Charter School Reform

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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 General’s efforts to tackle this issue.

In my remarks, I will look at three major aspects of proposed charter school reforms—accountability, authorization and growth, and funding.


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 spending—charter and school district—in 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.


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.

PA Charter School Enrollment Through 2012-13

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 story—even magnified—took place on the other side of the state. Philadelphia’s Math and Science Technology charter schools (MaST) received an incredible 5,000 applications for 98 slots on the school’s 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 Charter’s application to expand, while the School District of Philadelphia is trying to impose enrollment caps on charter schools like MaST. None of the state’s 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 shouldn’t limit children’s opportunities to attend a top-notch school based on how a lottery ping pong ball bounces.


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 district’s 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 difference—the amount school districts keep for children they are no longer educating—results in increased district spending per student.

Pennsylvania K-12 Spending & Revenue, 2011-12
  Total Spending Enrollment Spending per Student Total Revenue Revenue per Student
Public Schools (ADM) $24,761,443,033 1,755,040 $14,109 $25,030,564,337 $14,262
  School Districts, Less Charter   Payments $23,616,194,079 1,660,291 $14,224 $23,885,315,383 $14,386
Public Charter (all) $1,323,281,065 105,036 $12,598 $1,353,020,529 $12,881
  Cyber Charter $372,712,883 32,322 $11,531 $377,633,339 $11,683
  Brick and Mortar Charter $950,568,181 72,714 $13,073 $975,387,190 $13,414
Sources: PA Department of Education, Summaries of Annual Financial Report Data; Public School Enrollment Reports,

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 2011-12. 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
  Total Spending Percent of Total Public 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 $3,014,596,806 12.17%
Administration $1,374,673,428 5.55%
Business & Central Support $597,901,033 2.41%
Operation and Maintenance of Plant $1,982,000,803 8.00%
  Total General Fund Balances Percent of Total Public School Spending
School Districts $3,538,705,609 14.29%
Source: PA Department of Education, Summaries of Annual Financial Report Data,

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 General—which 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 didn’t 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,

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 aren’t 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 costs—since pension costs are included in the payment coming from school districts—and 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.