**Venturesome Capital:**

**State Charter School Finance Systems**

**National Charter School Finance Study**

F. Howard Nelson

######## Edward Muir

Rachel Drown

American Federation of Teachers Educational Foundation

Duc-Le To, Project Officer

Office of Educational Research and Improvement

U.S. Department of Education

**National Charter School Finance Study**

This study is contracted to the American Federation of Teachers
Educational Foundation, in conjunction with Policy Studies Associates,
Inc., and Fox River Learning L.L.C. The study is funded by the U.S.
Department of Education under contract number ED98-CO-0029.

**U.S. Department of Education**

Richard W. Riley

*Secretary*

**Office of Educational Research and Improvement**

C. Kent McGuire

*Assistant Secretary*

**National Institute on Educational Governance,**

**Finance, Policy Making, and Management**

Barbara Lieb

*Acting Director*

**Media and Information Services**

Cynthia Hearn Dorfman

*Director*

December 2000

This study was funded by the U.S. Department of Education. The content
does not necessarily reflect the views of the Department or any other
agency of the U.S. Government. This publication is in the public domain.
Authorization to reproduce it in whole or in part for educational
purposes is granted.

## Acknowledgments 

The authors thank the many individuals who contributed directly and
indirectly to this study. In particular we wish to recognize the
following staff of many state and national organizations, state
departments of education or state charter school offices who provided
information, data, review or feedback at various stages of this study.
The authors, however, accept full responsibility for the content.

**Alaska:** Marjorie Menzi, Eddy Jeans

**Arizona:** Kristen Jordison, Judy Richardson

**California:** Sonya Edwards, Dave Patterson, Lawrence Picus

**Colorado:** Bill Reimer, Byron Pendley

**Connecticut:** Robert Brewer, Jennifer Niles

**Delaware:** Gerry Gallagher

**District of Columbia:** Nelson Smith

**Florida:** Tracey Bailey, Danny Wheelock, Jim Croteau

**Georgia:** Beverly Schrenger, Debra Collier

**Illinois:** Gail Lieberman

**Kansas:** Phyllis Kelly, Veryl Peters

**Louisiana:** Terry Geske, Beth Scioneaux

**Massachusetts:** Jose Afonso, Ed Kirby, Christine Lynch

**Michigan:** Laurie Cummings, Jim Goenner, Ellen Hoekstra

**Minnesota:** John Bulger, Bob Porter

**New Jersey:** Pat Austin, Yut\'se Thomas

**New Mexico:** Susan Ball, Kathleen Forrer

**North Carolina:** Paul LeSieur

**Pennsylvania:** Timothy Daniels

**Rhode Island:** Celeste Bilotti, Jim Parisi

> **South Carolina:** Donald Tetreault, Pam McMillan, Dan Chandler,
> Mellanie Jinnette

**Texas:** Brooks Flemister, Omar Garcia, Cheryl Wampler

**Wisconsin:** James McIntosh, John Sauerburg

**Milwaukee:** Ken Black

Many others reviewed various aspects of this report. We appreciate the
extensive comments of Pat Lines of the Office of Educational Research
and Improvement (OERI) and Alex Medler, Office of Elementary and
Secondary Education; as well as the assistance of Judith Anderson and
Duc-Le To in OERI. Jane Hannaway, Urban Institute; Bryan Hassel, Public
Impact; Joe Nathan, Center for School Change, Hubert H. Humphrey
Institute, University of Minnesota; and Eric Premack, Institute for
Education Reform, California State University served as peer reviewers,
providing extensive and helpful feedback.

We also value the insightful ideas of the study's advisory board.
Members include: Bill Reimer, associate superintendent for finance,
Douglas County, Colo.; Peg Goertz, University of Pennsylvania and
co-director, CPRE; Judy Richardson, Peacock, Hislop, Staley & Given,
Inc., Phoenix; Richard Farias, president, Tejano Center for Community
Concerns, Houston; James N. Goenner, director, Charter Schools Office,
Central Michigan University; Kenneth J. Meier, Department of Political
Science, Texas A&M University; Cecelia Rouse; Economics and Public
Affairs, Princeton University.

While appreciating the contributions of all of the reviewers, the
authors accept full responsibility for the content of the report.

## Table of Contents

Executive Summary 1

Chapter 1 Introduction 7

Chapter 2 Research on Charter School Finance 11

> Financial Data Analysis 11
>
> Analysis of Finance Policy 15
>
> Research with Collateral Information on Charter School Financing 16
>
> Charter Schools and Federal Funding 19

Chapter 3 Methodology 21

> Terminology 21
>
> Hypothetical Charter Schools 22
>
> Components of Revenue 23
>
> Federal Funding 25
>
> Revenues and Expenditures Excluded from State Profiles 26

Chapter 4 Overview of Charter School Funding 29

> Charter School Funding Structure 30
>
> Funding Based on Student Characteristics 36
>
> Funding Based on Geography 44
>
> Categorical, Mandated and In-kind Services 48

Chapter 5 Start-up Assistance 55

> State Start-up Assistance 55
>
> Federal Start-up Grants 56

Chapter 6 Charter School Financial Structure and Accountability 61

> Timing of Payments and Cash Flow Assistance 61
>
> Uniform Financial Reporting 63
>
> Independent Audit 64
>
> Debt 65
>
> Ownership and Disposition of Assets Including Fund Balances 66

Chapter 7 Facilities and Capital Outlay Financing 69

> Capital Spending in School Districts 70
>
> Facilities Funding for Charter Schools 71
>
> Programs To Improve Access to Capital 74

Chapter 8 Other Financial Issues 77

> Teacher Retirement 77
>
> Private Funding 79

Chapter 9 Comparability of Charter School and School District Funding 83

References 91

Appendix 97

## List of Tables

Table 1 --- Average 1998-99 Federal Aid Per Pupil 26

Table 2 --- Basis of Per-pupil Funding 31

Table 3 --- Basis of Student Count for Charter School Funding 37

Table 4 --- Grade Level Funding Adjustments for Charter Schools 38

Table 5 --- Special Education Funding 39

Table 6 --- State Funding for At-risk or Low-income Students 43

Table 7 --- At-risk and Low-income Funding for Charter Schools,

Selected States 44

Table 8 --- Charter School Funding Based on Host School District

Wealth or Tax Effort 45

Table 9 --- Funding Adjusted for Small School/District Size or Cost of
Living 46

Table 10 --- Estimated Revenue for a Basic Elementary Charter School

Located in High-, Average- and Low-revenue School Districts 47

Table 11 --- Responsibility for Transportation 49

Table 12 --- State Funding of Transportation for Charter School Students
50

Table 13 --- Other State Categorical Funding 52

Table 14 --- State Start-up Funding 56

Table 15 --- Federal Start-up Grants 58

Table 16 --- Provisions for Speeding Up Payments to Charter Schools 62

Table 17 --- Uniform Financial Reporting Required 63

Table 18 --- Independent Financial Auditing of Charter Schools 64

Table 19 --- Charter School Acquisition of Debt 65

Table 20 --- Responsibility for Charter School Debt 66

Table 21 --- Ownership of Assets Purchased with Public Funds of Closed

Charter Schools 67

Table 22 --- Charter Schools Allowed To Maintain a Postitive Fund
Balance 68

Table 23 --- Facilities Funding 71

Table 24 --- Participation of Certified Teachers in Teacher Retirement
System 77

Table 25 --- Participation of Charter Schools in Teacher Retirement

System, 1998-99 78

Table 26 --- Funding of Charter Schools Compared to Host School District
85

## Executive Summary

The First Report of the National Charter School Finance Study examines
the laws, regulations and state practices governing charter school
finance during the 1998-99 school year in 23 states and two cities.
These states and cities had operative charter schools during 1997-98,
and thus had at least one year of experience in implementing laws and
developing financial practices. In addition to describing finance laws
and practices, our report includes an estimation of the actual dollar
amounts that states allocate to charter schools based on the types of
students enrolled, and numerous other factors central to charter school
funding.[^1] Our report also assesses comparability of charter school
funding to other public schools with similar students and education
programs.

**Structure of Funding.** Charter school funding policies vary from
state to state, but they share many of the same components.

-   At the heart of charter school funding systems is per-pupil base
    funding. In some cases, this funding is based on a state average
    per-pupil expenditure (e.g., Minnesota); in others it is based on
    district average revenue or expenditures (e.g., Massachusetts); and
    in still others, the amount is negotiated between charter schools
    and the chartering agency (e.g., Colorado). (See Table 2.)

```{=html}
<!-- -->
```
-   Per-pupil base funding is only one component of an eclectic
    financing system involving numerous state and federal revenue
    sources, and frequently, negotiations between charter schools and
    school districts.

-   Per-pupil funding includes some funding for facilities in Arizona,
    the District of Columbia, Florida, Massachusetts, Milwaukee,
    Minnesota and Rhode Island, but charter schools in many states
    receive no specific financial assistance for facilities. Authorizing

school districts generally provide facilities in Georgia, Hawaii,
Kansas, New Mexico and Wisconsin. (See Table 23.)

-   A few states (e.g., Georgia, Hawaii, Kansas and Wisconsin) leave
    charter school funding decisions to the school districts that
    charter them. Generally based on the district's standard budget and
    facilities allocation formulas, districts provide funding for the
    specific needs of charter schools including higher costs associated
    with particular programs, grade levels or student populations.

-   Negotiations between school districts and charter schools play a
    major role in funding in Alaska, California, Colorado and Illinois.
    However, negotiation also plays a role in most other states, usually
    in cases where school districts provide legally mandated services
    such as transportation or special education assessment.

-   Location is a critical financial issue for charter schools. Charter
    school funding varies with the financial characteristics of the
    school district in which it is physically located, or the school
    districts in which charter school students reside. Connecticut,
    Minnesota and a majority of schools in Arizona are exceptions. (See
    Tables 8 and 9.)

```{=html}
<!-- -->
```
-   Most or all per-pupil funding flows with students from school
    districts to charter schools in almost all states. Whether charter
    schools are funded through state appropriations, or payments
    directly from school districts, makes little difference in regard to
    school district revenue transferred to charter schools.

-   About half of the states in our study fund elementary students in
    charter schools at the same level as high school students, even
    though high school students probably cost more to serve. This policy
    encourages the development of elementary charter schools. (See Table
    4.)

-   Special education remains a contentious funding issue. Six states
    base funding for special education on average school district
    special education spending or revenue, rather than the specific
    needs of students enrolled in the charter school. This system
    discourages charter schools from serving high-cost special education
    students; charter schools serving only low-cost special education
    students reap a windfall. Other states link special education
    funding to the actual cost of special education students, either
    through a pupil weighting formula or negotiations. Like school
    districts, charter schools still need to draw on general operating
    revenue to fund some special education. (See Table 5.)

```{=html}
<!-- -->
```
-   A majority of states provide additional funding to charter schools
    for at-risk students either directly, or through school district
    negotiations. (See Table 6.) Funding varies widely, ranging from
    \$220 per at-risk pupil in some states, up to nearly \$900 in one
    state. (See Table 7.) Seven states base funding for at-risk students
    on school district averages, rather than the specific at-risk
    population in the charter school. This system discourages charter
    schools from serving at-risk students. Several states grant
    preference to charter school applicants seeking to serve at-risk
    children. While this preference increases the enrollment of at-risk
    children in charter schools, it does not ensure adequate funding.

```{=html}
<!-- -->
```
-   Charter schools are eligible for federal and state categorical
    program funding to help meet the needs of high-cost students (e.g.,
    Title I or special education), or to promote specific educational
    programs (e.g., technology literacy or Goals 2000). (See Table 1.)
    Excluding programs for special education students, at-risk students
    and transportation, only four states provided "other categorical
    funding" exceeding \$50 per pupil. (See Table 13.) A few states
    average categorical program funding into base per-pupil funding even
    if charter schools do not provide qualifying programs.

-   Federal planning and implementation grants provide several hundred
    dollars per pupil during a charter school's first two or three years
    of operation. (See Table 15.) Nine states provide additional
    start-up support for charter school programs through either grants
    or revolving loans. (See Table 14.)

-   Transportation is a very complicated funding issue. Most states
    either provide funding comparable to school districts or mandate
    that school districts provide service at no cost. (See Tables 11 and
    12.) Four states provide transportation funding for charter schools,
    but allow the funding to be used for other purposes.

```{=html}
<!-- -->
```
-   In California and Texas, charter school funding is based on daily
    attendance, as opposed to enrollment. This policy discourages the
    creation of charter schools serving low-income and other at-risk
    students. School districts located in low-income areas suffer the
    same financial deficit.

**Amount and Range of Funding for Charter Schools.** Our study created
three hypothetical charter schools in each state to demonstrate the
range of funding within a state and standardize comparisons across
states. The charter school finance laws, regulations and administrative
practices in each state were applied to each of the three hypothetical
charter schools to illustrate base funding, student weightings,
school/district size adjustments, the role of negotiations, special
education funding, at-risk funding, transportation funding and federal
funding. The appendix contains the detailed breakdown of revenue for
each state for the three hypothetical charter schools.

### 

> **Basic Elementary School**---an elementary school with no at-risk or
> special needs students located in a school district with state average
> spending, wealth and taxing characteristics.

-   Half of the 23 states and two cities would receive at least \$4,600
    per pupil from all revenue sources.

-   Total funding would fall below \$4,000 per pupil in five states.

-   Total funding per pupil would exceed \$6,000 in eight states and the
    District of Columbia.

> **Middle Cost K-12 Charter School**---a K-12 charter school with
> student demographics (special education, free-lunch eligibility and
> bilingual students) resembling the state average for public schools.
> This charter school is also located in a school district with state
> average spending, wealth, and taxing characteristics.

-   Half of the 23 states and two cities would receive at least \$5,500
    per pupil from all revenue sources.

-   Total funding would fall below \$5,000 per pupil in four states.

-   Total funding per pupil would exceed \$7,500 in five states and the
    District of Columbia.

> **At-Risk Upper Grade School**---an upper grade school with a high
> concentration of at-risk students. Generally, the state average
> concentration of special education, low-income and bilingual students
> is doubled. The at-risk hypothetical is assumed to be located in a
> central city.

-   At-risk charter schools would generate less than \$500 in extra
    funding per pupil---compared to a middle cost charter school---in
    seven states.

-   At-risk charter schools would generate more than \$1,000 in extra
    funding per pupil---compared to a middle cost charter school---in
    seven states.

**Comparability of Charter School and School District Funding.** A
number of factors support claims that charter schools obtain less
funding than school districts: Charter schools sometimes receive less
than 100 percent of operating revenue. Charter schools usually do not
receive funding to finance facilities and debt equivalent to districts.
Charter schools may pay administrative fees to school districts or
chartering authorities without receiving offsetting services. In some
states, charter schools focused predominantly on special needs and
at-risk students may be substantially underfunded.

Several offsetting factors, however, benefit charter schools when
judging funding comparability. Charter schools may receive "in-kind"
services directly from school districts (e.g., oversight,
transportation, special education services, personnel services, or
facilities) that are not reflected in superficial revenue calculations.
School districts may fund preschool programs, private school services,
community outreach, adult education, vocational education and other
activities that are justifiably withheld from charter schools. Charter
schools can also configure their grade level structure, waiting lists
and enrollment to generate optimal class size, staffing and funding. In
some states, charter schools with few special needs students get funding
equivalent to school district special education funding.

As summarized in Table 26, our study finds that:

-   Funding comparability issues focus primarily on start-up charter
    schools. Conversion of pre-existing schools to charter school
    status, a model that predominates in Georgia, Hawaii, Kansas and
    Wisconsin, and is common in California, usually results in funding
    comparability.

```{=html}
<!-- -->
```
-   In general, charter schools and school districts have comparable
    base funding (excludes special education and compensatory education,
    transportation and funding for programs that charter schools
    normally would not be expected to provide---such as services to
    private schools, adult education, community outreach, etc.). In
    Minnesota and Connecticut, charter schools funding is comparable to
    the state average school district. In Michigan, base funding
    comparability exists only up to \$6,000 per pupil, which is
    approximately the state average expenditure per pupil.

-   Comparisons of school districts and charter schools need to take
    into account the value of the direct services that charter schools
    receive from school districts---especially in Alaska, Colorado and
    Illinois---where negotiations between charter school and district
    play a significant role in funding.

-   Arizona is the only state where charter schools consistently
    generate more per-pupil base funding than the school district in
    which they are located, primarily because charter schools are funded
    like very small school districts.

-   In 1998-99, 14 states provided no significant funding for charter
    school facilities. Arizona provides more charter school facilities
    funding per pupil than the state provides for an average school
    district. The District of Columbia provides comparable facilities
    funding. Florida, Massachusetts and Minnesota also provide
    significant, though not necessarily comparable, funding for
    faculties.

```{=html}
<!-- -->
```
-   A charter school's student population usually is the deciding factor
    in determining whether or not the school receives funding similar to
    school districts:

```{=html}
<!-- -->
```
-   12 states provide the same funding for elementary schools as high
    schools, even though high school students are more costly to
    educate.

-   11 states provide funding advantages to charter schools with low
    special education populations.

-   Nine states provide funding advantages to charter schools with few
    low-income or at-risk children.

```{=html}
<!-- -->
```
-   Transportation *funding comparability* exists in all but four
    states, but the high costs of transporting students from dispersed
    locations to charter schools remains a significant problem.

**Accountability and Other Financial Issues.** While financial
accountability and other issues do not directly affect funding levels in
the 23 states and two cities in our study, together they influence
charter school operations, and determine the information that
policymakers and the public need for financial evaluation.

-   About half of the states provide some accelerated funding for
    charter schools to help address cash flow difficulties. Advance
    funding could be part of the charter agreement in most of the other
    states. (See Table 16.)

```{=html}
<!-- -->
```
-   Collecting financial data over time in a uniform format allows
    policymakers and researchers to consider issues such as how charter
    schools differ from other public schools and whether charter schools
    are fairly funded. Only 14 states require uniform financial
    reporting for individual charter schools. Eight states blend charter
    school data with district data, and four states had no uniform
    financial reporting. (See Table 17.)

-   If other states follow the path of Michigan, schools operated by
    *private* management contractors may be exempted from important
    aspects of uniform financial reporting that are normally required of
    *public* schools.

-   Except in Milwaukee, all charter schools are subject to an
    independent financial audit either on its own or as an entity of a
    school district. The lack of uniformity and detail in independent
    financial audits, however, seriously limits their usefulness for
    many aspects of financial accountability. (See Table 18.)

```{=html}
<!-- -->
```
-   Charter schools may acquire debt in all states except Hawaii,
    Kansas, New Mexico and Wisconsin---states where school districts
    charter schools and generally provide facilities. (See Table 19.)

```{=html}
<!-- -->
```
-   The disposition of assets of closed charter schools represents an
    issue not clearly addressed in many charter school laws. Four states
    do not allow charter schools to own assets. In nine states, assets
    revert to the school district or to the state. In the remaining
    states, assets disposition is left to the charter school's governing
    board. In most states, management companies will probably be allowed
    to keep assets that had been used to operate the closed charter
    school. (See Table 21.)

```{=html}
<!-- -->
```
-   Charter schools must participate in the state teacher retirement
    system in 12 states, and participation exceeds 75 percent in all
    remaining states except Arizona, the District of Columbia, Florida,
    Michigan and North Carolina. (See Tables 24 and 25.)

# **Chapter 1**

## Introduction

Charter school legislation seeks to grant greater fiscal and educational
autonomy to schools in exchange for greater accountability for student
achievement. Charter school concepts also include empowering teachers or
parents within schools, decentralizing and redemocratizing local
education, reinvigorating community structures and creating competitive
institutions that will bring market forces to bear on other public
schools.

The survival and health of the charter school movement, however, may be
determined more by questions about financing than by issues of autonomy
or student achievement. More charter schools have failed for financial
reasons than academic ones. Funding partly determines who wants
charters, who gets charters and what charter schools do. Inadequate
resources wound charter schools in the competition to succeed, but if
charter schools are funded too well compared to other public schools,
competition with other public schools can also be viewed as unfair. If
the market model becomes the dominant paradigm for charter schools, then
charter schools and school districts need to follow the same rules
(Arsen, Plank and Sykes, 1999).

Most research reveals that the charter school community believes that
financing represents the greatest obstacle to their success. Each year,
the report of the National Study of Charter Schools (RPP, 1997, 1998,
1999,2000), commissioned by the U.S. Department of Education, has found
that three of the top four significant barriers charter schools reported
facing all relate to finances: lack of start-up funds, inadequate
operating funds, and inadequate facilities. A Hudson Institute study
(Finn, et al., 1996) found, "\[R\]esource woes are the greatest single
barrier to establishment of a large number of flourishing charter
schools---and the one that state policymakers could do the most about."

To address problems with charter school financing, policymakers need to
understand how their decisions affect charter schools' financial
stability and educational quality. Among the questions of concern are
(1) whether charter schools receive resources for their educational
programs that are at least comparable to those resources that other
public schools receive for similar programs; and (2) whether charter
schools have spending patterns that differ from those of traditional
public schools. The development of a

broader understanding of these issues is among the goals of the National
Charter School Finance Study.

Our report, which is the first component of this study, summarizes and
analyzes charter school finance laws, regulations and practices in 23
states, the District of Columbia and Milwaukee. The research generally
focuses on charter school finance systems in place during the 1998-99
school year. The analysis includes a determination of the range of
per-pupil funding that charter schools should expect to receive in each
state. While our report examines the financial practices adopted by
state funding agencies needed to implement state finance laws and
regulations, it does not address the implementation practices of school
districts. Issues regarding school district fidelity to state law, or
unilateral actions taken by school districts, are not addressed in this
first report. Subsequent reports of our study will collect and analyze
revenue data for charter schools and school districts in most states and
expenditure data in Arizona, Colorado, Florida, Massachusetts, Michigan
and Texas. Intensive financial analysis and qualitative case study work
in selected charter schools and school districts will also be conducted
for these six states. These subsequent reports of our national study
will address important implementation issues regarding, among other
things, the extent to which school districts share revenue with charter
schools as required by state law.

Much of the previous research on charter school funding is based on
opinions from surveys. The actual relationship between charter school
funding and school district funding is systematically studied in our
report. The technical provisions relating to the financing of charter
schools and the oversight of their financial activities are still not
clearly understood even by some charter school operators and state
officials. Understanding the technical relationship between charter
school and school district finance is an essential preliminary step
toward understanding how state and local policies affect the provision
of services by charter schools and the effect that charter schools have
on school districts.

Although the systems established to finance charter schools vary from
state to state, they share many of the same components. At the heart of
these is the base amount of funding for each student enrolled. In some
cases, amounts are based on a state average per-pupil expenditure (e.g.,
Minnesota), in others a district average (e.g., Massachusetts); and in
still others the amount is negotiated between charter schools and the
authorizing school district (e.g., Colorado). Many states also provide
charter schools with additional funding for special education and
low-income or at-risk students on the same basis as other public
schools. Charter schools are eligible for federal and state categorical
program funding to help meet the needs of high-cost students (e.g.,
students eligible for services under Title I or special education laws)
or to promote specific educational programs (e.g., technology literacy
or Goals 2000). Finally, the amount and type of fiscal autonomy and
financial reporting given to charter schools vary from state to state,
as do procedures to monitor financial management and stability.

Our report identifies potential financial incentives in state charter
school finance systems. Subsequent reports of the National Charter
School Finance Study will examine the impact of these incentives. An
assessment of the impact of financial incentives on the adequacy and
distribution of resources---as well as educational
programs---constitutes an important component of any school finance
study. Federal start-up grants, for example, encourage the development
of charter schools by providing additional resources. Program
requirements attached to federal funding also advance the goals of
federal legislation by mandating procedures such as admission to charter
schools only by lottery. One could argue that financial incentives would
have more impact on market-oriented charter schools than on other public
schools. Prospective charter schools are free to develop unique missions
and specialized curricula in response to financial incentives. The
growing influence of for-profit management companies magnifies the need
to pay close attention to financial incentives because that is what
market forces are all about. However, the importance of financial
incentives should not be overstated. Parents, teachers and community
groups create charter schools for specific educational purposes---not to
maximize funding. Chartering authorities in many states also give
preference to charter schools serving at-risk children, even when no
financial incentive exists to serve high-cost children.

Chapter 2 of our report reviews previous research on charter school
finance. Chapter 3 describes methodology, including the procedures used
to create the hypothetical charter schools that provide the basis for
funding comparisons in our report. The overview of charter school
funding in Chapter 4 includes sections on base per-pupil funding and
funding linked to student characteristics or geographic location. Other
chapters address start-up funding, facilities funding and transportation
funding. Finally, Chapter 9 briefly examines the comparability of
charter school and school district funding.

Our report also includes a breakdown of the actual dollar amounts that
states could provide to charter schools based on the types of students
enrolled and on the financial characteristics of host school districts
and other factors that influence charter school funding levels in most
states. Appearing in the appendix, these state-by-state analyses
constitute the backbone of our study. In order to provide context, and
to address issues in state policy regarding flexibility and
accountability, our report also examines a number of other special
topics related to charter school finance on a state-by-state basis.
Issues such as oversight, financial reporting, asset ownership and debt
are pertinent to understanding the fiscal environment in which charter
schools operate.

Companies are less likely than independent charter schools to enter the
charter school business for altruistic reasons. Management fees are
linked to revenue and usually to the surplus (the difference between
revenues and expenditures) so, companies have an incentive to maximize
revenues and reduce costs.

# Chapter 2

## Research on Charter School Finance

No rigorous analysis of state charter school funding systems currently
exists. As one study notes, "the disparate formulas utilized state by
state in financing public schools make studying the finances surrounding
charter school initiatives extremely challenging" (Rofes, 1998, p. 4).
Existing research can be classified into three broad categories: (1)
actual data analysis; (2) reviews of laws and policies; and, (3) general
research on charter schools that touches on finance questions as a
collateral issue.

Together these studies reviewed in this chapter paint a confusing
picture. Charter holders report having trouble with financial matters or
underfunding compared to other public schools, but the studies that
examine comparable data reveal a more complex picture. The literature
highlights more questions about finance than it answers. In addition,
charter school finance legislation is a moving target; by now, state and
federal legislation already may have addressed some of the concerns
unearthed by early charter school finance research.

### Financial Data Analysis

The most comprehensive of the few existing statewide studies of charter
school finance have been conducted in Michigan (Arsen, 1999; Prince,
1997, 1999a, 1999b; PSC/MAXIMUS, 1999; Horn and Miron, 1999). Other
statewide research has been completed in Massachusetts (KPMG-Peat
Marwick, 1998) and Colorado (Berk, Augenblick and Myers, 1998). These
studies compared charter schools to public school districts. WestEd's
(1998) evaluation of charter schools in Los Angeles focused primarily on
comparing three independent charter schools to 10 dependent charter
schools.

Prince (1997, 1999a) examined operating fund spending patterns in
Michigan's charter schools and compared the patterns to public school
districts using data from the state uniform financial reporting
forms.[^2] When a subset of local districts with similar enrollment

and similar foundation allowances was used for purposes of comparison,
charter schools

spent more money per pupil than comparable districts.[^3] Prince found
that charter schools spent more on administration and less on special
needs students. Charter schools with K-12 enrollment, in particular,
spent more on basic education than regular school districts, which spent
more of their money on special education and transportation. Prince
noted that only 40 charter schools were studied and many of these were
in their first year of operation, so the results were not definitive.

In a more recent paper on Michigan, Prince (1999b) found that while
small elementary school districts spent \$38 per pupil on business
office expenses, charter schools averaged \$435 to \$628 per pupil.
However, much of this difference is explained by the inclusion of
facility leases in the business office category. In Michigan, there are
a number of entities that can authorize charter schools. These entities
collect an administrative fee of up to 3 percent of revenue, which is
classified as a school administrative expense for charter schools.[^4]
School districts spent \$300 per pupil more on transportation than
charter schools. According to Prince, charter school class sizes were
about the same as in other Michigan elementary schools. Over time,
spending on operations and maintenance in charter schools increased.
This finding, Prince noted, is counterintuitive*.* On the other hand,
administration expenses in charter schools declined over time, as did
spending on instruction. "Firm-managed"[^5] schools do not have to
provide contributions to the teacher retirement system, and Prince
believes that this accounts for some of the lower spending on
instruction. "Mom and pop" charter schools spent less on administration
and business office expenses than firm-managed schools, an "efficiency"
Prince found surprising.

Two comprehensive evaluations of charter schools commissioned by the
Michigan Department of Education also contain financial information. The
PSC/MAXIMUS (1999) evaluation examined 58 charter schools in the Detroit
metropolitan area operating in 1997-98. A Western Michigan University
(WMU) study by Horn and Miron (1999) covered a comparable number of
charter schools in the rest of the state.

PSC/MAXIMUS found that the proportion of funding for both administration
(25 percent of spending compared to 11 percent in surrounding school
districts) and operations and maintenance were higher in charter schools
compared to traditional public schools. Older charter schools carried
larger end-of-year fund balances than new schools. Schools operated by
"management chains" also had larger fund balances. Schools open for at
least three years averaged a 13 percent fund balance, and the chain
schools averaged 17 percent. Chain schools used only 35 percent of the
budget for instruction compared to 51 percent in other charter schools
and 54 percent in surrounding public school districts.[^6]
Administration consumed 32 percent of the chain school budget compared
to 11 percent in surrounding public schools. Michigan provides no
facilities assistance, and 89 percent of charter schools said they
leased their facilities. Charter schools averaged only \$34 in federal
aid per pupil compared to \$661 in surrounding districts. While the
authors attributed this gap to lack of administrative staff and
experience, other data in the report show that charter schools provided
almost no targeted federal programs for special education and at-risk
students. Another factor contributing to the gap may be a reluctance to
participate in the bureaucratic and oversight processes entailed in
federal programs.

In addition to the lack of facilities funding, charter schools received
a maximum of \$5,962 per pupil in operating funds, which is less than
most Detroit-area school districts spent. However, PSC/MAXIMUS
identified several cost advantages enjoyed by charter schools, including
the ability to control enrollment in order to optimize staffing and
facilities usage, the lower costs inherent in operation of elementary
charter schools; the money saved by not providing transportation; the
use of inexperienced teachers (85 percent with no more than three years
of experience) and almost no special education programs. The WMU study
identified similar cost advantages.

Although the WMU study provided less information than the PSC/MAXIMUS on
charter school finance, it focused on the importance of loans. Because
the state's fiscal year starts on Oct.1, almost all charter schools need
loans to finance the first month of the school year. Management
companies are in a stronger position to survive the annual cash crunch.
WMU concluded that operating income from the state seemed to be
sufficient, and some charter school directors reported that schools
could be operated with a \$1,000 per student profit. Most charter
schools were low-cost elementary schools, and teacher salaries averaged
less than starting salaries in surrounding school districts.

In a report reacting primarily to the WMU and PSC/MAXIMUS studies,
Wolfram (1999) argued that Michigan charter schools have similar
expenditure patterns to equally situated regular public schools.
Further, Wolfram pointed out that Michigan charter schools served more
minority and at-risk children compared to state averages.[^7] Wolfram's
calculations showed no statistical correlation between charter school
status and such factors as per-pupil expenditures for basic instruction,
current operations, or the total general fund. In effect, charter
schools spend at the same level as school districts. According to
Wolfram, other studies erred due to incorrect use of financial reporting
data collected by the state and reported in Bulletin 1014.[^8] Wolfram's
study reiterates Prince's (1999b) point that charter school facilities,
leases and payments to private contractors for instructional support are
misleadingly classified as business and administration expenditures.
Wolfram suggests that it is possible for schools to report their
payments to contractors using categories consistent with school district
reporting, but that this is not happening. Wolfram also challenges the
classification of the mandatory 3 percent payment to chartering
authorities as an administrative expense for charter schools.

In Massachusetts, charter schools are financed through "tuition" or
payments attached to students from their district of residence. The
KPMG-Peat Marwick (1998) study, financed by the state legislature,
reviewed charter school tuition payments, but in addressing the
intricate issues of the Massachusetts system, this study has broader
implications for charter school finance. KPMG-Peat Marwick found that
the tuition calculation includes about two-thirds of school district
capital expenditures. KPMG-Peat Marwick also found that charter schools
served fewer high-cost special education students. Yet the tuition
calculation system provided funds as if charter schools served the same
high-cost special education population as the sending school districts.
Nevertheless, the study argued that simplicity was an advantage in the
current tuition calculation. The report also observed that charter
schools were not required to submit financial data to the state in the
same uniform accounting format as school districts, which complicated
the analysis.

In a paper prepared for the Colorado Association of School Executives,
Berk, Augenblick and Myers (1998) studied three charter schools and the
districts that chartered them. The impact of a charter school on a
school district depended on district enrollment, the number of private
school students transferring to charter schools, whether the charter
school used an existing facility, and the number of schools in the
district from which the charter school drew pupils. The authors
estimated that it could require as much as a 30 percent reduction in the
revenue provided to a charter school for a district to fully recoup
losses, with the amount depending primarily on school district size and
charter school size. Another important finding: It costs more per pupil
to run a small charter school than to run a school district. To improve
efficiency, charter schools opt to purchase services from either school
districts or private entities. The Colorado study recommended that
school districts receive funds as if their charter schools were school
districts in order to get funding in line with funding that small school
districts in the state receive. With added funding, the charter schools
would be in a better position to buy back services from the host school
district.

WestEd's (1998) evaluation of 13 Los Angeles charter schools considered
finance issues, especially for the three independent charter schools
that operate an outside the district structure. The independent charter
schools were better funded primarily because they qualified for revenues
targeted at high concentrations of economically disadvantaged and
special needs students. The study found that independent charter schools
used their budget flexibility to implement changes quickly. One
limitation of this study is that it compared independent charter schools
to dependent charter schools, not to regular public schools. Because the
financial practices of regular public schools were not examined, some
practices described as innovations in charter school finance may
actually be common practices in some other public schools. For example,
the food service programs in two independent charter schools were
privately contracted at virtually no cost (about \$19 per student per
year at each school), and the contractor provided an array of benefits
(e.g., low contractor food prices, a nutritionist, auditing for
compliance with federal school lunch funding). Savings were used for
capital improvement. However, food service programs in most school
districts are financially self-supporting, provide the same services as
a contractor and often yield "profits" to finance capital
improvements.[^9] Furthermore, school districts regularly contract with
private companies for food service.

### Analysis of Finance Policy 

An Education Commission of the States policy brief (Bierlein and Fulton,
1996) illustrates the general thinking on the subject of charter school
finance in early 1996 when only 240 charter schools were operating and
22 states had charter school laws. The brief drew a distinction between
state and local funding and described charter schools as not having full
access to local funds. Lack of facilities funding was described as the
most significant cost issue facing charter schools. The brief asserted
that charter schools are frequently ineligible for state and federal
categorical funding. Without describing how special education funding
flows to charter schools, the authors described the potential problem of
high-cost special education students "breaking the budget." The brief
identified funding-related paperwork as especially burdensome in small
charter schools. School district financial issues such as school
district fixed costs that are not reduced when students move to charter
schools and the cost to the district of monitoring charter schools were
also addressed.

The Center for Education Reform (CER) maintains one of the most widely
used compilations of charter school laws. The center prefers finance
systems that give charter schools the maximum freedom from regulation
and access to funding, and it rates the laws accordingly. The center
examines whether charter holders are allowed to earn profit, how
transportation services are provided, and the extent to which charters
receive facilities assistance. The section on teachers contains
information on retirement, and the student section examines whether the
law contains specific provisions regarding service to children at risk.
While providing a framework for overview and cross-state comparison, the
CER analysis is limited by its focus on laws rather than on regulations,
practices, procedures and other details that give life to the laws.

The *California Charter School Finance Manual* (Premack, 1999) provides
an insightful examination of California school finance and how charter
schools fit into it. The manual is intended as an aid to charter
applicants and holders. The discussion of issues involved in negotiating
fiscal matters with sponsoring school districts has broad applicability
to any charter schools that must negotiate with school districts. The
information on conversion schools' financing, which involves budget
allocation formulas, staffing rules and district level changes, is
especially useful.

In work for the Charter Friends National Network Hassel (1999) prepared
a comprehensive study of charter school facilities financing. According
to the study, most states do not provide financing for charter school
facilities. This problem is compounded by the low supply of suitable
facilities. Charter schools generally do not benefit from the low-cost
financing and favorable tax status enjoyed by school districts. In
addition to suggesting equitable capital funding, Hassel offers a number
of examples and suggestions on how to gain access to low-cost financing.

### Research with Collateral Information on Charter School Financing

Several studies of charter schools that do not primarily focus on
finance nevertheless contain important observations about finance
issues. A series of studies by the Hudson Institute concludes, "most
charters do not receive their share of public education funds" (Finn,
Manno and Bierlein, 1996, p. 6). Finance issues are described as often
being "the greatest concern facing charter schools, particularly at the
outset." In addition, the authors write that "the great majority of
charter schools truly must make do with less money than conventional
public schools, while being expected to produce superior results." They
argue that state finance systems often do not provide funding early
enough in the school year for charter schools, which lack the credit or
cash reserves possessed by school districts. They also point out that
school finance structures may not be flexible enough to deal with issues
pertaining to certain idiosyncratic charter schools, e.g., how to
determine "attendance" in a distance learning facility.

Similar to the findings of the Hudson Institute study, the Little Hoover
Commission (1996) in California found that schools faced uncertainty
regarding funding. "In many instances, the complexity of education
funding drags charter schools back into the red tape and bureaucracy
that the concept is designed to avoid." The report also found that
charter schools experience significant cash flow problems.

Some research into the use of management contractors is beginning to
emerge. These companies have become a major part of the charter school
movement. A study released by the Charter School Friends National
Network (Hassel and Lin, 1999), aimed at improving contractual
relationships between nonprofit charter school boards and management
contractors, finds evidence that some charter school boards are
dissatisfied with some aspects of the contract and support received from
their service providers. A review of 20 contracts with 8 private firms
and 2 nonprofit providers revealed that no contractor charged a simple
fixed fee. Some contracts simply allowed management companies to keep
the surplus. Other contractors charged a percentage of revenues or
expenditures, usually in the 7 percent to 12 percent range. A few
contracts had incentive bonuses of 2.5 percent to 3.5 percent for
improving student achievement or meeting other performance standards.
The Charter School Friends study points out that under the surplus
method, management companies earn money by cutting costs. Private grants
and contributions may simply go to the company's bottom line.

A report by the Massachusetts inspector general (Cerasoli, 1999)
examined the business operations of 24 charter schools opened in
1997-98. Some trustees (including 29 trustees employed as teachers or
administrators) had financial interests that required them to restrict
their actions as trustees in order to comply with state conflict of
interest laws. The report concluded that the lack of uniformity in
financial statements reduced their usefulness as a monitoring tool. More
than half of the charter schools lacked written procurement procedures,
and only two required advertised competitive bids, a practice described
as inconsistent with the intent of the charter school movement to
promote competition. The Massachusetts report raised several issues
regarding management contractors. Some contracts had unclear management
fees, and other privately managed schools paid contractors more than
called for in the contract. Four of 11 management contracts contained no
performance provisions regarding student academic achievement. Five
contracts restricted public use of educational curricula. The report
found that loan agreements between charter schools and their management
contractors could render the schools excessively dependent on their
management contractors while reducing schools' contracting leverage. The
inspector general noted that both charter schools and the state board of
education were undertaking corrective actions to address many of the
report's concerns.

A field study of the impact of charter schools on school districts by
Eric Rofes (1998) used an interview methodology to examine perceptions
of the financial impact of charter schools in 25 districts. Rofes found
that 14 of the districts did not feel a noticeable financial loss as the
result of charter schools. Eleven districts reported financial impacts,
and five of these said the impact was substantial. The impact of
displaced funds may be ameliorated by a rising tide of students;
districts with enrollment growth appear to be less likely to feel they
were affected. Rofes also found that small districts were more likely to
feel effected than larger ones. Another important finding from the
interviews was that many school leaders had insufficient understanding
of the school finance system to determine the impact charter schools had
on their budgets. In Minnesota, the Center for Applied Research and
Educational Improvement (CAREI, 1996) also found that large districts
felt a minimal impact as a result of charter schools.

In a study of impediments facing Illinois charter schools, Beckwith,
Bradley and Price (1998) found that 72 percent of the applications
denied by local school boards were at least partially based on financial
grounds. This includes 9 of the 11 proposals appealed to the state board
of education. Facilities were less of a problem, being a factor in only
40 percent of the denials, ranking behind education program and
governance issues. Problems centered on budgets submitted with the
application, not school district financial issues. The study also
indicated that charter schools are dependent on private sector
contributions. For charter schools operating in 1997-98, grants, fees,
fundraising and donations accounted for 19 percent to 60 percent of
operating budgets.

