Rapidly growing districts are less likely to feel financial pain with the growth of charters. However, in a district with a stable or declining population, charters do pose a financial concern: this can be as simple as the loss of economies of scale. But if, as is typical, the charter finance system is based on the weights in the state-funding formula rather than on actual costs, districts can struggle with even greater financial problems.

If charter schools enroll fewer high-cost students than the host district, the loss of revenue for “average-cost” pupils lost to charters may decrease the amount districts have to cover their higher-cost students. Many charters have developed strong special ed programs, but 2005 National Assessment of Educational Progress data make clear that charters on average educate fewer special ed students and English language learners. Districts receive more funds for these students, but extra dollars are often not enough to cover the actual costs of providing services to them. This means the basic per-pupil allotment the district receives for all other students helps cover the higher-cost students.

When a charter school doesn’t serve as many high-cost kids or as many with severe special needs, it affects the district’s financial balancing act. In many urban areas, charters do enroll at-risk students at high rates, but the numbers, on average, still don’t match the host district. It’s important to note that there are also some cases where charter schools serve a higher proportion of the at-risk population than the host district and actually can help the district’s bottom line.

The financial impact charter schools have in some districts is generally not because charter schools have bad intentions (the teachers who work in them can be impressive, and some of them are represented by the AFT), but because the assumptions made about financing charters are often unrealistic. Charters typically have fewer students, making them more costly to run because there are fewer students to cover the school’s fixed overhead costs. Research shows running a small high school can cost $400 more per pupil than a typical district school; that doesn’t even include the additional overhead of district-level responsibilities. As a result of their size, charters’ administrative spending on a per-pupil basis is typically higher than that of other district schools.

When policymakers shoehorn a model that inherently will be more expensive into the current school finance system, something has to give. And when state funding systems have the unintended consequence of solving the problem by attracting lower-cost kids and penalize schools for attracting higher-cost ones, stuff happens. We should be sympathetic to the pressures charter schools face. Even so, policymakers considering expanding the number of charter schools need to keep in mind the financial impact they often have on districts and proceed prudently and responsibly.
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Ed Muir is associate director of the AFT research and information services department.