Paying for Charter Schools

In 2011, the New York State Education Department received a $113 million federal grant to create 400 charter schools by 2016, adding to the 171 charter schools operating that spring. But at the last bell this school year, just 256 charter schools served the state.

In July, moderators of a City & State co-sponsored debate posed this question to Albany lawmakers running for New York’s 13th Congressional District: Where did the money from that grant go? And if the state failed to create the schools, how would they convince Congress to give New York more charter money in the future? 

“The money?” said Assemblyman Keith Wright, facing his Harlem constituents in a moment of unrestrained candor. “Certainly, I can't tell you what happened to that money.”

While Wright addressed the question head on, his peers in the Assembly took a more traditional tack: Guillermo Linares and Adriano Espaillat dodged the question entirely.

Clyde Williams pounced.

“This is a part of the problem,” boomed Williams, the first Albany outsider to speak. “You have a bunch of elected officials, state officials, who can't tell you what happened to the money that the federal government gave them,” he said to whoops and cheers. 

But after the primary votes were cast and Espaillat ultimately prevailed, the question lingered: What happened to that money?

A representative for the state Education Department explained that about 73 percent of the money has been spent so far to fund 112 new charter schools and $30 million remains in the grant fund. The department was given a one-year extension through July 2017.

The vast majority of charter schools in New York are set up as 501(c)(3) nonprofit organizations, funded largely through tax dollars, that operate free of many regulations imposed on other public schools, in order to allow them flexibility to try new teaching techniques.

Asked about the shortfall, David Frank, executive director of the New York State Education Department’s Charter School Office, contended that “the goal was never 400. The goal in the grant was 150 schools under the grant period.” 

Still, the first sentence of the NYSED charter school grant application summary reads: “The New York State Charter Schools Program (CSP) Project 2011-2016 seeks to double the number of high-quality charter schools (to almost 400 charter schools) that serve students in New York State.” 

To date, New York state has just 256 charter schools operating, with 270 likely to be ready to serve students in the fall. An additional 20 are approved, but will remain in the planning stage, according to estimates from Northeast Charter Schools Network and education officials.

Frank said that 50 additional NY charter schools received separate funding directly from the federal government through a grant program for charter networks. With all of that taken into account, he said, the picture looks very different. 

“If you include the 112 to the 50 network schools, actually, we're above our benchmark of 150,” Frank said. “So, I would say the grant has been a resounding success.”

When told about the grant question at the debate, Frank doubled down.

“To say we haven't met these (grant) objectives,” Frank said, “is just a fallacy.”

The department had succeeded in maintaining high-quality schools, strengthening the grant administrative infrastructure, promoting dissemination of charter school best practices to other public schools, and improving outcomes from New York charter schools, he said. Moreover, given the department’s extension, he said, it is too early to judge what the grant accomplished.

“We are not about quantity,” Frank said. “We want high-quality schools.”

In interviews, education specialists, charter school lobbyists and public school interest groups showed sympathy for NYSED and characterized it as a department overwhelmed with its responsibilities.

Rick Timbs, executive director of the Statewide School Finance Consortium, which represents 433 New York public school districts serving “average and low-wealth communities,” said underfunding and staffing cuts had taken a toll on the state education department.

“I think they’re doing their best with what they have,” Timbs said. “We don’t want to diminish our expectations, but at the same time we’ve got to make sure they have the resources to do a good job.”

Lobbyists also noted that certain key government players in the charter approval process have slowed the growth of charter schools in New York.

Andrea Rogers, New York state director of the Northeast Charter Schools Network, said the education department was headed in the right direction with the appointment of David Frank, but there had been issues in the past. 

“There has been a little bit of a chilling effect in terms of how the board of regents has approached authorizing more recently,” Rogers said.

During one round of applications in 2015, all 15 applicants for charters were rejected. 

“I think (applicants) were looking at that saying, ‘Oh. Huh. A little bit surprising that not a single school was high-quality enough to have gotten a charter,’” Rogers said.

“I’m hopeful that a lot of schools see it differently now and want to put their applications back in front of the board,” she added.

But the broader question of “where the money went” encompasses not just the cost to open new charter schools, but also the cost to run all the state's schools. This is perhaps the most pressing policy question in New York education, considering the state spends more per pupil than any other and currently ranks in the bottom half of the K-12 achievement rankings nationally. New York state ranks 27th among 50 states and Washington, D.C., earning it a C-minus grade in Education Week’s 2016 Quality Count.

Considering New York state spends more per pupil than any other state – an average of $2,000 more than the next-highest spender – the Empire State is not getting much bang for its buck, said David Friedfel, director of state studies at the Citizens Budget Commission.

“New York state spends by far the most in the country,” Friedfel said. Part of the reason is the high cost of New York real estate, and other costs of maintaining schools in one of the most expensive parts of the country. “However, we also have very powerful unions and we spend a lot on teacher salaries and fringe benefits. Personnel costs are the largest costs in education and New York pays comparatively more than other places,” he said. 

Breaking down the state’s education costs further, Friedfel explained that New York is also home to “high-need populations” that require more spending as well.

The key problem, as Friedfel sees it, is the imbalance in how the money is dispensed to address those needs, particularly for high-need students.

“There are significant disparities,” Friedfel said, referring to his extensive research comparing spending between New York school districts.

To allocate education dollars, the state employs a byzantine spending formula – ostensibly to send more money to low-income districts that don’t collect as much local tax revenue and less money to richer areas where the local tax revenue is more robust. But in order to avoid stripping the richest areas of their state education funding, Albany’s legislative architects put in some guard rails.

"There are limitations on how rich or poor districts can be considered,” Friedfel explained.

The result is that the poorest school districts do receive more money than wealthier districts, but not as much as they otherwise would if those formulaic guard rails weren’t in place – and perhaps not as much as they really need.

The bulk of state education dollars in school aid is counted not in the tens of millions of dollars, but in the tens of billions of dollars: over $24 billion this year.

And those billions are distributed with a formula, Friedfel said, “built with so many caveats that money is going where it doesn't necessarily need to go.”

In other words, because wealthier districts receive more funding than they really need, more money must be spent overall to aid those poorer school districts due to the distribution formula.

And in every district the money is split among all public schools, including the largely nonprofit charter schools and the handful of for-profits that have been in operation since before 2010, when the state banned any new for-profit charters.

“We always remind everyone that charters are public schools. They are a different design and a different delivery mechanism, but it’s public school education and public school students being served,” said Rogers, the charter school advocate.

Rogers argues that charter schools have been shortchanged in terms of how they are reimbursed, leaving some of them struggling to operate.

“We feel very strongly that students in (charter) schools deserve equal support as what students in the neighborhood school across the street gets. So, it's definitely an equity issue,” Rogers said. She pointed to a current lawsuit aiming to extend building expense reimbursement to charter schools that do not currently receive it.

Charter schools’ unique status as nonprofits does, however, allow them to raise money privately – a fact the teachers’ union has called the “elephant in the room” when it comes to funding equity between schools.

Timbs, who represents poorer school districts, further argues that charters’ freedom from many collective bargaining agreements, auditing requirements and other regulations represents a savings to charter schools.

“They’re operating without a lot of costs that we have,” Timbs said. “Those differences, all these things we’re talking about, they kind of add up – and certainly the advantage goes to the charter.”

The question ultimately comes down to how to best spend the state’s education budget, Timbs said, noting that he was neither pro-charter nor anti-charter. But, he said, if charter schools are providing a superior learning environment, public schools should become more like them. If not, he wondered, why pay for two parallel educational systems?

“Probably,” Timbs said, “Because politically it works – even if it doesn’t work any other way.”