In a similar study of early implementation in Massachusetts, Millot and
Lake (1997) found that next to facilities, finances were the biggest
obstacle reported by charter schools. University- and business-run
charter schools had resources to deal with the up-front costs of opening
a charter school, but charter schools operated by community service
organizations and grassroots groups had to seek outside sources. The
authors attributed the failure of the legislature to provide start-up
funding to several different views on chartering: (1) some advocates
intended to expose public education to the discipline of the
marketplace; (2) other advocates envisioned a system made up of only the
most capable institutions; (3) opponents wanted to diminish the chance
of success; and (4) others simply failed to consider the cash
requirements of start-up.

Part of another paper on Massachusetts charter schools, by Anthony,
Scarpati and Bukowick (1996), described charter school financing as
"eclectic" because it involved tuition from local sending districts,
state start-up monies, federal Goals 2000 funding and private donations.
The paper highlighted the financial impact school districts faced when
losing students to charter schools or paying for students moving from
private schools to charter schools. It describes the Massachusetts's
provision of temporary compensation for school districts after they lose
students to charter schools.

An evaluation of the Wisconsin charter school program (Wisconsin
Legislative Audit Bureau, 1998) found that charter schools were
equitably funded when compared to host districts. Wisconsin has
dependent charter schools chartered by local districts, although a newer
law, affecting only Milwaukee, provides for independently chartered
schools in that city. Complete budget and expenditure information was
not available for most charter schools because school districts'
budgeting and cost accounting systems typically do not reflect total
costs incurred by individual schools. However, available information
indicates general education charter schools spent an average of \$4,458
per enrolled pupil during the 1997-98 school year, compared to \$4,918
per pupil for all schools in their districts. Charter schools serving
students at risk of failing or dropping out spent \$5,966 per pupil,
which reflects the higher cost associated with educating children who
require greater attention and special services in order to be successful
in school.

A study of voucher and charter schools' potential financial impact on
the Milwaukee public schools (Moore, 1998) identified the complexities
of the revenue shifts. The revenue outflow to charter schools is
mitigated, in part, because charter school students are counted as
enrollees in the regular public school system for state aid purposes.
Thus, the per-pupil wealth of the district does not increase as charter
school students leave, preventing a further loss of funds.

Special education has been a concern of a number of researchers (e.g.,
Finn et al. 1996), mainly echoing charter operators' fears that a
high-cost student could undermine a small charter school's financial
position. A recent study of the special education practices of
Massachusetts charter schools employing for-profit management
contractors has important finance implications (Zollers and Ramanathan,
1998).[^10] The study found a number of practices designed to discourage
enrollment of students with expensive individual education programs.
Companies profit because Massachusetts allocates special education
revenues as part of the base funding that follows each student to a
charter school, rather than following special education students.

A small part of the recent Arizona State University (Mulholland, 1999)
evaluation of Arizona charter schools focused on funding and facilities.
The need for facilities led charter schools to forge strong ties both
with local governments and with community groups. In some areas, charter
schools were able to make good use of public libraries, for example.
Some "stakeholders" surveyed as part of the study complained about a
1996 Arizona law that allowed charter school operators to retain
ownership of property purchased with public funds. Some also expressed
fear that the exemption from state facilities standards, which was
intended to offer flexibility, might instead lead to unsafe schools or
to schools not accessible to disabled students.

The first major evaluation of the Texas charter school system (Texas
Education Agency, 1998) also contained some information related to
financing. The percentage of low-income students was almost twice the
state average in charter schools than in traditional schools. Charter
schools, however, enrolled special education students at one-third the
rate of school districts and limited-English proficient students at
one-half the rate. Texas does not require certified teachers for its
charter schools, and more than half were not certified to teach. The
report concludes that so far, charter schools spend a smaller proportion
of expenditures on instruction and instructional-related services than
school districts and more on administration.

Finally, the analysis of charter schools by a UCLA team headed by Amy
Stuart Wells (1998) examined 17 schools in 10 California districts.[^11]
The researchers concluded that private resources were usually necessary
for the operation of a charter school. The study also found that schools
operating independent of their home district were most in need of
outside support. One of the key fundraising techniques was to ask
potential donors to serve on the schools' governing bodies (to which
members are generally appointed, not elected). Private support of
charter schools appeared to be uneven, with greater financing available
to schools that serve predominantly middle class or white students.
Parents' contributions, either financial ones or volunteering their
time, also emerged as important in operating the schools. Some of the
charter schools had "contracts" with parents that mandated involvement
in the school, which raised questions concerning the accessibility of
charter schools to all parents and children regardless of their
wherewithal in either time or money. The UCLA charter school study found
that school boards are more likely to hold charter schools accountable
for their fiscal responsibilities than for their academic ones.

### Charter Schools and Federal Funding

Federal involvement in charter schools has grown substantially in the
last several years, which has raised a number of issues. Three General
Accounting Office (GAO) reports pertain to charter school finance
issues.

In *Charter Schools: Issues Affecting Access to Federal Funds* (U.S.
GAO, 1997), the GAO noted that Title I funds for low-income children and
special education funds are allocated to schools that meet established
federal, state and local demographic criteria. Although charter schools
treated as school districts avoid having to meet additional criteria
used to distribute funds within school districts, these charter schools
were no more likely to have received Title I and special education
funding than were the charter schools that are treated as components of
existing school districts.[^12] Barriers included a lack of enrollment
and student eligibility data to submit to states before funding
allocation decisions are made, and the time and costs involved in
applying for such funds given the amount of funds available. A similar
GAO report *Charter Schools: Federal Funding Available but Barriers
Exist* (U.S. GAO 1998a) found that most charter school operators
believed that Title I and federal special education funds are fairly
allocated, but that there are some barriers to obtaining funds.
Recommendations included more state and district planning to help ensure
that federal program resources are directed to eligible students
enrolled in charter schools.

In a third report, released in 1998, *Charter Schools: Recent
Experiences in Accessing Federal Funds* (U.S. GAO 1998b), the GAO found
that slightly more than half of the schools surveyed received fiscal
year 1996 start-up grants ranging from \$7,000 to more than \$84,000.
The average grant was \$36,000. About two-fifths of the charter schools
the GAO surveyed received Title I funds, and slightly more than half of
the schools received either direct federal special education funds or
federally funded special education services.

# Chapter 3

## Methodology

Like many other studies, our report analyzes and summarizes charter
school finance provisions in state charter school laws and regulations.
It also takes the next step by examining the procedures and "practices"
developed by state finance officials that help determine the amount of
funding and when that funding gets to the schools. Our report, however,
does not systematically address the implementation practices of school
districts. No two charter schools ever receive exactly the same funding.
Consequently, this review breaks down the actual dollar amounts that
states could give to charter schools based on the types of students
enrolled and other features of the charter school funding formulas. This
chapter describes the terminology employed as well as the protocol used
to: (1) calculate state and local per-pupil allocations to charter
schools and (2) allocate state and federal categorical funding to
charter schools.

### Terminology

This study uses the term "charter school" throughout, even though some
states use different names for charter schools, e.g., in Michigan they
are called public school academies. "School district" describes public
school districts as both geographic areas and administrative units. Our
report does not use the term LEA (local education agency) to describe
school districts as administrative or governance units for several
reasons. Many states treat charter schools as LEAs. It is also confusing
to distinguish between school districts as geographic areas where
charter schools are located and school districts as LEAs, where they
have administrative authority over charter schools. School districts
authorize and oversee charter schools in some states, but the same
charter schools sometimes qualify for state categorical funding as if
they were LEAs. In other states, school districts generally have no
administrative connection to charter schools, but they may be the
administrative unit for a specific service such as transportation or
special education assessment.

This study frequently compares charter schools to "host school
districts" which our study defines as the school district in which the
charter school is physically located. The relationship between a host
school district and charter school ranges from chartering

authority to simply the geographic area in which the charter school is
physically located. Among the charter school states in this study, only
state-authorized schools in Arizona are totally independent of any
school district characteristic or service. For example, the very
independent charter schools in Michigan still receive funding in
accordance with the school district in which the charter school facility
is physically located. In Massachusetts, funding is based on
characteristics of those school districts "sending" children to charter
schools. Although not always the case, the school district in which the
charter school is located usually sends the most students.

### Hypothetical Charter Schools

While occasionally examining actual charter school funding data, most
attention focuses on the allocation of revenues to three *hypothetical*
charter schools in each state.[^13] The hypothetical constructs help
facilitate comparisons to traditional public schools within a state, as
well as standardizing comparisons across states. The state-by-state
analysis appears in the appendix, and it constitutes the basis for much
of the analysis in Chapter 4.

-   **Basic Elementary Charter School**---an elementary school with no
    at-risk students located in a school district with state average
    spending, wealth and taxing characteristics. When charter school
    funding is directly linked to characteristics of the local public
    school district, spending differences generated by disparities in
    property wealth and tax effort are also reflected in charter school
    revenues. In such cases, calculations for charter schools located in
    a low-spending school district and a high-spending school district
    are incorporated into the analysis and the calculations are
    presented in a footnote or the state narratives.

-   **Middle Cost K-12 Charter School**---a K-12 charter school with
    student demographics (special education, free-lunch eligibility, and
    bilingual students) resembling the state average for public schools.
    This charter school is also located in a school district with state
    average spending, wealth and taxing characteristics. This model
    should characterize the average public school, but probably not the
    actual average charter school. In most states, the demographic and
    location characteristics of the average charter school rarely match
    the average public school. Nevertheless, funding for the
    hypothetical middle cost charter school can be fairly compared to
    state average funding for traditional public schools after making a
    number of other assumptions carefully detailed in other parts of
    this chapter.

-   **At-Risk Upper Grade Charter School**---an upper grade school with
    a high concentration of at-risk students. Generally, the state
    average concentration of special education, low-income and bilingual
    students is doubled. Unlike the other two hypothetical models, which
    are located in school districts with state average wealth and taxing
    characteristics, the at-risk hypothetical is assumed to be located
    in a central city. Generally, an at-risk school in a central city
    represents the high range of charter school funding. In some states,
    however, big cities get less funding than other school districts,
    and the hypothetical at-risk charter school can end up receiving
    less funding than the middle cost charter school.

These three constructs provide a range of cost structures and student
types generally sufficient to illustrate how charter school funding
works, even though any specific charter school would seldom fit exactly
into one of these categories.

The charter school finance laws, regulations, provisions and
administrative practices in each state are applied to each of the three
hypothetical charter schools. Generally, these calculations are intended
to be illustrative and not based on actual data from specific charter
schools or school districts. However, there may be instances where the
practices of specific charter schools or school districts have been used
as models in the calculations, particularly when dealing with problems
presented by the provision of in-kind services resulting from local
negotiations between school districts and charter schools.

### Components of Revenue

Revenues from several possible sources are studied in each state.

**Base funding.** Coming through the state or local school districts,
this revenue source is commonly referred to as per-pupil funding. In
some states, the base funding is a minimum amount, and the other revenue
sources identified below are added to it. In other states, the base
funding received by charter schools incorporates some or all of the
following revenues obtained individually by school districts. In either
case, the individual sources of revenue are identified as well as
possible.

**Revenues derived from student weightings.** Usually based on student
characteristics such as special education disabilities or free-lunch
eligibility, additional weight allows some students to generate more
state aid. For example, a student qualifying for free lunch may generate
10 percent more base funding than an average student. The revenues
generated by student weightings are similar to categorical program
revenues but generally do not require that the funding flow to specific
programs for the individual students generating the revenue.

**Student counts.** As in public school districts, the details of
enrollment and attendance calculations play a role in determining
aggregate funding. These issues include time of year when membership is
calculated and whether average daily attendance is a funding factor.

**Effect of geographic location and school or district size.** State aid
formulas for traditional public schools sometimes contain adjustments
for cost-of-living differentials, the high cost of rural districts, the
high cost of urban districts, the high cost of small districts and
numerous other factors. Usually, a charter school inherits the extra
funding from the school district in which it is located through its
per-pupil funding allocation. Sometimes a characteristic of the charter
school itself, e.g., small size, generates the extra funding. In
Arizona, for example, small charter schools located in urban areas
benefit from the same extra funding that small rural school districts
receive.

**Effect of school district financial characteristics.** In many states,
the local funding of traditional public schools partly depends on local
property tax wealth or the willingness of school district residents to
tax themselves at higher rates. In some states, the revenues generated
by this ability or willingness to support traditional public education
are passed on to charter schools. In other states, however, charter
schools are funded based on a state average (e.g., Connecticut) or are
denied access to all of the revenues generated by high district wealth
(e.g., Michigan).

**Role of negotiations and the in-kind provision of services by school
districts.** In states where charter schools are more dependent on
school districts and where funding is a result of negotiations with the
school district, it is particularly difficult to estimate the amount of
funding that charter schools can expect to receive. In these instances
two approaches were used. Sometimes the actual practices of selected
charter schools in particular school districts (e.g., an at-risk urban
charter high school or a basic elementary charter school in an average
school district) were used as the basis for calculations. In a few
states, where charter schools are very dependent on school districts
(e.g., Kansas, Georgia or Wisconsin), it is not possible to untangle
charter school costs or revenues from school district costs and
revenues. In these instances, the revenues generated for the district by
students enrolled in the hypothetical charter schools are described.

**Special education funding.** Calculations include such easily
identifiable revenue as weightings in the general state aid formula
applying to charter schools, state categorical aid and federal funds. In
addition, our analysis usually incorporates: (1) special education costs
in school districts' general operating funds passed on to charter
schools and (2) mandated or negotiated in-kind provision of special
education services by school districts for charter schools. State and
federal funding for special education seldom covers all---or even
most---special education costs. Consequently, special education spending
from local operating revenue amounts to special education funding for
charter schools. In a few states, due to the absence of special
education cost data, highly simplified estimates of the cost of
providing special education are employed.

**Transportation funding.** These issues resemble the special education
issues. In concept, all transportation revenues available to charter
schools are identified, whether charter schools provide transportation
on their own or through a school district. Transportation revenue
includes such easily identifiable revenue as weightings in the general
state aid formula applying to charter schools, and state categorical
aid. In addition, this analysis usually incorporates: (1) transportation
costs in school district general operating funds passed on to charter
schools in the basic per-pupil funding and (2) mandated or negotiated
school district provision of transportation for charter schools. In some
states it is necessary to place a value of in-kind transportation
services. In the absence of better information, the state average cost
per pupil enrolled (not transported) is used as a rough estimate of the
value.

**Other state categorical funding.** Calculations are generally based on
the state average for major programs for which charter schools are
likely to qualify other then special education and transportation. Some
charter schools may be more aggressive in providing programs qualifying
for state categorical funding, and there is significant evidence that
charter schools for at-risk children have been successful in obtaining
competitively awarded funding. Other charter schools may have difficulty
working through school districts for their share of categorical funds,
or may find it not worth the effort to seek money from small categorical
programs.

### Federal Funding

In addition to federal start-up funding considered separately in Chapter
5, charter schools are eligible for most federal funding including
programs for compensatory education, education reform, special education
and bilingual education. The calculations in our report assume that
charter schools get their fair share of federal funds either from a
school district or by qualifying on their own as if they were their own
school district. The GAO reports discussed at the end of Chapter 2
indicate that, for the most part, charter schools are receiving federal
funds for which they are eligible but that some barriers still remain.
One problem has been that in many instances, charter schools are unable
to qualify for Title I and special education funding during their first
year of operation. Legislation enacted in 1998 and regulations issued by
the U.S. Department of Education the following year are expected to
rectify this problem.

The federal aid calculations for the three hypothetical charter schools
are described in Table 1. The per-pupil amounts apply to total
enrollment, not just the students generating the aid. Title I qualifying
students, for example, can generate over \$500 each, and special
education students also each get several hundred dollars. It is assumed
that Title I includes only the appropriation designated for pass-through
to school districts. Special education aid corresponds to 75 percent of
the basic state grant (the other 25 percent remains under the control of
state plans). Infant and toddler special education, preschool special
education, Medicaid and vocational rehabilitation funding are not
included because few charter schools are likely to enroll students
served by these federal programs. "Other" federal funding includes only
the following programs: comprehensive school reform, class size
reduction, education improvement, Eisenhower professional development,
Goals 2000 and the technology literacy challenge fund. Funding will vary
based on a number of factors including student population
characteristics.

The majority of the federal aid follows pupils with specific
characteristics and requires schools to offer specific programs or
provide qualifying services. Consequently the three hypothetical charter
schools, constructed to illustrate how state charter school funding
works generate different federal funding.

-   All schools get the same amount of "other" aid.

-   Basic elementary charter schools only get "other" federal aid.

-   Middle cost charter schools are assumed to get the average federal
    aid for Title I, bilingual, special education.

-   At-risk upper grade charter schools are assumed to get double the
    average aid for

Title I, bilingual and special education.

Charter schools for at-risk students sometimes receive federal funding
through competitive federal grants, which is not reflected in the
tables.

+----------------+----------+---------+---------+---------+---------+
| Table 1        |          |         |         |         |         |
|                |          |         |         |         |         |
| **Average      |          |         |         |         |         |
| 1998-99        |          |         |         |         |         |
| Federal Aid    |          |         |         |         |         |
| Per Pupil      |          |         |         |         |         |
| (Programs      |          |         |         |         |         |
| Applicable to  |          |         |         |         |         |
| Charter        |          |         |         |         |         |
| Schools)**     |          |         |         |         |         |
+----------------+----------+---------+---------+---------+---------+
|                | Title I  | Special | Bil     | Other   | Total   |
|                | Grants   | Ed      | ingual/ | Federal | Federal |
|                | to       | ucation | Im      |         |         |
|                | School   | State   | migrant |         |         |
|                | D        | Grant   |         |         |         |
|                | istricts | (75%)   |         |         |         |
+----------------+----------+---------+---------+---------+---------+
| Alaska         | \$125    | \$51    | \$9     | \$91    | \$276   |
+----------------+----------+---------+---------+---------+---------+
| Arizona        | 127      | 36      | 11      | 49      | 224     |
+----------------+----------+---------+---------+---------+---------+
| California     | 134      | 38      | 14      | 52      | 239     |
+----------------+----------+---------+---------+---------+---------+
| Colorado       | 98       | 40      | 7       | 48      | 193     |
+----------------+----------+---------+---------+---------+---------+
| Connecticut    | 123      | 59      | 4       | 58      | 244     |
+----------------+----------+---------+---------+---------+---------+
| Delaware       | 151      | 53      | 2       | 100     | 307     |
+----------------+----------+---------+---------+---------+---------+
| District of    | 268      | 33      | 21      | 134     | 456     |
| Columbia       |          |         |         |         |         |
+----------------+----------+---------+---------+---------+---------+
| Florida        | 137      | 54      | 7       | 58      | 256     |
+----------------+----------+---------+---------+---------+---------+
| Georgia        | 135      | 39      | 1       | 52      | 228     |
+----------------+----------+---------+---------+---------+---------+
| Hawaii         | 96       | 32      | 6       | 57      | 192     |
+----------------+----------+---------+---------+---------+---------+
| Illinois       | 161      | 52      | 6       | 64      | 283     |
+----------------+----------+---------+---------+---------+---------+
| Kansas         | 113      | 46      | 3       | 54      | 216     |
+----------------+----------+---------+---------+---------+---------+
| Louisiana      | 238      | 45      | 3       | 74      | 360     |
+----------------+----------+---------+---------+---------+---------+
| Massachusetts  | 147      | 65      | 5       | 64      | 280     |
+----------------+----------+---------+---------+---------+---------+
| Michigan       | 195      | 46      | 1       | 68      | 309     |
+----------------+----------+---------+---------+---------+---------+
| Minnesota      | 102      | 47      | 2       | 53      | 204     |
+----------------+----------+---------+---------+---------+---------+
| New Jersey     | 123      | 63      | 4       | 60      | 250     |
+----------------+----------+---------+---------+---------+---------+
| New Mexico     | 172      | 54      | 20      | 64      | 310     |
+----------------+----------+---------+---------+---------+---------+
| North Carolina | 106      | 47      | 0       | 51      | 204     |
+----------------+----------+---------+---------+---------+---------+
| Pennsylvania   | 175      | 46      | 1       | 65      | 288     |
+----------------+----------+---------+---------+---------+---------+
| Rhode Island   | 152      | 63      | 10      | 84      | 308     |
+----------------+----------+---------+---------+---------+---------+
| South Carolina | 139      | 53      | 0       | 59      | 251     |
+----------------+----------+---------+---------+---------+---------+
| Texas          | 155      | 45      | 6       | 57      | 263     |
+----------------+----------+---------+---------+---------+---------+
| Wisconsin      | 147      | 51      | 1       | 63      | 263     |
+----------------+----------+---------+---------+---------+---------+
| Source:        |          |         |         |         |         |
| Federal Funds  |          |         |         |         |         |
| Information    |          |         |         |         |         |
| Service        |          |         |         |         |         |
+----------------+----------+---------+---------+---------+---------+

### Revenues and Expenditures Excluded from State Profiles

The following items are generally excluded from the state profiles in
the appendix for both charter schools and school districts:

**Food service.** In school districts, food service generally accounts
for approximately 4 percent of total spending, but food service programs
are generally self-funded by state and federal assistance combined with
meal charges. The programs are self-sufficient even without free- and
reduced-price lunch and breakfast programs (which essentially provide
assistance for meal charges). Food service programs are accounted for by
a restricted, segregated, revolving enterprise or proprietary fund. The
funds are easy to identify and separate from educational expenditures.
This study found no state that automatically passed along to any charter
schools food service funding or funding based on food service costs.
Charter schools charge students for meals just as school districts do,
but like other state and federal categorical programs, the
administrative burden of state and federal categorical funding is a
problem for small charter schools.

Many charter schools contract with school districts or private providers
able to provide self-funding food service programs. Food service could
be a focal point of cooperation between charter schools and school
districts. Chicago, for example, recommends that its charter schools
choose school district food service, which is provided at no charge.
Many charter schools provide no food service program whatsoever, and
many other charter schools pay for food service programs from general
operating revenue. Other work of the National Charter School Finance
Study will explore the frequency and cost of this practice.

**Federal and state vocational education funding.** Charter high schools
providing vocational education are eligible for significant amounts of
state and federal vocational education assistance. Because a specialized
charter is generally required, this funding source is not fully explored
in this study.

**Federal start-up funding.** The hypothetical charter schools are
assumed to be fully operational schools that are not dependent on state
or federal start-up funding. Our report addresses federal start-up funds
in Chapter 5. Sometimes, the individual state narratives address
start-up funding, although only a few states now provide such funding.
The individual state reports also address issues related to start-up
such as revolving loan funds for cash flow assistance and the timing of
state and local payments to charter schools.

# Chapter 4

## Overview of Charter School Funding

The casual observer probably assumes that providing charter schools with
state and local funding should be relatively simple. One determines the
funding children receive in traditional public schools and transfers
this amount on a per-pupil basis to charter schools. However, wide
variations across states exist in how students are counted and how their
educational needs are determined. Revenue for school districts is also
distributed differently in every state. These differences have a major
impact on the amount of funding charter schools receive compared both to
school districts and to other charter schools. In addition to a
description of the basic funding structure, this chapter examines three
factors that determine charter school revenue variations within and
across states:

-   **Pupil Characteristics.** As a result of disability, poverty,
    limited-English proficiency or other factors, some children face
    greater educational challenges. School finance systems generally
    take this into account and assign additional funds to students with
    greater need. More resources may be allocated to children in
    specific grade levels--- such as the early grades or at the high
    school level. Another important difference across states is whether
    funding is based on student enrollment or attendance. One common
    method of making adjustments for pupil characteristics uses a
    weighting system correlated with the cost of educating a particular
    kind of student. If a basic student has a weight of 1.0 and a
    special education student has a weight of 2.4, the special education
    student would receive 2.4 times the funding of the basic student. In
    some states, students generate flat grants, where the amount of the
    grant for each need or disability is the same across all districts
    and charter schools.

```{=html}
<!-- -->
```
-   **Geography.** Most states provide funding for charter schools based
    on the revenue generated in either the school district the charter
    school is located in or the school district a charter school student
    is coming from (sometimes called the sending district or the
    district of residence). Charter schools inherit some or all of the
    funding differences among school districts within a state. There are
    two general sources of interdistrict variation based on geography.
    The first is based on differences in local wealth or tax effort. The
    second is

based on efforts by states to provide more resources to school districts
that face financial challenges such as urban density, rural sparsity,
size, or cost of living.

-   **Categorical Funding and Mandated and In-Kind Services.** States
    supply some funding to school districts with the expectation that it
    will be used for specific purposes. In addition to funds based on
    student characteristics such as special education and low-income
    students, such categorical programs typically include
    transportation, textbooks, libraries, professional development,
    technology programs and a variety of competitive grants. States
    provide this categorical funding for charter schools in various
    ways. Many states treat charter schools as if they were school
    districts, while a few states automatically include some categorical
    funding in the base per-pupil allocation. State law or the charter
    agreement may also require school districts to provide specific
    services (e.g., transportation) to charter schools. State mandates
    for charter schools range from requiring charter schools to serve a
    particular type of student (e.g., at-risk students) to requiring
    participation in public retirement systems. In states where school
    districts negotiate funding with charter schools, the provision of
    school district services varies charter by charter.

After outlining the basics of charter school financing, the remainder of
this overview describes each of these issues in detail, starting with
funding based on student characteristics.

### Charter School Funding Structure

One of the basic precepts of charter school finance is that resources
should follow children from school districts to charter schools. But
understanding how students generate funds, how resources are expended on
students, how resources are defined and even how students are counted is
essential in order to evaluate how money follows children to charter
schools. If states fund charter schools in more than one way, it is
important to know some of the details of each system. Should we care
whether school districts or the state pays for charter schools? Our
study suggests that this question is not very important despite all of
the attention paid to it. Funding flows from school districts to charter
schools in different ways, but the effect on district and charter school
finances varies little across the different methods. Funding issues
surrounding the movement of private school students into publicly funded
charter schools raise similar issues that are equally misunderstood.

#### Basis of Per-Pupil Funding

A majority of states provide funding to charter schools either by
calculating revenue according to the same formula as school districts,
or by calculating a school district per-pupil expenditure, which is then
shifted to the charter school. Under both the revenue- and
expenditure-based approaches, charter schools inherit funding generated
by the wealth, tax effort and geographic characteristics of the school
districts in which the charter school is located or in which its
students reside. Under the revenue-based funding approach, however,
charter schools get some funding based on the grade level, special needs
or low-income characteristics of students actually enrolled in the
school. Under the expenditure approach, charter schools receive funding
based primarily on the student characteristics of the school district,
usually with the expectation that each charter school will enroll a
student population similar to the district's. If the charter school
population is dissimilar, charter schools receive either generous or
insufficient funding.

+-------------------+------------------+------------+----------------+
| Table 2           |                  |            |                |
|                   |                  |            |                |
| **Basis of        |                  |            |                |
| Per-pupil         |                  |            |                |
| Funding**         |                  |            |                |
+-------------------+------------------+------------+----------------+
| **Revenue of      | **Spending of    | **State    | **District     |
| District**        | District**       | Average**  | Budget         |
|                   |                  |            | Formula**      |
+-------------------+------------------+------------+----------------+
| Alaska,^1^        | Delaware,        | Co         | C              |
| Arizona,^2^       | District of      | nnecticut, | onnecticut,^4^ |
| California,       | Columbia,        | Minnesota  | Georgia,       |
| Colorado,^1^      | Illinois,^3^     |            | Hawaii,        |
| Florida,          | Louisiana,       |            | Kansas,        |
| Michigan, New     | Massachusetts,   |            | Mas            |
| Jersey,^5^ New    | Milwaukee,       |            | sachusetts,^4^ |
| Mexico,^6^ North  | Pennsylvania,    |            | Wisconsin      |
| Carolina, Texas   | Rhode Island,^5^ |            |                |
|                   | South Carolina   |            |                |
+-------------------+------------------+------------+----------------+
| ^1^ In Alaska,    |                  |            |                |
| charter schools   |                  |            |                |
| negotiate with    |                  |            |                |
| school districts  |                  |            |                |
| over indirect     |                  |            |                |
| costs, which can  |                  |            |                |
| range from 0 to   |                  |            |                |
| 22 percent.       |                  |            |                |
| Charter schools   |                  |            |                |
| in Colorado are   |                  |            |                |
| guaranteed 80     |                  |            |                |
| percent of school |                  |            |                |
| districts'        |                  |            |                |
| per-pupil         |                  |            |                |
| operating         |                  |            |                |
| revenue, but the  |                  |            |                |
| guarantee         |                  |            |                |
| increases to 95   |                  |            |                |
| percent in        |                  |            |                |
| 2000-2001. The    |                  |            |                |
| range of funding  |                  |            |                |
| varies            |                  |            |                |
| considerably,     |                  |            |                |
| with more than a  |                  |            |                |
| third of charter  |                  |            |                |
| schools receiving |                  |            |                |
| more than 100     |                  |            |                |
| percent funding.  |                  |            |                |
|                   |                  |            |                |
| ^2^               |                  |            |                |
| Di                |                  |            |                |
| strict-authorized |                  |            |                |
| schools;          |                  |            |                |
| state-authorized  |                  |            |                |
| schools treated   |                  |            |                |
| as independent    |                  |            |                |
| school districts. |                  |            |                |
|                   |                  |            |                |
| ^3^ In Illinois,  |                  |            |                |
| negotiated        |                  |            |                |
| funding ranges    |                  |            |                |
| between 75        |                  |            |                |
| percent and 125   |                  |            |                |
| percent of        |                  |            |                |
| per-capita        |                  |            |                |
| tuition.          |                  |            |                |
|                   |                  |            |                |
| ^4^ Horace Mann   |                  |            |                |
| charter schools   |                  |            |                |
| in Massachusetts  |                  |            |                |
| and               |                  |            |                |
| d                 |                  |            |                |
| istrict-sponsored |                  |            |                |
| charter schools   |                  |            |                |
| in Connecticut.   |                  |            |                |
|                   |                  |            |                |
| ^5^ New Mexico    |                  |            |                |
| charter schools   |                  |            |                |
| are guaranteed    |                  |            |                |
| state revenue.    |                  |            |                |
| Local revenue is  |                  |            |                |
| subject to        |                  |            |                |
| district          |                  |            |                |
| allocation.       |                  |            |                |
|                   |                  |            |                |
| ^6^ Charter       |                  |            |                |
| schools receive   |                  |            |                |
| 95 percent of     |                  |            |                |
| spending in Rhode |                  |            |                |
| Island and 90     |                  |            |                |
| percent of        |                  |            |                |
| revenue in New    |                  |            |                |
| Jersey.           |                  |            |                |
+-------------------+------------------+------------+----------------+

Expenditure-based states usually refine the calculation of per-pupil
expenditure through regulatory and administrative procedures to promote
funding fairness. Pennsylvania subtracts special education expenditures
and adds them back based on the actual enrollment of special needs
students in charter schools. Other expenditure items usually excluded
from base funding calculations include transportation, community
service, adult education, most programs with other school districts and
private schools, school lunch and federal programs.

In a number of states, school districts have some control over the
amount of funding that charter schools receive, or the funding is
subject to negotiations between school districts and charter schools.
School district discretion could lead to the underfunding of charter
schools---a persistent complaint of charter school operators. However,
such funding arrangements also give school districts flexibility in
providing funding for the specific needs of charter schools including
higher costs associated with particular programs or student populations.
In states where school districts negotiate base funding with charter
schools---most notably Alaska, Colorado and Illinois---the provision of
school district services varies charter by charter, making it difficult
to use basic revenue totals to compare charter schools. For example, a
charter school that received \$4,000 per pupil from a school district
may be no better funded then one that received \$3,000 from a school
district, if in the latter case the district was responsible for
providing transportation, professional development and special
education.

Only two states base funding on state averages. Minnesota uses a
revenue-based model, where charter schools build funding driven by a
student-weighting system around the state average foundation level.
Connecticut sets base funding at an even \$6,500 (by coincidence,
approximately equal to the state average general fund expenditure per
pupil) including local option taxes.

Several states leave charter school funding decisions to the school
districts that charter them. Sometimes, state law guarantees charter
schools the same funding they would receive as regular district schools
through the district's budget allocation formula. Since many
district-authorized charter schools serve at-risk children or offer
specialized programs, negotiations between school districts and charter
schools are often a big part of the funding process.

#### Dual Funding Systems 

Of the 23 states examined in this study, seven fund charter schools in
more than one way.

-   **Connecticut.** The formula for state-authorized charter schools
    provides about \$6,500 per pupil. District-authorized charter
    schools are funded uniquely according to arrangements specified in
    the charter.

-   **Massachusetts.** Commonwealth schools receive a preset "tuition"
    based on average school district spending that follows pupils from
    their district of residence. Chartered by school districts, Horace
    Mann schools receive funding on the same basis as any other school
    in the district or as otherwise specified in the charter. Horace
    Mann charter schools may appeal school district funding decisions to
    the state board of education.

-   **Wisconsin.** Milwaukee is covered under a separate state law that
    allows universities, technical colleges and the city of Milwaukee to
    grant charters. Funding in Milwaukee is based on per-pupil "average
    shared cost," which is determined by taking the total operating
    cost, subtracting state and federal restricted program funding and
    adding district debt retirement costs. In the rest of Wisconsin,
    school districts grant charters and fund charter schools on the same
    basis as the funding of any other school, or as otherwise specified
    in the charter.

-   **Arizona, Louisiana, Michigan and Texas** also provide for
    district-authorized charter schools funded under arrangements agreed
    to in the charter. In Arizona, school districts authorize autonomous
    charter schools located outside of the district boundaries similar
    to the autonomous charter schools authorized by the state.

To simplify the exposition of findings, this study ignores
district-authorized charter schools in Michigan and Texas where the
number of such schools remains small. Horace Mann charter schools and
district-authorized charter schools in Connecticut and Louisiana are
treated separately from state-authorized charter schools.

#### Path of Funding

Whether a charter school receives its funding from school districts or
from the state has been the focus of much of the research on charter
school finance. The second report of the National Charter School Study
(RPP, 1998), for example, contains only one table (Exhibit 2-10) on
charter school finance. This table differentiates funding "directly from
the state treasury" from funding that is first directed to school
districts and then to charter schools. The table only describes which
government(s) sends the check to charter schools. For example,
Massachusetts is described as a state-funded system. However, school
districts in Massachusetts include charter school students in the
district pupil count, and pay charter schools "tuition"---an amount
approximately equal to the district's per-pupil expenditure. The school
district payment flows to charter schools through the state deduction of
the full tuition---not just the average state aid per pupil---from its
state aid payment to the school district.

The Massachusetts example illustrates that whether funds flow directly
from school districts or indirectly through a system of state aid
additions and subtractions has no effect on charter school revenue or
school district loss of revenue. The path of funding is an important
issue primarily as a result of misunderstandings that in turn lead to
misleading conclusions.

The most common misunderstanding about the flow of funds is that when
the state pays charter schools directly the funding comes from "new
money," not from revenue following students as they transfer from school
districts to charter schools. A related misunderstanding is that school
districts lose only the average state aid per pupil when the state pays
charter schools directly, and not any local property tax revenue. The
district is mistakenly viewed as better off in a "state-funded" system
because it loses no local revenue. This misconception implies that
direct payments from school districts to charter schools are composed of
both general state aid and local property tax revenue. In most states,
however, funding moves with students in the same amount from school
district to charter school whether or not the state directly pays
charter schools.[^14]

Another common mistake is the belief that school districts pay charter
schools for students who had never been enrolled in a district
school---i.e., those students transferring from private and home
schools. This misconception is common in states where charter school
students are included in the school district pupil count such as
Massachusetts or in states like California, Colorado and Florida where
school districts authorize charter schools. In fact, new public school
students generate new state aid for school districts, equivalent to the
entire foundation level, which is then paid to charter schools, leaving
host school districts financially unaffected. Presuming a fixed amount
of K-12 education aid for all school districts in a state, all districts
lose state aid on a per-pupil basis as a result of students moving from
private schools to either school districts or charter schools.[^15]

For states with foundation funding (all except Delaware, the District of
Columbia, Hawaii and North Carolina), charter schools' base per-pupil
funding flows from school districts to charter schools in one of two
different ways:

> **Method 1:** Charter school students are counted in the enrollment of
> the school district for state aid purposes, and

-   The district pays the full amount of charter school base per-pupil
    funding to charter schools, or

-   The state subtracts the full amount of charter school base per-pupil
    funding from state aid payments to the school district, and then
    pays charter schools, or

-   The state subtracts the average state aid per pupil from state aid
    payments to the school district, and sends the subtracted amount to
    charter schools. School districts pay charter schools the average
    local revenue per pupil. The two payments together equal the full
    amount of per-pupil funding.

> **Method 2:** Charter school students are no longer counted in the
> enrollment of school districts. State aid to school districts is
> reduced, generally by the full amount of the foundation
> allowance.[^16] The state then provides the full amount of charter
> school base per-pupil funding to charter schools, usually on the same
> basis as it guarantees a foundation level of spending for school
> districts

Under either method, transition aid for school districts (e.g.,
Massachusetts) or state aid minimums or guarantees (e.g., Connecticut)
may temporarily stem the outflow of funds from school districts. The
impact of the two methods on school districts and charter schools
ultimately turns out to be quite similar. A closer look at how funding
works for students transferring from school districts to charter schools
under Method 1 and students transferring from private schools to charter
schools under Method 2 will illustrate this point.

In California, Colorado, Florida, Massachusetts, and several other
states, charter school students are still counted as pupils of their
school districts for purposes of calculating state aid (Method 1), and
then all charter school base per-pupil funding moves with the students
to charter schools. In California, Colorado, Florida and a few other
states, the school district directly pays charter schools. In New Jersey
and Rhode Island, charter schools receive separate aid payments from the
state (representing average state aid per pupil) and school districts
(representing average local revenue per pupil). In all of these states,
private school and home school children choosing to attend charter
schools are first counted as school district students. New state aid
pays 100 percent of the foundation allowance for these new students.
This new revenue helps pay for funding transfers to charter
schools.[^17]

In states like Arizona, Michigan, Minnesota and Texas, students moving
to charter schools are no longer counted in school districts for state
aid purposes (Method 2). As a result, the district loses state aid equal
to the foundation level, which is approximately the full amount of state
and local per-pupil funding

An understanding of foundation funding formulas is the key to
comprehending both why states recapture from school districts all or
most of the funds paid to charter schools under Method 2, and why
charter school students coming from private schools do not impose
significant new costs on school districts in states employing Method 1.
Under foundation funding programs, the state guarantees a foundation
amount for each student. The amount is composed of local tax revenue and
state aid, with the relative proportions of each varying according to
the per-pupil tax base. Local property tax revenue is first determined
by applying a required tax rate to the tax base. Student enrollment is
not a factor in local revenue calculation. Local revenue does not vary
with enrollment. The state then provides enough aid to ensure that each
student generates funding equal to the foundation level or allowance.
Because the local tax contribution does not depend on enrollment, new
students are always 100 percent state funded, and enrollment decreases
always result in 100 percent state savings.[^18]

An equivalent, alternative explanation may help some readers. The
*addition* of a child to the district membership roll means that the
district has less wealth per student. Because state equalization
formulas give more funding to school districts with less wealth per
pupil (in order to bring them up to the foundation amount), there will
be a slight increase in state aid for all students in the district. To
the extent that the state has a fixed amount of foundation funding for
all students and schools districts, however, additional students could
lead to a lowering of the state foundation level for all students in the
state. In effect, all districts in the state are absorbing the added
expense through reduced state aid.[^19]

Under Method 2, private school and home school students choosing to
enroll in charter schools are funded 100 percent by the state because
they never generated state aid in a school district. Assuming a fixed
amount of state funding, however, the statewide foundation level must be
reduced, and all students and school districts surrender state aid.
Similarly, when a student *leaves* a district for a charter school in
Minnesota or another state using Method 2, that child no longer counts
in the school district's enrollment. Because student enrollment does not
affect total local revenue, the departure of a child means that the
school district has more wealth per remaining student. Since state
equalization formulas give less funding to school districts with greater
wealth per pupil, a child's exit to a charter school causes a slight
reduction in state aid for all remaining students. In the end, an amount
equal to the foundation level or amount leaves with that student.

### Funding Based on Student Characteristics

Taxpayers, educators and legislators all care deeply about disadvantaged
and special needs students. These students cost more to educate. High
school students also generally cost more. In an efficient charter school
funding system, the resources needed for high-cost students should flow
with them to charter schools. Simple fairness prescribes that charter
schools with high-cost students should get better funding than charter
schools with low-cost students. Simple fairness also dictates that
funding for high-cost students in school districts should not be
diverted from them to charter schools through an ill-conceived funding
strategy. Charter schools and school districts are unlikely to compete
on a level playing field unless funding directly or indirectly matches
the special needs of individual students.

