Moody’s warns of charter financial threat to school districts

 

Advocates of charter schools argue that taking students and tax dollars from traditional public schools and turning the revenue over to corporate-style charters doesn’t hurt neighborhood schools. Public school supporters who already knew that argument was wrong have now been joined by no less a financial authority than Moody’s Investors Service.

In a new report, Moody’s warns that growing charter enrollment is threatening school districts in economically weak urban areas. The implications are particularly troubling for Texas, which is under still another court order to fix an inadequate and inequitable school finance system. If poor, struggling school districts are going to suffer additional financial setbacks because of charter schools, as Moody’s suggests, an inequitable school finance system will become even more unfair to Texas students and taxpayers alike.

Remember, the Legislature, while in session last spring, restored part of the $5.4 billion in school funding cut two years ago. It did little, though, to improve an outdated, inequitable and still-underfunded school finance system, while the legislative majority was enacting a new law to raise the limit on charter operators in Texas from 215 to 305 over the next several years.

Although they technically are public schools and receive tax dollars, many of these charters are not operated by school districts. Some are organized by outside interests as “non-profits” but are managed by for-profit operators eager to rake in public money.

Some advocates argue that charter schools don’t undermine traditional public schools because the tax dollars the charters receive is based on the number of students they enroll. Charter boosters claim the public schools don’t “need” that money anymore because their enrollment has dropped. But that argument misses the point that school districts can’t simply reduce their costs based on the number of students they lose to charters. The districts lose revenue, but they have fixed costs that remain unchanged, including building maintenance, bus routes and other expenses that can’t be reduced proportionately.

As Tiphany Lee-Allen, one of the Moody’s authors noted, “Shifts in student enrollment from district schools to charters, while resulting in a transfer of a portion of district revenue to charter schools, do not typically result in a full shift of operating costs away from district public schools.”

The Moody’s report also noted that a school district that already is under financial pressure is particularly vulnerable to charter school growth. It cites examples of public schools in Cleveland, Detroit, Kansas City, St. Louis and Washington, D.C., where charters have made big inroads.

Now, with the change in state law, more corporate-style charter operators will attempt to move into Texas.

Last month, state Education Commissioner Michael Williams approved four new charter applications. At least two – Carpe Diem Schools, seeking a campus in San Antonio, and Great Hearts Academies, planning a campus in the Dallas area – bring with them a history in Arizona and other states of cherry-picking the best and/or more affluent students while taking tax dollars from thousands of other children in traditional neighborhood schools. Williams’ decision will be reviewed by the State Board of Education next month.

https://www.moodys.com/research/Moodys-Charter-schools-pose-greatest-credit-challenge-to-school-districts–PR_284505?WT.mc_id=NLTITLE_YYYYMMDD_PR_284505%3c%2fp%3e

 

 

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4 Responses to Moody’s warns of charter financial threat to school districts

  1. LaurelH says:

    So, then, why is it that some charter schools are providing a better education for less money? Because they were willing to kill some sacred cows. Are you? I commented on one of your previous blogs…charter schools don’t have buses or typical school lunch programs. They find other alternatives for libraries, gyms and team sports. Team sport participation in our charter school is fully funded by the parents. Would Texas make such a drastic change to their football programs to ensure a better education for kids? Charter schools are highlighting this problem – public schools stuck in old paradigms.

    Charter schools like BASIS are also providing a contrast to show the loss of potential when above average students are stuck in traditional public schools that don’t meet their needs. You like to say that the above average student is not the problem in Texas. Of course they are not and they never will be simply by their definition and your measurement of what constitutes a problem. They will always score good enough and since you previously had no way to measure the loss of their potential, you could continue prioritizing the lower end of the bell-curve over them. Now that BASIS and other high performing options are in the picture, you can no longer hide from what our public schools are doing to these top students. They go to BASIS and take off. Now we have the data to show that there is indeed a problem for above average kids in our traditional public schools. They are not being served and their potential is being tossed out with the garbage. If we want to take back our global position of educational excellence, we need to enable excellence wherever it is found, not take resources away from high potential kids once they reach “good enough.”

  2. Sandra Peek says:

    Well–what about children who cannot afford extracurriculars? Those children will choose public school if the charter is making people pay for those activities. This pushed low sociaeconomic kids into systems that then become underfunded since those schools MUST provide transportation and maintain current facilities but with less money.

    • LaurelH says:

      If a parent chooses to go to a public school because it offers extracurricular activities without cost, then I might wonder about their priorities but I would not question their right to make that choice. At the same time, neither should they complain about charters providing a choice for parents to put academic excellence over extracurricular activities. The issue I take with Mr. Robison is that he would see charters cut off – specifically those that are drawing away top students -because the public schools can’t balance their budgets. I am for school choice. If my assigned public school isn’t meeting my needs, I should have the option to go elsewhere and take the public funding with me. I am not wealthy. I cannot afford private school tuition. By choosing a charter that requires the parents to fund extracurricular activities, my priority that academic excellence is not undermined by non-essential activities is realized. Parents who want more activities have the choice to fund them or not. In the public school, however, I get little say whether gifted programs are sacrificed for what I might consider non-essentials. Charters provide me the option to “vote with my feet.”

  3. LaurelH says:

    You are prioritizing services (as well as athletics and aesthetics) over academics and this is why the private sector is stepping in. They are telling you that you are not preparing kids for the real world and they are demonstrating it via public charters that highlight what is possible when you kill the sacred cows. Charter schools start from ‘what can we afford’ and ‘what do we absolutely HAVE to have?’ They do not start from ‘tradition,’ ‘the way we’ve always done it’ or ‘the union won’t let us.’

    I’m not saying don’t have services for families that can prove hardship, but you need to rethink services for everyone else (lunches, buses, etc.). Believe me, it wasn’t fun to go from being able to just hand my kids a couple bucks for lunch each day to having to plan out and prepare lunches and it wasn’t fun to go from getting them on/from the bus a few steps from my house to dropping off and picking up every day either. I work full time – it took some figuring. BUT it’s worth it. I wager that you could free up enough money across the districts and the state to drastically improve your academic programs if you step out of old paradigms.

    Now, you’re probably going to argue with me that parents would revolt at such changes – that not all of them are willing to do what I do, that all this is part of the “academic experience.” Yes, you’ve habituated them to this pattern. And my response is this…if you don’t want to go through the hard work of shifting them to a new way of doing things, then keep your mediocre academics but don’t complain about high performing charter schools and their “cherry picking” ways.

    The reality is that there are enough parents who care about excellence in academics that they will make sacrifices given the choice. This is why BASIS and other high performing charter schools are growing. There is demand…the BASIS schools in Phoenix had enough of a waiting list to justify opening two new campuses. And, if they can provide a better education for less money and still generate a profit, more power to them.

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