"It is the intent of the Legislature that each charter school be provided with operational funding that is equal to the total funding that would be available to a similar school district serving a similar pupil population..."
[Education Code 47630(a)]
California law is clear that charter schools should be provided with operational funding equal to the total funding available to a similar school district serving similar pupils. In reality, that is rarely the case. Instead, large gaps of funding exist between charter schools and traditional schools.
On January 26, 2012, the California Legislative Analyst's Office (LAO) issued a report confirming funding inequity of at least 7%, or $395 per student for categorical funding, between California charter public schools and their traditional school counterparts, a gap which can exceed $1,000 per student for some charter schools. This report did not address facility funding, federal funding or local revenues, which further widen the funding gap.
Funding gaps were also highlighted in recent studies by Bellwether Education Partners and Ball State University and have been exacerbated by the tough economic times the state has gone through for the past decade.
According to the Ball State study, the funding disparity is more than nine percent in California, with charter schools receiving only a sliver of revenues afforded to traditional public schools. This gap is especially significant when we consider that both charters and traditional schools are serving public school students.
The California Charter Schools Association advocates to improve funding for charter schools, and to reduce funding inequities between charter schools and traditional public schools.
All of California's public schools have faced considerable budget challenges in recent years. Charter schools also face a number of unique, severe challenges around funding.
Charters Receive Less Funding on Average
School districts receive much of their funding from the state in the form of "categorical funds," whereas charter schools receive much of their funding as a "block grant," which they can use for a range of purposes. However, the charter school categorical block grant provides at least $125 less per student than the statewide average spent on students that don't attend charters for the same programs. In addition, charters cannot access any reimbursements that schools districts receive for activities that are mandated by the state.
Charter schools also don't usually have access to money traditional school districts can raise from school bonds or parcel taxes. The parents of charter school students pay their fair share of these taxes, but the charter schools their children attend don't usually benefit.
Impacts on Newer Charter Schools
In addition to those challenges, newer charter schools have been impacted by changes in programs due to the state budget crisis that "freezes" funding levels received in the 2008-09 fiscal year. On average, these newer charter schools that have been locked out of the categorical flex-freeze scheme lose an additional $176 per student, despite a budgeted supplement to their categorical block grant. Further, if a new school is serving a Kindergarten through 3rd grade population, those pupils loose an additional $1,071 each due to lack of access to the K-3 Class Size Reduction Program enacted to keep class sizes small in those grades.
Deferrals Hit Charters Especially Hard
One way the state has dealt with declining revenues for schools is to defer payments of funding to schools well beyond the payment schedule required by law. Because operational expenses are relatively evenly distributed throughout the year, when revenues are deferred it can create a massive cash deficit for schools. During 2011-12, three are 13 scheduled apportionment deferrals; approximately 59% of revenue will be deferred at some point and 35% of state payments will be deferred into 2012-2013.
Charter schools are more severely affected than other school districts for a number of reasons, including the funding inequities outlined above. Charters do not have access to short-term borrowing instruments available to districts such as Tax Revenue Anticipation Notes (TRANs) or other affordable public lending options. Therefore, access to short-term capital for charter schools can be very expensive, sometimes exceeding 20% in annualized interest, if available at all. Deferrals are particularly devastating for newer charter schools that have not had the longevity to build up reserves necessary to weather uneven and unpredictable cash payments from the state. Newer schools also lack the track record necessary to establish the credibility or collateral necessary for most borrowing options.
Facilities Challenges Exacerbate the Problem
Since many charter schools must pay for facilities out of general operating funds, rather than have access to local bonds, or existing public facilities, charter schools may spend an additional 15-20% of their operating funds on facilities- funds that traditional district have available for direct instruction.
This cost takes money out of the classroom to pay for the physical classroom itself, which is why ensuring greater access to equitable facilities has long been a CCSA priority.
At the state level, CCSA's work has already resulted in a number of wins at the legislative level that result in more funds for charters, and has been successful in defeating legislation that would cost charters dearly.
CCSA has also worked to develop solutions, and create access to a number of innovative programs that allow schools to address their financial needs so they can focus on educating students. Among our many efforts, we have:
- convened charter school leaders, members of the banking community, representatives from philanthropic foundations, the California School Finance Authority, the California Department of Education and Association for in-depth conversations about charter school funding equity and access to working capital financing
- offered our members an Emergency Loan Program to cope with deferrals
- focused work at the local level, such as advocating for inclusion of charters in local efforts such as parcel tax campaigns
In Los Angeles, CCSA brought players to the table, resulting in a groundbreaking deal that allowed Birmingham Charter High School access to working capital to address the school's state deferral-caused cash flow challenges. Moving forward, this type of transaction has the potential to assist charter schools across the state.
Another bright spot in Los Angeles is the signing of a compact between charters and the Los Angeles Unified School District. Among other things, the compact commits the district to including charter schools in any revenue generated by Tax Revenue Anticipation Notes (TRANs) or parcel tax initiatives.
In Sacramento, a compact between charters and the Sacramento City Unified School District commits that district to negotiate cash-flow solutions with charters where feasible, working together to pass a local facilities bond and/or parcel measure that includes a pro rata share for district and charter schools.
CCSA remains committed to providing members the most up to date and complete information possible, as our State Budget Update shows.
- Regular communications through list-serves such as our Capitol Update and Weekly Member Digest to share breaking budget-related news and links to relevant resources
- Support though web-based materials such as the Budget Update page, budget briefs and cash management tools. In this extremely difficult cash flow situation, we urge our members to be as prepared as possible. Visit the Financial Management section of our website for advice and resources, such as the 2011 edition of CCSA's Charter School Financial Management Guide and Bridging the Gap: Understanding Cash Flow Options in the Midst of Deferrals.
- School developers can access a budget update highlighting specific concerns for new schools, as well as an updated budget template.
- In-person meetings and webinars such as regional meetings and business manager meetings offer opportunities for one-on-one interaction with experts and other colleagues. Review the schedule and watch for updates on CCSA's events webpage.
- Our Help Desk and Regional Directors are available for technical questions, strategy and support.
- Materials to help charter school parents understand funding challenges, through CCSA Families, CCSA's grassroots organizing effort.
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