#### Student Counts

Even before looking at how the characteristics of students generate
funding, one must first consider how students are counted. The most
common way to count the number of students for funding purposes is
either the average daily membership (ADM) over time or the enrollment or
head count on a particular day. As of 1994, 34 states used membership in
one form or another (Gold, et al.1995). The second most common practice
for counting students is average daily attendance (ADA). As of 1994,
seven states used this method. Another seven states based their school
funding on staff counts rather than on pupil counts.[^20] The techniques
used by states in counting charter school students, shown in the table
below, match the methods used for funding school districts. Only two
states use daily attendance figures rather than enrollment.

+----------------------------------------------+-----------------------+
| Table 3                                      |                       |
|                                              |                       |
| **Basis of Student Count for Charter School  |                       |
| Funding**                                    |                       |
+----------------------------------------------+-----------------------+
| **Enrollment/ADM**                           | **Attendance/ADA**    |
+----------------------------------------------+-----------------------+
| Alaska, Arizona, Connecticut, Colorado,      | California, Texas     |
| Delaware**,** District of Columbia, Florida, |                       |
| Georgia, Hawaii, Illinois,^1^ Kansas,        |                       |
| Louisiana, Massachusetts, Michigan,          |                       |
| Milwaukee, Minnesota, New Jersey, New        |                       |
| Mexico, North Carolina, Pennsylvania, Rhode  |                       |
| Island, South Carolina, Wisconsin            |                       |
+----------------------------------------------+-----------------------+
| ^1^ School district funding in Illinois is   |                       |
| based on ADA.                                |                       |
+----------------------------------------------+-----------------------+

ADA funding raises important equity issues because poor and at-risk
students generally have higher rates of absenteeism than other students.
Charter schools with disadvantaged children are likely to generate fewer
dollars than average schools. In California and Texas, the ADA equity
problem is offset to some degree by extra funding for at-risk students.
In Texas, for example, compensatory education students generate 20
percent extra funding compared to regular students. Assume in a
particular school that compensatory students attend school 80 percent of
the time and that regular students have a 95 percent attendance average.
This would mean that the funding per compensatory pupil (1.2 x .80 or 96
percent) is just one percentage point greater than the funding generated
for regular pupils (95 percent). While the at-risk funding helps negate
the ADA problem, it leaves no money for the extra educational needs of
at-risk students. The penalty imposed on at-risk charter schools by
basing funding on attendance is not a problem unique to charter schools.
All school districts serving disadvantaged children in these states face
the same problem. Illinois funds school districts based on ADA but funds
charter schools based on membership, thus mitigating the negative
effects of ADA funding on charter schools for at-risk children.[^21]

#### Grade Level Funding Adjustments

A number of states use weights in their funding formula to reflect the
higher costs of education at some grade levels. A higher weight for
primary students could reflect an emphasis on early education and class
size reduction. More commonly, states give high school students more
weight because they require a greater range of specialized courses and
facilities including science labs.

+--------------------+------------------------+------------------------+
| Table 4            |                        |                        |
|                    |                        |                        |
| **Grade Level      |                        |                        |
| Funding            |                        |                        |
| Adjustments for    |                        |                        |
| Charter Schools**  |                        |                        |
+--------------------+------------------------+------------------------+
| **Subject to       | **Varies By Grade      | ######## No            |
| Negotiation**      | Level**                | Grade Level Adjustment |
+--------------------+------------------------+------------------------+
| Colorado,^1^       | Arizona,               | Alaska, Connecticut,   |
| Georgia,           | California,^2^         | Louisiana,             |
| Hawaii,^1^         | Delaware, District of  | Pennsylvania,          |
| Illinois,          | Columbia, Florida,     | Massachusetts,         |
| Kansas,^1^         | Minnesota, New Jersey, | Michigan, Milwaukee,   |
| Wisconsin^1^       | New Mexico, South      | North Carolina, Rhode  |
|                    | Carolina               | Island, Texas          |
+--------------------+------------------------+------------------------+
| ^1^ Funding        |                        |                        |
| formula for school |                        |                        |
| districts does not |                        |                        |
| use grade level    |                        |                        |
| weights.           |                        |                        |
|                    |                        |                        |
| ^2^ The state      |                        |                        |
| class size         |                        |                        |
| reduction program, |                        |                        |
| which provides     |                        |                        |
| extra funding for  |                        |                        |
| grades K-2.        |                        |                        |
+--------------------+------------------------+------------------------+

Grade level weightings for school districts do not necessarily mean that
charter schools receive commensurate funding on a per-pupil basis. For
example, Massachusetts supplies school districts with more funds for
high school students, but charter school students generate only the
school district average funding regardless of grades actually served. In
effect, charter high school students generate less funding than students
in traditional high schools. Conversely, students in charter elementary
schools generate more funding than do students in traditional elementary
schools. In fact, the 10 states that do not use grade level weights
probably overfund charter elementary schools and underfund charter high
schools. Some states, such as California, Illinois and Massachusetts,
have separate elementary and secondary school districts as well as K-12
districts. This arrangement obviates the need for grade level
adjustments in elementary and high school districts.

A charter school funding system based on negotiation also offers an
opportunity for appropriate grade level adjustments. In Illinois, where
charter schools receive 75 percent to 125 percent of school district
spending, charter high schools in K-12 districts could be funded above
the 100 percent level, while elementary schools might be funded at less
than 100 percent. This practice does not occur in Chicago, however,
where most charter schools are located. Similar negotiated arrangements
could be reached in Colorado.

#### Special Education 

One of the most sensitive topics in school finance is special education
funding. Systemic reforms of special education finance have been made or
considered in almost every state in the past decade (Parrish and Wolman,
1998). Underlying this turmoil is the need for school districts to pay
for a significant share of special education costs from general
operating funds. In effect, districts could be viewed as diverting base
funding from general education students in order to meet their
underfunded special education mandates. Charter school special education
funding needs to be analyzed in this framework.

State special education funding systems for charter schools vary along a
continuum in the extent to which funding matches the specific
educational needs of special education students actually enrolled in
charter schools. At one end of the continuum, states match funding to
the specific disabilities of the children in charter schools through:

-   Actual costs;

-   Pupil weights based on student disability;

-   Categorical funding based on student disability.

Minnesota bases funding on the actual cost of services provided and on
the concentration of special education students in a school. Special
education students in Hawaii, Kansas and Wisconsin charter schools get
services and funding on the same basis as other district schools. In
these states, funding is also based on actual costs, but targeted state
funding pays for only a portion of actual special education costs. The
rest of the funding comes from general operating revenues consisting of
local revenues and general state aid.

Most of the other states at this end of the continuum use funding
systems driven by student weights seeking to match funding with
particular categories of special needs including Arizona, Delaware,
Florida, South Carolina, Washington, D.C., and Texas. California and New
Jersey attach specific dollar amounts to different categories of special
education students. The weights or targeted categorical aids are based
on a projection of the cost of the particular child, as opposed to the
actual expense. Charter schools and school districts that provide more
efficient or less costly services get the same revenue as schools that
are either less efficient or spare less expense. As a result, weighting
systems create incentives to contain costs. In a system based on actual
costs, however, special education revenue declines as spending declines.

+---------------------------+-------------------+----------------------+
| Table 5                   |                   |                      |
|                           |                   |                      |
| ########                  |                   |                      |
| Special Education Funding |                   |                      |
+---------------------------+-------------------+----------------------+
| **Based on Disabilities   | **Based on        | **Matches School     |
| of Students Enrolled In   | Negotiations with | District's Special   |
| Charter School**          | School District** | Education Spending   |
|                           |                   | or Revenue**         |
+---------------------------+-------------------+----------------------+
| Arizona, ^1^ Delaware,    | California,       | Alaska,^4^           |
| District of Columbia,     | Colorado,         | Arizona,^1^          |
| Florida, Georgia, ^2^     | Connecticut,^3^   | Louisiana,           |
| Hawaii, ^2^ Kansas, ^2^   | Illinois^3^       | Massachusetts,       |
| Michigan, New Jersey, New |                   | Milwaukee,           |
| Mexico, ^2^ Minnesota,^5^ |                   | Pennsylvania,^4^     |
| South Carolina, Texas,    |                   | North Carolina,^4^   |
| Wisconsin^1^              |                   | Rhode Island         |
+---------------------------+-------------------+----------------------+
| ^1^ All school districts  |                   |                      |
| and charter schools in    |                   |                      |
| Arizona receive a weight  |                   |                      |
| of 0.158, worth about     |                   |                      |
| \$375, for every pupil    |                   |                      |
| enrolled, whether or not  |                   |                      |
| they have a disability.   |                   |                      |
| No other funding is       |                   |                      |
| available for low-cost    |                   |                      |
| disabilities such as      |                   |                      |
| speech and learning       |                   |                      |
| disabilities, but         |                   |                      |
| students with middle- and |                   |                      |
| high-cost disabilities    |                   |                      |
| generate substantial      |                   |                      |
| funding through a         |                   |                      |
| weighting system.         |                   |                      |
|                           |                   |                      |
| ^2^ On same basis as any  |                   |                      |
| school in the district as |                   |                      |
| opposed to receiving      |                   |                      |
| direct funding from the   |                   |                      |
| state formula.            |                   |                      |
|                           |                   |                      |
| ^3^ District of residence |                   |                      |
| pays actual cost if       |                   |                      |
| charter school provides   |                   |                      |
| service.                  |                   |                      |
|                           |                   |                      |
| ^4^ Special education     |                   |                      |
| students generate         |                   |                      |
| funding, but not based on |                   |                      |
| a specific disability.    |                   |                      |
|                           |                   |                      |
| ^5^ Based on actual cost. |                   |                      |
+---------------------------+-------------------+----------------------+

States in the middle of this continuum leave special education funding
to negotiations or other arrangements between charter schools and school
districts. In Illinois and Connecticut, school districts are responsible
for either providing or funding the additional special education
services needed by children, but they are also responsible for
assessment. By controlling assessment, these districts in these states
have an assurance of how the costs will be determined. If charter
schools provide services in these two states, school districts provide
funding based on actual costs and therefore the disabilities of specific
students. Overall, Illinois school districts pay charter schools 75
percent to 125 percent of average costs. Much of the funding
differential is based on whether a charter school provides special
education services on its own or relies on the school district.
Similarly, Colorado school districts negotiate with charter schools over
a funding level that ranges from 80 percent to 120 percent of district
spending.[^22] Charter schools often get less than 100 percent funding
if they attract fewer special education students, or if the school
district provides special education services at no cost. Fieldwork and
more research are necessary to determine the degree to which special
education funding matches specific pupil needs in these states.

The other end of the continuum includes states such as Louisiana,
Massachusetts, Pennsylvania, North Carolina and Rhode Island. Special
education funding is based not only on host school district special
education costs or revenue, but also on the characteristics of the host
district's special education population, as opposed to special education
students actually enrolled in the charter school.[^23] These systems
should work perfectly if charter school special education populations
exactly mirror host school district special education populations. But
as the number of special education students and the severity of their
disabilities deviate from school district averages, the potential
emerges for overfunding (for charter schools with low special needs
populations) and underfunding (for charter schools serving high numbers
of special education students).

North Carolina and Pennsylvania base revenue for every special education
student on the average expenditure (Pennsylvania) or revenue (North
Carolina) per special education pupil in the student's district of
residence. Thus, every special education student in a charter school
gets district-average funding regardless of the cost of services or the
severity of the disability. This funding strategy provides charter
schools with a strong financial incentive to enroll special education
students, but to enroll those with the least costly disabilities. The
finance systems in Louisiana, Massachusetts, Milwaukee and Rhode Island
create an even stronger financial incentive to avoid special education
altogether.[^24] In these states, charter school funding is based on the
host school districts' total operating costs (including special
education) divided by district enrollment (including special education).
No matter how many special education students a charter school serves,
it receives special education funding as part of its per-pupil allotment
as if it were serving a special needs population exactly matching the
school district average.

Regardless of the charter school issues, controversies swirl over
special education finance largely because of ever-increasing costs that
arguably come at the expense of regular education spending. According to
one longitudinal study, the share of district budgets devoted to special
education during the past 25 years has increased from 4 percent to 17
percent (Rothstein, 1992; 1997). In New York state, between 1979 and
1992 the share of the budget devoted to special education increased from
5 percent to more than 11 percent, and the increase in regular teaching
expenditures was about half that of the increase in special education
expenditures (Lankford and Wykoff, 1999).

Against this backdrop, the issue of charter school special education
finance needs to be considered carefully. Parents of students with
disabilities have started a number of charter schools. In several
states, charter schools report serving a higher percentage of students
in special education than the state average. Nationwide, however,
charter schools serve fewer handicapped children than do all public
schools (RPP, 1997, 1998, 1999). In several states, however, charter
schools report serving a higher percentage of students in special
education than the state averages. Charter schools in Massachusetts with
for-profit managers have also been charged with systematically
"counseling out" students with the most costly disabilities (Zollers and
Ramanthan, 1998). Studies in Michigan (Horn and Miron, 1999, and
PCS/MAXIMUS, 1999) indicate a dramatic difference between charter
schools and host districts in spending on added needs students.

The most commonly expressed concern within the charter school community
is that a high-cost special education student could outstrip a charter
school's financial ability to meet that student's educational needs
(Bierlein and Fulton, 1996). Part of the problem is size. Small charter
schools are unable to spread the high costs of a severely handicapped
child among all students without having an impact on the education
offerings for other students. The funding system may also be part of the
problem. States that provide significant extra funding for high-cost
children help to protect charter schools from this financial burden.
States relying only on an average funding concept (i.e., charter schools
get the average expenditure per pupil regardless of the number of
special needs students and the cost of their disabilities) fail to
protect charter schools from the financial burden of high-cost children.
Some states use other strategies. Pennsylvania has a separate
contingency fund for ultra-high-cost special education students to which
all of it its public schools have recourse. Massachusetts specifically
excludes charter schools from paying for high-cost private and
residential placements. Many charter schools in Colorado pay the school
district the average cost of district special education and in return
get district special education services including protection against
high-cost special education students. In a sense, this system "insures"
charter schools from high special education costs.

Charter schools also argue that they provide special education both more
efficiently in regular education settings and with less harm to
students. Categorizing students for funding purposes, it is argued,
constitutes a "labeling" of students that may result in low expectations
and low self esteem or lead to increased regulatory requirements (Finn
et al. 1996). Some parents choosing charter schools seek to escape or
remove special education labels, or come to the charter school for an
alternative to services provided in the previous school. The obvious
merits of these arguments need to be weighed against possible abuses.
Offering no specific special education program, or one specifically
limited to inclusion in regular classroom settings, may deter students
with disabilities from enrolling in charter schools and may diminish
needed services to charter school students with special needs.

Charter schools also maintain that federal and state special education
funding is insufficient to provide a panoply of special education
services. School districts, however, face exactly the same problem. In
most states, if not all, special education expenditures exceed state and
federal funding specifically designated for special education. General
operating revenues make up for the resulting revenue gap. In Wisconsin,
for example, state categorical aid funds about 40 percent of special
education costs. In California, the state funds about 50 percent. Some
analysts view the use of general operating revenue for special education
as a transfer from regular education programs to special education, but
there is nothing inherently wrong or inequitable about funding special
education from general revenues. It means only that federal and state
special education revenue streams fail to fund all special education
costs.

#### Low-income and At-risk Students 

Most states provide more funding for the higher costs of educating
at-risk students. While states define at-risk status in various ways,
poverty is generally the major determinant. Most commonly, enrollment in
free- and reduced-price lunch programs is used to determine at-risk
status. Some states use qualification for federal programs such as Aid
to Families with Dependent Children to define poverty.

Some argue that charter schools "cream" the easiest students to educate.
To prevent creaming based on income, Louisiana mandates that charter
schools have a proportion of at-risk students that is at least 85
percent of the proportion of at-risk students within the district as a
whole. Colorado, Illinois and Texas give preferences in granting
charters to those seeking to serve at-risk populations, and Texas has
developed a large number of charter schools for at-risk children.
However, little of the discussion about the selectivity issue centers on
funding. Additional funding attached to at-risk youth may create
powerful incentives for potential charter holders to create programs
serving these children. Without extra funding, charter schools have less
incentive to serve high-cost students. A great deal of variation exists
in the degree to which charter schools receive extra state and local
funds specifically for the education of at-risk youth, as shown in Table
6.

+------------------------+---------------------+----------------------+
| Table 6                |                     |                      |
|                        |                     |                      |
| **State Funding for    |                     |                      |
| At-risk or Low-income  |                     |                      |
| Students**             |                     |                      |
+------------------------+---------------------+----------------------+
| **Yes**                | **Negotiated or     | **No**               |
|                        | Allocated by School |                      |
|                        | district**          |                      |
+------------------------+---------------------+----------------------+
| Alaska, Arizona,       | Colorado,^2,3^      | Connecticut,         |
| California, Delaware,  | Georgia, Hawaii,    | District of          |
| Florida, Illinois,^1^  | Illinois,^2^        | Columbia,            |
| Michigan, Milwaukee,   | Kansas,^3^ New      | Louisiana,^4^        |
| Minnesota, New Jersey, | Mexico,^3^ South    | Massachusetts,^5^    |
| Texas                  | Carolina, Wisconsin | North Carolina, ^5^  |
|                        |                     | Pennsylvania, ^5^    |
|                        |                     | Rhode Island^5^      |
+------------------------+---------------------+----------------------+
| ^1^ Yes, for Chicago   |                     |                      |
| charter schools.       |                     |                      |
|                        |                     |                      |
| ^2^ Charter schools    |                     |                      |
| can negotiate for more |                     |                      |
| than 100 percent of    |                     |                      |
| average district       |                     |                      |
| funding.               |                     |                      |
|                        |                     |                      |
| ^3^ At-risk students   |                     |                      |
| are weighted in state  |                     |                      |
| aid formula generating |                     |                      |
| funds for the school   |                     |                      |
| district.              |                     |                      |
|                        |                     |                      |
| ^4^ No, for schools    |                     |                      |
| chartered by school    |                     |                      |
| districts; yes for a   |                     |                      |
| few state-authorized   |                     |                      |
| schools.               |                     |                      |
|                        |                     |                      |
| ^5^ Charter schools    |                     |                      |
| receive school         |                     |                      |
| district average for   |                     |                      |
| at-risk or low-income  |                     |                      |
| students as part of    |                     |                      |
| base funding.          |                     |                      |
+------------------------+---------------------+----------------------+

In Colorado, Georgia, Illinois, New Mexico and other states that leave
funding decisions up to negotiations between school districts and
charter schools, more dollars may follow an at-risk child, but this
extra funding is not guaranteed. States such as Hawaii, Kansas and

Wisconsin may provide extra funding for at-risk students through the
normal school district budget allocation procedure. Most of the other
states that provide more funding for at-risk or low-income students use
a weighting system. In Texas, at-risk students receive an extra
weighting of 20 percent. In Michigan, the additional weight is 11
percent. Other states fund low-income students as a categorical program.
New Jersey, for example, provides \$436 per at-risk student. Minnesota
provides at-risk funding that is partially based on a concentration
factor. As the proportion of at-risk students increases in a school, the
per-pupil funding grows larger. Table 7 contains information on the
amount of funding that follows an at-risk student to a charter school in
a number of different states. It also contains a column "amount per
member" which describes at-risk funding per member (not per at-risk
student) in schools with an at-risk population equal to the state
average.

Funding the higher costs of educating at-risk youth raises many of the
same concerns as the funding of special education. States failing to
provide extra funds for special needs and high-cost students create
financial incentives for charter holders to avoid high-cost students.
The lottery-driven, open admissions process required of charter schools
in most states mitigates the impact of these incentives. Conversely,
charter schools serving at-risk students face substantial economic
obstacles.

+--------------------+-----------+---+-----------+---+-----------+----+---+
| > Table 7          |           |   |           |   |           |    |   |
+--------------------+-----------+---+-----------+---+-----------+----+---+
| > **At-risk and    |           |   |           |   |           |    |   |
| > Low-income       |           |   |           |   |           |    |   |
| > Funding for      |           |   |           |   |           |    |   |
| > Charter Schools, |           |   |           |   |           |    |   |
| > Selected         |           |   |           |   |           |    |   |
| > States**         |           |   |           |   |           |    |   |
+--------------------+-----------+---+-----------+---+-----------+----+---+
|                    | **        |   | **Amount  |   | **Amount  |    |   |
|                    | Weighting |   | Per       |   | Per       |    |   |
|                    | Factor**  |   | At-risk   |   | Member**  |    |   |
|                    |           |   | Pupil**   |   |           |    |   |
+--------------------+-----------+---+-----------+---+-----------+----+---+
| > California^1,2^  | na        |   | \$200     |   | \$40      |    |   |
+--------------------+-----------+---+-----------+---+-----------+----+---+
| > Colorado^3^      | na        |   | 500       |   | 142       |    |   |
+--------------------+-----------+---+-----------+---+-----------+----+---+
| > Illinois^4^      | na        |   | 767       |   | 613       |    |   |
+--------------------+-----------+---+-----------+---+-----------+----+---+
| > Kansas           | 0.080     |   | 300       |   | 100       |    |   |
+--------------------+-----------+---+-----------+---+-----------+----+---+
| > Michigan         | 0.115     |   | 685       |   | 206       |    |   |
+--------------------+-----------+---+-----------+---+-----------+----+---+
| > Minnesota^3^     | na        |   | 490       |   | 133       |    |   |
+--------------------+-----------+---+-----------+---+-----------+----+---+
| > New Mexico^5^    | 0.080     |   | na        |   | 185       |    |   |
+--------------------+-----------+---+-----------+---+-----------+----+---+
| > South Carolina   | 0.260     |   | 450       |   | 181       |    |   |
+--------------------+-----------+---+-----------+---+-----------+----+---+
| > Texas^2^         | 0.200     |   | 867       |   | 416       |    |   |
+--------------------+-----------+---+-----------+---+-----------+----+---+
| > Wisconsin^6^     | na        |   | 250       |   | 12        |    |   |
+--------------------+-----------+---+-----------+---+-----------+----+---+
| Source: Based on   |           |   |           |   |           |    |   |
| middle cost K-12   |           |   |           |   |           |    |   |
| charter school     |           |   |           |   |           |    |   |
| profiled in the    |           |   |           |   |           |    |   |
| appendix.          |           |   |           |   |           |    |   |
|                    |           |   |           |   |           |    |   |
| ^1^ Compensatory   |           |   |           |   |           |    |   |
| education.         |           |   |           |   |           |    |   |
|                    |           |   |           |   |           |    |   |
| ^2^ California and |           |   |           |   |           |    |   |
| Texas base funding |           |   |           |   |           |    |   |
| on ADA, which      |           |   |           |   |           |    |   |
| offsets at-risk    |           |   |           |   |           |    |   |
| funding by the     |           |   |           |   |           |    |   |
| extent to which    |           |   |           |   |           |    |   |
| at-risk students   |           |   |           |   |           |    |   |
| have lower         |           |   |           |   |           |    |   |
| attendance rates.  |           |   |           |   |           |    |   |
|                    |           |   |           |   |           |    |   |
| ^3^ State average; |           |   |           |   |           |    |   |
| actual amount      |           |   |           |   |           |    |   |
| varies.            |           |   |           |   |           |    |   |
|                    |           |   |           |   |           |    |   |
| ^4^ Supplemental   |           |   |           |   |           |    |   |
| general state aid  |           |   |           |   |           |    |   |
| in Chicago. No     |           |   |           |   |           |    |   |
| other districts    |           |   |           |   |           |    |   |
| with charter       |           |   |           |   |           |    |   |
| schools currently  |           |   |           |   |           |    |   |
| qualify for        |           |   |           |   |           |    |   |
| supplemental       |           |   |           |   |           |    |   |
| general state aid. |           |   |           |   |           |    |   |
|                    |           |   |           |   |           |    |   |
| ^5^ Based on       |           |   |           |   |           |    |   |
| school district    |           |   |           |   |           |    |   |
| index.             |           |   |           |   |           |    |   |
|                    |           |   |           |   |           |    |   |
| ^6^ At-risk and    |           |   |           |   |           |    |   |
| low-income pre-K   |           |   |           |   |           |    |   |
| to grade 5         |           |   |           |   |           |    |   |
| programs.          |           |   |           |   |           |    |   |
+--------------------+-----------+---+-----------+---+-----------+----+---+

### Funding Based on Geography

In most states, charter school revenues vary based on the specific
district in which the school is located. In states where charter schools
serve students across school district lines, funding is generally based
on the students' district of residence. Minnesota and Connecticut are
exceptions to this rule, with most charter schools receiving funding
from the state funding formula regardless of their locations. Michigan
charter school funding matches the school district's foundation
allowance up to a maximum of about \$6,000.

The desirable linkage between charter school and school district funding
helps charter schools benefit from state efforts to adjust school
district funding for isolation, small size and cost of living. If
charter school funding were not linked to school district funding, then
charter school operators would be encouraged to search for locations
with a financial advantage over other public schools. On the other hand,
tax effort and wealth inequities among school districts are also passed
on to charter schools. Under this equally onerous incentive system,
families in the most disadvantaged school districts may be the least
likely to find a charter school alternative if charter schools are
congregated in better-financed school districts.

#### Wealth and Tax Effort

Some school districts are wealthier than others, which usually
translates into higher spending. State equalization formulas attempt to
level the playing field among school districts, but some wealth
advantage almost always remains. In addition to variations in levels of
wealth, some school districts devote more of the community's resources
to education through higher local taxes. Increased tax effort could
increase the funding of a poorer school district relative to more
affluent districts. State funding formulas often encourage local tax
effort by supplying incentives and matches geared to reward high tax
effort. The states where charter school funding is linked to school
district wealth and tax effort are highlighted in Table 8.

+-------------------------------------------+--------------------------+
| ###### Table 8                            |                          |
|                                           |                          |
| **Charter School Funding Based on Host    |                          |
| School District Wealth or Tax Effort**    |                          |
+-------------------------------------------+--------------------------+
| **Yes**                                   | **No**                   |
+-------------------------------------------+--------------------------+
| Alaska, Delaware, Florida, Georgia,       | Arizona, California,^1^  |
| Illinois, Kansas, Louisiana,              | Colorado,^2^             |
| Massachusetts, Michigan,^3^ Milwaukee,    | Connecticut,^4^ District |
| New Jersey, North Carolina, Pennsylvania, | of Columbia,^5^          |
| Rhode Island, South Carolina, Texas,      | Hawaii,^5^ Minnesota,    |
| Wisconsin                                 | New Mexico               |
+-------------------------------------------+--------------------------+
| ^1^ School district funding in California |                          |
| is not based on wealth or a tax effort.   |                          |
|                                           |                          |
| ^2^ Some charter schools may get levy     |                          |
| override funds if agreed to in the        |                          |
| charter.                                  |                          |
|                                           |                          |
| ^3^ Per-pupil funding capped at about     |                          |
| \$6,000.                                  |                          |
|                                           |                          |
| ^4^ State-authorized schools only.        |                          |
|                                           |                          |
| ^5^ Not applicable because only one       |                          |
| school district exists.                   |                          |
+-------------------------------------------+--------------------------+

The District of Columbia and Hawaii, as single school districts,
naturally do not have geographic variation in local wealth and tax
effort. Minnesota gives all charter schools the same base aid per pupil,
but total funding varies considerably due to a weighting system based on
student characteristics. In Connecticut, state-authorized charter
schools receive a flat \$6,500, approximately equal to the state
average. For Connecticut and Minnesota this centralized state funding
raises an incentive issue. Charter schools in the two states are better
funded than local school districts when the schools are located in
low-spending districts. This situation may create incentives for charter
school operators to locate in school districts that receive less funding
to obtain a competitive advantage. In Connecticut, Michigan and
Minnesota, charter schools located in high-spending school districts
suffer a resource deficit compared to the local school districts.

In the other states, the incentive system is reversed. Charter schools
located in, or enrolling students from, poorer school districts with
lower tax effort receive fewer dollars. Charter schools have an
incentive to shop from district to district, looking for those with the
highest revenue or spending levels. On the other hand, the impact of the
location incentive is mitigated if families in high-spending school
districts are satisfied with their public education and therefore less
likely to seek charter school alternatives.

#### Geographic State Aid Adjustments

Many states adjust the general state aid formula for school districts
that are, in a sense, geographically challenged. Charter schools
generally benefit from these adjustments as well. Table 9 identifies
states that make some of these adjustments.

+-------------------------+--------------------------------------------+
| Table 9                 |                                            |
|                         |                                            |
| **Funding Adjusted for  |                                            |
| Small School/District   |                                            |
| Size or Cost of         |                                            |
| Living**                |                                            |
+-------------------------+--------------------------------------------+
| **Yes**                 | **No**                                     |
+-------------------------+--------------------------------------------+
| Alaska, Arizona,        | California, Connecticut, Delaware,         |
| Colorado, Florida,      | District of Columbia, Georgia, Hawaii,     |
| Kansas, Louisiana,      | Illinois, Michigan, Milwaukee, Minnesota,  |
| Massachusetts, New      | New Jersey, North Carolina, Pennsylvania,  |
| Mexico, Texas           | Rhode Island, South Carolina, Wisconsin    |
+-------------------------+--------------------------------------------+

A number of states provide extra funding for small school districts to
compensate for diseconomies of small scale. In Louisiana, this "economy
of scale" funding helps offset the inefficiency created by small schools
and small school districts. Small school district size is also a factor
in Colorado, Kansas, New Mexico and Texas. Some states recognize the
high cost of urban education. Colorado gives a little more money both to
very small and to very large school districts. Illinois and Minnesota
indirectly help urban districts by providing more funding to school
districts with high concentrations of low-income students. Colorado,
Florida and Texas provide more money to school districts where the cost
of living is high. Massachusetts has a small adjustment for inter-area
wage differentials.

Arizona is the only state that provides incentives to create small
charter schools by allocating state aid to charter schools as if they
were small school districts. These provisions apply to state-authorized
charter schools only. A small charter school of fewer than 100 students
in Phoenix gets 20 percent more per-pupil funding than an elementary
school of 600 students. This provides one possible reason for the large
number of small schools and multi-campus schools in Arizona.[^25] Many
charter operators centralize administration and in effect create mini
school districts containing several small schools. District-authorized
charter schools operating outside the district's boundaries get funding
based on district size rather than on charter school enrollment.

#### Intrastate Variation in Charter School Revenue 

One way to highlight the effect of geographic differences on funding is
to compare how a hypothetical charter school would generate revenue in
high- and low-spending school districts within a state. The hypothetical
charter school in Table 10 enrolls 100 students (except Alaska and
Arizona---see tables in the appendix) none of whom are low-income or
special needs students. Given data constraints, it was not practical to
pick high- and low-revenue school districts on precisely the same
criteria consistently across states. In most instances, the low-revenue
school district is at approximately the 10th percentile of funding, and
the high revenue school district is at approximately the 90th
percentile.

+-------------------+----------+------------+------------+------------+
| > Table 10        |          |            |            |            |
+-------------------+----------+------------+------------+------------+
| > **Estimated     |          |            |            |            |
| > Revenue for a   |          |            |            |            |
| > Basic           |          |            |            |            |
| > Elementary      |          |            |            |            |
| > Charter School  |          |            |            |            |
| > Located in      |          |            |            |            |
| > High-, Average- |          |            |            |            |
| > and Low-revenue |          |            |            |            |
| > School          |          |            |            |            |
| > Districts**     |          |            |            |            |
+-------------------+----------+------------+------------+------------+
|                   | **High-  | **Average  | **Low-     | **Di       |
|                   | Revenue  | District** | Revenue    | fference** |
|                   | Di       |            | District** |            |
|                   | strict** |            |            |            |
+-------------------+----------+------------+------------+------------+
| > Alaska          | \$11,800 | \$6,719    | \$5,500    | \$6,300    |
+-------------------+----------+------------+------------+------------+
| > Arizona         | 4,450    | 4,450      | 4,450      | 0          |
+-------------------+----------+------------+------------+------------+
| > California      | 5,200    | 4,350      | 4,250      | 950        |
+-------------------+----------+------------+------------+------------+
| > Colorado        | 4,800    | 3,750      | 3,480      | 1,320      |
+-------------------+----------+------------+------------+------------+
| > Connecticut     | 6,900    | 6,900      | 6,900      | 0          |
+-------------------+----------+------------+------------+------------+
| > Delaware        | 9,550    | 8,900      | 8,800      | 750        |
+-------------------+----------+------------+------------+------------+
| > Florida         | 4,040    | 3,840      | 3,540      | 500        |
+-------------------+----------+------------+------------+------------+
| > Georgia         | 4,050    | 3,870      | 3,350      | 700        |
+-------------------+----------+------------+------------+------------+
| > Illinois        | 5,300    | 4,900      | 3,600      | 1,700      |
+-------------------+----------+------------+------------+------------+
| > Kansas          | 5,700    | 4,500      | 4,100      | 1,600      |
+-------------------+----------+------------+------------+------------+
| > Louisiana       | 5,200    | 4,800      | 4,000      | 1,200      |
+-------------------+----------+------------+------------+------------+
| > Massachusetts   | 8,750    | 7,500      | 6,400      | 2,350      |
+-------------------+----------+------------+------------+------------+
| > Michigan        | 6,000    | 5,900      | 5,200      | 800        |
+-------------------+----------+------------+------------+------------+
| > Milwaukee       | 6,100    | 6,100      | 6,100      | 0          |
+-------------------+----------+------------+------------+------------+
| > Minnesota       | 4,700    | 4,700      | 4,700      | 0          |
+-------------------+----------+------------+------------+------------+
| > New Jersey      | 9,250    | 7,150      | 6,350      | 2,900      |
+-------------------+----------+------------+------------+------------+
| > New Mexico      | 5,800    | 3,500      | 3,200      | 2,600      |
+-------------------+----------+------------+------------+------------+
| > North Carolina  | 5,200    | 4,530      | 3,900      | 1,300      |
+-------------------+----------+------------+------------+------------+
| > Pennsylvania    | 8,000    | 6,200      | 5,600      | 2,400      |
+-------------------+----------+------------+------------+------------+
| > Rhode Island    | 7,250    | 6,750      | 6,650      | 600        |
+-------------------+----------+------------+------------+------------+
| > South Carolina  | 6,000    | 4,864      | 4,000      | 2,000      |
+-------------------+----------+------------+------------+------------+
| > Texas           | 5,100    | 4,200      | 3,800      | 1,300      |
+-------------------+----------+------------+------------+------------+
| > Wisconsin       | 7,600    | 6,400      | 6,300      | 1,300      |
+-------------------+----------+------------+------------+------------+
| > Note: In        |          |            |            |            |
| > Kansas,         |          |            |            |            |
| > Florida,        |          |            |            |            |
| > Massachusetts   |          |            |            |            |
| > and Michigan,   |          |            |            |            |
| > the range of    |          |            |            |            |
| > funding is      |          |            |            |            |
| > based only on   |          |            |            |            |
| > school          |          |            |            |            |
| > districts in    |          |            |            |            |
| > which charter   |          |            |            |            |
| > schools are     |          |            |            |            |
| > located. All    |          |            |            |            |
| > amounts include |          |            |            |            |
| > facilities      |          |            |            |            |
| > funding. There  |          |            |            |            |
| > are large       |          |            |            |            |
| > variations in   |          |            |            |            |
| > funding in      |          |            |            |            |
| > Alaska due to   |          |            |            |            |
| > the presence of |          |            |            |            |
| > many small      |          |            |            |            |
| > rural schools.  |          |            |            |            |
| > Data for        |          |            |            |            |
| > Illinois apply  |          |            |            |            |
| > only to K-12    |          |            |            |            |
| > districts. The  |          |            |            |            |
| > range of        |          |            |            |            |
| > spending        |          |            |            |            |
| > between high-   |          |            |            |            |
| > and low-revenue |          |            |            |            |
| > districts       |          |            |            |            |
| > captures        |          |            |            |            |
| > spending in     |          |            |            |            |
| > about 80        |          |            |            |            |
| > percent of      |          |            |            |            |
| > school          |          |            |            |            |
| > districts. See  |          |            |            |            |
| > text for a      |          |            |            |            |
| > fuller          |          |            |            |            |
| > explanation.    |          |            |            |            |
+-------------------+----------+------------+------------+------------+

No geographic variation in revenue exists in four states and two cities.
Hawaii and the District of Columbia have only one school district.
Charter school funding in Minnesota and Connecticut (state-chartered
schools) and Arizona is not linked to school district revenues. The
average difference between a high and low revenue school district is
around \$1,700 per pupil in the states where such funding differences
exist. In six states, the difference is \$2,000 or greater. These
revenue differences may provide incentives for charter schools to locate
in areas with high- spending school districts. The highest spending
school districts---the top 10 percent---are not even included in Table
10. On the other hand, high revenue school districts may also experience
higher costs due to rural or urban location and cost-of-living
differences.

### Categorical, Mandated and In-kind Services

In addition to basic instructional services for regular students, school
districts provide a number of other supplemental educational and
non-instructional services. In many states, funding is contained in
separate categorical budget lines, generally because states seek to
ensure that funding goes to particular programs. Functions most often
funded in this manner include student transportation, student health,
after-school programs, professional development of faculty, technology
and instructional materials. In some states, school districts are
supposed to pass along funds for these functions to charter schools,
while other states directly fund charter schools for categorical
programs. In some instances, school districts provide the services
directly to charter schools.

School districts in some states are responsible for providing services
to persons not regularly enrolled in their schools, such as
transportation and textbooks for private schools, and adult education.
Before analyzing charter school funding issues, it is important to
examine the educational goals of the charter. For example, should a
charter school receive adult education, special education or preschool
funding if its mission (as expressed in the charter) relates only to
elementary education? This section of Chapter 4 provides an in-depth
look at how these issues play out in transportation funding. A brief
overview of other categorical funding concludes this section.

#### Transportation

Student transportation proves to be one of the more problematic finance
issues for charter schools. Transportation often proves a barrier to the
exercise of choice, especially for poor students. The transportation
costs of charter schools obviously are higher than transportation
serving a system of neighborhood schools even if school districts
provide transportation for charter school students on regular bus
routes. Legislatures should be concerned about imposing high-cost
charter school transportation on school districts without also providing
extra funding.

Transportation generally emerges as the single largest categorical
funding item unless special education is funded as a categorical
program. For example, using 1994 data, state transportation funding in
Connecticut averaged \$36.4 million, covering approximately 30 percent
of the transportation costs of school districts. All other state
categorical programs, including aid to parochial schools was less than
\$14 million (Martin and Brewer, 1995). A major charter school issue
centers on whether school districts or charter schools are responsible
for providing these services. Questions sometimes arise as to how
funding for transportation works for students traveling across school
district lines to attend charter schools. Poor children are more likely
to depend on bus transportation for a variety of reasons. Subtle issues
of charter school selectivity become important when no transportation,
other than car pools, is available to charter school students. Several
states have directly addressed the issue of transporting low-income
children to charter schools. In some areas, mass transportation is
available and charter schools provide funds for students to use it.

+------------------------+---------------------+-----------------------+
| Table 11               |                     |                       |
|                        |                     |                       |
| **Responsibility for   |                     |                       |
| Transportation**       |                     |                       |
+------------------------+---------------------+-----------------------+
| **School Districts     | **Charter Schools   | **No Transportation   |
| Provide Charter School | Have Specific       | Required**            |
| Transportation^1^**    | Transportation      |                       |
|                        | Responsibilities**  |                       |
+------------------------+---------------------+-----------------------+
| Connecticut,^2^        | Delaware,^4^        | Alaska,^6^ Arizona,   |
| District of            | Florida,^5^         | California, Colorado, |
| Columbia,^3^ Hawaii,   | Illinois, ^5^North  | Georgia,^6^           |
| ^3^ Kansas,^3^         | Carolina, ^5^ South | Louisiana, Michigan,  |
| Massachusetts,^2^ New  | Carolina^5^         | Milwaukee, Minnesota, |
| Jersey, New Mexico,    |                     | Rhode Island, Texas   |
| ^3^ Pennsylvania,      |                     |                       |
| Wisconsin^3^           |                     |                       |
+------------------------+---------------------+-----------------------+
| ^1^ Either mandated by |                     |                       |
| state at request of a  |                     |                       |
| charter school, or     |                     |                       |
| funded by school       |                     |                       |
| district.              |                     |                       |
|                        |                     |                       |
| ^2^ Charter schools    |                     |                       |
| can provide            |                     |                       |
| transportation, or     |                     |                       |
| they can request that  |                     |                       |
| the school district    |                     |                       |
| provide it.            |                     |                       |
|                        |                     |                       |
| ^3^ Same as any other  |                     |                       |
| school in the          |                     |                       |
| district.              |                     |                       |
|                        |                     |                       |
| ^4^ At the request of  |                     |                       |
| the charter school,    |                     |                       |
| school district        |                     |                       |
| provides               |                     |                       |
| transportation.        |                     |                       |
|                        |                     |                       |
| ^5^ Must provide a     |                     |                       |
| transportation plan    |                     |                       |
| for low-income or      |                     |                       |
| at-risk students or in |                     |                       |
| North Carolina a plan  |                     |                       |
| for all students.      |                     |                       |
|                        |                     |                       |
| ^6^ When convenient or |                     |                       |
| feasible.              |                     |                       |
+------------------------+---------------------+-----------------------+

The actual responsibility (if any) for providing transportation services
or funding rests on school districts in 12 states.[^26] Additionally,
Georgia and Alaska require school districts to provide charter school
transportation "to the extent feasible." In many other states, school
districts provide charter schools with transportation services in lieu
of operating revenue. In other states, charter schools buy
transportation from school districts. Table 11 shows which states
mandate school districts to provide services directly to charter
schools.

