Most charter schools can also receive services and funding for Special Education students, depending on how it’s outlined in its charter.1

    One major difference between traditional public schools and charter schools' funding is that the latter does not receive start-up money to cover the cost of the buildings and other start-up expenses, unless it is specifically outlined in its state charter. However, the remainder of the operating costs, including salaries, rent, utilities, books, insurance and supplies, is picked up by private donations, endowments, or loans.

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    When Charter Schools Financially Hurt Public Schools

    Just because the public funds follow a student from public to charter school doesn't mean it isn't always felt in the former's budget. For example, a Maine public school district superintendent said local charter schools are expenses that weren't originally planned for in his budget this year.

    So far in 2012, the district has lost a half-million dollars because the cost of educating a child in a charter school is more than what the state allocates. Therefore, the public school district has to make up the difference, though the child doesn't attend the traditional school. Another hit to this public school district's budget is that although 42 out of the district's 2,800 students now attend charter schools, that wasn't enough of a student reduction to eliminate staff positions or busing.2 This school district is spending the same amount of money to educate a smaller student body with less funds.

    Opponents feel that even the smallest number of students leaving a traditional school for a charter school can impact the stability of a school's finances especially if enrollment numbers are put together right before the school year begins, which typically is after a school budget is approved.

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    Is a Change Needed?

    For charter schools to be successful, they have to be financially sound as well as educationally competitive. If state or local public monies aren't enough to support these alternative schools, then new ways need to be found. A top-notch charter school is only as good as the finances supporting it. Once the money runs out, there's a good chance the school will close.

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