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Local News

Pennsylvania lawmakers ponder big changes to charter school funding

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Katie Meyer, Spotlight PA 
January 24, 2024

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HARRISBURG — Pennsylvania lawmakers are considering significant changes to the way charter schools are funded as they undertake a monumental overhaul of public education mandated by a court ruling.

More than 160,000 Pennsylvania students are enrolled in brick-and-mortar and cyber charter schools, with the latter’s enrollment having ballooned in recent years.

Tuition for these students is almost entirely funded by the public school districts in which they live. In conversations with Spotlight PA, key lawmakers on both sides of the aisle acknowledged that this arrangement leads to financial losses for districts, which can’t reduce costs enough to offset charter tuition.

For years, attempts to overhaul the more than two-decade-old law that governs charters and their funding have repeatedly failed in Harrisburg.

But as lawmakers begin hashing out their legally mandated overhaul of the commonwealth’s school funding system, they’re also taking a serious look at the charter law.

Democratic- and Republican-authored reports, meant to kick-start the funding conversation, offer a glimpse at possible common ground.

They suggest giving public school districts reimbursements for costs associated with charters. Leaders in both chambers have also said it could be possible to change the way districts pay cyber charters for certain students’ tuition.

Any changes to the way charter schools are funded will be hemmed in at every step of the way by a political minefield.

The status quo

The amount that traditional public school districts pay for students’ charter tuition is based on their own per-student spending, with some deductions (facilities expenses are held back from the total, for instance).

The Scranton School District, for example, spent $15,667 per student during the 2021-22 school year; charter tuition for any student without a disability who lives in that district was based on that number.

If a student has a disability, their tuition is built on that base rate for the district, plus a standard percentage of its spending for all disability services — regardless of the kind of disability the student has.

Public school districts and advocates have criticized these billing practices for years.

For one, the mechanism by which disabled students’ tuition is calculated uses an average that doesn’t take different kinds of disabilities, and their different costs, into account. Because districts’ payments for severe disabilities tend to inflate the total, charters can get more money than a particular student needs.

As state Rep. Pete Schweyer (D., Lehigh) recently told Spotlight PA, “A child with spina bifida is vastly more expensive to educate than a child with some level of hearing loss.” Schweyer chairs the state House Education Committee, which will play a key role in negotiating education overhauls, and he broadly supports changes to charter financing.

Lawmakers also face a challenge inherent to Pennsylvania’s funding structure for charters: When a student moves from a traditional public school to a charter, there is not a corresponding level of savings.

Education circles commonly refer to this as a “stranded cost” — the gap between the savings a school can realize when a student leaves for a charter, and the cost it still bears to pay for charter tuition.

In a 2017 study that delved into the finances of six different Pennsylvania districts, the nonprofit Research for Action found that charter enrollment negatively affected traditional districts, and that impact deepend as more students left. While RFA found that these effects decreased over time, public schools never completely stopped losing money under the group’s model. The consequences were bigger in smaller districts.

What’s on the table?

Lawmakers on the Basic Education Funding Commission were tasked with coming up with new overall financing formulas for public education, which Democrats and Republicans unveiled in separate reports earlier this year. Both reports included proposals related to charter schools.

The reports pitched the return of reimbursement for at least some stranded costs associated with charters — an old idea. A previous state budget line item that provided a partial reimbursement was cut under former GOP Gov. Tom Corbett’s administration.

“If charter school reimbursement had remained part of the budget and flat funded since 2010/11, it could have offset districts’ need to pass these costs onto taxpayers by approximately $2.5 billion before adjusting for inflation,” the Democratic report said. “However, charter school costs have more than doubled in the past decade.”

The GOP report also noted stranded costs, though it focused specifically on costs associated with cyber charter schools. It offered two reimbursement options, both of which would calculate payments based on districts’ expenses for cyber charter tuition in particular.

Schweyer, the state House Education Committee chair, noted that one reason there’s some bipartisan consensus on the issue is that it could be tied to lowering property taxes — a long-held priority for some Republicans.

“Property taxes make up the majority of districts’ budgets, and many administrators testified [during education hearings] that charter payments are a big reason why property taxes must be so high,” he said during his conversation with Spotlight PA.

The Pennsylvania State Education Association, the union that represents around 180,000 public school workers, has called for $500 million annually to be devoted to the reimbursement line item. While neither the Democratic nor Republican report made a specific financial commitment, PSEA spokesperson Chris Lilienthal said it’s “promising” that both reports called for the funding to be restored.

