What a New Report Says About Charter School Funding

A persistent complaint among charter schools, charter operators and their advocates is that their schools often get the short end of the financial stick from states. Charter schools and their allies charge that local and state funding formulas shortchange charter schools, giving them less per-student funding than traditional public schools.

Opponents counter that traditional public school districts provide a greater range of services, such as transportation and meals, than many charter schools do. In addition, research has shown that public schools tend to serve large proportions of special education students, who carry a greater cost per student.

A new report from the University of Arkansas' Department of Education Reform concluded that charter schools receive an average of $5,721 less per student than their traditional counterparts, representing a funding gap of about 29 percent. The report, "Charter School Funding: Inequity in the City," was funded by the Walton Family Foundation, one of the nation's top backers of charter schools.

Earlier this year, Inside Philanthropy spoke with Bruno Manno, Walton's senior advisor on K-12 Education Reform, about how the foundation's new strategy aims to spread policies and practices that foster the growth of charter schools. That strategy outlines a plan to "create environments that support expanded choice and high-quality schools" by tackling a number of issues including enrollment systems, transportation, providing families with better information, and changing education funding patterns. This new research has implications for the last topic and should be of keen interest to charter advocates nationwide. 

Related: Choice Is Not Enough: What Walton Is Up to With Its New K-12 Funding Strategy

The study examined charter school funding in 14 urban areas in which charter schools have a strong presence, including Atlanta, Boston, Los Angeles, New York City, Washington, Memphis and Camden. The authors found that the funding gap narrowed in a few cities, but widened in others. The study found Washington and Camden have the widest disparity in per-pupil funding between charters and traditional public schools — more than $12,000 in both cities.

This new study is actually a follow-up to previous research the authors produced in 2014 on the state of charter school funding. The studies are not without their critics. Some education policy scholars have said the Arkansas researchers demonstrated little understanding of intergovernmental fiscal relationships and have created inappropriate "apples to oranges" comparisons. Of course, the source of funding may make this research automatically suspect to some. (Walton backs quite a bit of research and evaluation as part of its K-12 program, with grants going to scholars at Harvard, Stanford, UPenn and other universities, as well as such research organizations as RAND and Mathematica.)

The Arkansas study addressed the claim that the higher proportion of special needs children in many traditional school districts is a major source of the funding gap, reporting that while traditional schools have more special education students, the funding differences were significant only in Boston and Atlanta.

But it was the funding situation in Memphis that drew our attention. The authors reported that charter schools in that city received an average of $900 more per pupil than traditional schools. The reason? According to the study, it's philanthropy.

Memphis, it turns out, is not just known for its excellent barbecue and for being one of the birthplaces of rock and roll. The city is also an example of funders coming together in an effort to improve K-12 education options. A few years ago, a group of local funders, including the Pyramid Peak Foundation and the Hyde Family Foundation, united in an ambitious education reform strategy.

If any city needed the help, it was Memphis. For years, the majority African American and nearly all-poor Memphis City Schools struggled with low academic performance. In 2011, city residents voted to dissolve the system, merging it with the Shelby County School District. That merger took effect in 2013. Today, the Shelby County school system serves the city of Memphis and the unincorporated areas of Shelby County. This reorganization, along with a $90 million gift from the Bill and Melinda Gates Foundation for teacher effectiveness work, created new opportunities for funder involvement in Memphis. A 2014 study by the Bridgespan Group cites Memphis, along with Charlotte, North Carolina, and Jacksonville, Florida, as examples of how local funders can work side by side with school districts and the broader community to improve educational options and outcomes.

Pyramid Peak reported that it historically had not invested its resources in Memphis public schools, preferring instead to focus on private and parochial schools, which the funder saw as more open to the types of reforms it favored. Legislative changes in Nashville also paved the way for a more reform-friendly environment. Tennessee's 2010 First to the Top education act, signed into law by then-Gov. Phil Bredesen, created the state's Achievement School District to operate historically low-performing schools, many of which were in Memphis. A year later, state lawmakers lifted the cap on the number of charter schools that would be allowed in Tennessee.

Memphis-area funders saw an alignment between funders and district priorities as a critical first step in a productive collaboration. Once the school system had a clear road map for transforming itself, with an emphasis on teacher development and expanded educational options, the philanthropic partnership came together and lent its support. For teacher development, local funder interest supplemented an injection of grant funding from the Gates Foundation. Hyde and other local funders saw school leadership and teacher talent as two of the strongest drivers of improved student achievement. The funder collaborative works with both the Shelby County Schools and the Achievement School District on initiatives to ensure a supply of quality teachers.

Meanwhile, funder support of local charter operators helped the latter to expand and attract charter school operators from outside the city with a track record for turning around troubled schools. Today, Memphis has more than 40 charter schools, up from less than five a decade earlier.

Not everyone will agree on whether this surge in charters is a good thing. And more broadly, philanthropy's role in Memphis has generated controversy. It's been slammed by some critics as misguided experimentation that uses the city's kids as "guinea pigs." Last year, the Memphis NAACP called for a freeze on further expansion of the Achievement School District "until sufficient improvement can be demonstrated by the existing schools."

Regardless, though, the new data on charter funding in Memphis offers an important case study of how to create more favorable conditions for choice, as Walton and other reform funders are so keen to do. And it suggests there are ways for local funders to close the gap between charter and district schools.