Although state law often does not require charter schools to provide
transportation, many do so anyway. Charter schools frequently contract
with school districts, contract with commercial providers or provide
their own transportation. However, many charter schools depend on
parents to provide transportation, most commonly in states where school
districts do not have a mandated role. Parental provision of
transportation constitutes a cost shift from charter schools to parents
both in terms of time and money spent on carpooling. The cost shift
could be viewed as desirable since parent-provided transportation frees
money to spend elsewhere in the school. However, providing no
transportation may deter some parents from enrolling their children.
Evidence shows that families from ethnic minority groups are more likely
to see transportation as a barrier to public school choice (Bauch and
Goldring, 1995). For this reason, states like Florida, Illinois and
South Carolina require a transportation plan for low-income students.
Depending on the stringency of regulatory oversight, the transportation
plan approach constitutes a minimal safeguard.

In states where school districts are required to provide transportation,
the degree of service varies. In most states, the school district
transportation obligations are confined to the school district in which
the students and charter schools are located. In Washington, D.C. (where
charter school students are eligible for reduced fares on mass
transportation) and Hawaii, for example, "yellow-bus" transportation
across the entire school system is generally available only to special
education students for charter schools and other public schools.
Pennsylvania, on the other hand, requires school districts to transport
charter school students up to 10 miles over school district lines. The
extra state funding for out-of-district transportation usually does not
match school district costs.[^27] Some school districts have resisted
paying for transportation services to charter schools for which they
have no legal authority. One charter school (with assistance from the
state) was forced to sue the Philadelphia school district over this
issue. Philadelphia contends that since it does not bus elementary
students to traditional public schools, the charter school
transportation mandate represented an unfair additional cost.

+---------------------+---------------------------+--------------------+
| Table 12            |                           |                    |
|                     |                           |                    |
| **State Funding of  |                           |                    |
| Transportation for  |                           |                    |
| Charter School      |                           |                    |
| Students**          |                           |                    |
+---------------------+---------------------------+--------------------+
| **Get State Aid     | **State Aid and General   | **No State         |
| Even If No          | Operating Revenue^1^**    | Transportation     |
| Transportation      |                           | Funding            |
| Provided**          |                           | Available**        |
+---------------------+---------------------------+--------------------+
| Arizona, North      | Alaska, California,       | Michigan,^3^ South |
| Carolina,^2^ Rhode  | Colorado, Connecticut,    | Carolina           |
| Island,^2^          | Delaware, District of     |                    |
| Louisiana^2^        | Columbia, Florida,        |                    |
|                     | Georgia, Hawaii,          |                    |
|                     | Illinois, Kansas,         |                    |
|                     | Massachusetts, Minnesota, |                    |
|                     | New Jersey, New Mexico,   |                    |
|                     | Milwaukee, Pennsylvania,  |                    |
|                     | Texas, Wisconsin          |                    |
+---------------------+---------------------------+--------------------+
| ^1^ State aid       |                           |                    |
| generated for       |                           |                    |
| school district or  |                           |                    |
| charter school,     |                           |                    |
| depending on who    |                           |                    |
| provides            |                           |                    |
| transportation.     |                           |                    |
|                     |                           |                    |
| ^2^ State           |                           |                    |
| transportation aid  |                           |                    |
| incorporated into   |                           |                    |
| base per-pupil      |                           |                    |
| funding.            |                           |                    |
|                     |                           |                    |
| ^3^ School          |                           |                    |
| districts get no    |                           |                    |
| state               |                           |                    |
| transportation      |                           |                    |
| funding.            |                           |                    |
+---------------------+---------------------------+--------------------+

Transportation funding for school districts varies considerably across
states as shown in Table 12. Michigan and South Carolina provide school
districts with no financial assistance for transportation. As in special
education, states generally provide extra funding for transportation but
school districts also pay for transportation from general operating
funds. When school districts provide transportation to charter school
students, both state transportation aid and general operating revenues
are generally necessary. In some states, charter schools not providing
any transportation still get a portion of what the school district
spends on transportation funding through the per-pupil funding formula.

Charter school transportation funding should be conceptualized as the
total cost of transportation, not just the state aid. In some states,
school districts may be providing double transportation aid, first when
the school district provides transportation services, and second, when
local transportation expenditures are included in the per-pupil funding
formula for charter schools. Massachusetts and Pennsylvania prevent
duplication of aid by clearly subtracting transportation costs from
tuition calculations. However, in Connecticut some of the general
operating revenues typically used by school districts for transportation
are included in the base funding for charter schools, even though school
districts are also providing the service. [^28] In New Jersey, charter
schools receive only 90 percent of school district spending (including
transportation), but school districts provide transportation at no cost.

In a similar vein, a number of states require that school district
revenue typically used for transportation go to charter schools while
not mandating that charter schools provide transportation. In these
states, transportation is typically a service that school districts are
expected to pay for entirely out of their general state aid, such as
Louisiana and Michigan. Some states provide dedicated transportation
funds to charter schools, but then do not require them to use the
funding for transportation, as in Arizona. Delaware has tightened its
law in this regard, although it still provides transportation funds
based on membership, not on the number of students transported. This
means that a school providing limited transportation services (Delaware
charter schools must provide transportation) would have a windfall, and
a school providing more comprehensive services might have to supplement
transportation out of its general operating revenues.

In Arizona, state-authorized charter schools get \$174 per member (not
pupils transported) for transportation. District-authorized charter
schools claim reimbursement for miles that parents drive their children
to school. The charter school gets \$1.95 or \$1.59 per mile (depending
on the ratio of pupils to route miles), pays parents 10 cents to 25
cents a mile and is allowed to use the difference for other expenses of
the school. Because there are so many miles involved when parents drive
their own kids to school, district-authorized charter schools generate
hundreds of dollars in extra revenue per pupil. For example, the Arizona
Joint Legislative Budget Committee has computed that one charter school
gets \$12,080 per pupil for transportation. Another gets \$5,668. The
average cost of transportation per member (not students transported) for
district-authorized charter schools for 1998-99 was \$2,144. This
unintended "loophole" arises from provisions in the Arizona
transportation law intended for isolated school districts, which are
allowed to pay parents to bring their children to a bus route. The
Arizona Legislature has had difficulty closing the loophole because it
is the way school districts are funded; but after 1999-2000,
district-authorized charter schools will get the same \$174 per member
for transportation that other charter schools get.[^29] State-authorized
charter schools have not benefited from lucrative transportation
funding, but district-authorized charter schools do not get the small
district weights in the general state aid and facilities funding formula
benefiting most state-authorized charter schools.

The discussion above does not describe the adequacy of funding for
charter school transportation, regardless of whether it is provided by
the school or district. Due to geographic dispersion, charter school
students are probably more expensive to transport than regular students.
Magnet schools in public school districts also carry these higher
transportation costs, as do desegregation plans. If charter schools
provide or contract for transportation, the school absorbs the higher
transportation cost. Allowing charter schools a choice about providing
transportation is partly an acknowledgment of the potential
impracticality of providing transportation through traditional means
both for charter schools and for school districts.

#### Other State Categorical Programs

Although a source of controversy and uncertainty, "other state
categorical" programs generally represent very small pools of money.
Among all of the charter school states studied, California distributed
the most money through other state categorical programs, averaging about
\$520 per pupil.[^30] On the other hand, all but four charter school
states distributed less than \$50 per pupil in other state categorical
aid as listed in Table 13. The table includes only those categorical
programs for which charter schools should routinely get funding. Funding
for adult education, preschool and like programs is not included.
"Other" state categorical funding also excludes special education,
low-income, transportation, vocational education and food service
funding.

+--------------------+--------------------------+---------------------+
| Table 13           |                          |                     |
|                    |                          |                     |
| **Other State      |                          |                     |
| Categorical        |                          |                     |
| Funding**^1^       |                          |                     |
+--------------------+--------------------------+---------------------+
| **More than \$50** | **Less than \$50**       | **Integrated Into   |
|                    |                          | Per-pupil Funding   |
|                    |                          | Calculation**       |
+--------------------+--------------------------+---------------------+
| California         | Alaska, Arizona,         | District of         |
| (\$520), Florida   | Colorado, Connecticut,   | Columbia,^2^        |
| (\$200), Georgia   | Delaware, Kansas,        | Hawaii,^2^          |
| (\$160), Illinois  | Louisiana, Michigan,     | Massachusetts,      |
| (\$180)            | Milwaukee, Minnesota,    | North Carolina,     |
|                    | New Jersey, New Mexico,  | Pennsylvania, Rhode |
|                    | South Carolina, Texas,   | Island              |
|                    | Wisconsin                |                     |
+--------------------+--------------------------+---------------------+
| ^1^ "Other"        |                          |                     |
| excludes special   |                          |                     |
| education,         |                          |                     |
| low-income,        |                          |                     |
| transportation,    |                          |                     |
| vocational         |                          |                     |
| education, adult   |                          |                     |
| education,         |                          |                     |
| preschool and food |                          |                     |
| service funding.   |                          |                     |
|                    |                          |                     |
| ^2^ Only one       |                          |                     |
| school district in |                          |                     |
| state.             |                          |                     |
+--------------------+--------------------------+---------------------+

Categorical funding questions resemble those arising in federal funding
for charter schools. Can a charter school qualify for funding on its
own, or does it get a share of the local school district's allocation?
Is there enough funding to justify the effort needed to get it and the
accountability that may go with the funding? Because the awarding of
grants is discretionary, controversy engendered by the outsider status
of charter schools may arise as well. In Louisiana, for instance, a
district-chartered school's competitive grant application has to pass
through the school district to be considered by the state. This has been
a source of concern, because some charter holders feel that school
district officials will favor applications from other public schools in
the district.

Charter schools in some states capture a share of the host district's
categorical funding whether or not they provide the specific programs
generating that funding. North Carolina, Pennsylvania, and Rhode Island
all include state-funded categorical programs in the calculation of
per-pupil base funding. Other states disqualify charter schools from
receiving funding through certain categorical programs. Minnesota
prohibits its charter schools from applying for grants for which a local
levy is required, such as integration, community and adult education
programs.[^31]

Whether charter schools should be required to use categorical funding
for the specific program purposes of the funding stream raises both
philosophical and financial questions. The crux of the issue is the
trade-off between flexibility for charter schools and the desire of
states to see that particular educational priorities are addressed.
Categorical dollars generally come with strings, and schools using this
funding usually are expected to meet certain goals such as installation
of new computer software or the provision of mentors for new teachers.
In many instances, categorical funding promotes the redirection of other
school funds to a specific program. Yet, the charter school concept is
generally antithetical to the rules and regulations that go with
categorical funding. In addition, the reporting requirements for grant
applications might be onerous for small charter schools operating with
minimal administrative support.

# Chapter 5

## Start-up Assistance 

Many studies identify inadequate start-up funding as a barrier for
charter school creation. Some of the oldest charter schools obtained no
start-up funding from state or federal sources. The advent of federal
planning and implementation funds alleviated some of the concern over
start-up funding. Despite substantial federal financial assistance, the
most recent national survey of charter schools (RPP, 2000) reports that
the lack of start-up funds remains the number one implementation
difficulty of start-up charter schools, followed by inadequate operating
funds, lack of planning time and inadequate facilities.

Even in an otherwise well-conceived and fairly funded charter school
finance system, the absence of start-up funding for textbooks, computers
and equipment quickly disadvantages charter schools. On the other hand,
it may be smart to require prospective charter schools to acquire
external support as evidence of their viability (Millot and Lake, 1997).
Start-up funding issues are probably more of an obstacle to
one-of-a-kind charter schools started by teachers, parents or community
groups than for better-financed private management companies. One reason
for the growth of management companies is the ability to finance school
start-up.

### State Start-up Assistance

Some states provide start-up funding or assistance. During the first two
years of operation, Minnesota charter schools are eligible for aid to
pay start-up costs and additional operating costs in the amount of \$500
per pupil, with a minimum of \$50,000 per school. In Arizona**,** the
charter school stimulus fund provided assistance for both start-up costs
and the renovation of facilities. With the availability of federal
start-up funding, however, the legislature appropriated no funding for
1999-2000. Pennsylvania rolls state funding into the federal start-up
grants for charter schools. Pennsylvania also awards additional funding
to charter schools as their enrollment grows. This strategy allows
charter schools to start small and grow at an efficient pace, avoiding
the incentive to front-load enrollment in order to receive maximum
start-up grants. Rhode Island provides start-up assistance if no federal
money is available.

+----------------------------------+-----------------------------------+
| Table 14                         |                                   |
|                                  |                                   |
| **State Start-up Funding**       |                                   |
+----------------------------------+-----------------------------------+
| **Yes**                          | **No**                            |
+----------------------------------+-----------------------------------+
| Arizona, California,             | Alaska, Colorado, Delaware,       |
| Connecticut,^1^ Illinois,^1^     | District of Columbia, Florida,    |
| Louisiana,^1^ Massachusetts,^1^  | Georgia, Hawaii, Kansas,          |
| Minnesota, Pennsylvania, Rhode   | Michigan, Milwaukee, New Jersey,  |
| Island                           | New Mexico, North Carolina, South |
|                                  | Carolina, Texas, Wisconsin        |
+----------------------------------+-----------------------------------+
| ^1^Some assistance with cash     |                                   |
| flow problems through loans      |                                   |
| and/or advance aid payments.     |                                   |
+----------------------------------+-----------------------------------+

Other states established low- or no-interest lines of credit. In
Louisiana, start-up funds could be provided through a revolving loan
fund. This fund, however, has been unsuccessful in attracting
applicants, in part, because it is privately managed, and charter
holders have to provide detailed background information and collateral
for some types of funding. In Illinois, the charter school law
authorizes a \$500,000 revolving loan fund, but the fund is not yet in
operation. On its own, the Chicago school district established a \$2
million revolving loan fund administered through the Illinois Facility
Fund, a nonprofit community development loan institution. California
also has a \$5.5 million revolving loan fund offering loans up to
\$50,000 per school. Another way that states have attempted to deal with
cash flow problems is to advance the schedule of payments to first-year
charter schools, a topic addressed fully in Chapter 6.

### Federal Start-up Grants

The Federal Public Charter School Program (ESEA Title X, Part C)
provides federal funding to assist with costs for opening and starting a
charter school. Usually awarded through a competitive process,
individual charter school developers use the funding for the planning,
design and implementation of charter schools. Generally, a state
education agency (SEA) applies to the federal government for the funds,
which are awarded on a competitive basis. Charter school developers then
apply to the state for the sub-grant. If a state application is
rejected, or does not apply, charter schools apply directly to the
federal government. In Arizona, for example, new and prospective charter
school operators apply directly to the federal government even though
Arizona has more charter schools than any other state.[^32]

Federal start-up grants, which are awarded for a period of up to three
years, are restricted to certain kinds of expenditures. Qualifying
expenditures include refinement of the desired educational results and
the methods for measuring those results; implementation costs; informing
the community about the charter school; and acquiring the necessary
equipment, materials, supplies and other operational needs that cannot
be met from state and local revenues. By helping to cover costs charter
schools would have faced without federal funding, the start-up funding
also helps charter schools establish fund balances and relieves pressure
on the general operations budget.

Of the 24 states with charter schools open in 1997-98, 20 states
obtained start-up grants. The SEA determines eligibility requirements in
order to make subgrants to authorized public chartering agencies in
partnership with local developers of charter schools. SEAs also
establish guidelines for distributing funds and annual reporting
requirements. Typically, reporting requirements consist of an annual
progress report that includes budget information and progression toward
goals. Participating SEAs can keep up to 5 percent of the total grant to
account for administrative costs. In many states, the 5 percent holdback
provides the major source funding for state charter school offices.

Three main types of allocation processes have emerged from the states.
In some states, Pennsylvania and North Carolina for example, funding is
based on a per-pupil amount. [^33] In others, like Alaska and Georgia,
equal-sized block grants go to each charter school. States like
California and Massachusetts determine the amount of the grant on an
individual basis. In California, where school districts authorize most
charter schools, districts may retain a portion of the grant to cover
indirect costs for distributing the grant to charter schools. In
Connecticut and Massachusetts, the amount of the grant is based on a
formula and takes into account many factors including ethnicity and
growth rate. In most states, start-up funds are awarded on a competitive
basis, but the District of Columbia and a few states like Delaware have
non-competitive programs where all qualified applicants receive funds.

Federal start-up funds typically cover a one year of planning grant
followed by two years of implementation. In all states, except Delaware,
charter developers are eligible to receive planning funds before formal
approval of a charter. Illinois and Louisiana use both pre-charter or
stimulus grants and post-charter planning grants that entitle charter
developers to more planning funds once the charter has been approved.
Implementation grants range from \$40,000 to \$200,000. Charter schools
must already be in operation to receive implementation funds.
Connecticut and Louisiana provide smaller implementation grants for
conversion schools.

+----------------+---+------+---+------------------+---+----------------------+
| > Table 15     |   |      |   |                  |   |                      |
+----------------+---+------+---+------------------+---+----------------------+
| > **Federal    |   |      |   |                  |   |                      |
| > Start-up     |   |      |   |                  |   |                      |
| > Grants**     |   |      |   |                  |   |                      |
+----------------+---+------+---+------------------+---+----------------------+
| *              |   |      | * |                  |   | **Implementation**   |
| *Competitive** |   |      | * |                  |   |                      |
|                |   |      | P |                  |   |                      |
|                |   |      | l |                  |   |                      |
|                |   |      | a |                  |   |                      |
|                |   |      | n |                  |   |                      |
|                |   |      | n |                  |   |                      |
|                |   |      | i |                  |   |                      |
|                |   |      | n |                  |   |                      |
|                |   |      | g |                  |   |                      |
|                |   |      | * |                  |   |                      |
|                |   |      | * |                  |   |                      |
+----------------+---+------+---+------------------+---+----------------------+
|                | * |      | * |                  |   | **Amount**           |
|                | * |      | * |                  |   |                      |
|                | G |      | A |                  |   |                      |
|                | r |      | m |                  |   |                      |
|                | a |      | o |                  |   |                      |
|                | n |      | u |                  |   |                      |
|                | t |      | n |                  |   |                      |
|                | s |      | t |                  |   |                      |
|                | * |      | * |                  |   |                      |
|                | * |      | * |                  |   |                      |
+----------------+---+------+---+------------------+---+----------------------+
| > Alaska       | Y |      | > |                  |   | > \$125,000          |
|                | e |      |   |                  |   |                      |
|                | s |      | \ |                  |   |                      |
|                |   |      | $ |                  |   |                      |
|                |   |      | 2 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | , |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
+----------------+---+------+---+------------------+---+----------------------+
| > Arizona^1^   | Y |      | > |                  |   | > Up to \$156,000    |
|                | e |      |   |                  |   |                      |
|                | s |      | A |                  |   |                      |
|                |   |      | t |                  |   |                      |
|                |   |      | > |                  |   |                      |
|                |   |      |   |                  |   |                      |
|                |   |      | l |                  |   |                      |
|                |   |      | e |                  |   |                      |
|                |   |      | a |                  |   |                      |
|                |   |      | s |                  |   |                      |
|                |   |      | t |                  |   |                      |
|                |   |      | > |                  |   |                      |
|                |   |      |   |                  |   |                      |
|                |   |      | \ |                  |   |                      |
|                |   |      | $ |                  |   |                      |
|                |   |      | 3 |                  |   |                      |
|                |   |      | 4 |                  |   |                      |
|                |   |      | , |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
+----------------+---+------+---+------------------+---+----------------------+
| > California   | Y |      | > |                  |   | > Up to \$150,000    |
|                | e |      |   |                  |   |                      |
|                | s |      | \ |                  |   |                      |
|                |   |      | $ |                  |   |                      |
|                |   |      | 1 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | , |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      |   |                  |   |                      |
|                |   |      | - |                  |   |                      |
|                |   |      | > |                  |   |                      |
|                |   |      |   |                  |   |                      |
|                |   |      | \ |                  |   |                      |
|                |   |      | $ |                  |   |                      |
|                |   |      | 3 |                  |   |                      |
|                |   |      | 5 |                  |   |                      |
|                |   |      | , |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
+----------------+---+------+---+------------------+---+----------------------+
| > Colorado     | Y |      | > |                  |   | > Up to \$197,000    |
|                | e |      |   |                  |   |                      |
|                | s |      | A |                  |   |                      |
|                |   |      | t |                  |   |                      |
|                |   |      | > |                  |   |                      |
|                |   |      |   |                  |   |                      |
|                |   |      | l |                  |   |                      |
|                |   |      | e |                  |   |                      |
|                |   |      | a |                  |   |                      |
|                |   |      | s |                  |   |                      |
|                |   |      | t |                  |   |                      |
|                |   |      | > |                  |   |                      |
|                |   |      |   |                  |   |                      |
|                |   |      | \ |                  |   |                      |
|                |   |      | $ |                  |   |                      |
|                |   |      | 2 |                  |   |                      |
|                |   |      | 3 |                  |   |                      |
|                |   |      | , |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
+----------------+---+------+---+------------------+---+----------------------+
| > Connecticut  |   |      |   |                  |   |                      |
+----------------+---+------+---+------------------+---+----------------------+
| > St           | Y |      | > |                  |   | > \$50,000;          |
| ate-authorized | e |      |   |                  |   | > per-pupil grants   |
|                | s |      | \ |                  |   | > with the balance   |
|                |   |      | $ |                  |   |                      |
|                |   |      | 5 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | , |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
+----------------+---+------+---+------------------+---+----------------------+
| > Distr        | Y |      | > |                  |   | > \$20,000;          |
| ict-authorized | e |      |   |                  |   | > per-pupil grants   |
|                | s |      | \ |                  |   | > with the balance   |
|                |   |      | $ |                  |   |                      |
|                |   |      | 2 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | , |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
+----------------+---+------+---+------------------+---+----------------------+
| > Delaware     | N |      | > |                  |   | > \$100,000          |
|                | o |      |   |                  |   |                      |
|                |   |      | \ |                  |   |                      |
|                |   |      | $ |                  |   |                      |
|                |   |      | 3 |                  |   |                      |
|                |   |      | 5 |                  |   |                      |
|                |   |      | , |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
+----------------+---+------+---+------------------+---+----------------------+
| > District of  | N |      | > |                  |   | > Up to \$95,000     |
| > Columbia     | o |      |   |                  |   |                      |
|                |   |      | U |                  |   |                      |
|                |   |      | p |                  |   |                      |
|                |   |      | > |                  |   |                      |
|                |   |      |   |                  |   |                      |
|                |   |      | t |                  |   |                      |
|                |   |      | o |                  |   |                      |
|                |   |      | > |                  |   |                      |
|                |   |      |   |                  |   |                      |
|                |   |      | \ |                  |   |                      |
|                |   |      | $ |                  |   |                      |
|                |   |      | 1 |                  |   |                      |
|                |   |      | 1 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | , |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
+----------------+---+------+---+------------------+---+----------------------+
| > Florida      | Y |      | > |                  |   | > \$55,000           |
|                | e |      |   |                  |   |                      |
|                | s |      | \ |                  |   |                      |
|                |   |      | $ |                  |   |                      |
|                |   |      | 1 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | , |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
+----------------+---+------+---+------------------+---+----------------------+
| > Georgia      | Y |      | > |                  |   | > \$100,000 first    |
|                | e |      |   |                  |   | > year; \$60,000     |
|                | s |      | P |                  |   | > second year        |
|                |   |      | r |                  |   |                      |
|                |   |      | e |                  |   |                      |
|                |   |      | - |                  |   |                      |
|                |   |      | c |                  |   |                      |
|                |   |      | h |                  |   |                      |
|                |   |      | a |                  |   |                      |
|                |   |      | r |                  |   |                      |
|                |   |      | t |                  |   |                      |
|                |   |      | e |                  |   |                      |
|                |   |      | r |                  |   |                      |
|                |   |      | : |                  |   |                      |
|                |   |      | > |                  |   |                      |
|                |   |      |   |                  |   |                      |
|                |   |      | \ |                  |   |                      |
|                |   |      | $ |                  |   |                      |
|                |   |      | 5 |                  |   |                      |
|                |   |      | , |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
+----------------+---+------+---+------------------+---+----------------------+
| > Hawaii^1^    | Y |      | > |                  |   | > Up to \$156,000    |
|                | e |      |   |                  |   |                      |
|                | s |      | A |                  |   |                      |
|                |   |      | t |                  |   |                      |
|                |   |      | > |                  |   |                      |
|                |   |      |   |                  |   |                      |
|                |   |      | l |                  |   |                      |
|                |   |      | e |                  |   |                      |
|                |   |      | a |                  |   |                      |
|                |   |      | s |                  |   |                      |
|                |   |      | t |                  |   |                      |
|                |   |      | > |                  |   |                      |
|                |   |      |   |                  |   |                      |
|                |   |      | \ |                  |   |                      |
|                |   |      | $ |                  |   |                      |
|                |   |      | 3 |                  |   |                      |
|                |   |      | 4 |                  |   |                      |
|                |   |      | , |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
+----------------+---+------+---+------------------+---+----------------------+
| > Illinois     | Y |      | > |                  |   | > \$50,000 -         |
|                | e |      |   |                  |   | > \$100,000          |
|                | s |      | S |                  |   |                      |
|                |   |      | t |                  |   |                      |
|                |   |      | i |                  |   |                      |
|                |   |      | m |                  |   |                      |
|                |   |      | u |                  |   |                      |
|                |   |      | l |                  |   |                      |
|                |   |      | u |                  |   |                      |
|                |   |      | s |                  |   |                      |
|                |   |      | : |                  |   |                      |
|                |   |      | > |                  |   |                      |
|                |   |      |   |                  |   |                      |
|                |   |      | \ |                  |   |                      |
|                |   |      | $ |                  |   |                      |
|                |   |      | 5 |                  |   |                      |
|                |   |      | , |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | - |                  |   |                      |
|                |   |      | 1 |                  |   |                      |
|                |   |      | 2 |                  |   |                      |
|                |   |      | , |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | > |                  |   |                      |
|                |   |      |   |                  |   |                      |
|                |   |      | P |                  |   |                      |
|                |   |      | l |                  |   |                      |
|                |   |      | a |                  |   |                      |
|                |   |      | n |                  |   |                      |
|                |   |      | n |                  |   |                      |
|                |   |      | i |                  |   |                      |
|                |   |      | n |                  |   |                      |
|                |   |      | g |                  |   |                      |
|                |   |      | : |                  |   |                      |
|                |   |      | > |                  |   |                      |
|                |   |      |   |                  |   |                      |
|                |   |      | \ |                  |   |                      |
|                |   |      | $ |                  |   |                      |
|                |   |      | 2 |                  |   |                      |
|                |   |      | 5 |                  |   |                      |
|                |   |      | , |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | - |                  |   |                      |
|                |   |      | 7 |                  |   |                      |
|                |   |      | 5 |                  |   |                      |
|                |   |      | , |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
+----------------+---+------+---+------------------+---+----------------------+
| > Kansas       | Y |      | > |                  |   | > Phase 1: \$25,000  |
|                | e |      |   |                  |   | >                    |
|                | s |      | \ |                  |   | > Phase 2:           |
|                |   |      | $ |                  |   | > \$77,000 -         |
|                |   |      | 3 |                  |   | > \$170,000          |
|                |   |      | 5 |                  |   |                      |
|                |   |      | , |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
+----------------+---+------+---+------------------+---+----------------------+
| > Louisiana    | N |      | > |                  |   | > \$50,000 first     |
| >              | o |      |   |                  |   | > year; \$40,000     |
| > Start-up     |   |      | P |                  |   | >                    |
|                |   |      | r |                  |   | > second year        |
|                |   |      | e |                  |   |                      |
|                |   |      | - |                  |   |                      |
|                |   |      | c |                  |   |                      |
|                |   |      | h |                  |   |                      |
|                |   |      | a |                  |   |                      |
|                |   |      | r |                  |   |                      |
|                |   |      | t |                  |   |                      |
|                |   |      | e |                  |   |                      |
|                |   |      | r |                  |   |                      |
|                |   |      | : |                  |   |                      |
|                |   |      | > |                  |   |                      |
|                |   |      |   |                  |   |                      |
|                |   |      | \ |                  |   |                      |
|                |   |      | $ |                  |   |                      |
|                |   |      | 5 |                  |   |                      |
|                |   |      | , |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | > |                  |   |                      |
|                |   |      | > |                  |   |                      |
|                |   |      |   |                  |   |                      |
|                |   |      | P |                  |   |                      |
|                |   |      | o |                  |   |                      |
|                |   |      | s |                  |   |                      |
|                |   |      | t |                  |   |                      |
|                |   |      | - |                  |   |                      |
|                |   |      | c |                  |   |                      |
|                |   |      | h |                  |   |                      |
|                |   |      | a |                  |   |                      |
|                |   |      | r |                  |   |                      |
|                |   |      | t |                  |   |                      |
|                |   |      | e |                  |   |                      |
|                |   |      | r |                  |   |                      |
|                |   |      | : |                  |   |                      |
|                |   |      | > |                  |   |                      |
|                |   |      |   |                  |   |                      |
|                |   |      | \ |                  |   |                      |
|                |   |      | $ |                  |   |                      |
|                |   |      | 2 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | , |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
+----------------+---+------+---+------------------+---+----------------------+
| > Conversion   | N |      | > |                  |   | > \$40,000 first     |
|                | o |      |   |                  |   | > year; \$30,000     |
|                |   |      | P |                  |   | >                    |
|                |   |      | r |                  |   | > second year        |
|                |   |      | e |                  |   |                      |
|                |   |      | - |                  |   |                      |
|                |   |      | c |                  |   |                      |
|                |   |      | h |                  |   |                      |
|                |   |      | a |                  |   |                      |
|                |   |      | r |                  |   |                      |
|                |   |      | t |                  |   |                      |
|                |   |      | e |                  |   |                      |
|                |   |      | r |                  |   |                      |
|                |   |      | : |                  |   |                      |
|                |   |      | > |                  |   |                      |
|                |   |      |   |                  |   |                      |
|                |   |      | \ |                  |   |                      |
|                |   |      | $ |                  |   |                      |
|                |   |      | 5 |                  |   |                      |
|                |   |      | , |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | > |                  |   |                      |
|                |   |      | > |                  |   |                      |
|                |   |      |   |                  |   |                      |
|                |   |      | P |                  |   |                      |
|                |   |      | o |                  |   |                      |
|                |   |      | s |                  |   |                      |
|                |   |      | t |                  |   |                      |
|                |   |      | - |                  |   |                      |
|                |   |      | c |                  |   |                      |
|                |   |      | h |                  |   |                      |
|                |   |      | a |                  |   |                      |
|                |   |      | r |                  |   |                      |
|                |   |      | t |                  |   |                      |
|                |   |      | e |                  |   |                      |
|                |   |      | r |                  |   |                      |
|                |   |      | : |                  |   |                      |
|                |   |      | > |                  |   |                      |
|                |   |      |   |                  |   |                      |
|                |   |      | \ |                  |   |                      |
|                |   |      | $ |                  |   |                      |
|                |   |      | 1 |                  |   |                      |
|                |   |      | 5 |                  |   |                      |
|                |   |      | , |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
+----------------+---+------+---+------------------+---+----------------------+
| >              | Y |      | > |                  |   | > \$103,000 -        |
|  Massachusetts | e |      |   |                  |   | > \$186,000          |
|                | s |      | \ |                  |   |                      |
|                |   |      | $ |                  |   |                      |
|                |   |      | 1 |                  |   |                      |
|                |   |      | 1 |                  |   |                      |
|                |   |      | 5 |                  |   |                      |
|                |   |      | , |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
+----------------+---+------+---+------------------+---+----------------------+
| > Michigan     | Y |      | > |                  |   | > Up to \$100,000    |
|                | e |      |   |                  |   |                      |
|                | s |      | A |                  |   |                      |
|                |   |      | t |                  |   |                      |
|                |   |      | > |                  |   |                      |
|                |   |      |   |                  |   |                      |
|                |   |      | l |                  |   |                      |
|                |   |      | e |                  |   |                      |
|                |   |      | a |                  |   |                      |
|                |   |      | s |                  |   |                      |
|                |   |      | t |                  |   |                      |
|                |   |      | > |                  |   |                      |
|                |   |      |   |                  |   |                      |
|                |   |      | \ |                  |   |                      |
|                |   |      | $ |                  |   |                      |
|                |   |      | 4 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | , |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
+----------------+---+------+---+------------------+---+----------------------+
| > Minnesota    | Y |      | > |                  |   | > Up to \$60,000     |
|                | e |      |   |                  |   |                      |
|                | s |      | A |                  |   |                      |
|                |   |      | t |                  |   |                      |
|                |   |      | > |                  |   |                      |
|                |   |      |   |                  |   |                      |
|                |   |      | l |                  |   |                      |
|                |   |      | e |                  |   |                      |
|                |   |      | a |                  |   |                      |
|                |   |      | s |                  |   |                      |
|                |   |      | t |                  |   |                      |
|                |   |      | > |                  |   |                      |
|                |   |      |   |                  |   |                      |
|                |   |      | \ |                  |   |                      |
|                |   |      | $ |                  |   |                      |
|                |   |      | 4 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | , |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
+----------------+---+------+---+------------------+---+----------------------+
| > New Jersey   | Y |      | > |                  |   | > Up to \$75,000     |
|                | e |      |   |                  |   |                      |
|                | s |      | U |                  |   |                      |
|                |   |      | p |                  |   |                      |
|                |   |      | > |                  |   |                      |
|                |   |      |   |                  |   |                      |
|                |   |      | t |                  |   |                      |
|                |   |      | o |                  |   |                      |
|                |   |      | > |                  |   |                      |
|                |   |      |   |                  |   |                      |
|                |   |      | \ |                  |   |                      |
|                |   |      | $ |                  |   |                      |
|                |   |      | 5 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | , |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
+----------------+---+------+---+------------------+---+----------------------+
| > New          | Y |      | > |                  |   | > Up to \$156,000    |
| > Mexico^1^    | e |      |   |                  |   |                      |
|                | s |      | A |                  |   |                      |
|                |   |      | t |                  |   |                      |
|                |   |      | > |                  |   |                      |
|                |   |      |   |                  |   |                      |
|                |   |      | l |                  |   |                      |
|                |   |      | e |                  |   |                      |
|                |   |      | a |                  |   |                      |
|                |   |      | s |                  |   |                      |
|                |   |      | t |                  |   |                      |
|                |   |      | > |                  |   |                      |
|                |   |      |   |                  |   |                      |
|                |   |      | \ |                  |   |                      |
|                |   |      | $ |                  |   |                      |
|                |   |      | 3 |                  |   |                      |
|                |   |      | 4 |                  |   |                      |
|                |   |      | , |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
+----------------+---+------+---+------------------+---+----------------------+
| > North        | N |      | > |                  |   | > Up to \$156,000    |
| > Carolina     | o |      |   |                  |   |                      |
|                |   |      | A |                  |   |                      |
|                |   |      | t |                  |   |                      |
|                |   |      | > |                  |   |                      |
|                |   |      |   |                  |   |                      |
|                |   |      | l |                  |   |                      |
|                |   |      | e |                  |   |                      |
|                |   |      | a |                  |   |                      |
|                |   |      | s |                  |   |                      |
|                |   |      | t |                  |   |                      |
|                |   |      | > |                  |   |                      |
|                |   |      |   |                  |   |                      |
|                |   |      | \ |                  |   |                      |
|                |   |      | $ |                  |   |                      |
|                |   |      | 3 |                  |   |                      |
|                |   |      | 4 |                  |   |                      |
|                |   |      | , |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
+----------------+---+------+---+------------------+---+----------------------+
| > Pennsylvania | Y |      | > |                  |   | > \$800 per pupil    |
|                | e |      |   |                  |   |                      |
|                | s |      | \ |                  |   |                      |
|                |   |      | $ |                  |   |                      |
|                |   |      | 1 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | , |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      |   |                  |   |                      |
|                |   |      | - |                  |   |                      |
|                |   |      | > |                  |   |                      |
|                |   |      |   |                  |   |                      |
|                |   |      | \ |                  |   |                      |
|                |   |      | $ |                  |   |                      |
|                |   |      | 2 |                  |   |                      |
|                |   |      | 5 |                  |   |                      |
|                |   |      | , |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
+----------------+---+------+---+------------------+---+----------------------+
| > Rhode        | Y |      | > |                  |   | > Up to \$156,000    |
| > Island^1^    | e |      |   |                  |   |                      |
|                | s |      | A |                  |   |                      |
|                |   |      | t |                  |   |                      |
|                |   |      | > |                  |   |                      |
|                |   |      |   |                  |   |                      |
|                |   |      | l |                  |   |                      |
|                |   |      | e |                  |   |                      |
|                |   |      | a |                  |   |                      |
|                |   |      | s |                  |   |                      |
|                |   |      | t |                  |   |                      |
|                |   |      | > |                  |   |                      |
|                |   |      |   |                  |   |                      |
|                |   |      | \ |                  |   |                      |
|                |   |      | $ |                  |   |                      |
|                |   |      | 3 |                  |   |                      |
|                |   |      | 4 |                  |   |                      |
|                |   |      | , |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
+----------------+---+------+---+------------------+---+----------------------+
| > South        | Y |      | > |                  |   | > Up to \$15,000     |
| > Carolina     | e |      |   |                  |   |                      |
|                | s |      | \ |                  |   |                      |
|                |   |      | $ |                  |   |                      |
|                |   |      | 1 |                  |   |                      |
|                |   |      | 5 |                  |   |                      |
|                |   |      | , |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      |   |                  |   |                      |
|                |   |      | - |                  |   |                      |
|                |   |      | > |                  |   |                      |
|                |   |      |   |                  |   |                      |
|                |   |      | \ |                  |   |                      |
|                |   |      | $ |                  |   |                      |
|                |   |      | 4 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | , |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
+----------------+---+------+---+------------------+---+----------------------+
| > Texas        | N |      | > |                  |   | > \$60,000 maximum   |
|                | o |      |   |                  |   |                      |
|                |   |      | \ |                  |   |                      |
|                |   |      | $ |                  |   |                      |
|                |   |      | 6 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | , |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | > |                  |   |                      |
|                |   |      |   |                  |   |                      |
|                |   |      | m |                  |   |                      |
|                |   |      | a |                  |   |                      |
|                |   |      | x |                  |   |                      |
|                |   |      | i |                  |   |                      |
|                |   |      | m |                  |   |                      |
|                |   |      | u |                  |   |                      |
|                |   |      | m |                  |   |                      |
+----------------+---+------+---+------------------+---+----------------------+
| > Wisconsin    | Y |      | > |                  |   | > \$96,000-200,000   |
|                | e |      |   |                  |   | > (averaging about   |
|                | s |      | \ |                  |   | > \$100,000)         |
|                |   |      | $ |                  |   |                      |
|                |   |      | 2 |                  |   |                      |
|                |   |      | 5 |                  |   |                      |
|                |   |      | , |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
|                |   |      | 0 |                  |   |                      |
+----------------+---+------+---+------------------+---+----------------------+
| > Source:      |   |      |   |                  |   |                      |
| > Telephone    |   |      |   |                  |   |                      |
| > interviews   |   |      |   |                  |   |                      |
| > with state   |   |      |   |                  |   |                      |
| > departments  |   |      |   |                  |   |                      |
| > of education |   |      |   |                  |   |                      |
| > and state    |   |      |   |                  |   |                      |
| > charter      |   |      |   |                  |   |                      |
| > school       |   |      |   |                  |   |                      |
| > offices.     |   |      |   |                  |   |                      |
+----------------+---+------+---+------------------+---+----------------------+
| > ^1^ Charter  |   |      |   |                  |   |                      |
| > schools      |   |      |   |                  |   |                      |
| > apply        |   |      |   |                  |   |                      |
| > directly to  |   |      |   |                  |   |                      |
| > U.S.         |   |      |   |                  |   |                      |
| > Department   |   |      |   |                  |   |                      |
| > of           |   |      |   |                  |   |                      |
| > Education.   |   |      |   |                  |   |                      |
+----------------+---+------+---+------------------+---+----------------------+

In the states where charter school developers apply directly to the
federal government, start-up grant amounts are determined on an
individual basis. Planning and implementation grants are available, and
grant competition is based on the strength of the application and need.
Four states did not receive federal grants for various reasons in
1998-99. Arizona decided not to apply, in part, due to controversies
over schools that were receiving other forms of federal funding and
therefore were being "double funded." In Hawaii and Rhode Island there
were so few charter school developers that it made little economic sense
for the SEA to apply for the funds and as a result the developers
applied directly to the federal government. New Mexico's charter school
law did not meet federal requirements.