The Democratic report also briefly mentions changing the way districts pay charters for disabled students’ tuition. Schweyer said there’s some bipartisan agreement on creating a tiered system in which payments would be tied to a disability’s severity and associated expenses.

State Sen. David Argall (R., Schuylkill), who chairs the GOP-controlled upper chamber’s Education Committee, concurred that this tiered system could be on the table, at least when it comes to cyber charters.

“The devil will be in the details, but yes,” he said of the concept.

He also confirmed that some Republicans support bringing back the charter school reimbursement. Because lawmakers are already broadly prepared to make major education investments to satisfy the terms of the landmark 2023 school funding court decision, it’s one of the less politically tricky charter school changes on the table.

“No one’s ox gets gored on that front,” Argall said. “I think we understand that it’s a cost that we need to help school districts.”

A deep well of political challenges

Lawmakers are entering talks on charter school policy with the understanding that areas of consensus are limited.

“We haven’t successfully touched this issue in years,” Argall said. “If we can get a 10% agreement, let’s do 10%, and then we’ll get the other 90%.”

Lawmakers largely consider cyber charter schools to lie within that 10%. Enrollment in these online-only schools has ballooned since the pandemic, making them a particular focus for legislators — especially because despite their lower facilities costs, they’re funded through the same formula that brick-and-mortar charters are.

Legislative leaders say this consensus that the law doesn’t appropriately deal with cyber charter schools makes them an easier target for reform. For instance, some lawmakers, particularly in the GOP, have said they’re open to a tier system for disabled students’ tuition in cyber charters but not necessarily in brick-and-mortar charters.

Schweyer, the Democrat, said he would personally be in favor of applying the tiers more broadly, but that “all of this is a hard sell.”

“Sometimes we’ve just got to get as far as we can and measure results before we take a second bite of the apple,” he said.

Charter advocates have agreed to take part in these reform discussions, but shy away from any policy change that would lead to a lower tuition share.

Anne Clark, who heads the Pennsylvania Coalition of Public Charter Schools, said she agrees that the current charter law “doesn’t serve anyone well.” But she thinks cyber charter schools are being used as a scapegoat because “it’s an easy attack,” and said her fundamental position is that charters should get the same share of funding as any traditional public school.

“What I would like to see is a discussion about what it takes to fund students well,” she said.

Inextricable from any conversation about charter school policy is the political and financial pressure it puts on lawmakers. Public school unions exert significant influence on lawmakers via campaign donations, and so too do charter advocates, particularly ones tied to large, well-established brick-and-mortar schools.

For instance, Vahan Gureghian, who heads Chester-based for-profit charter operator CSMI, doled out nearly $800,000 in the 2022 election season alone. The money primarily went to top legislative Republicans, including state Senate President Pro Tempore Kim Ward (she got $125,000 that cycle) and state House GOP Leader Bryan Cutler (he received $50,000). Gureghian also gave prodigiously to legislative Republican campaign committees.

Gureghian isn’t the only big charter operator who gives hundreds of thousands to politicians, and the donations are not dictated by party alone. Philadelphia-area Democrats in particular have long had close ties with charter school operators. And though the party has, in recent years, cut down on the cash it takes from these groups, charter boosters and their allies still have influence.

Education Opportunity PAC, a group focused broadly on school choice — which includes championing state support for private and parochial schools along with charters — gave to a long list of Democrats in 2022. Big names include state House Majority Leader Matt Bradford ($15,000 in 2023), Democratic state Senate Appropriations Chair Vincent Hughes ($30,000 in 2022), and longtime state Sen. Anthony Williams (another $30,000 in 2022). Gov. Josh Shapiro also took $10,000 from the committee in 2022.

Education Opportunity gets a significant portion of its funding from other PACs that are funded almost entirely by billionaire Jeffrey Yass, Pennsylvania’s single biggest school choice donor. In 2022, nearly 40% of the PAC’s funds for the cycle came from Yass’ PAC, Students First.

Public sector teachers’ unions like PSEA, meanwhile, concentrate most of their spending on supporting Democrats. Legislative leaders are the biggest beneficiaries of that money — state House Speaker Joanna McClinton received $123,500 in the 2022 cycle, Bradford got $90,500, and Shapiro’s gubernatorial campaign got the lion’s share of the union’s spending, with $775,000.

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