# Chapter 6

## Charter School Financial Structure and Accountability

In addition to determining funding levels, charter school finance
systems address a number of other financial and accountability issues.
These issues include requirements for audits, participation in the
uniform financial data reporting system, ownership of charter school
assets, responsibility for debt and bankruptcy, and the timing of
revenue allocations to charter schools. While none of these provisions
affect the actual dollar amounts that flow to charter schools, together
they have an important impact on how charter schools operate and the
information that policymakers and the public need to evaluate these
schools. Some of these issues are of major importance to charter
schools, particularly the timing of revenue allocations. Others issues,
such as ownership and disposition of assets purchased with public funds,
represent important long-term concerns for taxpayers.

### Timing of Payments and Cash Flow Assistance

An issue related to start-up, the timing of per-pupil payments has
understandably been an issue of concern to charter schools. Expenditures
are larger at the beginning of the school year for both charter schools
and school districts. The inflow of revenue also varies over the course
of the year. Thus, straightening "out the kinks in the channels and
cycles by which cash flows to charter schools" is one of the fiscal
recommendations of the Hudson Institute report (Finn et al. 1996).
School districts deal with their cash flow needs by engaging in
short-term borrowing and investing. Charter schools engage in the same
strategy if they qualify for a line of credit from a private institution
or a state-sponsored revolving loan fund. Not all charter schools,
especially new ones, can get lines of credit. Some alternatives exist.
The Massachusetts Industrial Finance Agency, for example, provides
partial guarantees for cash flow loans for several charter schools. In
any event, the short-term interest rates for charter schools are greater
than for public school districts.

The timing of charter school payments varies across states. States such
as Massachusetts and Rhode Island pay quarterly. Pennsylvania pays
monthly. Minnesota uses biweekly

installments. In New Jersey, separate aid payments from the state and
school district arrive at charter schools at different times.

+------------------------+---------------------+-----------------------+
| Table 16               |                     |                       |
|                        |                     |                       |
| **Provisions for       |                     |                       |
| Speeding Up Payments   |                     |                       |
| to Charter Schools**   |                     |                       |
+------------------------+---------------------+-----------------------+
| **Yes**                | **No**              | **Discretion of       |
|                        |                     | District or in        |
|                        |                     | Charter Agreement**   |
+------------------------+---------------------+-----------------------+
| Arizona, Connecticut,  | Alaska, California, | Colorado, Georgia,    |
| Delaware, District of  | Florida, Milwaukee  | Hawaii, Kansas, New   |
| Columbia,^1^ Illinois, |                     | Mexico, Wisconsin     |
| Louisiana,^2^          |                     |                       |
| Massachusetts,^3^      |                     |                       |
| Minnesota, New Jersey, |                     |                       |
| North Carolina,^4^     |                     |                       |
| Rhode Island, South    |                     |                       |
| Carolina, Texas        |                     |                       |
+------------------------+---------------------+-----------------------+
| ^1^ New schools can    |                     |                       |
| get loans secured by   |                     |                       |
| first payment in       |                     |                       |
| October.               |                     |                       |
|                        |                     |                       |
| ^2^ In practice.       |                     |                       |
|                        |                     |                       |
| ^3^ In first year      |                     |                       |
| only.                  |                     |                       |
|                        |                     |                       |
| ^4^ Contingent on a    |                     |                       |
| facility being         |                     |                       |
| secured.               |                     |                       |
+------------------------+---------------------+-----------------------+

In several states, charter school dollars arrive before the school year
begins. In Texas, two of the 13 installments arrive in the first month
children attend school. North Carolina schools receive funding beginning
July 1. Minnesota and New Jersey provide funds beginning July 15. When a
school is in its first year of operation in Minnesota, the payment
formula is skewed to deliver more funding in that first payment.
Similarly, in Massachusetts, payments are made at the end of each
quarter except for the first year of charter school operation, when the
first payment arrives 45 days after the beginning of the first quarter.

Some states advance considerable funding to charter schools. Connecticut
provides 25 percent of funding in July and another 25 percent in
September. In Illinois, school districts forward funds to charter
schools in four equal quarterly payments beginning no later than July 1.
By Oct. 1, charter schools have received half of their base funding.
Delaware mandates the payment of 75 percent of the anticipated state
per-pupil funding at the beginning of each fiscal year. The District of
Columbia advances 75 percent of funding in October, with the remainder
paid the next spring. Other states expect charter schools to have good
credit or capitalization as a precondition to receiving a charter. In
Florida, for example, school districts are not allowed to advance funds
to charter schools. Some school districts in Florida require charter
schools to secure a line of credit for start-up purposes before a
charter is granted.

In addition to these timing issues, some states also have provisions to
recapture excess pupil funding. In Minnesota, for example, the final
payment for a year is given in October of the subsequent year. Payments
later in the school year are adjusted to reconcile charter school
funding with the school's actual enrollment or attendance. Similarly,
the District of Columbia reconciles enrollment-driven funding changes in
its spring payment.

### Uniform Financial Reporting

Uniform financial reporting is important for fiscal accountability and
for data-based analysis of charter schools as instruments of policy
innovation. Collecting data over time in a consistent format allows
policymakers and researchers to consider questions such as how do
charter schools differ from other public schools, and are charter
schools fairly funded? In California, for example, the absence of
uniform financial reporting for charter schools hampers the efforts of
charter school operators to verify persistent complaints about
underfunding by school district authorities.

All states collect school district data in a uniform format for student
enrollment and finances. These data, which are available to the public,
provide the foundation for financial accountability. Examples of these
data-collection systems include the Program Cost Reports in Florida,
Form B in Michigan, and the Public Education Information Management
System (PEIMS) in Texas. In about half of the states, charter schools
report financial data in a uniform format as if they were school
districts. In other states, charter school finances are blended into
school district uniform financial reporting. A few states have no
uniform financial reporting requirements for charter schools, requiring
only audited financial statements (see Table 18). The following table
provides a breakdown.

+-----------------------+----------------------+----------------------+
| Table 17              |                      |                      |
|                       |                      |                      |
| **Uniform Financial   |                      |                      |
| Reporting Required**  |                      |                      |
+-----------------------+----------------------+----------------------+
| **Yes**               | **No---Blended With  | **No**               |
|                       | District**           |                      |
+-----------------------+----------------------+----------------------+
| Arizona, Connecticut, | Alaska, Arizona,^1^  | Georgia, ^3^         |
| Delaware, District of | California,          | Illinois, Milwaukee, |
| Columbia, Florida,    | Colorado, Hawaii,    | Rhode Island         |
| Louisiana,            | Kansas, New Mexico,  |                      |
| Massachusetts,^2^     | Wisconsin            |                      |
| Michigan, Minnesota,  |                      |                      |
| New Jersey, North     |                      |                      |
| Carolina,             |                      |                      |
| Pennsylvania, South   |                      |                      |
| Carolina, Texas       |                      |                      |
+-----------------------+----------------------+----------------------+
| ^1^                   |                      |                      |
| District-authorized   |                      |                      |
| charter schools       |                      |                      |
| report to the school  |                      |                      |
| district, not the     |                      |                      |
| state.                |                      |                      |
|                       |                      |                      |
| ^2^ Beginning in      |                      |                      |
| 1998-99.              |                      |                      |
|                       |                      |                      |
| ^3^ Subject to the    |                      |                      |
| charter, school       |                      |                      |
| districts may require |                      |                      |
| reporting.            |                      |                      |
+-----------------------+----------------------+----------------------+

Some states, such as Florida, Massachusetts and Texas, have modified
their uniform financial reporting specifically for charter schools. The
modifications help address the contentions of many charter school
administrators that state financial reporting requirements designed for
school districts with full-time compliance staff are unduly burdensome
for stand-alone charter schools. The states that do not require charter
schools to complete state financial reporting forms generally include
charter schools in the authorizing school district's financial reports
as a matter of practice or as part of the charter agreement. Charter
schools in Michigan run by independent management companies do not have
to comply with several parts of the state's Freedom of Information Act,
which has sharply limited the usefulness of uniform financial reporting.
(See discussion in Chapter 2.)

### Independent Audit

Almost every public dollar going to a charter school is subject to an
independent financial audit. The only exception is Milwaukee where no
independent audit or uniform financial reporting is currently required.
In a few states, charter schools are audited as a component of the
school district, but like other district schools, charter schools may
not be presented as separate entities. For the most part, standards
developed by the accounting profession should govern the conduct of
audits.

+-------------------------+-------------------------+-----------------+
| Table 18                |                         |                 |
|                         |                         |                 |
| **Independent Financial |                         |                 |
| Auditing of Charter     |                         |                 |
| Schools**               |                         |                 |
+-------------------------+-------------------------+-----------------+
| **Separate Audit**      | **Part of School        | **Not           |
|                         | District Audit**        | Required**      |
+-------------------------+-------------------------+-----------------+
| Arizona,^1^             | Alaska, California,^2^  | Milwaukee       |
| Connecticut, Delaware,  | Colorado,^2^ Georgia,   |                 |
| District of Columbia,   | Hawaii, Kansas,         |                 |
| Florida, Illinois,      | Louisiana,^3^ New       |                 |
| Massachusetts,          | Mexico, Wisconsin       |                 |
| Michigan, Minnesota,    |                         |                 |
| New Jersey, North       |                         |                 |
| Carolina, Pennsylvania, |                         |                 |
| Rhode Island, South     |                         |                 |
| Carolina, Texas         |                         |                 |
+-------------------------+-------------------------+-----------------+
| ^1^ Only                |                         |                 |
| state-authorized        |                         |                 |
| charter schools must    |                         |                 |
| provide audit.          |                         |                 |
|                         |                         |                 |
| ^2^ Independent audit   |                         |                 |
| can be negotiated in    |                         |                 |
| charter.                |                         |                 |
|                         |                         |                 |
| ^3^State-authorized     |                         |                 |
| charter schools must    |                         |                 |
| have separate audits.   |                         |                 |
+-------------------------+-------------------------+-----------------+

Independent audits have at least three objectives:

-   **Financial statements.** Present the school's financial position
    (assets and liabilities) and results of operations (revenue and
    expenditures) at the end of the fiscal year.

-   **Internal control system.** Assess the school's implementation of
    internal controls (e.g., who can sign checks) for authorizing
    financial transactions and safeguarding assets.

-   **Compliance.** Determine the school's compliance with applicable
    laws, regulations, administrative rules and guidelines governing the
    school.

Audits usually present revenues and expenditures in a highly aggregated
form. In Florida for example, audits of charter schools conducted by the
state's auditor general aggregate all federal funds, so it is
impossible, for example, to distinguish start-up funds from Title I
funds. In Massachusetts, one school financial statement presented 75
percent of expenditures in a single line item for its payment to a
management company (Boston Renaissance Charter School, 1997).
Traditional public schools (and some charter schools) are almost always
audited as *components* of school districts. In this sense,
independently audited charter schools are subjected to a higher level of
accountability than traditional schools, because they undergo an
individual school-level audit. The presentation of independent audits
varies greatly from one charter school to another. Lack of detail and/or
lack of uniformity seriously limit the usefulness of financial audits
for research and policy analysis purposes.

### Debt 

An essential financial question is whether charter schools can acquire
debt for start-up, cash flow or facilities acquisition. The following
discussion focuses on laws, regulations and practices specifically
addressing charter school debt. In states with very independent charter
schools, however, issues of charter school debt may be determined as
much by the laws governing nonprofit corporations as by charter school
laws.

The table below indicates the states where charter schools are not
allowed to go into debt. Many states where school districts award
charters---such as California, Colorado and Florida---also allow charter
school indebtedness.

+-----------------------------------------------+----------------------+
| Table 19                                      |                      |
|                                               |                      |
| **Charter School Acquisition of Debt**        |                      |
+-----------------------------------------------+----------------------+
| **Allowed**                                   | **Not Allowed**      |
+-----------------------------------------------+----------------------+
| Alaska, Arizona, California, Colorado,        | Hawaii, Kansas, New  |
| Connecticut, Delaware, District of Columbia,  | Mexico, Wisconsin    |
| Florida, Georgia,^1^ Illinois, Louisiana,     |                      |
| Massachusetts,^2^ Michigan, Milwaukee,        |                      |
| Minnesota, New Jersey, North Carolina,        |                      |
| Pennsylvania, Rhode Island, South Carolina,   |                      |
| Texas                                         |                      |
+-----------------------------------------------+----------------------+
| ^1^The law is silent on this issue, but in    |                      |
| practice, short-term borrowing occurs.        |                      |
|                                               |                      |
| ^2^Horace Mann schools may also acquire debt  |                      |
| with school district's permission.            |                      |
+-----------------------------------------------+----------------------+

Another important financial issue related to debt is whether school
districts or state education agencies, rather than charter schools, are
ultimately responsible for charter schools' fiscal decisions. Ability to
incur debt brings freedom and flexibility to charter schools, but
lenders probably prefer that the state or a school district have
responsibility for charter school debt. The table below indicates
whether the charter school or the school district is responsible for the
debt.

+-------------+--------------------------+---------------+-----------+
| Table 20    |                          |               |           |
|             |                          |               |           |
| **Res       |                          |               |           |
| ponsibility |                          |               |           |
| for Charter |                          |               |           |
| School      |                          |               |           |
| Debt**      |                          |               |           |
+-------------+--------------------------+---------------+-----------+
| **School    | **Charter School         | **No Debt     | **Not     |
| District or | Corporation or Board**   | Allowed**     | Ad        |
| State**     |                          |               | dressed** |
+-------------+--------------------------+---------------+-----------+
| Alaska,^1^  | Arizona, California,     | Hawaii,       | Georgia,  |
| Massa       | Colorado,^2^             | Kansas, New   | L         |
| chusetts^1^ | Connecticut, Delaware,   | Mexico,       | ouisiana, |
|             | District of Columbia,    | Wisconsin     | New       |
|             | Florida, Illinois,       |               | Jersey    |
|             | Massachusetts, Michigan, |               |           |
|             | Milwaukee, Minnesota,    |               |           |
|             | North Carolina,          |               |           |
|             | Pennsylvania, South      |               |           |
|             | Carolina, Rhode Island,  |               |           |
|             | Texas                    |               |           |
+-------------+--------------------------+---------------+-----------+
| ^1^ School  |                          |               |           |
| districts   |                          |               |           |
| are         |                          |               |           |
| responsible |                          |               |           |
| for any     |                          |               |           |
| debt        |                          |               |           |
| incurred by |                          |               |           |
| Horace Mann |                          |               |           |
| charter     |                          |               |           |
| schools in  |                          |               |           |
| Ma          |                          |               |           |
| ssachusetts |                          |               |           |
| and Alaskan |                          |               |           |
| charter     |                          |               |           |
| schools.    |                          |               |           |
|             |                          |               |           |
| ^2^ School  |                          |               |           |
| districts   |                          |               |           |
| may         |                          |               |           |
| voluntarily |                          |               |           |
| acquire     |                          |               |           |
| res         |                          |               |           |
| ponsibility |                          |               |           |
| for debt.   |                          |               |           |
+-------------+--------------------------+---------------+-----------+

Only two of the states allowing charter school debt also make the school
district or state responsible for this debt. Like churches, community
organizations and most other nonprofit organizations, the charter
school's governing board is responsible for debt in most cases.

### Ownership and Disposition of Assets Including Fund Balances 

Some analysts portray the closure of charter schools for educational and
economic reasons as the ultimate measure of accountability. So far,
charter schools have closed in a relatively small number of cases.
Nevertheless, the disposition of assets of closed charter schools
represents an issue not clearly addressed in a number of the charter
school laws.

School districts do not go out of business, which is one reason school
districts can borrow money at low interest rates, but charter schools
can dissolve like any other small business. One school of thought holds
that as public schools, charter schools' assets purchased with public
funds belong to the public. Donated facilities and equipment remain the
property of the nonprofit corporation. Florida operates this way, and
the state requires charter school property records that clearly identify
property purchased with public funds. Another school of thought contends
that asset ownership is essential for charter school independence and
flexibility. Public funding belongs to charter schools whether directly
expended on instruction or invested in physical assets such as
textbooks, buildings or equipment. Some charter schools also express a
fear that if their assets revert to a school district in the event of
closure, an incentive exists for school districts to sabotage or close
their school to get the resources.

+----------------------+------------------------+---------------------+
| Table 21             |                        |                     |
|                      |                        |                     |
| ##                   |                        |                     |
| ###### Ownership of  |                        |                     |
| Assets Purchased wit |                        |                     |
| h Public Funds of Cl |                        |                     |
| osed Charter Schools |                        |                     |
+----------------------+------------------------+---------------------+
| **Revert to School   | Unclear, Not           | **Charter School    |
| District or State**  | Addressed, or Left to  | Does Not Have       |
|                      | Charter School         | Assets**            |
+----------------------+------------------------+---------------------+
| Alaska, Colorado,    | Arizona, California,   | Hawaii, Kansas, New |
| Delaware,            | Connecticut, District  | Mexico, Wisconsin   |
| Florida,^1^          | of Columbia, Georgia,  |                     |
| Illinois,^2^         | Louisiana,^3^          |                     |
| Massachusetts,       | Michigan, Milwaukee,   |                     |
| Minnesota,^1^ New    | South Carolina, Texas  |                     |
| Jersey, North        |                        |                     |
| Carolina,            |                        |                     |
| Pennsylvania         |                        |                     |
+----------------------+------------------------+---------------------+
| ^1^ Assets purchased |                        |                     |
| with public funds.   |                        |                     |
|                      |                        |                     |
| ^2^ Law clear only   |                        |                     |
| on unspent fund      |                        |                     |
| balances.            |                        |                     |
|                      |                        |                     |
| ^3^ Left to the      |                        |                     |
| charter school,      |                        |                     |
| although in          |                        |                     |
| state-authorized     |                        |                     |
| charter schools,     |                        |                     |
| assets revert to the |                        |                     |
| state.               |                        |                     |
+----------------------+------------------------+---------------------+

Michigan is typical of many states. Property purchased by a charter
school remains the property of the charter school, but no specific rules
exist for disposing of property for failed charter schools. Illinois is
a little more specific. In the event of closure, charter schools in
Illinois would also be required to refund to the local school board any
unspent funds received from the local school board. The Illinois law is
silent with respect to the ownership of property paid for with public
funds. As in North Carolina, some state laws clearly indicate that asset
reversion applies to "net assets" or the remaining assets after the
claims of creditors have been satisfied, which may help overcome the
reluctance of some lenders to make loans to charter schools.

Why are charter school laws so unclear on the issues of asset
disposition? While focusing on establishing charter schools, perhaps
legislators overlooked the asset disposition issue and other matters
related to shutdown. On the other hand, maybe the disposition of assets
is not unclear. In the absence of legislation, assets belong to the
nonprofit corporation or entity holding the charter, and the laws
governing nonprofit corporations guide the issue of asset disposition.
In essence, funds awarded to charter schools are no longer public funds,
and the nonprofit's governing board has the power to disburse assets in
the event of school closure.

Another issue related to asset ownership is whether charter schools are
allowed to carry a positive or negative fund balance from year to year.
In most states, charter school ownership of unspent funds rewards
frugality, helps solve cash flow problems and represents a major
component of financial autonomy. A large, positive fund balance makes it
easier for charter schools to secure facilities or loans at lower
interest rates. Other public schools do not need a fund balance because
school level cash flow is irrelevant. Instead, school districts
accumulate fund balances. Especially in environments where charter
schools are unable to obtain credit at reasonable rates, healthy charter
schools could be expected to carry large fund balances compared to
school districts. Fund balance accumulation also allows charter schools
to create building funds.

+-------------------------------------+--------------------------------+
| Table 22                            |                                |
|                                     |                                |
| **Charter Schools Allowed To        |                                |
| Maintain a Positive Fund Balance**  |                                |
+-------------------------------------+--------------------------------+
| **Yes**                             | **At Discretion of District**  |
+-------------------------------------+--------------------------------+
| Alaska, Arizona, California,        | Georgia, Hawaii, Kansas,       |
| Colorado, Connecticut,^1^ Delaware, | Louisiana,^3^ New Mexico,      |
| District of Columbia, Florida,      | Wisconsin                      |
| Illinois, Massachusetts, Michigan,  |                                |
| Milwaukee, Minnesota, New           |                                |
| Jersey,^1^ North Carolina,^2^       |                                |
| Pennsylvania, Rhode Island, South   |                                |
| Carolina, Texas                     |                                |
+-------------------------------------+--------------------------------+
| ^1^Some limitations exist.          |                                |
|                                     |                                |
| ^2^State funds must be spent, but   |                                |
| local funds from school districts   |                                |
| can be carried over.                |                                |
|                                     |                                |
| ^3^State-authorized schools can     |                                |
| maintain positive fund balances.    |                                |
+-------------------------------------+--------------------------------+

Many states have policies seeking to minimize excessive charter school
fund balance accumulation. In Connecticut, for example, up to 10 percent
of current year reserves can be used for next year's expenses, and 5
percent can be used as a reserve to finance a specific capital or
equipment purchase. New Jersey allows charter schools to maintain
positive fund balances, but also empowers school districts to request an
adjustment in the funding provided to charter schools. In states where
charter schools receive funds in the same way as other schools---such as
Georgia, Hawaii, Kansas, New Mexico and Wisconsin---fund balances may be
carried over at the discretion of the school district according to the
terms of charter.

# Chapter 7

## Facilities and Capital Outlay Financing

Funding adequate facilities---after start-up funding and operations
funding---rank as the biggest implementation problem for start-up
charter schools (RPP,2000). Aggravating the problem, charter schools in
many areas are viewed as a partial solution to an already existing
shortage of space in other public schools. While district schools
generally have dedicated funding sources for capital, charter schools
with insufficient public funding for facilities pay for facilities out
of regular operating funds or raise money from private sources. As a
result, the capital funding issue is not just a matter of bricks and
mortar---it has implications for the quality of education. Class size
may be higher, teacher salaries lower or instructional materials
lacking. Or schools may have to eschew services such as transportation.

Charter schools that lease facilities through commercial landlords
usually pay property taxes to local school districts as part of the
rent. Lenders, investors and property owners often regard charter
schools as risky and charge a premium, or refuse to do business
altogether. The private sector capital supporting management companies
helps company-run schools on the facilities issue, but it puts
parent-run and grassroots charter schools at a disadvantage. Capital
provided by management contractors may also endanger the independence of
nonprofit charter school boards to monitor and enforce contracts. One of
the stronger arguments for public and private conversion schools is that
they do not face the daunting facilities problem.

Charter schools in many states are unable to take advantage of the
low-cost financing available to school districts through tax-exempt
bonding authority. Tax-exempt financing of charter school facilities,
however, is rapidly spreading in Michigan and Colorado, and Texas.
Although tax exempt, the higher risk carried by charter school
securities results in interest rates substantially higher than those
obtained by school districts.

While most states attempt to provide operating funds to charter schools
on the same basis as school districts, states have been reluctant to
provide comparable capital financing.

Facilities for charter schools represent new costs in all but the
fastest growing states, where new schools would have needed to be built
anyway. States enacted the first charter school laws in the early 1990s
during an economic recession. Viewed as a no-cost reform, operating
funds followed students from school districts to charter schools. New
facilities complicated the cost neutrality, especially if vacant space
existed in school districts. There also may have been expectations that
charter schools had an obligation to bring private sector resources with
them, especially facilities. The ability to procure facilities was seen
in part as an acid test of an individual charter school's viability.
Today, with state coffers full, the "no cost" approach to charter
schools now proves less compelling, and legislative action in many
states seeks to provide more capital financing for charter schools; some
states in fact provide charter schools with substantial capital funds.

### Capital Spending in School Districts 

As a rule of thumb, school districts devote about 10 percent of
education spending to debt retirement and capital outlay for equipment
and renovation. In fast-growing states and school districts, capital
expenditures usually exceed this level, and in low-growth states and
mature cities, capital spending consumes a smaller share of the budget.
The fiscal health of a community or state also determines spending on
capital facilities. States and school districts often allocate general
operating funds to equipment and renovation during periods of revenue
growth. Similarly, capital expenditures fall to the budget axe during
periods of fiscal decline. The variation in facilities funding over
time, among states, and among school districts within states makes it
difficult to determine what comparable capital financing for charter
schools would look like.

In 1997-98, Connecticut spent about \$550 per student on debt retirement
or about 8 percent of total spending. In Massachusetts, state and local
spending on capital averaged \$750, about 9 percent of total spending.
Minnesota calculates school district average spending on debt retirement
as \$465, or roughly 7 percent of total spending. In Pennsylvania, debt
service consumes about 8 percent of total spending, with another 1.1
percent devoted to capital outlay. On the other hand, a fast growing
state like Florida devoted about 14 percent of total spending to
facilities construction in 1997-98. Across the country in 1996-97, the
average school district spent 6.2 percent of revenue on long-term debt.
(Protheroe, 1997).[^34]

These state averages, however, belie great variation between school
districts. In 1997-98, according to the KPMGPeat Marwick (1998) study of
charter school tuition, debt retirement spending per pupil in five large
Massachusetts school districts varied considerably: Boston,\$184; Fall
River, \$115; Lawrence, \$520; Springfield, \$573; and Worcester, \$353.
A study of eight school districts in Pennsylvania found that debt
service costs ranged from 2.9 percent to 14.8 percent of spending, and
capital projects expenditures ranged from nothing to 3.4 percent
(Hartman and Keller, 1999). A city like Washington, D.C., over time,
demonstrates great variability in capital spending. Under pressure from
a court order after years of neglecting its school facilities, the
District spent about \$600 per pupil, roughly 8 percent of total
spending, on capital projects in 1996-97. In 1997-98, capital spending
increased to about \$1,000 per student, roughly 13 percent of total
spending.

If charter schools receive capital funding based on spending in the host
district, funding will seldom exactly match the charter school's needs.
If the host district has greater capital needs than charter schools, a
charter school will receive more funding than necessary. If the host
district has lower capital needs than charter schools, charter schools
receive less funding than needed.

### Facilities Funding for Charter Schools

About half of the charter school states either provide facilities as
part of the conversion process or directly provide some facilities
funding as shown in the following table.

+----------------+----------------+-----------------+-----------------+
| Table 23       |                |                 |                 |
|                |                |                 |                 |
| **Facilities   |                |                 |                 |
| Funding**      |                |                 |                 |
+----------------+----------------+-----------------+-----------------+
| **Some         | **Some         | **No Funding or | **Provided by   |
| Facilities     | Assistance     | Assistance**    | School          |
| Funding        | Possible**     |                 | Districts**     |
| Provided**     |                |                 |                 |
+----------------+----------------+-----------------+-----------------+
| Arizona,       | Colorado,^2,4^ | Alaska,         | California,^1^  |
| District of    | C              | California,^1^  | Georgia,        |
| Columbia,      | onnecticut,^3^ | Louisiana, New  | Hawaii, Kansas, |
| Florida,       | Illinois,^3^   | Jersey,         | Ma              |
| Mas            | North          | Pennsylvania,   | ssachusetts,^1^ |
| sachusetts,^1^ | Carolina,^4^   | South Carolina  | New Mexico,     |
| Milwaukee,^5^  | Michigan,^7^   |                 | Wisconsin       |
| Minnesota,     | Texas^3,\ 7^   |                 |                 |
| Rhode          |                |                 |                 |
| Island^6^      |                |                 |                 |
+----------------+----------------+-----------------+-----------------+
| ^1^ Horace     |                |                 |                 |
| Mann schools   |                |                 |                 |
| in             |                |                 |                 |
| Massachusetts  |                |                 |                 |
| and conversion |                |                 |                 |
| schools in     |                |                 |                 |
| California use |                |                 |                 |
| dis            |                |                 |                 |
| trict-provided |                |                 |                 |
| facilities.    |                |                 |                 |
|                |                |                 |                 |
| ^2^ About      |                |                 |                 |
| one-third of   |                |                 |                 |
| school         |                |                 |                 |
| districts      |                |                 |                 |
| provided about |                |                 |                 |
| \$200 for      |                |                 |                 |
| capital, and   |                |                 |                 |
| some districts |                |                 |                 |
| provided       |                |                 |                 |
| facilities for |                |                 |                 |
| charter        |                |                 |                 |
| schools at no  |                |                 |                 |
| charge. School |                |                 |                 |
| districts must |                |                 |                 |
| allow charter  |                |                 |                 |
| schools to use |                |                 |                 |
| surplus school |                |                 |                 |
| property at no |                |                 |                 |
| charge.        |                |                 |                 |
|                |                |                 |                 |
| ^3^ Revolving  |                |                 |                 |
| loan funds.    |                |                 |                 |
|                |                |                 |                 |
| ^4^ Empower    |                |                 |                 |
| bonding        |                |                 |                 |
| authorities to |                |                 |                 |
| issue          |                |                 |                 |
| tax-exempt     |                |                 |                 |
| securities     |                |                 |                 |
| behalf of      |                |                 |                 |
| charter        |                |                 |                 |
| schools        |                |                 |                 |
| through        |                |                 |                 |
| conduit        |                |                 |                 |
| financing.     |                |                 |                 |
|                |                |                 |                 |
| ^5^ Under      |                |                 |                 |
| \$100 per      |                |                 |                 |
| pupil.         |                |                 |                 |
|                |                |                 |                 |
| ^6^ On         |                |                 |                 |
| case-by-case   |                |                 |                 |
| basis.         |                |                 |                 |
|                |                |                 |                 |
| ^7^ Charter    |                |                 |                 |
| schools        |                |                 |                 |
| allowed to     |                |                 |                 |
| issue          |                |                 |                 |
| tax-exempt     |                |                 |                 |
| securities     |                |                 |                 |
+----------------+----------------+-----------------+-----------------+

#### States Providing Facilities Funding

For most of its charter schools, Arizona provides more facilities
funding than surrounding school districts. The District of Columbia
provides facilities funding approximately comparable to public schools,
as did Massachusetts in 1998-99. Minnesota provided 80 percent funding
for lease payments, up to the state average expenditure for debt
redemption and capital (\$465 per pupil in 1998-99). In 1999-2000, lease
aid increases to 90 percent of approved costs up to \$1,500 per pupil.
Florida and Rhode Island provide facilities funding for some schools.
Both Florida and Minnesota improved charter school facilities funding in
1999-2000. In Florida, Minnesota and Rhode Island, funds are narrowly
restricted to capital purchases. In Arizona, Massachusetts and the
District of Columbia, funds provided for capital can be used for general
operating expenditures. School districts, on the other hand, are almost
always restricted from using capital funds for general operating
purposes. The flexibility offered to charter schools in those states is
often portrayed as an incentive to provide facilities efficiently, but
it also raises questions about whether the facilities issue is exploited
simply to improve funding.

In Arizona, the state provides generous funding for capital outlay and
capital levy expenditures. Some of the funding for state authorized
charter schools depends on grade level and school size.[^35] The capital
outlay revenue limit program provides \$195 (large elementary schools)
to \$330 per pupil (small high schools). The capital levy revenue limit
program, which depends on school size but not grade level, provides
\$195 (large schools) to \$300 per pupil (small schools). Regular and
charter high schools get \$70 per pupil for textbooks, which in Arizona
is considered a capital expense. The third capital assistance program
(\$496 to \$569 per pupil) is available only to charter schools. Under
the new school capital finance system, school districts get state
funding based on need. Average funding totals about \$400 per pupil.
With voter approval, however, school districts can issue bonds, and
several fast-growing school districts have debt retirement costs of
\$800 to \$1,000 per pupil. In addition to extra funding provided by the
weighting system, charter schools enjoy more flexibility. School
districts can use the capital levy only for equipment. Charter schools
get an equal amount and can spend it for any legitimate purpose.

Charter schools in the District of Columbia received a facilities
allowance of \$617 per pupil in 1998-99. The use of the funds is not
limited to capital. The facilities allowance for 1999-2000 increased to
\$1,058 per pupil, approximately the average per-pupil capital expense
in other public schools for the prior fiscal year. Almost all capital
improvement programs in other District of Columbia public schools are
devoted to the repair of leaky roofs, broken windows, lead paint and
asbestos removal, poor lighting, inadequate heating, inoperable
bathrooms and other repairs. Some charter schools occupy former district
schools and use facility funds for exactly the same purposes.

In Massachusetts, all debt service in excess of State Building
Assistance Bureau (SBAB) grants for debt retirement enters the charter
school tuition calculation. SBAB funds up to 90 percent of the debt
retirement cost of new facilities in cities where facilities
construction is an integral component of a racial desegregation plan;
otherwise SBAB funds about half of debt retirement costs for qualifying
projects, or no funding at all. A KPMG-Peat Marwick study of 33 school
districts sending students to charter schools found that two-thirds had
some capital expenditure for facilities included in tuition. On average,
63 percent of long-term debt was included in the tuition calculation. In
1998-99, a one-time state appropriation gave charter schools an
additional \$260 per pupil for facilities funding---approximately
equivalent to the annual SBAB average grant. Therefore, total facilities
funding for the average charter school approximated the state average in
1998-99. Charter schools can use capital funding for general operating
expenditures in Massachusetts.

In 1999, the Florida Legislature established a separate capital outlay
trust fund for charter schools with its own annual appropriation.
Beginning in their third year of operation, charter schools receive the
state's share of the 30-year amortized cost of a "student station" in
annual installments. In 1998-99, that annual figure amounted to \$387
for each elementary school student, \$443 for each middle school student
and \$587 for each high school student. Charter schools can use capital
outlay funds only for capital expenses. Significant, one-time capital
funding has also been available for established charter schools through
Florida's School Infrastructure Thrift Fund (SIT). This program rewards
school districts for finding alternatives to building new facilities.
The district in which a charter school had been operating in
non-district facilities for at least a year was eligible for one-time
payments of \$5,800 (elementary) to \$8,800 (high school) per pupil
attending the charter schools. If the charter school's enrollment grew,
the district received additional payments corresponding to the
enrollment increase. The state department of education requires
districts and charter schools to submit a joint application for SIT
funds, with most districts splitting the funds evenly with their charter
schools. SIT funds will be available until the one-time appropriation is
exhausted, which could occur in 1999-2000.

In Milwaukee charter schools, capital outlay and debt service of the
school district are included in the base charter school funding (about
\$90 per student). Most public school facilities however, are owned and
financed by the municipal government. In Washington, D.C., the District
government also owns and finances most school district facilities. In
Hawaii, all school building and capital improvement projects are
financed with cash and must be approved by the legislature as part of
the state's capital improvement appropriations (Thompson, 1995).

Rhode Island adopted a more deliberative approach to providing capital
funding for charter schools. Considered on a case-by-case basis, a
minimum of 30 percent funding of capital costs is guaranteed to those
schools deemed to be in need. It is expected that a majority of capital
funding will come from private sources and that the public funding will
go primarily to the neediest charter schools. The law is so new that
funds have yet to be allocated.

#### Equipment and Capital Outlay in General Fund

School districts typically spend 1 percent to 2 percent of their general
operating funds on equipment, furniture and minor renovations. A study
of eight school districts in Pennsylvania found capital projects
expenditures ranged from nothing to 3.4 percent, averaging 1.1 percent
(Hartman and Keller, 1999).

Although clearly insufficient for start-up purposes, most of the
resources for capital outlay financed from general operating funds in
school districts are passed on to charter schools. In most states,
capital outlay funded by general operating revenue is included in the
base revenue calculations. In addition to the facilities allowance in
Washington, D.C., another \$150 per pupil, representing equipment
purchases, is imbedded in the base funding formula. North Carolina and
Rhode Island also include some capital outlay spending in the average
per-pupil cost used to derive charter school funding. The tuition
calculation in Massachusetts includes school district costs for
acquisition, improvement and replacement of fixed assets (primarily
equipment, furniture and minor repairs), as well as expenditures for
rent and instructional equipment, averaging about \$400 per pupil.

### Programs To Improve Access to Capital

While falling short of direct financial assistance for facilities,
several states and private entities help improve access to capital,
lower the cost of borrowing or provide technical assistance.

**Access to Low-cost Financing.** Two states empowered existing bonding
authorities to issue tax-exempt securities on behalf of charter schools
through conduit financing (Hassel, 1999; Caldwell and Arrington, 2000).
The Colorado Educational and Cultural Facilities Authority (CECFA)
expanded the list of eligible beneficiaries to include organizations
that "provide an educational program pursuant to a charter from a school
district." North Carolina expanded the mandate of the Educational
Facilities Finance Agency to include any "nonprofit institution within
the State of North Carolina authorized by law and engaged or to be
engaged in the providing of kindergarten, elementary, or secondary
education, or any combination thereof." To date, the North Carolina
authority has not been willing to actually issue any securities for
charter schools.

The CECFA issues the bonds and loans the proceeds to Colorado charter
schools after charging transaction fees of \$20,00 to \$30,000. The
bonds issued are "non-course" to CECFA, which means that responsibility
for repayment is limited to the charter school and investors will focus
on creditworthiness of the charter school rather than the CECFA. Six
charter schools have already obtained tax-exempt financing to refinance,
purchase or build facilities (Caldwell and Arrington, 2000) Together,
the six schools raised over \$23 million in financing at an interest
rate between 6 percent and 7 percent, cutting borrowing costs in half
compared to commercial lenders.

While no state facilities assistance is provided, the Michigan charter
school law specifically allows charter schools to issue tax-exempt
securities. Based on an Internal Revenue Service ruling that did not
specifically disallow the practice, numerous charter schools have
successfully obtained tax-exempt financing to purchase or build
facilities. Typically, an investment company secures financing for the
charter school for which it earns a fee. In addition to interest, the
lender receives points and holds a reserve of about 10 percent. The fees
and reserve are capitalized into the financing so no down payment or
other up-front money is required. The universities that authorize
charter schools usually must agree to forward payments directly to
lenders on behalf of the charter school.

In 1999, the Texas legislature specifically allowed charter schools to
issue tax-exempt securities. North Hills Prep became the first charter
school in Texas to secure tax-exempt financing. Charter schools directly
issue the securities with the help of investment banking firms as in
Michigan, rather than through a conduit bonding authority as in
Colorado.

**Revolving Loan Funds for Charter Schools.** In Connecticut, the Health
and Educational Facilities Authority makes direct loans to Connecticut
charter schools in amounts up to \$150,000. The five-year loans carry
interest rates of 5.9 percent. The privately established Financial
Foundation for Texas Charter Schools provides working capital rather
than facilities. With an interest rate of 4-5 percent, the loans are
administered by a national bank. The Chicago school district established
a \$2 million revolving loan fund administered through the Illinois
Facility Fund, a nonprofit community development loan institution.
Revolving loan funds also exist in California and Louisiana.

**Incentive To Supply Facilities.** Some states encourage local school
districts, other governmental entities, property owners, employers and
real-estate developers to provide facilities for charter schools. In
Washington, D.C., charter schools can bid on favorable terms when vacant
schools go on the market. If school districts provide vacant facilities
to charter schools in Colorado, no rent can be charged. Florida allows
employers to establish charter schools and to reserve school seats for
children of employees if the employer invests substantially in school
facilities. Only excess seats are available for other students. Arizona
has considered legislation that would allow developers to claim a
substantial tax credit for subsidizing charter school facilities and
then give admissions preference to development residents.

**Lengthening Term of Charter.** Investors called upon to make 15- to
30-year commitments to charter schools are often concerned about charter
renewals every 3- to 5-years. Arizona lengthened the term of charters to
as many as 15 years. Florida recently enacted legislation that allows
school districts to issue 15-year charters. Policymakers in other states
may regard such long terms as antithetical to the accountability of
charter schools.

# Chapter 8

## Other Financial Issues

A number of other financial issues need to be addressed in order to
create a complete picture of charter school finance. These issues
include private funding of charter schools and charter schools
participation in teacher retirement systems.

### Teacher Retirement 

Teacher retirement systems represent an important component of the
teaching profession. They predate teacher unions by several decades and
are important to maintaining a stable, experienced workforce. If charter
schools are prohibited from participation, or choose not to participate
based on short-term financial incentives, the effectiveness of charter
schools in obtaining a stable teaching force may be compromised.

Of the 23 states and two cities examined, 11 states mandate that all
certified teachers must participate in the appropriate public employee
retirement system. Twelve states and two cities specifically exempt
charter schools from participation in at least some circumstances.

+----------------------------+-----------------------------------------+
| Table 24                   |                                         |
|                            |                                         |
| **Participation of         |                                         |
| Certified Teachers in      |                                         |
| Teacher Retirement         |                                         |
| System**                   |                                         |
+----------------------------+-----------------------------------------+
| **Mandatory**              | **Not Mandatory in Some or All          |
|                            | Situations**                            |
+----------------------------+-----------------------------------------+
| Alaska, Colorado, Hawaii,  | Arizona, California,^1^ Connecticut,^1^ |
| Illinois, Kansas,          | Delaware, District of Columbia,         |
| Massachusetts, Minnesota,  | Florida, Georgia,^3^ Louisiana,^2^      |
| New Jersey, New Mexico,    | Michigan,^3^ Milwaukee,^4^ North        |
| Rhode Island, South        | Carolina, Pennsylvania,^5^ Texas,^3^    |
| Carolina                   | Wisconsin^4^                            |
+----------------------------+-----------------------------------------+
| ^1^ Teachers decide.       |                                         |
|                            |                                         |
| ^2^ All but one school     |                                         |
| currently participate in   |                                         |
| Louisiana, and all         |                                         |
| currently participate in   |                                         |
| Delaware.                  |                                         |
|                            |                                         |
| ^3^ Exemptions for         |                                         |
| management contractors     |                                         |
| only.                      |                                         |
|                            |                                         |
| ^4^ Charter schools that   |                                         |
| are not an instrumentality |                                         |
| of a school district are   |                                         |
| excluded. Only one of 40   |                                         |
| Wisconsin schools outside  |                                         |
| of Milwaukee is not an     |                                         |
| instrumentality. Most      |                                         |
| Milwaukee charter schools  |                                         |
| are not instrumentalities. |                                         |
|                            |                                         |
| ^5^ Must have some kind of |                                         |
| retirement plan.           |                                         |
+----------------------------+-----------------------------------------+

The states without mandatory pension coverage deal with the issue in a
variety of ways. Louisiana guarantees that teachers on leave from public
schools will be able to maintain their membership in the state
retirement system. The charter school itself must address the issue of
whether new hires will be covered by the state system. Only one school
in Louisiana currently provides an alternative plan for new employees.
This charter school pays for Social Security. Louisiana is one of
several states where all public school teachers are exempt from
contributing to Social Security if they participate in a state teachers
retirement plan. As shown in Table 25, exemption from Social Security
predicts high charter school participation in state retirement systems.

The governing board of charter schools in Florida decides whether its
employees will participate in the state retirement system. In
Pennsylvania, employees must participate in the appropriate state system
unless the nonprofit corporation holding the charter has an alternative
plan. No requirements exist for what this plan must do. In Texas,
employees who work directly for charter schools are considered public
employees who must be enrolled in the appropriate plan. However, if
charter schools contract for personnel with an employment agency, staff
are not considered public employees and are left to whatever
arrangements the private agency chooses to make. In Michigan, the
exemption of private contractors from participation in the state
retirement system resulted in several schools switching to management
companies.

+------------------+--------------+---+-----------------+-------------+
| Table 25         |              |   |                 |             |
+------------------+--------------+---+-----------------+-------------+
| **Participation  |              |   |                 |             |
| of Charter       |              |   |                 |             |
| Schools in       |              |   |                 |             |
| Teacher          |              |   |                 |             |
| Retirement       |              |   |                 |             |
| System,          |              |   |                 |             |
| 1998-99**        |              |   |                 |             |
+------------------+--------------+---+-----------------+-------------+
|                  | P            |   |                 | Pa          |
|                  | articipation |   |                 | rticipation |
|                  |              |   |                 |             |
|                  | of Schools   |   |                 | of Schools  |
+------------------+--------------+---+-----------------+-------------+
| Alaska^1^        | all          |   | Louisiana^1^    | all but one |
+------------------+--------------+---+-----------------+-------------+
| Arizona          | about 25 %   |   | M               | all         |
|                  |              |   | assachusetts^1^ |             |
+------------------+--------------+---+-----------------+-------------+
| California^1^    | most         |   | Michigan        | 50 of 141   |
+------------------+--------------+---+-----------------+-------------+
| Colorado         | all          |   | Minnesota       | all         |
+------------------+--------------+---+-----------------+-------------+
| Connecticut^1^   | 12 of 16     |   | New Jersey      | all         |
+------------------+--------------+---+-----------------+-------------+
| Delaware         | all          |   | New Mexico      | all         |
+------------------+--------------+---+-----------------+-------------+
| District of      | none         |   | North Carolina  | 16 of 57    |
| Columbia         |              |   |                 |             |
+------------------+--------------+---+-----------------+-------------+
| Florida          | none         |   | Pennsylvania    | 28 of 31    |
+------------------+--------------+---+-----------------+-------------+
| Georgia          | all          |   | Rhode Island    | all         |
+------------------+--------------+---+-----------------+-------------+
| Hawaii           | all          |   | South Carolina  | all         |
+------------------+--------------+---+-----------------+-------------+
| Illinois^1^      | all          |   | Texas^1^        | 82 of 87    |
+------------------+--------------+---+-----------------+-------------+
| Kansas           | all          |   | Wisconsin^2^    | about 80%   |
+------------------+--------------+---+-----------------+-------------+
| Source:          |              |   |                 |             |
| Telephone survey |              |   |                 |             |
| of retirement    |              |   |                 |             |
| systems.         |              |   |                 |             |
|                  |              |   |                 |             |
| ^1^Public school |              |   |                 |             |
| teachers         |              |   |                 |             |
| exempted from    |              |   |                 |             |
| old-age          |              |   |                 |             |
| assistance       |              |   |                 |             |
| portion of       |              |   |                 |             |
| Social Security. |              |   |                 |             |
|                  |              |   |                 |             |
| ^2^Includes      |              |   |                 |             |
| Milwaukee.       |              |   |                 |             |
+------------------+--------------+---+-----------------+-------------+

The actual participation rate of charter schools is shown in Table 25.
Florida, Arizona, the District of Columbia and North Carolina have the
lowest participation rates. Reflecting the high percentage of private
management contracts in Michigan, only 50 of 141 charter schools
participate. On the other hand, some states allowing exemptions such as
California, Connecticut, Pennsylvania and Texas experience a high rate
of charter school participation in state retirement systems. Among the
states without mandatory charter school inclusion in state retirement
systems, California, Connecticut and Texas are states where public
school teachers participating in the state retirement plan are exempted
from the old-age portion of Social Security. Teachers play key roles in
making decisions about retirement systems in California and Connecticut.

Some evidence indicates that charter schools opt out of state retirement
systems for financial reasons. Exemption from the state retirement
system is a frequently mentioned explanation for the growth of private
management contractors in Michigan (Horn and Miron, 1999; Prince,
1999b). Where charter schools can choose to opt out, the retirement plan
participation rate remains high in states where all public school
teachers are exempted from Social Security by participating in the state
teachers retirement plan. On the other hand, opting out of conventional
retirement systems allows charter schools to offer innovative retirement
plans. Individual charter schools may offer more generous employer
contributions. Exemption from the one size fits all statewide plans may
lead to retirement plans that are more appealing to charter school
teachers. Innovations could include portability across state lines,
shorter vesting periods and ability to borrow against savings.

Opting out of state retirement systems may lead to financial savings.
However, the resulting reduction in contributions to a retirement system
is not necessarily more efficient for employees, the larger community or
the state. While some may argue that retirement benefits are peripheral
to the question of educational costs, reductions in retirement benefits
may impede the ability of charter schools to attract a stable teaching
staff over time.

### Private Funding

The primary goal of our report is to investigate state charter school
funding laws and practices. Yet private funding plays an integral role
in the charter school concept. Beckwith, et al., (1998) found that
fundraising was essential in Illinois. The UCLA study of charter schools
in California (Wells, 1999) found that not only was fundraising
essential in California but that some charter schools had clear
advantages over others in their ability to generate private funds.

Some research shows a growing trend toward private contributions to
traditional public schools. Although foundations created specifically to
support school district activities are becoming more common, the average
amount raised by school district foundations is only 0.3 percent of the
school district's total budget according to Merz and Frankel (1997). In
Michigan, Adonizio (1999) found that the number of public school
district foundations grew from five to 153 between 1981 and 1997. In
1995, the average amount raised by a district foundation was \$17,024.
Private foundations also provide funding directly to school districts
with first being channeled through a school district foundation.[^36]

Analysis of the extent to which charter schools and school districts
rely on private fundraising may be impeded by limited reporting
requirements for private contributions. Massachusetts and Minnesota
require that financial statements include information on private
contributions in the annual report. In other states, gift giving
reported in financial statements may underestimate the amount of private
fundraising both for school districts and for charter schools. In school
districts, donations to school foundations, which are incorporated as
nonprofit foundations and booster clubs, generally do not have to be
included in school district financial reporting. Since nonprofit boards
generally govern charter schools, private fundraising of the board may
not be accounted for in the charter school's financial statements. Many
charter schools have their own nonprofit foundations created to raise
funds.

In order to help readers evaluate the role that private funding plays in
charter school financing, a review of the 1996-97 annual reports of 10
Massachusetts charter schools was conducted.[^37] The reports indicate
major differences in fundraising but that overall, the reliance of
charter schools on private funding may be overstated. One of the schools
aggregated private giving with restricted federal funds, making analysis
impossible. One charter school raised revenues from private funds equal
to 25 percent of the tuition it received from the state. The
administration at the Academy of the Pacific Rim, according to its
annual report, made a conscious decision not to do extensive
fundraising; and overall, four of nine schools with data raised revenue
from private sources equal to less than 2 percent of the tuition
received. Three other charter schools raised funding from private
sources equal to between 5 percent and 12 percent of tuition revenue.

A review of six audits conducted in Florida revealed a similar range of
private support.[^38] Two schools reported receiving no private funding.
One small school for at-risk students reported private funding amounting
to 17 percent of revenues. The other three reported private fundraising
amounting to between 2.7 percent and 5.5 percent of total revenues,
again showing that the reliance of charter schools on private funding
may be overstated.

Private funding may help knit communities to schools, which is sometimes
mentioned as an important goal of the charter school experiment. Yet the
issue of private financing for charter schools raises many public policy
questions. When charter schools rely on private funding to be
successful, it may signal that too few resources are devoted to
traditional public education. Reliance on private financing could also
indicate that charter schools receive insufficient public funds or that
charter schools are not financially viable when supported solely by
public funds. The concept of public education itself may be threatened
when private funding brings private advantages. Such an arrangement
exists in Florida where employers that provide facilities can reserve
slots for children of their employees. This increasingly controversial
issue affects all aspects of public education, not just charter schools,
as reflected in debates over corporate sponsorships, vending rights,
advertising in educational programming, and the conflict over school to
work programs.

# Chapter 9

## Comparability of Charter School and School District Funding

At a superficial level, it is relatively easy to compare charter school
and school district finances. For example, in New Jersey a charter
school receives 90 percent of the per-pupil operational revenue in the
district sending a student to the charter school and none of the capital
funding. In Colorado, some charter schools receive 80 percent of the
per-pupil operating revenue. In a majority of states, charter school
students do not bring capital funding with them. These comparisons
indicate that charter schools are generally funded at a lower rate than
school districts.

Without an understanding of the specific educational tasks that charter
schools undertake, including the types of students they seek to educate,
it is difficult to assess funding comparability with school districts.
Each comparison of a charter school to a school district running several
schools will be somewhat different. A number of factors support the
observation that charter schools receive less funding than school
districts:

-   Charter schools sometimes receive less than 100 percent of operating
    revenue.

-   Charter schools usually do not receive funding to finance facilities
    and debt in a manner equivalent to district resources.

-   Charter schools do not necessarily have equal access to all of the
    revenue streams school districts have access to.

-   Charter schools may be required to pay administrative fees either to
    school districts or to chartering authorities without receiving
    offsetting services.

-   Charter schools focused exclusively on special needs and at-risk
    students may be substantially underfunded.

However, several mitigating factors need to be considered in judging
funding comparability.

-   Charter schools may receive services (e.g., oversight,
    transportation, special education assessment and financial services)
    "in-kind" from school districts. The value of these services may not
    be measured in charter school revenue calculations.

-   School districts may fund preschool programs for at-risk children,
    private school services, community outreach, adult education and
    other activities, funding for which may be justifiably withheld from
    charter schools providing basic K-12 education.

-   Charter schools can configure their grade level structure and
    enrollment in order to generate optimal funding. They can set limits
    on enrollment and use waiting lists to maximize funding efficiency
    (e.g., optimal class sizes and staffing ratios) by quickly replacing
    students leaving the school.

-   Charter schools usually serve a smaller proportion of special needs
    students compared to host districts, but in some states the charter
    schools may receive revenues based on an assumption that their
    special education population will match the school district average.

-   Many states allow charter schools to avoid expenditures for such
    items as transportation or teacher retirement without compensating
    decreases in revenues.

Previous chapters of our report examined these complex issues. The
information in Table 26 summarizes many of the findings and also draws
on information from the state profiles in the appendix. The rows in
Table 26 describe the comparability of specific features of charter
school funding to school district funding. *Less* or "L" indicates that
charter schools have a funding disadvantage for a particular feature of
the funding system relative to the host school district. *Comparable* or
"C" indicates that the funding is comparable relative to the host
district for a particular aspect of the funding system. *More* or "M"
indicates that charter schools receive more funding than the host school
district to accomplish the same task. "M" also indicates that charter
schools get funding for services they may not provide such as adult
education, preschool and payments to private schools for special
education. The degree to which charter schools get less or more funding
requires more detailed analysis; for this, the reader is referred to the
state profiles in the appendix.

A common table entry is L/C/M, indicating that a comparability
assessment depends on the specific characteristics of the charter or the
school's students and programs. Financial comparability is uncertain in
states like Colorado where negotiations over financial issues represent
an important aspect of the charter. Uncertain comparability also arises
in several states that fund charter schools based on average school
district costs or revenues. Charter school funding in these states is
comparable to host districts only when the student body resembles the
host district's student body. Otherwise, inequities emerge regarding
revenue for special education, at-risk students, transportation and
other funding designated for students or specific purposes. Charter
schools with high-cost students and programs are not funded equitably.

<table>
<colgroup>
<col style="width: 16%" />
<col style="width: 1%" />
<col style="width: 4%" />
<col style="width: 4%" />
<col style="width: 4%" />
<col style="width: 4%" />
<col style="width: 4%" />
<col style="width: 4%" />
<col style="width: 4%" />
<col style="width: 4%" />
<col style="width: 4%" />
<col style="width: 4%" />
<col style="width: 3%" />
<col style="width: 4%" />
<col style="width: 4%" />
<col style="width: 4%" />
<col style="width: 4%" />
<col style="width: 4%" />
<col style="width: 4%" />
<col style="width: 4%" />
<col style="width: 2%" />
<col style="width: 1%" />
<col style="width: 4%" />
</colgroup>
<tbody>
<tr class="odd">
<td colspan="21"><h5 id="section-1"></h5></td>
<td colspan="2"></td>
</tr>
<tr class="even">
<td colspan="21"></td>
<td colspan="2"></td>
</tr>
<tr class="odd">
<td colspan="23">Table 26</td>
</tr>
<tr class="even">
<td colspan="23"><strong>Funding of Charter Schools Compared to Host
School District</strong></td>
</tr>
<tr class="odd">
<td colspan="23"></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td>AK</td>
<td>AZ</td>
<td>CA</td>
<td>CO<sup>a</sup></td>
<td>CT</td>
<td>DC</td>
<td>DE</td>
<td>FL</td>
<td>IL<sup>b</sup></td>
<td>LA</td>
<td>MA</td>
<td>MI</td>
<td>Milw</td>
<td>MN</td>
<td>NJ</td>
<td>NC</td>
<td>PA</td>
<td>RI</td>
<td colspan="2">SC</td>
<td>TX</td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="even">
<td>Base funding</td>
<td></td>
<td>C</td>
<td>C</td>
<td>C</td>
<td>L/C/M</td>
<td>L/C/M</td>
<td>C</td>
<td>C</td>
<td>C</td>
<td>L/C/M</td>
<td>C</td>
<td>C</td>
<td>L/C<sup>c</sup></td>
<td>C</td>
<td>L/C/M</td>
<td>L/C<sup>d</sup></td>
<td>C</td>
<td>C<sup>k</sup></td>
<td>C</td>
<td colspan="2">C</td>
<td>C</td>
</tr>
<tr class="odd">
<td>Elementary and middle<sup>e</sup></td>
<td></td>
<td>M</td>
<td>C</td>
<td>M</td>
<td>M</td>
<td>M</td>
<td>C</td>
<td>C</td>
<td>C</td>
<td>M</td>
<td>M</td>
<td>M</td>
<td>M</td>
<td>M</td>
<td>C</td>
<td>C</td>
<td>M</td>
<td>M</td>
<td>M</td>
<td colspan="2">C</td>
<td>M</td>
</tr>
<tr class="even">
<td>Secondary</td>
<td></td>
<td>L</td>
<td>C</td>
<td>L</td>
<td>L</td>
<td>L</td>
<td>C</td>
<td>C</td>
<td>C</td>
<td>L</td>
<td>L</td>
<td>L</td>
<td>L</td>
<td>L</td>
<td>C</td>
<td>C</td>
<td>L</td>
<td>L</td>
<td>L</td>
<td colspan="2">C</td>
<td>L</td>
</tr>
<tr class="odd">
<td>Size/sparsity/cost</td>
<td></td>
<td>C</td>
<td>M</td>
<td>C</td>
<td>C</td>
<td>L/C/M</td>
<td>C</td>
<td>C</td>
<td>C</td>
<td>C</td>
<td>C</td>
<td>C</td>
<td>C</td>
<td>C</td>
<td>L/C/M</td>
<td>C</td>
<td>C</td>
<td>C</td>
<td>C</td>
<td colspan="2">C</td>
<td>C</td>
</tr>
<tr class="even">
<td colspan="2">Few special needs pupils</td>
<td>M</td>
<td>M</td>
<td>C</td>
<td>C/M</td>
<td>M</td>
<td>C</td>
<td>C</td>
<td>C</td>
<td>M</td>
<td>M</td>
<td>M</td>
<td>C</td>
<td>M</td>
<td>C</td>
<td>M</td>
<td>M<sup>f</sup></td>
<td>M<sup>f</sup></td>
<td>M</td>
<td colspan="2">C</td>
<td>C</td>
</tr>
<tr class="odd">
<td>Average special needs</td>
<td></td>
<td>C</td>
<td>C</td>
<td>C</td>
<td>C</td>
<td>M</td>
<td>C</td>
<td>C</td>
<td>C</td>
<td>C</td>
<td>C</td>
<td>C</td>
<td>C</td>
<td>C</td>
<td>C</td>
<td>C</td>
<td>C<sup>f</sup></td>
<td>C<sup>f</sup></td>
<td>C</td>
<td colspan="2">C</td>
<td>C</td>
</tr>
<tr class="even">
<td>Many special needs pupils</td>
<td></td>
<td>L</td>
<td>L</td>
<td>C</td>
<td>L/C</td>
<td>M</td>
<td>C</td>
<td>C</td>
<td>C</td>
<td>L</td>
<td>L</td>
<td>L</td>
<td>C</td>
<td>L</td>
<td>C</td>
<td>L</td>
<td>L<sup>f</sup></td>
<td>L<sup>f</sup></td>
<td>L</td>
<td colspan="2">C</td>
<td>C</td>
</tr>
<tr class="odd">
<td>Few low-income pupils</td>
<td></td>
<td>C</td>
<td>M</td>
<td>C</td>
<td>C/M</td>
<td>M</td>
<td>M</td>
<td>C</td>
<td>C</td>
<td><sup>g</sup></td>
<td>C/M<sup>h</sup></td>
<td>M</td>
<td>C</td>
<td>M</td>
<td>C</td>
<td>C</td>
<td>M</td>
<td>M</td>
<td>M</td>
<td colspan="2">C</td>
<td>C</td>
</tr>
<tr class="even">
<td colspan="2">Average low-income pupils</td>
<td>C</td>
<td>C</td>
<td>C</td>
<td>C</td>
<td>C</td>
<td>C</td>
<td>C</td>
<td>C</td>
<td><sup>g</sup></td>
<td>C</td>
<td>C</td>
<td>C</td>
<td>C</td>
<td>C</td>
<td>C</td>
<td>C</td>
<td>C</td>
<td>C</td>
<td colspan="2">C</td>
<td>C</td>
</tr>
<tr class="odd">
<td>Many low-income pupils</td>
<td></td>
<td>C</td>
<td>L</td>
<td>C</td>
<td>L/C</td>
<td>L</td>
<td>L</td>
<td>C</td>
<td>C</td>
<td><sup>g</sup></td>
<td>L</td>
<td>L</td>
<td>C</td>
<td>L</td>
<td>C</td>
<td>C</td>
<td>L</td>
<td>L</td>
<td>L</td>
<td colspan="2">C</td>
<td>C</td>
</tr>
<tr class="even">
<td>Transportation</td>
<td></td>
<td>C</td>
<td>C/M</td>
<td>C</td>
<td>L/C</td>
<td>C</td>
<td>C</td>
<td>C</td>
<td>L</td>
<td>L</td>
<td>C</td>
<td>C</td>
<td>C</td>
<td>C</td>
<td>C</td>
<td>C</td>
<td>C</td>
<td>M</td>
<td>C</td>
<td colspan="2">L</td>
<td>C</td>
</tr>
<tr class="odd">
<td>Capital and facilities</td>
<td></td>
<td>L</td>
<td>L/C/M</td>
<td>L</td>
<td>L/C</td>
<td>L</td>
<td>C</td>
<td>L</td>
<td>L/C<sup>j</sup></td>
<td>L</td>
<td>L</td>
<td>L/C<sup>j</sup></td>
<td>L</td>
<td>C<sup>j</sup></td>
<td>L/C<sup>j</sup></td>
<td>L</td>
<td>L</td>
<td>L</td>
<td>L/C<sup>j</sup></td>
<td colspan="2">L<sup>i</sup></td>
<td>L</td>
</tr>
<tr class="even">
<td>Teacher retirement</td>
<td></td>
<td>C</td>
<td>C/M</td>
<td>C/M</td>
<td>C</td>
<td>C/M</td>
<td>C/M</td>
<td>C/M</td>
<td>C/M</td>
<td>C</td>
<td>C/M</td>
<td>C</td>
<td>C/M</td>
<td>C/M</td>
<td>C</td>
<td>C</td>
<td>C/M</td>
<td>C/M</td>
<td>C</td>
<td colspan="2">C</td>
<td>C/M</td>
</tr>
</tbody>
</table>

L = Less, C = Comparable, and M = More funding for charter schools
relative to host school districts.

Excludes GA, HI, KS, NM and WI (except Milwaukee) because charter
schools are funded on the same basis as traditional public schools.

^a^ Table entries (except base funding in first row) based on 100
percent funding. Funding can vary from 80 percent to more than 100
percent.

^b^ Table entries (except base funding in first row) based on 100
percent funding (e.g., Chicago). Funding can vary from 75 percent to 125
percent.

^c^ Comparable (C) up to about \$6,000, then less (L).

^d^ Charter schools in New Jersey receive 90 percent of base funding,
but the base includes transportation (5.4 percent) and private school
support (1.4 percent).

^e^ Assumes that elementary and middle schools have same cost because
there is no consistency among states as to which costs more.

^f^ Low-cost special needs students get average special needs funding.

^g^ In Chicago, funding is comparable. All school districts can adjust
charter school funding in the 75 percent to 125 percent range to achieve
comparability.

^h^ All charter schools in Louisiana are required to have concentrations
of low-income students equal to at least 85 percent of the district
average.

^i^ Many charter schools are housed in public school facilities and
therefore get comparable facilities.

^j^ Gets significant, but not necessarily comparable, capital funding
(see text).

^k^ Base funding does not include transportation, private school
services, adult education and other expenditures not normally provided
by charter schools.

Federal funding is not assessed in this table because federal funding
for charter schools should be comparable to public school districts
under federal law. The only source of variation among states in federal
funding comparability would depend on whether charter schools qualify
for funding as part of a district or as an LEA. A GAO report indicates
no difference.[^39] Some charter schools may not find it worthwhile to
seek small amounts of federal funding. Other charter schools may reject
federal funding in order to avoid reporting requirements. These issues
are more fully discussed in Chapter 3 on methodology. Funding
comparability is not assessed for Hawaii, Kansas, New Mexico and
Wisconsin because charter schools in these states are funded on the same
basis as other public schools as determined locally by authorizing
school districts.

In the first row, "base funding" is an estimate of the degree to which
charter schools receive 100 percent of the base operating revenue or
expenditures obtained by the school district in which the charter school
is located. Base funding excludes capital, transportation and programs
for students with special needs. These issues are addressed elsewhere in
the table. A majority of states adhere to the 100 percent funding
concept. Colorado and Illinois allow funding of varying percentages to
account for the unique circumstances of charter schools. Some schools
are funded at less than 100 percent, and some are funded at higher
levels. Connecticut and Minnesota fund charter schools equally
regardless of the school district in which they are located, so some
charter schools get less than local school districts, and some get more.
In Michigan, charter schools are funded comparably up to about \$6,000 a
year, the maximum funding for charter schools. In New Jersey, charter
schools receive 90 percent of base funding, but the base includes
transportation (5.4 percent) and private school support (1.4
percent).[^40] Charter schools can also appeal to the state commissioner
of education to increase the percentage above 90 percent. So in New
Jersey, base funding can be rated as comparable**.**

The next two rows address the question of grade level funding. By
definition, K-12 charter schools are funded comparably to K-12 school
districts.[^41] Most experts agree that elementary school students are
less expensive to educate than high school students.[^42] Thus an
elementary charter school receiving funds based on K-12 averages has an
advantage compared to a regular elementary school. Charter high schools
face a funding disadvantage. Hence, the table gives an "M" rating to
elementary charter schools and an "L" rating to charter high schools.
States that use grade level weights for charter schools receive a "C"
rating even though it is unclear whether the state weightings for grade
level accurately account for all the additional costs of educating
particular grade populations in school districts.

The next row contains a rating of how charter school funding matches up
to its host district as a result of geographic variations in funding.
Such variations include those based on local wealth and tax effort, as
well as those based on formula adjustments for factors such as cost of
living, school/district size and sparsity. Arizona is the only state
that gives charter schools an advantage over school districts. Small
charter schools, including those schools in large urban areas, receive
significant small-school funding adjustments normally intended for small
school districts. In Connecticut and Minnesota, charter school funding
is not linked to local school districts, so comparability varies with
characteristics of the host district.

Special education funding comparability is evaluated for charter schools
that have either fewer special needs students than school districts, a
comparable special needs population or more special needs students than
school districts. Many states, such as Massachusetts, and Rhode Island,
pass along all or almost all special education funding to charter
schools whether or not charter schools enroll more or fewer special
education students than school districts. Charter schools with higher
percentages of special needs students get insufficient funding, while
charter schools with few special needs students are able to divert
special education funding to other areas. In states where the special
education weightings or categorical funding is insufficient and a
significant amount of general operating funds are used for special
education, the same dynamics apply, albeit to a lesser degree. States
that specifically fund special education costs, such as Delaware, the
District of Columbia, and Florida, either through an adequate weighting
formula or through reimbursement, are rated as comparable in the table.
States where school districts either pay for or provide special
education services to charter schools are also classified as comparable
states. In North Carolina and Pennsylvania, school district average
spending on special education follows special education students
regardless of the cost of services for the disability. Thus, high-cost
special needs students are not comparably funded, and low-cost students
are more than comparably funded.

The three rows following special education address funding comparability
for low-income students broadly defined to include programs and
weightings for at-risk students and compensatory education. The dynamics
are similar to those discussed for special education and grade level
adjustments. If states provide charter schools with extra funding for
low-income students, the charter school funding system is judged as
comparable. States using low-income weightings or categorical
funding---such as California, Florida or Michigan---are generally
labeled as comparable if charter schools generate funds based on their
own enrollment. When charter schools simply get the low-income funding
incorporated in school district averages, the problem of underfunding
for charter schools with high numbers of at-risk students emerges.

Transportation funding comparability is judged on whether charter
schools get transportation funding approximating the school district
average, or directly receive district-provided transportation. In some
states, such as Arizona, transportation funding can be used for any
legitimate purpose. In states like Michigan and Louisiana, school
districts provide all transportation funding from general operating
revenues. Consequently, charter school transportation funding is
comparable in Michigan and Louisiana even if there is no special revenue
stream for transportation and even if transportation is not provided.
About 75 percent of states provide comparable transportation funding or
services. Pennsylvania is the only state where charter school students
clearly get more transportation services because they are entitled to
transportation outside school district lines in some circumstances.
District-authorized charter schools in Arizona get lucrative
transportation funding, but state-authorized charter schools do not. In
Connecticut and several other states, charter schools get transportation
from school districts, so funding is judged as comparable even though
state aid covers only part of the cost.

The second to the last category concerns capital funding comparability.
Arizona is the only state where charter schools get more capital funding
than equivalent public schools, primarily because charter schools are
funded like small school districts, not like the school districts in
which they are located. A footnote identifies states where charter
schools have access to some capital funding, but not necessarily to the
entire range of capital funding available for school districts. About
half of the states provide no financial assistance for facilities.

The final row addresses the issue of charter school payments to the
public employee retirement systems. Teacher retirement system payments
are similar to school district transportation and special education
costs paid from general operating funds. In states where charter school
teachers must belong to the state teacher retirement system, funding is
judged comparable. In states where charter schools can opt out of the
retirement system, charter schools can divert revenue typically used for
employee benefits to other purposes.

Reading across the rows provides a good summary of how the bulleted
points included at the start of this chapter play out across the states.
When differences in responsibilities are taken into account, base
per-pupil revenue is essentially comparable between charter schools and
school districts. Grade level funding is skewed to give charter
elementary schools an advantage over traditional elementary schools in
13 states. These same 13 states place charter high schools at a
disadvantage. A dozen of the states provide comparative funding
disadvantages to charter schools with higher concentrations of special
education students or with special education students with greater
degrees of disability. These same systems provide charter schools with
funding advantages when they have fewer special education students than
the district average or have fewer students with greater degrees of
disability. The one area where charter schools are consistently left at
a disadvantage compared to traditional districts is capital finance.
Only Arizona provides more generous funding to charter schools, and 14
systems leave charter schools with less funding per pupil for capital
than found in school districts.

Placing a dollar value on how much funding charter schools receive
compared to school districts is a difficult task without detailed
revenue allocation figures for school districts and charter schools. The
state profiles in the appendix contain more precise estimates. Future
reports of the National Charter School Finance Study will contain
comprehensive revenue and expenditure data that will make it easier to
assess comparability issues.

## References

Adonizio, M. 1999. "New Revenues for Public Schools: Alternatives to
Broad-Based Taxes." *Selected Papers in School Finance, 1997-98.* Ed.
Fowler, W. Washington, DC. National Center for Education Statistics,
U.S. Department of Education.

Anthony, P., Scarpati, S., Bukowick, G. March 1996. "Massachusetts
Charter Schools: Who Is Attending, Why, and What Public Education Can
Learn from Them." Paper presented at the annual meeting of the American
Education Finance Association, Savannah, Ga.

Arsen, D. March 1999. "Charter School Spending: Autonomous and
Accountable?" Paper presented at the annual meeting of the American
Education Finance Association, Seattle.

Arsen, D., Plank, D. L., Sykes, G. 1999. *School Choice Policies in
Michigan: The Rule Matter*. East Lansing, Mich.: Michigan Stated
University Educational Policy Center.
\<edtech.connect.msu.edu/policy/center/choice/default.asp\>

Bauch, P., Goldring, E. 1995. "Parent Involvement and School
Responsiveness: Facilitating the Home-School Connection in Schools of
Choice." *Education Evaluation and Policy Analysis* 17: 1-21.

Beckwith, J., Bradley, C., Price, A. 1998. "Impediments Facing Illinois
Charter Schools. Unpublished manuscript. Chicago: Northeastern Illinois
University.

Berk, A., Augenblick, J., Myers, J. 1998. *A Study of Charter School
Finance Issues. Final Report*. Paper prepared for the Colorado
Association of School Executives. Denver: Augenblick and Myers.

Bierlein, L., Fulton, M. 1996. *Emerging Issues in Charter School
Financing*. Denver. Education Commission of the States.

Boston Renaissance Charter School. 1997. *Annual Report, 1996-97 School
Year*. Boston: Edison Schools, Inc.

Caldwell, R., Arrington, B. 2000. *Colorado Charter Schools Capital
Finance Study*. Denver: Colorado Department of Education. (Visited
Rachel will get) \<www.cde.state.co.us/cdechart/chcapfinance.htm\>.

Center for Applied Research and Educational Improvement. 1996.
*Minnesota Charter Schools Evaluation: Interim Report.* Minneapolis:
College of Education and Human Development, University of Minnesota.

Center for Education Reform. 1999. *Charter School Legislation and
Laws.*

(Visited 2/9/00) \<edreform.com/laws/chlaws.htm\>.

Cerasoli, R. J. 1999. *A Management Review of Commonwealth Charter
Schools*, Boston: Office of the Inspector General. (Visited 2/9/00)
Executive Summary: \<www.state.ma.us/ig/publ/chscx.htm\>, Full Text:
\<www.state.ma.us/ig/publ/chscrpt.pdf\>.

Finn, C., Manno, B., Bierlein, L. 1996. *Charter Schools in Action: What
Have We Learned*. Indianapolis: Hudson Institute Educational Excellence
Network. (Visited 2/9/00) \<www.edreform.com/pubs/hudson1.htm\>.

Gold, S., Smith, D., Lawton, S. 1995. "Overview of Approaches to School
Funding." *Public School Finance Programs of the United States and
Canada, 1993-94*. Eds. Gold, S., Smith, D., Lawton, S. New York: Nelson
Rockefeller Institute of Government, State University of New York.

Hartman, W., Keller, E. March 1999. "Your Schools, Your Money: An
Analysis of School and District Level Spending Patterns." Paper
presented at the American Education Finance Association, Seattle.

Hassel, B. 1999. *Paying for the Charter Schoolhouse: A Policy Agenda
for Charter School Facilities Financing.* St. Paul, Minn.: Charter
School Friends National Network*.* (Visited 2/9/00)
\<www.charterfriends.org/facilities.html\>.

Hassel, B., Lin, M. 1999. *Contracting for Charter School Success: A
Resource Guide for Clear Contracting with School Management
Organizations*. St. Paul, Minn.: Charter School Friends National
Network. (Visited, 2/9/00) \<www.charterfriends.org/

partnerships.html\>.

Horn, J., Miron, G. 1999. *Evaluation of the Michigan Public School
Academy Initiative*. Kalamazoo, Mich.: Evaluation Center, Western
Michigan University. (Visited 2/9/00)
\<www.mde.state.mi.us/reports/psaeval9901/wmu_finalrpt.pdf\>.

Inrichs, W. Laine, R. 1995. "Illinois." *Public School Finance Programs
of the Unites States and Canada, 1993-94*. Eds. Gold, S., Smith, D.,
Lawton, S. New York: Nelson Rockefeller Institute of Government, State
University of New York.

KPMG-Peat Marwick. 1998. "Tuition Rate Study---Study of Charter School
Tuition Rate Calculations." Boston: Massachusetts Department of
Education. (Visited 2/9/00) \<finance1.doe.mass.edu/tuition_study.html
\>.

Lankford, H., Wykoff, J. 1999. "The Allocation of Resources to Special
Education and Regular Instruction in New York State." *Funding Special
Education*. Eds. Parrish, T., Chambers, J., Guarino, C. Thousand Oaks,
Calif.: Corwin Press.

Levin, H. 1999. "Education Vouchers: Effectiveness, Choice and Costs*.*"
*Journal of Policy Analysis and Management*. Vol. 17, No. 3.

Little Hoover Commission, State of California. 1996. *The Charter
Movement: Education Reform School by School.* Sacramento, Calif.
(Visited 2/9/00) \<www.lhc.ca.gov/

lhcdir/138rp.html\>.

Martin, J., Brewer, R. 1995. "Connecticut." *Public School Finance
Programs of the United States and Canada, 1993-94*. Eds. Gold, S.,
Smith, D., Lawton, S. New York: Nelson Rockefeller Institute of
Government, State University of New York.

Merz, C., Frankel, S. 1997. "School Foundations: Local Control or Equity
Circumvented?" *School Administrator*. 54: 28-31.

Millot, M., Lake, R. 1997. *Supplying a System of Charter Schools:
Observations on Early Implementation of the Massachusetts Statute*.
Seattle: Institute for Public Policy and Management, University of
Washington.

Moore, T. 1998. *Tax Funding for Private School Alternatives: The
Financial Impact on Milwaukee Public Schools and Taxpayers.* Milwaukee:
The Institute for Wisconsin's Future.

Mueller, V. et al. 1995. "Minnesota." *Public School Finance Programs of
the United States and Canada, 1993-94*. Eds. Gold, S., Smith, D.,
Lawton, S. New York: Nelson Rockefeller Institute of Government, State
University of New York.

Mulholland, L. 1999. *Arizona Charter School Progress Evaluation*.
Tempe, Ariz.: Morrison Institute for Public Policy, Arizona State
University. (Visited 2/9/00)
\<www.ade.state.az.us/charterschools/info/CharterSchoolStatusMainReport3-15-99.pdf\>

Parrish, T., Wolman, J. 1998. "Trends and New Developments in Special
Education Funding: What the States Report." *Funding Special Education*.
Eds. Parrish, T., Chambers, J., Guarino, C. Thousand Oaks, Calif.:
Corwin Press.

Premack, E. 1999. California Charter School Finance. Sacramento, Calif..
Excerpts from an earlier version are available at (Visited 2/9/00)
\<www.csus.edu/ier/charter/

chartfistab.html\>.

Premack, E. 1998. "UCLA's Charter School Study." California State
University, Institute for Education Reform.
\<www.csus.edu/ier/charter/news_12_6_98.html\>

Prince H. Fall 1999a, "Follow the Money: An Initial View of Elementary
Charter School Spending in Michigan." *Journal of Education Finance*.
175-194.

Prince, H. March 1999b. "A Second Look at Elementary Charter School
Spending in Michigan." Paper presented at the annual meeting of the
American Education Finance Association, Seattle.

Prince, H. 1997. "Expenditure Patterns of Michigan's Charter Schools: An
Exploratory Story." Paper presented at the annual meeting of the
American Education Finance Association, Savannah, Ga.

Protheroe, N. October 1997. "ERS Local School Budget Profile Study."
*School Business Affairs.* 42-49.

Public Sector Consultants, Inc., and MAXIMUS, Inc. 1999*. Michigan's
Charter School Initiative: From Theory to Practice.* East Lansing,
Mich.: Michigan Department of Education. (Visited 2/9/00)
\<www.mde.state.mi.us/reports/psaeval9901/

pscfullreport.pdf\>.

Ramanathan, A, Zollers, N. 1999. "For-Profit Schools Continue to Skimp
on Special Education, A response to Naomi Zigmond." *Phi Delta Kappan*
80: 284-290

RPP International. Berman, P., Nelson, B., Ericson, J., Perry, R.,
Silverman, D*.* 2000. A National Study of Charter Schools: Fourth-Year
Report (Visited 2/9/00)

\<www.ed.gov/pubs/charter4thyear/\>.

--- 1999. *A National Study of Charter Schools: Third-Year Report.*
(Visited 2/9/00) \<www.ed.gov/pubs/charter3rdyear/\>.

--- 1998. *A National Study of Charter Schools: Second-Year Report.*
(Visited 2/9/00) \<www.ed.gov/pubs/charter98/\>.

--- 1997. *A National Study of Charter Schools: First-Year Report.*
Washington, D.C.: Office of Educational Research and Improvement. U.S.
Department of Education. (Visited 2/9/00)
\<www.ed.gov/pubs/charter/index.html\>.

Rofes, E. 1998. *How Are School Districts Responding to Charter Laws and
Charter Schools? A Study of Eight States and the District of Columbia*.
Berkeley, Calif.: Policy Analysis for California Education.

Rothstein, R. (with Miles, K.). 1995. *Where's the Money Gone? Changes
in the Level and Composition of Education Spending* Washington, D.C.:
Economic Policy Institute.

Rothstein. R. 1997. *Where's The Money Gone? Changes in the Level and
Composition of Education Spending, 1991-96.* Washington, D.C.: Economic
Policy Institute.

SRI International. Powell, J., Blackorby, J., Marsh, J., Finnegan, K.,
Anderson, L. 1997. *Evaluation of Charter School Effectiveness.*
Sacramento, Calif.: Legislative Analyst's Office. (Visited 2/9/00)
\<www.lao.ca.gov/sri_charter_schools_1297-part1.html\>.

Texas Education Agency. Office of Charter Schools. 1998. *Open
Enrollment Charter Schools: Second Year Evaluation*. Austin, Texas.
(Visited2/9/00) \<www.tea.state.tx.us/charter/eval98/index.html\>.

Thompson, J. 1995. "Hawaii." *Public School Finance Programs of the
United States and Canada, 1993-94*. Ed. Gold, S., Smith, D., Lawton, S.
New York: Nelson Rockefeller Institute of Government, State University
of New York.

U.S. General Accounting Office (GAO). 1998a*. Charter Schools: Federal
Funding Available but Barriers Exist*. Washington D.C. GAO/HEHS-98-84.
(Visited 2/9/00) \<frwebgate.access.gpo.gov/

cgi-bin/useftp.cgi?IPaddress=162.140.64.88&filename=he98084.txt&directory=/

diskb/wais/data/gao\>.

U.S. GAO. 1998b. *Charter Schools: Recent Experiences in Accessing
Federal Funds*. Washington D.C GAO/T-HEHS-98-129. (Visited 2/9/00)
\<frwebgate.access.gpo.gov/cgi-bin/useftp.cgi?IPaddress=162.140.64.88

&filename=he98129t.txt&directory=/diskb/wais/data/gao\>.

U.S. GAO. 1997. *Charter Schools: Issues Affecting Access to Federal
Funding*. Washington D.C. GAO/T-HEHS-97-216. (Visited 2/9/00)
\<frwebgate.access.gpo.gov/cgi-bin/useftp.cgi?IPaddress=162.140.64.88&filename=

he97216t.txt&directory=/diskb/wais/data/gao\>.

Wells, A. 1998*. Beyond the Rhetoric of Charter School Reform: A Study
of Ten California School Districts*. Los Angeles, Calif.: University of
California at Los Angeles.

(Visited 2/9/00) \<www.gseis.ucla.edu/docs/charter.pdf\>.

WestEd. 1998. "The Findings and Implications of Increased Flexibility
and Accountability: An Evaluation of Charter Schools in Los Angeles
Unified School District." San Francisco: WestEd. (Visited 2/9/00)
\<www.wested.org/policy/pubs/full_text/lausd.htm\>.

Wisconsin Legislative Audit Bureau. 1998. *Charter School Program
Evaluation*. Madison, Wis. (Visited 2/9/00) \<
ww.legis.state.wi.us/lab/98-15full.pdf\>.

Wolfram, G. 1999. *Report of Hillsdale Policy Group on Michigan Charter
Schools*. Hillsdale, Mich.: Hillsdale Policy Group. (Visited 2/9/00)
\<www.charterschools.org/whatsnew/pr/domore0899.html\>

Wynn, M. 1995. "New Jersey." *Public School Finance Programs of the
United States and Canada, 1993-94*. Ed. Gold, S., Smith, D., Lawton, S.
New York: Nelson Rockefeller Institute of Government, State University
of New York.

Zigmond, N. 1999. "Special Education Revisited: A Response to Zollers
and Ramanathan." *Phi Delta Kappan* 80: 228-234.

Zollers, N., Ramanathan, A. 1998. "For-Profit Charters and Students with
Disabilities: The Sordid Side of the Business of Schooling." *Phi Delta
Kappan* 79: 297-304

## Appendix

This appendix contains the state profiles that formed the basis of the
analysis provided in this report. They detail each state's finance
system as well as information on expected funding levels for charter
schools in a variety of circumstances. The tables provide a breakdown of
how different pupil characteristics affect overall funding and how
funding varies across type of school. State officials were consulted
during this process, and they reviewed each profile.

The text entries describe funding practices and issues related to
finance such as financial reporting, participation in state retirement
systems, and asset ownership issues. The tables illustrate how charter
schools generate a per-pupil amount of funding (expressed as funding per
member rather than funding per pupil served by a specific program) in a
variety of circumstances that depend primarily on variations in the type
of students enrolled. Each table provides funding estimates for three
hypothetical charter schools (described fully in the methodology section
of this report). The hypothetical **basic elementary charter school**
enrolls no special needs or at-risk students and is generally located in
a district with state average geographic and financial characteristics.
The hypothetical **middle cost K-12 charter school** is located in the
same district as the basic elementary charter school, but has a
population closely matching the state average student population
regarding grade level, at-risk and special needs characteristics. In
most instances, the hypothetical **at-risk upper grade charter school**
has double the state average enrollment of special needs and at-risk
students and is located in a big city.

Generally, each hypothetical charter school has a population of 100
students (a number that allows easy conversion to percentages). In
instances where funding varies by school size, the population sometimes
varies from 100 students to highlight the impact of school size on
funding levels. Arizona, for example, has 500 students enrolled in the
hypothetical basic elementary school. In the first section of each state
table, the column FTE (full-time equivalent) or WFTE (weighted full-time
equivalent) provides an enrollment breakdown by student type. Because
FTE students are sometimes counted twice (e.g., first as a regular
student and then as a special education student), the breakdown of FTE
students does not necessarily add up to 100.

Subsequent sections of each state table provide information on base
funding and categorical funding expressed as amounts per FTE pupil
(\$/Member) including states with a pupil weighting system of funding
averaged across the entire membership rather than pupils served in
specific programs. In the New Jersey middle cost K-12 charter school,
for example, four Tier II special education students each generate
\$3,024 in state categorical aid for combined additional funding of
\$12,100. Averaged over the entire membership of 100 students, the
additional funding is \$121 per member. Table entries are always
expressed in "per member" amounts. Federal funding includes the average
dollar per member that each school's population should generate for
Title 1, limited English proficient, and special education students as
explained fully in the methodology section of the report. Start-up funds
and food service revenue are not included. Capital funding is a table
entry, but not a component of "total revenue."

## Alaska 

**Base Funding:** Authorized by school districts, charter schools are
entitled to 100 percent of state operations funding based on average
per-pupil revenue. School districts, however, can charge for indirect or
administrative costs approved by the state for an amount up to 22
percent of funding. Charter schools are classified as either alternative
schools or independent schools. Alternative schools enroll fewer than
200 students and are considered a part of the district school with the
largest average daily membership (ADM). Independent schools enroll more
than 200 students and exist as their own entity. As a result,
independent charter schools benefit from increased funding weights
associated with school size.

**Adjustments for School Size and Cost Differentials:** An area cost
differential accounts for regional cost-of-living differences. The index
averages 1.27 with Anchorage's index at 1.00. A school size factor
allows more funding for smaller schools to account for higher costs in
low populated areas. Independent charter schools (more than 200
students) benefit from greater funding due to the adjustment for size.
The very small dependent schools benefit from the size adjustment only
to the extent that the district school with which it is associated
belongs to generates small school funding. The state department of
education specifically designed this incentive to encourage charter
schools to reach a certain efficiency level.

**Categorical Funds Including Special Education and Bilingual
Education:** Categorical funds are folded into a single block grant
under the umbrella of "special needs." Charter schools are eligible for
these funds if they provide required services for special needs
students. ADM adjusted for size and cost differential is multiplied by
the special needs factor of 1.20. Funding is the same no matter how many
students are served or how many programs are provided. This 20 percent
funding includes dollars for vocational education, special education
(except intensive special education), gifted and talented programs, and
bilingual/bicultural services.

**Low-Income Students:** Alaska has no low-income, at-risk or
compensatory aid program.

**Transportation:** Charter schools are not required to provide
transportation to students. Some charter schools receive *incidental*
transportation service from the state if the student lives within the
attendance center. These students do not cost the state any additional
money, and the state does not establish any additional routes for
charter school students.

**State Start-Up Assistance:** None.

**Capital Outlay and Facilities Assistance:** None.

**Timing of Payments:** Charter schools maintain their financial
accounts with the school districts and receive funding monthly from the
general operating budget.

**Financial Reporting:** Financial reporting is blended with school
district reporting. No independent audits are required.

**Acquisition of Debt and Disposition of Assets:** Charter schools may
acquire debt, but assets revert to the school district if the charter
school dissolves.

**Correspondence Schools:** An exception to funding rules is made for
schools not following traditional models including cyber-schools and
home schooling. In these situations, schools are funded at what has been
determined as a "correspondence school level" equal to approximately 80
percent of the base student allotment. Thus, funding for fixed costs in
regular schools is not available to correspondence schools.

**Property Issues:** A charter school recently attempted to build its
own building using private funds and then lease the building back to the
school district. This request was denied because the state department of
education viewed the arrangement as a conflict of interest.

  ------------------- ------------------- -- ------------ ---------- --- ---------- ---------- -- -- --------- -- --------- ---------- --
  **Alaska**                                 **Basic                     **Middle                                 **Urban              
                                             Elementary                  Cost K-12                                At-Risk              
                                             Charter                     Charter                                  Upper                
                                             School**                    School**                                 Grade**              

                                             **FTE**      **WFTE**       **FTE**    **WFTE**         **FTE**                **WFTE**   

  Weighted FTE                                                                                                                         
  calculations                                                                                                                         

                      Basic K-12             200          200.0          200        200.0            200                    200.0      

                      School size                         \+ 72.0                   \+ 72.0                                 \+ 72.0    
                      factor^a^                                                                                                        

                      subtotal                            272.0                     272.0                                   272.0      

                      District cost                       x 1.237                   x 1.237                                 x 1.000    
                      factor^b^                                                                                                        

                      Special needs                       x 1.0                     x 1.2                                   x 1.2      
                      factor^c^                                                                                                        

                      Subtotal                            336.5                     403.8                                   326.4      

                      Special education      0            0.0            36         0.0              72                     0.0        

                      Bilingual              0            0.0            25         0.0              50                     0.0        

                      Vocational/gifted      0            0.0            10         0.0              20                     0.0        

                      Enrolled in Title I    0            0.0            19         0.0              38                     0.0        

  Total weighted                                          336.5                     403.8                                   326.4      
  FTE^d^                                                                                                                               

                                                                                                                                       

  1\. Basic need^e^                          \$ 6,628     \$ 3,940       \$ 7,954   \$ 3,940         \$ 6,430               \$ 3,940   

  2\.                                        \$ -                        \$ -                        \$ -                              
  Transportation^f^                                                                                                                    

  3\. Federal funding                                                                                                                  

                      Other federal          \$ 91                       \$ 91                       \$ 91                             
                      programs                                                                                                         

                      Title I                \$ -                        \$ 125                      \$ 250                            

                      Special education      \$ -                        \$ 51                       \$ 101                            

                      Bilingual and          \$ -                        \$ 9                        \$ 18                             
                      immigrant                                                                                                        

  Total revenue                              \$ 6,719                    \$ 8,230                    \$ 6,890                          
  ------------------- ------------------- -- ------------ ---------- --- ---------- ---------- -- -- --------- -- --------- ---------- --

ASSUMPTIONS: All schools enroll 200 students (independent schools).
Basic elementary charter school has no special needs program. Middle
cost K-12 charter school population reflects the state average. At-risk
upper grade charter school has twice the state average concentration of
special needs students and is located in Anchorage.

^a^ In a 200 student school, small size adds about 72 students to the
WFTE.

^b^ District cost factor accounts for disparity in cost of living across
the state. State mean is 1.237.

^c^ Special needs factor is equal to 1.20. This factor accounts for all
categorical programs including special education (except intensive
special education), gifted and talented, vocational education, and
bilingual education. Middle cost school enrolls 30 special education
students, 25 bilingual students and 19 qualify for Title I programs.
At-risk school has twice the concentration of these students.

^d^ FTE plus school size factor, multiplied by district cost factor,
multiplied by special needs factor.

^e^ Basic need factor includes required local contribution, Title VIII
Impact Aid and state aid.

^f^ Charter schools receive transportation funding in-kind from the
state if the state decides to provide it. Average state transportation
funding is about \$725 per member.

## Arizona

Arizona charter schools obtain funds in two ways. State-authorized
(including both the state board of education and the state charter
school board) charter schools get base support, transportation and
capital funding as if they were school districts. School districts also
authorize charter schools that are independent of the school district
and funded under almost the same formula as state-authorized charter
schools. With district-authorized charter schools, school size
weightings are based on district characteristics, and transportation
funding is significantly higher than for state-authorized schools. These
schools generally are not located in the authorizing district.

**Base Funding:** Arizona basic support for school districts and charter
schools alike started with a foundation of \$2,533 in 1998-99. Funding
for maintenance and operations, transportation and capital expenditures
is added to the base funding. With the exception of some capital funds,
state funds are considered block grants to districts. School districts
are not required to direct funding to any specific programs; as a
result, capital outlay monies can be budgeted for maintenance and
operations. Beginning in 1999-2000, charter schools will be able to
spend capital funding for any purpose.

**Grade Level Weights and Adjustments for School Size:** Small school
districts in Arizona get more funding. High school students also
generate extra funds. Funding for state-authorized charter schools is
adjusted for individual school size. The weighting ranges from as high
as an additional 50 percent of the base support level for a small (less
than 100 students) high school to no increase in the base support level
for a large (more than 600 students) elementary school. Arizona provides
less funding for large charter schools to account for expected
efficiencies of larger schools.

**Special Education and Bilingual Programs:** Special education and
bilingual education are accounted for in the basic formula through
add-on weights (see table for weights). A weight for high-incidence
lower-cost handicaps such as learning disabilities, mental retardation
and the emotionally disturbed is applied to all students (not just the
handicapped) ranging from approximately 16 percent of funding for
elementary students to 27 percent for high school students. Charter
schools receive this funding whether or not they enroll special needs
students or provide services. High-cost handicaps and residential

and private school placement are funded through additional add-on
weights.

**At-Risk Funding:** Discretionary grants are available for K-3 at-risk
programs.

**Adjustment for Longer School Day:** Charter schools are eligible for
an additional 3 percent of funding (increasing to 5 percent in
1999-2000) for school years of more than 200 days.

**Transportation Support:** Transportation funding for charter schools
can be spent for any legitimate purpose. State-authorized charter
schools received a flat \$174 per member in 1998-99. A
district-authorized charter school's transportation allowance is based
on the approved daily route-miles for school transportation and the
number of eligible students transported. For 1998-99,
district-authorized charter schools received \$1.59 -\$1.95 per mile
(depends on ratio of pupils to route miles) and paid parents 10 cents or
25 cents per mile to drive their children to school. Charter schools can
use the difference (about \$1.50 per mile) to spend on programming.
School districts get the \$1.50 - \$1.92 per mile reimbursement mostly
for school buses, but because so many miles are involved when parents
drive their own children to a charter school, thousands of dollars per
pupil are generated. The Arizona Joint Legislative Bureau computed that
one charter school was receiving \$12,080 per member for transportation.
The average transportation cost for district-authorized charter schools
in 1998-99 was \$2,144.

**Capital and Facilities Assistance:** All charter schools receive
capital and facilities funding: District-authorized charter schools are
funded based on characteristics of the sponsoring school district;
state-authorized charter schools are funded based on characteristics of
the school itself. Some capital funding depends on grade level and
school size. The capital outlay revenue limit program provides \$195
(large elementary schools) to \$330 per pupil (small high schools). The
capital levy revenue limit program, which depends on school size but not
grade level, provides \$195 (large schools) to \$300 per pupil (small
schools). Regular and charter high schools get \$70 per pupil for
textbooks, which in Arizona is considered a capital expense. A third
capital assistance program, providing \$496 per pupil for K-8 schools
and \$569 per pupil for high schools, is available only to charter
schools. School districts get funding under the new school construction
program. Based on need, funding for school districts averages only about
\$400 per pupil per year. With voter approval, however, school districts
can also sell tax exempt bonds to finance construction. Overall,
facilities funding for charter schools ranges from \$900 to \$1,300 per
student. Since charter schools qualify for capital funding as if they
were small school districts, charter schools get better funding than the
larger surrounding school districts in which they are located.
Additionally, charter schools are granted flexibility with facilities
funding and may spend the money on any legitimate purpose. School
districts must spend the money on capital outlay and construction.

**Charter School Stimulus Fund:** Under the original state legislation,
Arizona created a "stimulus fund" earmarked for start-up and facility
costs. The upper limit for state start-up grants was up to \$100,000,
but the average grant size was \$21,000. Arizona terminated the state
stimulus funds in the 1997-98 school year in response to a court case
brought by the Arizona Department of Education against former Bureau of
Indian Affairs (BIA) schools that had converted to charter schools. The
state argued that former BIA schools should not continue to receive both
state stimulus and BIA-federal funds. Thus, it argued Arizona should be
exempt from its responsibility to fund BIA's charter schools through the
state stimulus fund, or the state should be able to deduct the amount of
state start-up funding from the federal start-up grants. The state won
the case and Arizona has decided not to apply for federal start-up
monies. Instead, state-authorized charter schools may apply directly for
federal start-up funds.

**Timing of Payments:** For state-authorized charter schools, new
charter schools are paid one-third of the total apportionment on July 1
and then one-twelfth of the total amount in eight monthly payments from
Oct. 15 through June 15. In subsequent years, charter schools are paid
in 12 monthly installments.

**Uniform Financial Reporting:** All state-authorized charter schools
take part in the state's uniform financial reporting system. Charter
schools may seek exemption from this requirement. District chartered
schools are exempted from uniform financial reporting as individual
schools.

**Auditing Practice:** Independent financial audits are required of
state-authorized charter schools. District charter schools are included
in the district's budget where the charter school is located and audited
as a part of that district.

**Ownership and Disposition of Assets:** All property accumulated by
charter schools, including property purchased with public schools,
remains property of the charter school.

**Teacher Retirement:** A charter school is eligible to participate in
the Arizona state retirement system, but most choose not to participate.

  ---------------- ------------------ -- ------------ ------------ ---------- -- ------------ --------- ---------- -- -- --------- ------------ --------- ---------- --
  **Arizona**                                         **Basic                    **Middle                                **Urban                                     
                                                      Elementary                 Cost K-12                               At-Risk                                     
                                                      Charter                    Charter                                 Upper                                       
                                                      School**                   School**                                Grade**                                     

                                         **Weight**   **FTE**      **WFTE**      **Weight**   **FTE**   **WFTE**                   **Weight**   **FTE**   **WFTE**   

  Grade/school                                                                                                                                                       
  size weights^a^                                                                                                                                                    

                   Basic K-8             1.28         500.0        639.00        1.39         132.0     183.22                     1.40         0.0       0.00       

                   Basic 9-12            1.40         0.0          0.00          1.56         68.0      106.01                     1.56         99.0      154.34     

  Student count                                                                                                                                                      
  add-ons^b^                                                                                                                                                         

                   Hearing impairment    3.34         0.0          0.00                       0.2       0.67                                    0.4       1.34       

                   K-3                   0.04         0.0          0.00                       60.0      2.40                                    0.0       0.00       

                   LEP                   0.06         0.0          0.00                       8.0       0.48                                    16.0      0.96       

                   MD-R, AR, and         2.00         0.0          0.00                       0.0       0.04                                    0.0       0.08       
                   SMR-R                                                                                                                                             

                   MD-SC, A-SC, and      5.02         0.0          0.00                       0.4       2.01                                    0.8       4.01       
                   SMR-SC                                                                                                                                            

                   Multiple              6.03         0.0          0.00                       0.1       0.43                                    0.1       0.87       
                   disabilities                                                                                                                                      

                   Orthopedic            1.74         0.0          0.00                       0.1       0.17                                    0.2       0.35       
                   (resource)                                                                                                                                        

                   Orthopedic            5.64         0.0          0.00                       0.1       0.45                                    0.2       0.90       
                   (self-contained)                                                                                                                                  

                   ED, MIMR, SLD, SLI    0.00         0.0          0.00                       7.0       0.02                                    14.0      0.04       
                   and OHI                                                                                                                                           

                   ED (private)          2.63         0.0          0.00                       0.1       0.16                                    0.1       0.32       

                   Moderate MR           2.81         0.0          0.00                       0.2       0.56                                    0.4       1.12       

                   Visual impairment     4.83         0.0          0.00                       0.1       0.68                                    0.3       1.35       

                   Total                              500.0        639.00                     200.0     297.30                                  99.0      165.68     

                                                                                                                                                                     

  1\. FY 1998-1999                                    \$3,237      \$2,533                    \$3,765   \$2,533                                 \$4,239   \$2,533    
  base ^c^                                                                                                                                                           

  2\. State                                           \$ 174                                  \$ 174                                            \$ 174               
  transportation                                                                                                                                                     
  aid^d^                                                                                                                                                             

  3\. Federal                                                                                                                                                        
  funding                                                                                                                                                            

                   Title I                            \$ -                                    \$ 127                                            \$ 254               

                   Special education                  \$ -                                    \$ 36                                             \$ 72                

                   Bilingual and                      \$ -                                    \$ 11                                             \$ 22                
                   immigrant                                                                                                                                         

                   Other federal                      \$ 49                                   \$ 49                                             \$ 49                
                   programs                                                                                                                                          

                                                                                                                                                                     

  Total revenue                                       \$3,460                                 \$4,162                                           \$4,810              

                                                                                                                                                                     

  4\. Capital                                                                                                                                                        
  outlay revenue                                                                                                                                                     
  limit                                                                                                                                                              

                   K-8 support                        \$ 249       \$ 195                     \$ 271    \$ 195                                                       
                   level^e^                                                                                                                                          

                   9-12 support                                                               \$ 329    \$ 211                                  \$ 329    \$ 211     
                   level^e^                                                                                                                                          

                   9-12 textbook ^f^                                                          \$ 70                                             \$ 70                

  5\. Capital levy                                    \$ 248       \$ 194                     \$ 281    \$ 194                                  \$ 302    \$ 194     
  revenue limit^e^                                                                                                                                                   

  6\. Additional                                                                                                                                                     
  capital                                                                                                                                                            
  Assistance                                                                                                                                                         

                   K-8 support                        \$ 496                                  \$ 496                                                                 
                   level^f^                                                                                                                                          

                   9-12 support                                                               \$ 569                                            \$ 569               
                   level^f^                                                                                                                                          

  Facilities                                          29%                                     25%       per K-8                                 26%                  
  percent of                                                                                                                                                         
  current revenue                                                                                                                                                    

                                                                                              30%       per 9-12                                                     

  Total revenue                                       \$4,453                                 \$5,209   per K-8                                 \$6,081              
  with facilities                                                                                                                                                    

                                                                                              \$5,411   per 9-12                                                     
  ---------------- ------------------ -- ------------ ------------ ---------- -- ------------ --------- ---------- -- -- --------- ------------ --------- ---------- --

ASSUMPTIONS: Table applies to state-sponsored charter schools. Basic
elementary charter school is a 500 student elementary school with no
special populations. Middle cost K-12 charter school is a 200 student
high school and elementary school with the state average special
populations. At risk upper grade charter school has 99 high school
students with twice the state average concentration of special needs
students.

^a^ Support level weight of .0.159 (K-8) or 0.279 (K-12) is incorporated
into grade level/school size weight.

^b^ MD-R (Multiple Disabilities-Resource), AR (Autism-Resource), SMR-R
(Severe Mental Retardation-Resource), MD-SC (Multiple Disabilities-Self
Contained), A-SC (Autism-Self Contained), SMR-SC (Severe Mental
Retardation-Self Contained), ED (Emotional Disability), MIMR (Mild
Mental Retardation), SLD (Specific Learning Disability), SLI
(Speech/Language Impairment), and OHI (Other Health Impairments).

^c^ Add 3 percent for a school with a 200 day school year.

^d^ District-sponsored charter schools get significantly more
transportation funding, but not school size weights (see text).

^e^ WFTE calculations based only on school size and grade-level weights.

^f^ Funding based on FTE count, not WFTE.

## California

**Base Funding:** School districts authorize charter schools, but
students are allowed to cross district lines to attend charter schools.
Charter school and school district funding comes from the base revenue
limit program and an extensive system of categorical funding averaging
about \$1,000 per student.[^43] For the 1997-98 school year, the base
revenue limit averaged about \$4,040 per pupil with most districts
spending within \$300 of the average. Although this money is considered
general purpose funding, school districts typically spend approximately
8 percent of the base revenue limit on special education and
transportation. Charter schools are not automatically entitled to the
full amount of base revenue funding. School districts frequently charge
administrative fees and subtract amounts to cover district-provided
services.

**Pupil Count:** Unlike most states, California charter school funding
depends on *average daily attendance* (ADA). Charter schools with low
attendance rates experience reduced funding. The alternative method,
*average daily membership* (ADM) is used in all states with charter
schools except Texas and California. Low-income and at-risk students
usually have the highest absence rates. ADA funding discourages the
establishment of charter schools serving these high-cost children and
contributes to funding problems for charter schools that choose to do
so.

**Categorical Funding:** Charter schools are entitled to state
discretionary and categorical funds if they have eligible students.
Charter schools negotiate for categorical funds with the school
district. No statutory requirements specify that charter schools must
expend funds received from a particular state-funded categorical program
for that particular purpose. Charter schools can receive categorical
funding for the following programs: lottery funds,

school improvement programs, desegregation funding, state instructional
materials, class size reduction, special education, transportation,
gifted and talented, economic impact aid, mentor teacher and state
compensatory education. Prior to 1999-2000, California law did not
clearly entitle charter schools to lottery funds. Some school districts
did not pass lottery funds on to charter schools because the funds were
considered neither base revenue limit funds nor categorical funds. Table
1 shows district average categorical funding per member.

**Special Education:** Charter schools are entitled to special education
funding to the extent that the pupils in their schools are entitled to
special education services. Special education used to be funded through
a complex reimbursement model, but the state has implemented a per
capita funding model. Based on the assumption that children with
disabilities are uniformly distributed among districts, funding is based
on total enrollment rather than on the district's special education
population. Charter schools must negotiate for funding with either their
authorizing district or the Special Education Local Planning Area
(SELPA). District special education funding formulas call for a fixed
contribution of approximately 6 percent from the district's general
purpose aid.

**Limited-English Proficiency:** Accounted for as a categorical program.

**Low-Income Students:** Accounted for as a categorical program based on
student eligibility for free- and reduced-price lunch.

**State Desegregation Funding:** Charter schools can receive funding if
the charter school agrees to participate in the state plan. The Edison
Schools, Inc. charter school in San Francisco received approximately
\$680 per pupil in 1998-99 for this program.

**Transportation:** Transportation plans are detailed in the charter.
The California Department of Education ruled that charter school
students are entitled to state categorical aid for transportation, which
averages about \$40 per student (not per user).

**State Start-Up Assistance:** A small revolving loan fund with \$5.5
million offers \$50,000 loans with a two-year repayment schedule.

**Capital Outlay and Facilities Assistance:** None.

**Timing of Payments:** Apportionment to charter schools is on the same
schedule as apportionment to district schools.

**Facility Ownership:** Since the charter school is a part of the
district, a facility owned by a charter school still belongs to the
district. The charter needs to spell out responsibility for maintenance
and insurance on the facility, as well as any other financial
arrangements regarding facilities that may arise. In the case of
start-up schools, charter schools are able to purchase property.

**Uniform Financial Reporting:** None.

**Auditing Practice:** The charter specifies whether the charter school
is part of the school district audit or has its own audit conducted by
an independent auditor in accordance with Generally Accepted Auditing
Standards. The charter school component of a school district audit could
be as simple as one line titled, "payment to charter school," or it
could treat charter schools like other district schools.

**Teacher Retirement:** Teachers are eligible to participate in the
state retirement system. Charter school teachers, not the governing
board of the charter school, choose whether to participate, and most
charter schools do.

**Administrative Fees:** School districts, county departments of
education or the state board of education (all chartering agencies) may
charge for the actual costs of supervisory oversight of a charter
school, not to exceed 1 percent of the revenue of the charter school. If
the charter school is receiving rent-free facilities from the chartering
agency, then the chartering agency can charge 3 percent of the charter
school revenue for supervisory oversight. A local agency that is
providing supervisory oversight and administrative costs necessary to
secure charter school funding may charge 3 percent of total charter
school revenue.

<table>
<colgroup>
<col style="width: 33%" />
<col style="width: 1%" />
<col style="width: 8%" />
<col style="width: 2%" />
<col style="width: 9%" />
<col style="width: 1%" />
<col style="width: 8%" />
<col style="width: 2%" />
<col style="width: 9%" />
<col style="width: 1%" />
<col style="width: 8%" />
<col style="width: 2%" />
<col style="width: 10%" />
</colgroup>
<tbody>
<tr class="odd">
<td><strong>California</strong></td>
<td></td>
<td colspan="3"><blockquote>
<p><strong>Basic Elementary Charter School</strong></p>
</blockquote></td>
<td></td>
<td colspan="3"><blockquote>
<p><strong>Middle Cost K-12 Charter School</strong></p>
</blockquote></td>
<td></td>
<td colspan="3"><blockquote>
<p><strong>Urban At-Risk Upper Grade</strong></p>
</blockquote></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td><strong>FTE</strong></td>
<td></td>
<td colspan="2"><strong>$/Member</strong></td>
<td><strong>FTE</strong></td>
<td></td>
<td colspan="2"><strong>$/Member</strong></td>
<td><strong>FTE</strong></td>
<td></td>
<td><strong>$/Member</strong></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td>Total FTE enrollment</td>
<td></td>
<td>100</td>
<td></td>
<td></td>
<td></td>
<td>100</td>
<td></td>
<td></td>
<td></td>
<td>100</td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td>Average daily attendance (ADA)<sup>a</sup></td>
<td></td>
<td>95</td>
<td></td>
<td></td>
<td></td>
<td>95</td>
<td></td>
<td></td>
<td></td>
<td>80</td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td>Revenue limit per ADA</td>
<td></td>
<td></td>
<td></td>
<td>$ 4,031</td>
<td></td>
<td></td>
<td></td>
<td>$ 4,031</td>
<td></td>
<td></td>
<td></td>
<td>$ 4,031</td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td>1. Revenue limit per FTE</td>
<td></td>
<td>100</td>
<td></td>
<td>$ 3,829</td>
<td></td>
<td>100</td>
<td></td>
<td>$ 3,829</td>
<td></td>
<td>100</td>
<td></td>
<td>$ 3,225</td>
</tr>
<tr class="odd">
<td>2. State categorical funds<sup>b</sup></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td>Lottery funds</td>
<td></td>
<td></td>
<td></td>
<td>$ 105</td>
<td></td>
<td></td>
<td></td>
<td>$ 105</td>
<td></td>
<td></td>
<td></td>
<td>$ 105</td>
</tr>
<tr class="odd">
<td>School improvement program</td>
<td></td>
<td></td>
<td></td>
<td>$ 93</td>
<td></td>
<td></td>
<td></td>
<td>$ 93</td>
<td></td>
<td></td>
<td></td>
<td>$ 93</td>
</tr>
<tr class="even">
<td>Limited-English proficiency</td>
<td></td>
<td>0</td>
<td></td>
<td>$ -</td>
<td></td>
<td>25</td>
<td></td>
<td>$ 180</td>
<td></td>
<td>50</td>
<td></td>
<td>$ 360</td>
</tr>
<tr class="odd">
<td>Desegregation</td>
<td></td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td></td>
<td>$ 680</td>
</tr>
<tr class="even">
<td>State instructional materials</td>
<td></td>
<td></td>
<td></td>
<td>$ 31</td>
<td></td>
<td></td>
<td></td>
<td>$ 31</td>
<td></td>
<td></td>
<td></td>
<td>$ 31</td>
</tr>
<tr class="odd">
<td>Class size reduction</td>
<td></td>
<td></td>
<td></td>
<td>$ 150</td>
<td></td>
<td></td>
<td></td>
<td>$ 150</td>
<td></td>
<td></td>
<td></td>
<td>$ 150</td>
</tr>
<tr class="even">
<td>Special education</td>
<td></td>
<td>0</td>
<td></td>
<td>$ -</td>
<td></td>
<td>10</td>
<td></td>
<td>$ 222</td>
<td></td>
<td>20</td>
<td></td>
<td>$ 444</td>
</tr>
<tr class="odd">
<td>Transportation</td>
<td></td>
<td></td>
<td></td>
<td>$ 41</td>
<td></td>
<td></td>
<td></td>
<td>$ 41</td>
<td></td>
<td></td>
<td></td>
<td>$ 41</td>
</tr>
<tr class="even">
<td>Mega item growth &amp; COLA</td>
<td></td>
<td></td>
<td></td>
<td>$ 12</td>
<td></td>
<td></td>
<td></td>
<td>$ 12</td>
<td></td>
<td></td>
<td></td>
<td>$ 12</td>
</tr>
<tr class="odd">
<td>Gifted and talented</td>
<td></td>
<td></td>
<td></td>
<td>$ 7</td>
<td></td>
<td></td>
<td></td>
<td>$ 7</td>
<td></td>
<td></td>
<td></td>
<td>$ 7</td>
</tr>
<tr class="even">
<td>Economic impact aid</td>
<td></td>
<td></td>
<td></td>
<td>$ 6</td>
<td></td>
<td></td>
<td></td>
<td>$ 80</td>
<td></td>
<td></td>
<td></td>
<td>$ 190</td>
</tr>
<tr class="odd">
<td>Mentor teacher</td>
<td></td>
<td></td>
<td></td>
<td>$ 16</td>
<td></td>
<td></td>
<td></td>
<td>$ 16</td>
<td></td>
<td></td>
<td></td>
<td>$ 16</td>
</tr>
<tr class="even">
<td>State compensatory education</td>
<td></td>
<td>0</td>
<td></td>
<td>$ -</td>
<td></td>
<td>20</td>
<td></td>
<td>$ 40</td>
<td></td>
<td>40</td>
<td></td>
<td>$ 80</td>
</tr>
<tr class="odd">
<td>3. Federal funding</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td>Title I</td>
<td></td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td></td>
<td>$ 134</td>
<td></td>
<td></td>
<td></td>
<td>$ 268</td>
</tr>
<tr class="odd">
<td>Special education</td>
<td></td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td></td>
<td>$ 38</td>
<td></td>
<td></td>
<td></td>
<td>$ 76</td>
</tr>
<tr class="even">
<td>Bilingual and immigrant</td>
<td></td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td></td>
<td>$ 14</td>
<td></td>
<td></td>
<td></td>
<td>$ 28</td>
</tr>
<tr class="odd">
<td>Other federal programs</td>
<td></td>
<td></td>
<td></td>
<td>$ 52</td>
<td></td>
<td></td>
<td></td>
<td>$ 52</td>
<td></td>
<td></td>
<td></td>
<td>$ 52</td>
</tr>
<tr class="even">
<td>Total revenue</td>
<td></td>
<td></td>
<td></td>
<td>$ 4,342</td>
<td></td>
<td></td>
<td></td>
<td>$ 5,044</td>
<td></td>
<td></td>
<td></td>
<td>$ 5,858</td>
</tr>
</tbody>
</table>

ASSUMPTIONS : Basic elementary charter school enrolls students with no
special needs. Middle cost charter school has students with special
needs reflecting the state average. At-risk upper grade charter school
is in an urban area with twice the concentration of special needs
students as the state average.

^a^ Funding in California is based on average daily attendance rather
than membership. Basic elementary and middle cost charter schools are
assumed to have a 95 percent attendance rate, while the upper grade
urban at-risk school is assumed to have an 80 percent attendance rate.

^b^ Categorical aid estimates are based upon 1996-97 per pupil revenues
adjusted for inflation. Charter schools are eligible for all 60
categorical programs if they document their eligibility. The categorical
chosen above represent the programs for which most charter schools could
receive funding

## Colorado

**Base Funding:** A charter school's base budget in 1997-98 was at least
80 percent of the school district's per-pupil operating revenue. The
remaining 20 percent *or more* is negotiated over such issues as the
purchasing of services from the school district or the receipt of
in-kind services from the district. The average charter school receives
approximately 95 percent of per-pupil operating revenue, and some
receive up to 120 percent. The base amount of funding for each pupil was
\$3,667 in budget year 1997-98, but adjustments for several school
district characteristics add considerably more funding. A few districts
have additional local option taxes that are sometimes shared with
charter schools. In 1998-99, "override revenue" averaged \$224 per pupil
in school districts where charter schools are located, although half of
the charter schools are in districts with no override revenue.

**Funding Based on School District Characteristics:** Several
adjustments are made to the school district base funding level
including:

> *Cost-of-Living Factor:* The cost-of-living factor reflects the
> differences in the costs of goods and services among each of the 176
> school districts in Colorado. This factor ranged from 1.004 to 1.630
> for the 1997-98 budget year.
>
> *Personnel Costs Factor:* The personnel costs factor is based on
> enrollment and is used to adjust for cost differentials in employee
> salaries. This factor ranged from 79.9 percent to 90.5 percent in
> budget year 1997-98.
>
> *Non-Personnel Costs Factor:* The non-personnel costs factor accounts
> for expenditure differentials other than personnel.
>
> *Size Factor:* This factor provides more funds for both larger
> districts and smaller districts to adjust for the high cost of urban
> education or the diseconomies of small scale.

**At-Risk Funding:** Colorado uses participation in the federal free
lunch program as the measure of an at-risk population. For each at-risk
pupil, a district receives funding equal to at least 11.5 percent but no
more than 30 percent of its total per-pupil funding. A district receives
funding for the greater of (1) each pupil eligible for the federal free
lunch program; or (2) a calculated number of pupils based on the number
of grade 1-8 pupils eligible for the federal free lunch program as a
percentage of the total population. The at-risk adjustment is
automatically included in the per-pupil funding calculation for charter
schools. Charter schools serving large numbers of at-risk students do
not automatically get better funding, although these schools may
negotiate a higher funding rate with the school district.

**Special Education:** Charter schools negotiate with school districts
for special education funding or the in-kind provision of special
education services. A school district is entitled to a base amount of
state funding for special education equal to the amount of state funding
received the preceding budget year. Once the base amount is determined
for all districts, remaining state monies are distributed to districts
servicing more special education students than the preceding budget
year. State funding is insufficient, so most special education services
are financed by general operating revenues.

**Bilingual Education:** Charter schools negotiate with districts for
bilingual education funding, which is about 20 percent of the state
average per-pupil operating costs for each bilingual student.

**Transportation:** Like school districts, charter schools are not
required to provide transportation to students. State transportation for
school districts is funded at a rate in cents per mile, plus 34 percent
of the amount by which the costs exceed the mileage reimbursement.
General operating revenues finance most transportation costs. Charter
schools can negotiate for services or funds, and can use funds to
reimburse parents for car-pool costs.

**Capital Outlay and Facilities Assistance:** School districts are
required to budget at least \$216 per pupil (1997-98 budget year) out of
their equalized formula funding for capital outlay, insurance and risk
management. This amount was not automatically included in per-pupil
operating revenue, the basis of charter school funding. Many school
districts funded charter schools at 105 percent, an amount that
incorporates per-pupil operating and capital outlay funding. Charter
schools operating their own facilities were more likely to get 105
percent funding. The 1999 legislature raised per pupil funding to a
minimum of 95 percent of per pupil revenue (PPR), a figure that includes
funding for capital outlay, insurance and risk management. Approximately
25 percent of Colorado charter schools are housed in school district
facilities (Caldwell and Arrington, 2000).

The charter school law requires districts to provide vacant facilities
to charter schools free of charge. Partly because of this provision,
about 25 percent of Colorado charter schools are housed in school
district facilities. Charter schools are not entitled to proceeds of the
local bond redemption fund mill levies of school districts used to pay
off debt incurred for constructing school facilities. In rapidly growing
Jefferson county, for example, charter schools do not receive the \$717
per student raised through the levy (Caldwell and Arrington, 2000).

The Colorado Educational and Cultural Facilities Authority (CECFA)
serves as a "conduit" for obtaining tax-exempt financing for
organizations that "provide an educational program pursuant to a charter
from a school district." CECFA issues the bonds and loans the proceeds
to the charter school after charging transaction fees of \$20,00 to
\$30,000. The bonds issued are "non-course" to CECFA, which means that
responsibility for repayment is limited to the charter school and
investors will focus on creditworthiness of the charter school rather
than the CECFA. Six charter schools have already obtained tax-exempt
financing to refinance, purchase or build facilities (Caldwell and
Arrington, 2000) Together, the six schools raised over \$23 million in
financing at an interest rate between 6 percent and 7 percent, cutting
borrowing costs in half compared to commercial lenders.

**Administrative Fees:** Administrative fees are allowed and specified
in the charter.

**Uniform Financial Reporting:** Charter school financial reporting is
blended with the district's reporting, but the reporting is not uniform.
State officials expect to provide some comparable charter school data
for the 1998-99 school year.

**Auditing Practices:** Charter schools are required to describe the
manner in which an annual audit of financial and administrative
operations is conducted. Most charter schools appear as an entity in the
school district's audit.

**Responsibility for Debt and Disposition of Assets:** School districts
are responsible for charter school debt. Some districts allow charter
schools to form nonprofit corporations that can acquire debt and
purchase property. Other school districts allow no debt. Issues about
the disposition of assets from a closed charter school are currently
unresolved, but because charter schools are entities of the schools
district, districts are probably responsible.

**Teacher Retirement:** All charter schools participate in public
employee retirement systems.

<table>
<colgroup>
<col style="width: 4%" />
<col style="width: 28%" />
<col style="width: 9%" />
<col style="width: 2%" />
<col style="width: 11%" />
<col style="width: 1%" />
<col style="width: 8%" />
<col style="width: 2%" />
<col style="width: 11%" />
<col style="width: 1%" />
<col style="width: 7%" />
<col style="width: 2%" />
<col style="width: 11%" />
</colgroup>
<tbody>
<tr class="odd">
<td colspan="2"><strong>Colorado</strong></td>
<td colspan="3"><blockquote>
<p><strong>Basic Elementary Charter School</strong></p>
</blockquote></td>
<td></td>
<td colspan="3"><blockquote>
<p><strong>Middle Cost K-12 Charter School</strong></p>
</blockquote></td>
<td></td>
<td colspan="3"><blockquote>
<p><strong>Urban At-Risk Upper Grade</strong></p>
</blockquote></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td><strong>FTE</strong></td>
<td></td>
<td colspan="2"><strong>$/Member</strong></td>
<td><strong>FTE</strong></td>
<td></td>
<td colspan="2"><strong>$/Member</strong></td>
<td><strong>FTE</strong></td>
<td></td>
<td><strong>$/Member</strong></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td colspan="2">Total FTE enrollment</td>
<td>100</td>
<td></td>
<td></td>
<td></td>
<td>100</td>
<td></td>
<td></td>
<td></td>
<td>100</td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td colspan="2">Per pupil funding calculation</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td colspan="2">FY98 base funding</td>
<td></td>
<td></td>
<td>$ 3,667</td>
<td></td>
<td></td>
<td></td>
<td>$ 3,667</td>
<td></td>
<td></td>
<td></td>
<td>$ 3,667</td>
</tr>
<tr class="odd">
<td colspan="2">Cost-of-living factor</td>
<td></td>
<td></td>
<td>1.124</td>
<td></td>
<td></td>
<td></td>
<td>1.194</td>
<td></td>
<td></td>
<td></td>
<td>1.236</td>
</tr>
<tr class="even">
<td colspan="2">Personnel costs factor</td>
<td></td>
<td></td>
<td>0.865</td>
<td></td>
<td></td>
<td></td>
<td>0.905</td>
<td></td>
<td></td>
<td></td>
<td>0.9050</td>
</tr>
<tr class="odd">
<td colspan="2">Non-personnel costs factor</td>
<td></td>
<td></td>
<td>0.135</td>
<td></td>
<td></td>
<td></td>
<td>0.095</td>
<td></td>
<td></td>
<td></td>
<td>0.0950</td>
</tr>
<tr class="even">
<td colspan="2">Size factor</td>
<td></td>
<td></td>
<td>1.051</td>
<td></td>
<td></td>
<td></td>
<td>1.032</td>
<td></td>
<td></td>
<td></td>
<td>1.0342</td>
</tr>
<tr class="odd">
<td colspan="2">Per pupil funding (PPF)</td>
<td></td>
<td></td>
<td>$ 4,268</td>
<td></td>
<td></td>
<td></td>
<td>$ 4,450</td>
<td></td>
<td></td>
<td></td>
<td>$ 4,462</td>
</tr>
<tr class="even">
<td colspan="2">At-risk funding (ARF)<sup>a</sup></td>
<td>0</td>
<td></td>
<td>$ -</td>
<td></td>
<td>28</td>
<td></td>
<td>$ 142</td>
<td></td>
<td>56</td>
<td></td>
<td>$ 284</td>
</tr>
<tr class="odd">
<td colspan="2">Per pupil operating revenue<sup>b</sup></td>
<td></td>
<td></td>
<td>$ 4,052</td>
<td></td>
<td></td>
<td></td>
<td>$ 4,375</td>
<td></td>
<td></td>
<td></td>
<td>$ 4,530</td>
</tr>
<tr class="even">
<td colspan="2">(PPOR)= [PPF+ ARF]-216</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td colspan="2">Percent of PPOR negotiated<sup>c</sup></td>
<td></td>
<td></td>
<td>90%</td>
<td></td>
<td></td>
<td></td>
<td>100%</td>
<td></td>
<td></td>
<td></td>
<td>120%</td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td colspan="2">1. Categorical funds<sup>d</sup></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td colspan="2">Transportation payments<sup>e</sup></td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td></td>
<td>$ 55</td>
</tr>
<tr class="odd">
<td colspan="2">Bilingual education</td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td></td>
<td>$ 4</td>
<td></td>
<td></td>
<td></td>
<td>$ 8</td>
</tr>
<tr class="even">
<td colspan="2">Special education</td>
<td>0</td>
<td></td>
<td>$ -</td>
<td></td>
<td>10</td>
<td></td>
<td>$ 106</td>
<td></td>
<td>20</td>
<td></td>
<td>$ 212</td>
</tr>
<tr class="odd">
<td colspan="2">Gifted/talented</td>
<td>0</td>
<td></td>
<td>$ -</td>
<td></td>
<td>7</td>
<td></td>
<td>$ 7</td>
<td></td>
<td>7</td>
<td></td>
<td>$ 7</td>
</tr>
<tr class="even">
<td colspan="2">2. Federal funding<sup>d</sup></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td colspan="2">Title I</td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td></td>
<td>$ 98</td>
<td></td>
<td></td>
<td></td>
<td>$ 96</td>
</tr>
<tr class="even">
<td colspan="2">Special education</td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td></td>
<td>$ 40</td>
<td></td>
<td></td>
<td></td>
<td>$ 80</td>
</tr>
<tr class="odd">
<td colspan="2">Bilingual and immigrant</td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td></td>
<td>$ 7</td>
<td></td>
<td></td>
<td></td>
<td>$ 14</td>
</tr>
<tr class="even">
<td colspan="2">1. Total negotiated revenue</td>
<td>100</td>
<td></td>
<td>$ 3,647</td>
<td></td>
<td>100</td>
<td></td>
<td>$ 4,375</td>
<td></td>
<td>100</td>
<td></td>
<td>$ 5,436</td>
</tr>
</tbody>
</table>

ASSUMPTIONS: Basic elementary charter school receives 90 percent of
PPOR, and its students generate no state or federal categorical funding
for the school district. Data are reflective of Moffat school district.
Middle cost K-12 charter school receives 100 percent of PPOR, and its
students generate the average state and federal categorical aid for the
school district. Data are reflective of El Paso school district. At-risk
upper grade charter school receives 120 percent of PPOR and has twice
the state average in state and federal categorical funding. Data are
reflective of Denver.

^a^ At-risk funding expressed as the average amount per pupil, not per
at-risk student.

^b^ \$216 per student is earmarked for capital reserves and insurance.
Beginning in 1999-2000, charter schools will receive this amount
automatically.

^c^ District and charter school negotiate the percent of PPOR to account
for in-kind provision of services. Beginning in 1999-2000, minimum
funding is set at 95 percent.

^d^ Categoricals are state per pupil averages in 1997-98. Few Colorado
charter schools directly received state categorical aid or federal aid.
Categorical and federal aid are reflected either in the negotiated
adjustment of the percentage of PPOR, or is received "in-kind" through
district provision of the service.

^e^ Some districts provide transportation at no charge to charter
schools.

## Connecticut

**Base Funding:** Funding depends on whether charter schools are
authorized by a school district or the state board of education. Of the
12 original charter schools, only two were authorized by school
districts.

> *Local district charter school*. Charter school students are counted
> in the school district's enrollment. All payments to the charter
> school are negotiated locally. The state-mandated minimum expenditure,
> or foundation level, was \$5,775 in 1998-99. However, the typical
> school district added an extra 15 percent to the foundation through
> local tax levies for general operations, bringing total base revenue
> to an average of about \$6,500 per pupil.
>
> *State charter school*. State-authorized charter schools receive a
> flat \$6,500 per pupil. Consequently, funding does not depend on the
> location of the charter school or the resident school districts of
> their students. Although approximately equal to the state average sum
> of the foundation level and local option property taxes for general
> operations, the relationship is coincidental. Charter school students
> are not counted in the district of residence for equalization aid
> purposes, so school districts could lose about \$5,775 in state
> equalization aid when a student attends a state-sponsored charter
> school.[^44] A majority of school districts in Connecticut, however,
> are protected from state aid reductions due to an elaborate system of
> constraints on growth and reductions in state aid.

**Funding Based on School District Characteristics:** Local district
charter schools have access to funding based on all of the unique
characteristics of the local school district including higher revenues
associated with high wealth and tax effort. State-chartered school
funding corresponds only to the state average.

**Special Education:** Most school district special education costs are
financed from general operating revenue. Consequently, the \$6,500 base
funding for charter schools includes most of the money an average school
district spends on special education. In the most recent revision of the
Connecticut charter school law, students identified as needing special
education services in a charter school are entitled to a planning and
placement team meeting held by the school district in which the student
resides. The school district also pays the charter school "reasonable"
costs in excess of \$6,500 (plus other state, federal and private
resources if any) for special education services. Most observers
interpret this provision of the charter school law as making special
education the responsibility of the school district. If special
education costs comprise 18 percent of a school district's budget (the
state average), this in-kind service amounts to \$1,000 per member (not
just students served) after accounting for state aid (\$85 per member)
and federal aid (\$60 per member).

**Transportation:** School districts in which a charter school is
located, including state-authorized charter schools, provide
transportation in-kind for students residing in the district. The state
provides equalization aid for transportation averaging about \$85 per
pupil (across total enrollment, not pupils transported). State
transportation aid ranges from nil to 60 percent of actual costs
depending on district wealth. Total state and local transportation costs
per-pupil amounts to about \$380 per pupil.

**Categorical Programs:** Charter schools are eligible for competitive
grants and other categorical aids as if the charters were a school
district.

**Limited-English Proficiency:** Regular schools with more than 20 LEP
students are required to have a bilingual program. The state provides
about \$150 per bilingual pupil.

**Low-Income Students:** Connecticut's foundation funding formula
provides more state equalization aid for school districts with large
numbers of children from families receiving Aid for Families with
Dependent Children (AFDC). Charter schools authorized by a school
district could benefit from this extra funding. The flat \$6,500 payment
for state-chartered schools, however, has no adjustment for low-income
students.

**Capital Outlay and Facilities Financing:** Connecticut school
districts spend about \$550 per pupil on capital facilities and debt
repayment. Charter schools have no access to this funding. Charter
schools may apply for low interest loans from the state Health and
Educational Facilities Authority, which makes direct loans up to
\$150,000 to Connecticut charter schools. Up to 5 percent of unexpended
funds each year can be contributed to a reserve to finance a specific
capital or equipment purchase.

**Timing of Payments:** Early state aid payments assist charter schools
with cash flow. For state-chartered schools, 25 percent of funding is
transferred to the charter school in July and another 25 percent in
September.

**Uniform Financial Reporting:** Charter schools are required to
complete a modified form of the state uniform financial reporting
required of school districts.

**Auditing Practice:** All charter schools must submit a certified audit
statement of revenues and expenditures to the chartering authority.

**Responsibility for Debt:** The governing body of a state-authorized
charter school is responsible for debts. School districts do not have to
assume the debts of a charter school unless it is part of an agreement
or contract**.**

**Ownership and Disposition of Assets:** Charter schools can purchase,
own and convey real property.

**Unexpended Funds:** Up to 10 percent of such funds can be used for
next year's expenses, and 5 percent can be used as a reserve to finance
a specific capital or equipment purchase.

**Teacher Retirement:** Qualified school professionals may participate,
and the charter school makes payments under the same terms and
conditions as school districts will. About 75 percent of Connecticut
charter schools participate.

<table style="width:100%;">
<colgroup>
<col style="width: 3%" />
<col style="width: 22%" />
<col style="width: 3%" />
<col style="width: 4%" />
<col style="width: 8%" />
<col style="width: 2%" />
<col style="width: 9%" />
<col style="width: 0%" />
<col style="width: 8%" />
<col style="width: 2%" />
<col style="width: 9%" />
<col style="width: 1%" />
<col style="width: 8%" />
<col style="width: 2%" />
<col style="width: 11%" />
</colgroup>
<tbody>
<tr class="odd">
<td colspan="2"><strong>Connecticut</strong></td>
<td></td>
<td></td>
<td colspan="3"><blockquote>
<p><strong>Basic Elementary Charter School</strong></p>
</blockquote></td>
<td></td>
<td colspan="3"><blockquote>
<p><strong>Middle Cost K-12 Charter School</strong></p>
</blockquote></td>
<td></td>
<td colspan="3"><blockquote>
<p><strong>Urban At-Risk Upper Grade</strong></p>
</blockquote></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td><strong>FTE</strong></td>
<td></td>
<td colspan="2"><strong>$/Member</strong></td>
<td><strong>FTE</strong></td>
<td></td>
<td colspan="2"><strong>$/Member</strong></td>
<td><strong>FTE</strong></td>
<td></td>
<td><strong>$/Member</strong></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td colspan="2">Total FTE enrollment</td>
<td></td>
<td></td>
<td>100</td>
<td></td>
<td></td>
<td></td>
<td>100</td>
<td></td>
<td></td>
<td></td>
<td>100</td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td colspan="2">1. Foundation allowance<sup>a</sup></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td>$ 6,500</td>
<td></td>
<td></td>
<td></td>
<td>$ 6,500</td>
<td></td>
<td></td>
<td></td>
<td>$ 6,500</td>
</tr>
<tr class="odd">
<td colspan="2">2. Special education<sup>b</sup></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td>District provided</td>
<td></td>
<td></td>
<td>0</td>
<td></td>
<td>$ -</td>
<td></td>
<td>12</td>
<td></td>
<td>$ 1,000</td>
<td></td>
<td>24</td>
<td></td>
<td>$ 2,000</td>
</tr>
<tr class="odd">
<td></td>
<td>State categorical</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td></td>
<td>$ 85</td>
<td></td>
<td></td>
<td></td>
<td>$ 170</td>
</tr>
<tr class="even">
<td colspan="2">3. Low income<sup>c</sup></td>
<td></td>
<td></td>
<td>0</td>
<td></td>
<td>$ -</td>
<td></td>
<td>24</td>
<td></td>
<td>$ -</td>
<td></td>
<td>48</td>
<td></td>
<td>$ -</td>
</tr>
<tr class="odd">
<td colspan="3">4. Limited-English proficient<sup>d</sup></td>
<td></td>
<td>0</td>
<td></td>
<td>$ -</td>
<td></td>
<td>12</td>
<td></td>
<td>$ 18</td>
<td></td>
<td>24</td>
<td></td>
<td>$ 36</td>
</tr>
<tr class="even">
<td colspan="2">5. Student transportation<sup>e</sup></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td>$ 380</td>
<td></td>
<td></td>
<td></td>
<td>$ 380</td>
<td></td>
<td></td>
<td></td>
<td>$ 380</td>
</tr>
<tr class="odd">
<td colspan="2">6. Federal funding</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td>Title I</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td></td>
<td>$ 123</td>
<td></td>
<td></td>
<td></td>
<td>$ 246</td>
</tr>
<tr class="odd">
<td></td>
<td>Special education</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td></td>
<td>$ 59</td>
<td></td>
<td></td>
<td></td>
<td>$ 118</td>
</tr>
<tr class="even">
<td></td>
<td colspan="2">Bilingual and immigrant</td>
<td></td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td></td>
<td>$ 4</td>
<td></td>
<td></td>
<td></td>
<td>$ 8</td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2">Other federal programs</td>
<td></td>
<td></td>
<td></td>
<td>$ 58</td>
<td></td>
<td></td>
<td></td>
<td>$ 58</td>
<td></td>
<td></td>
<td></td>
<td>$ 58</td>
</tr>
<tr class="even">
<td colspan="2">Total revenue</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td>$ 6,938</td>
<td></td>
<td></td>
<td></td>
<td>$ 8,227</td>
<td></td>
<td></td>
<td></td>
<td>$ 9,516</td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2">Without special education</td>
<td></td>
<td></td>
<td></td>
<td>$ 6,938</td>
<td></td>
<td></td>
<td></td>
<td>$ 7,083</td>
<td></td>
<td></td>
<td></td>
<td>$ 7,228</td>
</tr>
</tbody>
</table>

ASSUMPTIONS: Each school is sponsored by the state chartering authority.
Basic elementary charter school enrolls only elementary students who
generate no extra funds. Middle cost K-12 charter school has the same
student population characteristics as the average Connecticut district.
At-risk upper grade charter school has twice the concentration of
special education and at-risk students as the state average.

^a^ Most special education costs are financed from general operating
revenue (state special education aid averages about \$85 per pupil).

^b^ School districts either pay charter schools for the extra costs of
special education or provide the services "in-kind." Special education
costs average 18 percent of spending in Connecticut. The estimated value
of federal, state and district-provided special education is about 18
percent of expenditures.

^c^ Unlike school districts, state charter schools receive no funding
adjustment for low income pupils.

^d^ \$150 per bilingual pupil when schools have more than 20 pupils
needing a bilingual program.

^e^ Estimated state average cost per student enrolled (not per student
transported) for 1998-99. Includes both state and local sources.

## Delaware

**Base** **Funding:** Per-pupil funding is based on expenditures in the
home districts of charter school students. Per-pupil revenue is
calculated separately for regular and special education based on school
district expenditures. The state funding formula assigns different unit
amounts, usually teachers, to pupils of various grade levels and special
education categories. It also provides differentiated funding based on
staff experience and credentialing. Charter schools receive staff
experience funding based on the characteristics of their own staff.

**Funding Based on School District Characteristics:** Charter school
funding varies with school district spending. This small state relies
heavily on state funding, so there is little variation in spending among
school districts based on wealth, tax effort or geography. About 80
percent of school districts spend between \$8,730 and \$9,270 per pupil
excluding federal funds, special education and other categorical
programs.

**Grade Level Funding:** The formula contains very small adjustments for
grade level cost differentials based on standardized pupil to teacher
ratios. In effect, pupils in grades 1-3 receive 5 percent greater
funding because one teacher is funded for every 19 students instead of
one teacher for every 20 students. There is no adjustment for high
school grades.

**Special Education:** Funding for special education is based on the
average school district spending for special education students.

**Limited-English Proficiency:** No separate state funding provided.

**Low-Income or Compensatory Education:** Programs for compensatory
education are rolled into the state aid formula, so there is no separate
per-pupil funding for at-risk children. In effect, school districts
receive district average funding regardless of their actual at-risk
population.

**State Categorical Aid:** Charter schools are eligible to receive other
state categorical aids as though they were school districts. These
programs include the Delaware Mentor Teacher

Program and programs for gifted and talented children. Funding amounts
to less than \$50 per child enrolled**.**

**Transportation:** Charter schools can elect to have the school
district in which they are located provide transportation for students
residing in the district. Families outside of the school district are
responsible for transportation to a bus route within the district.
Charter schools can also elect to provide transportation themselves,
either directly or through a contract. Funding is provided up to the
contracted amount as if the charter were a vocational school district
(up to \$600-\$700 per pupil transported). If a charter school supplies
the services directly, it is funded like a vocational school district
and can keep any excess transportation revenue.

**Capital Outlay Funding and Facilities Financing:** None provided. The
state's Minor Capital Improvement Fund expressly omits charter schools.

**Timing of Payments:** Charter schools get advance funding. Based on a
student roster submitted in May, the state and district advance a
portion of estimated revenue during the summer. The remaining funding is
provided in the middle of the school year**.**

**Uniform Financial Reporting:** Charter school annual reports must
follow a uniform format and contain information related to revenues,
expenditures, assets and liabilities. Before a charter school can
operate outside of the state's accounting, payroll, purchasing,
compensation, pension and/or benefits systems, a specific memorandum of
understanding has to be developed. One reason for this procedure is to
ensure that the state's financial reporting requirements are satisfied.

**Auditing Practice:** The state auditor conducts annual financial
audits of all charter schools just as it conducts audits on regular
school districts. The state or the chartering agency can also conduct
financial, programmatic or compliance audits of a charter school. In
cooperation with the state education department, the chartering
authority must conduct such audits at least every three years.

**Responsibility for Debt:** Charter schools can incur debt. Since
charter school boards have the power of a local school board, they also
bear responsibility for the debt.

**Ownership and Disposition of Assets:** Charter schools can acquire
assets including real property. Assets revert to the state if a charter
school closes.

**Teacher Retirement:** A charter school may choose to be covered by the
state retirement system or choose another retirement system in lieu of
the state retirement system. If the charter school chooses another
retirement system, a memorandum of understanding must be executed. All
charter schools in 1998-99 participated in the state retirement system.

<table style="width:100%;">
<colgroup>
<col style="width: 3%" />
<col style="width: 23%" />
<col style="width: 2%" />
<col style="width: 3%" />
<col style="width: 7%" />
<col style="width: 2%" />
<col style="width: 11%" />
<col style="width: 2%" />
<col style="width: 7%" />
<col style="width: 2%" />
<col style="width: 11%" />
<col style="width: 1%" />
<col style="width: 0%" />
<col style="width: 7%" />
<col style="width: 0%" />
<col style="width: 2%" />
<col style="width: 11%" />
</colgroup>
<tbody>
<tr class="odd">
<td colspan="2"><strong>Delaware</strong></td>
<td></td>
<td></td>
<td colspan="3"><blockquote>
<p><strong>Basic Elementary Charter School</strong></p>
</blockquote></td>
<td></td>
<td colspan="3"><blockquote>
<p><strong>Middle Cost K-12 Charter School</strong></p>
</blockquote></td>
<td></td>
<td colspan="5"><strong>Urban At-Risk Upper Grade</strong></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td><strong>FTE</strong></td>
<td></td>
<td colspan="2"><strong>$/Member</strong></td>
<td><strong>FTE</strong></td>
<td></td>
<td colspan="2"><strong>$/Member</strong></td>
<td colspan="2"><strong>FTE</strong></td>
<td colspan="2"></td>
<td><strong>$/Member</strong></td>
</tr>
<tr class="odd">
<td colspan="2">Total FTE enrollment</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td>Basic 1 - 3</td>
<td></td>
<td></td>
<td>0</td>
<td></td>
<td></td>
<td></td>
<td>27</td>
<td></td>
<td></td>
<td></td>
<td colspan="2">20</td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td>Basic 4 - 6</td>
<td></td>
<td></td>
<td>60</td>
<td></td>
<td></td>
<td></td>
<td>27</td>
<td></td>
<td></td>
<td colspan="2"></td>
<td colspan="2">21</td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td>Basic 7 - 12</td>
<td></td>
<td></td>
<td>40</td>
<td></td>
<td></td>
<td></td>
<td>37</td>
<td></td>
<td></td>
<td></td>
<td colspan="2">41</td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td>EMH students</td>
<td></td>
<td></td>
<td>0</td>
<td></td>
<td></td>
<td></td>
<td>3</td>
<td></td>
<td></td>
<td></td>
<td colspan="2">6</td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td>SED students</td>
<td></td>
<td></td>
<td>0</td>
<td></td>
<td></td>
<td></td>
<td>3</td>
<td></td>
<td></td>
<td></td>
<td colspan="2">6</td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td>LD students</td>
<td></td>
<td></td>
<td>0</td>
<td></td>
<td></td>
<td></td>
<td>3</td>
<td></td>
<td></td>
<td></td>
<td colspan="2">6</td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td>Total FTE</td>
<td></td>
<td></td>
<td>100</td>
<td></td>
<td></td>
<td></td>
<td>100</td>
<td></td>
<td></td>
<td></td>
<td colspan="2">100</td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="even">
<td colspan="2">1. Base funding<sup>a</sup></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2">State average teachers</td>
<td></td>
<td></td>
<td></td>
<td>$ 8,844</td>
<td></td>
<td></td>
<td></td>
<td>$ 8,992</td>
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td>$ 9,277</td>
</tr>
<tr class="even">
<td></td>
<td colspan="3">Charter average teachers</td>
<td></td>
<td></td>
<td>$ 8,635<sup>b</sup></td>
<td></td>
<td></td>
<td></td>
<td>$ 8,777</td>
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td>$ 9,048</td>
</tr>
<tr class="odd">
<td></td>
<td>Entry-level teachers</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td>$ 8,191</td>
<td></td>
<td></td>
<td></td>
<td>$ 8,317</td>
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td>$ 8,558</td>
</tr>
<tr class="even">
<td colspan="2">2. Special education<sup>c</sup></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td>$ -</td>
</tr>
<tr class="odd">
<td colspan="2">3. Low-income<sup>c</sup></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td>$ -</td>
</tr>
<tr class="even">
<td colspan="3">4. Other state categorical<sup>d</sup></td>
<td></td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td>$ -</td>
</tr>
<tr class="odd">
<td colspan="2">5. Transportation<sup>e</sup></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td>$ 215</td>
<td></td>
<td></td>
<td></td>
<td>$ 215</td>
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td>$ 215</td>
</tr>
<tr class="even">
<td colspan="2">6. Federal funding</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td>Title I</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td></td>
<td>$ 161</td>
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td>$ 302</td>
</tr>
<tr class="even">
<td></td>
<td>Special education</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td></td>
<td>$ 52</td>
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td>$ 104</td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2">Bilingual and immigrant</td>
<td></td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td></td>
<td>$ 6</td>
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td>$ 12</td>
</tr>
<tr class="even">
<td></td>
<td colspan="2">Other federal programs</td>
<td></td>
<td></td>
<td></td>
<td>$ 64</td>
<td></td>
<td></td>
<td></td>
<td>$ 64</td>
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td>$ 64</td>
</tr>
<tr class="odd">
<td colspan="2">Total revenue<sup>a</sup></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td colspan="2">State average teachers</td>
<td></td>
<td></td>
<td></td>
<td>$ 9,123</td>
<td></td>
<td></td>
<td></td>
<td>$ 9,490</td>
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td>$ 9,974</td>
</tr>
<tr class="odd">
<td></td>
<td colspan="3">Charter average teachers</td>
<td></td>
<td></td>
<td>$ 8,914</td>
<td></td>
<td></td>
<td></td>
<td>$ 9,275</td>
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td>$ 9,745</td>
</tr>
<tr class="even">
<td></td>
<td>Entry-level teachers</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td>$ 8,470</td>
<td></td>
<td></td>
<td></td>
<td>$ 8,815</td>
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td>$ 9,255</td>
</tr>
</tbody>
</table>

ASSUMPTIONS: Basic elementary charter school has no at-risk or special
needs pupils. Middle cost K-12 school has the same student
characteristics as the average Delaware district. At-risk upper grade
charter school has twice the concentration of special education and
at-risk students as the Delaware average. All hypothetical charter
schools are located in an average wealth and tax effort school district.

^a^ "State average" funds charter schools as if their staff had state
average characteristics regarding experience and credentialling.
"Charter average" reflects the lower experience and credential levels of
current charter schools. "Entry-level" reflects funding for a school
staffed entirely by entry-level personnel.

^b^ Represents a K-12 district with state average expenditures (80
percent of districts spend between \$8,636 to \$9,278), excluding
special education and other categorical programs.

^c^ incorporated into base funding calculation.

^d^ Amounts total to less than \$50.

^e^ Assume that 33 students are transported at a cost of \$650 per pupil
(see text).

## District of Columbia

**Base Funding and Grade Level Weights:** Both the school district and a
newly created public charter school board authorize charter schools. In
concept, D.C. charter schools receive the average basic cost per pupil,
adjusted for grade level. They also get their share of money for special
needs pupils. As operationalized in 1998-99, charter schools receive a
base funding per pupil of \$5,500 in grades 6-8. In grades K-5, students
get 5 percent more, and in high school, students are weighted 20 percent
more, or \$6,600. Charter schools with pre-kindergarten or preschool
programs get 16 percent extra, and summer school programs could add
another 10 percent. A majority of charter school funding came from "new
money" in 1998-99, rather than diverting funds from other public
schools. Local funding provided only \$12.2 million for charter schools
in 1998-99. The U.S. Congress appropriated \$16.8 million to make up the
shortfall.

**Special Education and Limited-English Proficiency:** Special education
students are divided into four categories that generate extra funding:

  ----------------- ------------ ------------ ---------------------------------------------
                                 **Weight**   **Per-pupil Supplement**

  **Special                                   
  Education**                                 

                    Level 1      +0.22        \$1,210 All services in regular classroom

                    Level 2      +0.80        \$4,400 Student leaves classroom (less than
                                              25% of day)

                    Level 3      +1.13        \$9,515 Student leaves classroom (more than
                                              50% of day)

                    Level 4      +1.73        \$9,460 Self-contained classroom

  **Residential**                +1.70        \$9,350 Student resides at school facility

  **LEP**                        +0.40        \$2,200
  ----------------- ------------ ------------ ---------------------------------------------

In 1997-98, D.C. public schools served only about 10 percent of students
in special education programs, but the district has a reputation for
procedural delays in assessing children---delays that can last for
years. Eventually, the District expects about 14 percent of students to
need special education services. Currently, special education accounts
for 20 percent of the school district budget when special education
transportation is included. The charter school weightings clearly
reflect that the average special education student costs well over twice
as much as the average regular student.

**Categorical Programs:** This concept is not applicable to D.C. because
it is both a state education agency and a school district. To the extent
that the central administration allocates categorical-type funding to
individual schools, these monies are already averaged into charter
school funding.

**Low-Income Students:** As with regular public schools, the income or
poverty status of students is not a specifically identifiable factor in
the charter school funding formula.

**Transportation:** Charter school students are entitled to
transportation, including reduced fares on D.C. public transportation
systems on the same basis as regular students. The D.C. transportation
program is driven primarily by special education transportation, which
accounts for 95 percent of expenditures.

**Capital Finances:** Charter schools in Washington, D.C., received a
facilities allowance of \$617 per pupil in 1998-99. The funds can be
spent for any purpose, not just for facilities. The facilities allowance
for 1999-2000 increases to \$1,058 per pupil, approximately the average
per-pupil capital expense in other public schools for the prior fiscal
year. Almost all capital improvement programs in traditional District of
Columbia public schools are devoted to the repair of leaky roofs, broken
windows, lead paint and asbestos removal, poor lighting, inadequate
heating, inoperable bathrooms and other repairs. Some charter schools
occupy former district schools and are using facility funds for exactly
the same purposes. Public schools already have excess property for sale,
and many schools are underutilized. Charter school operators are allowed
to purchase or lease (including lease with option to purchase) public
school facilities at a 15 percent to 25 percent discount.

**Federal Funds:** The weighting system incorporates federal funding for
special education and bilingual education. Charter schools get Title I
funding from the D.C. public schools as if they were traditional public
schools. For competitive federal grants, charter schools are treated
like independent school districts.

**Timing of Payments:** Charter schools receive 75 percent of funding in
October (the beginning of the federal fiscal year) based on initial
enrollment. The other 25 percent is paid in the spring based on
subsequent enrollment counts. Funding can decrease in the spring, but
not increase. New schools can get a loan based on projections of the
first payment.

**Mandated Administrative Fees:** Charter schools are required to pay
for any mandated district-wide assessments. Both the D.C. school board
and the public charter school board charge an administrative fee of 0.5
percent.

**Uniform Financial Reporting:** Required.

**Auditing Practice:** The school must undergo an independent financial
audit using government auditing standards.

**Responsibility for Debt and Ownership of Assets:** As a nonprofit
corporation, charter school governing boards own assets and are
responsible for debt. The chartering authorities monitor the disposition
of assets in the event of school closure.

**Teacher Retirement:** Only teachers who taught in other D.C. public
schools are eligible to continue participation in the teacher retirement
system. Otherwise, charter schools are not involved in the main D.C.
public employee retirement systems.

<table style="width:100%;">
<colgroup>
<col style="width: 2%" />
<col style="width: 23%" />
<col style="width: 3%" />
<col style="width: 9%" />
<col style="width: 9%" />
<col style="width: 10%" />
<col style="width: 1%" />
<col style="width: 10%" />
<col style="width: 10%" />
<col style="width: 2%" />
<col style="width: 8%" />
<col style="width: 10%" />
</colgroup>
<tbody>
<tr class="odd">
<td colspan="3"><strong>Dist. of Columbia</strong></td>
<td><strong>Cost Factor</strong></td>
<td colspan="2"><blockquote>
<p><strong>Basic Elementary Charter School</strong></p>
</blockquote></td>
<td></td>
<td colspan="2"><blockquote>
<p><strong>Middle Cost K-12 Charter School</strong></p>
</blockquote></td>
<td></td>
<td colspan="2"><blockquote>
<p><strong>Urban At-Risk Upper Grade</strong></p>
</blockquote></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td><strong>Weight</strong></td>
<td><strong>FTE</strong></td>
<td><strong>WFTE</strong></td>
<td></td>
<td><strong>FTE</strong></td>
<td><strong>WFTE</strong></td>
<td></td>
<td><strong>FTE</strong></td>
<td><strong>WFTE</strong></td>
</tr>
<tr class="odd">
<td colspan="2">Weighted FTE calculations</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td>Basic K-5</td>
<td></td>
<td>1.05</td>
<td>100</td>
<td>105.0</td>
<td></td>
<td>42</td>
<td>44.1</td>
<td></td>
<td>0</td>
<td>0.0</td>
</tr>
<tr class="odd">
<td></td>
<td>Basic 6-8</td>
<td></td>
<td>1.00</td>
<td>0</td>
<td>0.0</td>
<td></td>
<td>25</td>
<td>25.0</td>
<td></td>
<td>50</td>
<td>50.0</td>
</tr>
<tr class="even">
<td></td>
<td>Basic 9-12</td>
<td></td>
<td>1.20</td>
<td>0</td>
<td>0.0</td>
<td></td>
<td>33</td>
<td>39.6</td>
<td></td>
<td>50</td>
<td>60.0</td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2">Special education level 1</td>
<td>0.22</td>
<td>0</td>
<td>0.0</td>
<td></td>
<td>3</td>
<td>0.7</td>
<td></td>
<td>6</td>
<td>1.3</td>
</tr>
<tr class="even">
<td></td>
<td colspan="2">Special education level 2</td>
<td>0.80</td>
<td>0</td>
<td>0.0</td>
<td></td>
<td>3</td>
<td>2.4</td>
<td></td>
<td>6</td>
<td>4.8</td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2">Special education level 3</td>
<td>1.13</td>
<td>0</td>
<td>0.0</td>
<td></td>
<td>2</td>
<td>2.3</td>
<td></td>
<td>4</td>
<td>4.5</td>
</tr>
<tr class="even">
<td></td>
<td colspan="2">Special education level 4</td>
<td>1.73</td>
<td>0</td>
<td>0.0</td>
<td></td>
<td>2</td>
<td>3.5</td>
<td></td>
<td>4</td>
<td>6.9</td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2">Limited-English proficient</td>
<td>0.40</td>
<td>0</td>
<td>0.0</td>
<td></td>
<td>4</td>
<td>1.6</td>
<td></td>
<td>8</td>
<td>3.2</td>
</tr>
<tr class="even">
<td></td>
<td>Total weighted FTE</td>
<td></td>
<td></td>
<td></td>
<td>105.0</td>
<td></td>
<td></td>
<td>119.1</td>
<td></td>
<td></td>
<td>130.8</td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td colspan="2">1. Local funding</td>
<td></td>
<td></td>
<td>$ 5,775</td>
<td>$ 5,500</td>
<td></td>
<td>$ 6,549</td>
<td>$ 5,500</td>
<td></td>
<td>$ 7,192</td>
<td>$ 5,500</td>
</tr>
<tr class="odd">
<td colspan="2">2. Transportation<sup>a</sup></td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
</tr>
<tr class="even">
<td colspan="2">3. Summer school<sup>b</sup></td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
</tr>
<tr class="odd">
<td colspan="2">4. Other state categorical<sup>c</sup></td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
</tr>
<tr class="even">
<td colspan="2">5. Federal funding</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td>Title I</td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td>$ 268</td>
<td></td>
<td></td>
<td>$ 335</td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td>Special education</td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td><sup>d</sup></td>
<td></td>
<td></td>
<td><sup>d</sup></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td>Other federal programs</td>
<td></td>
<td></td>
<td>$ 134</td>
<td></td>
<td></td>
<td>$ 134</td>
<td></td>
<td></td>
<td>$ 134</td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td>Bilingual and immigrant</td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td><sup>d</sup></td>
<td></td>
<td></td>
<td><sup>d</sup></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td colspan="2">Total revenue</td>
<td></td>
<td></td>
<td>$ 5,909</td>
<td></td>
<td></td>
<td>$ 6,951</td>
<td></td>
<td></td>
<td>$ 7,661</td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td colspan="2">Facilities allowance</td>
<td></td>
<td></td>
<td>$ 617</td>
<td></td>
<td></td>
<td>$ 617</td>
<td></td>
<td></td>
<td>$ 617</td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td colspan="3">Total revenue with facilities allowance</td>
<td></td>
<td>$ 6,526</td>
<td></td>
<td></td>
<td>$ 7,568</td>
<td></td>
<td></td>
<td>$ 8,278</td>
<td></td>
</tr>
</tbody>
</table>

ASSUMPTIONS: Each school has 100 students. Basic elementary charter
school has no pupils generating program cost weightings. Middle cost
K-12 charter school has the same student population as the average D.C.
public school. At-risk upper grade charter school has twice the
concentration of students at each special education level as the D.C.
average, and all students qualify for federal Title I funding.

^a^ About 95 percent of transportation costs in D.C. are for special
education.

^b^ Charter schools providing qualifying summer school programs get an
extra 10 percent, or \$550.

^c^ Categorical-type funding to individual public schools is averaged
into the per-pupil allocation for charter schools.

^d^ Federal special education funding incorporated into student
weightings.

## Florida

**Base Funding:** Although school districts authorize charter schools,
Florida's charter schools tend to function independently. Charter school
students generate revenue for their schools in almost the same way that
students generate funding for their school district. In 1998-99, base
student funding in grades 4 to 8 was approximately \$3,223 per student.
An elaborate system of weighting for high-cost pupils raises base
funding by an average of 30 percent to about \$4,200 per pupil. A
cost-of-living differential ranges from 0.91 in counties with the lowest
cost of living to 1.07 in high-cost counties.

**Grade Level Funding:** Compared to students in grades 4 to 8, students
in grades 1 to 3 obtain 6 percent extra funding and high school students
receive about 14 percent more funding.

**Funding Based on School District Characteristics:** The base funding
formula for school districts accounts for declining enrollment,
sparsity, cost-of-living and similar factors. These adjustments are
passed on to charter schools.

**Special Education:** Special education students generate funding
through the base funding formula in five categories ranging from nearly
35 percent more for mild exceptionalities to approximately 700 percent
more for the most complicated special needs.

**Categorical Programs:** Charter schools are entitled to their share of
state discretionary (including lottery funding) and categorical funds
averaging about \$200 per pupil.

**Limited-English Proficiency:** LEP students generate 20 percent extra
funding through the weighting system.

**Low-Income Students:** Not specifically accounted for in the weighting
system.

**Transportation:** Charter schools are responsible for transportation
within a reasonable distance of the school and must show that
transportation is not a barrier to equal access. However, they do not
necessarily have to provide transportation. Extra funding, averaging
\$160 a student is available for this specific purpose under the same
formula applicable to school districts. Charter schools may contract
with the school district or private contractors.

**Capital and Facilities Financing:** Total school district capital
spending from all state and local sources in Florida is about \$1,000
per pupil (14 percent of total). Some charter schools in Florida are
housed in school district facilities; but since Florida is desperately
short of classroom space, most charter schools find their own
facilities. School districts are not required to share the proceeds of
discretionary local tax levies raised for school construction.
Significant, one-time capital funding has been available for established
charter schools through Florida's School Infrastructure Thrift Fund
(SIT).[^45] A district in which charter schools had been operating in
non-district facilities for at least a year was eligible for one-time
payments of \$5,800 (elementary) to \$8,800 (high school) per pupil
attending the charter school.[^46] If the charter schools' enrollment
grew, the district received additional payments corresponding to the
enrollment increase. The state department of education requires
districts and charter schools to submit a joint application for SIT
funds, which has resulted in shared allocations. The percentage of SIT
funds that districts share with charter schools ranges from 40 percent
to 95 percent, with most districts splitting the funds evenly with their
charter schools. SIT funds will be available until the one-time
appropriation is exhausted, which could occur in 1999-2000.

The 1999 Florida Legislature established a separate capital outlay trust
fund for charter schools with its own annual appropriation. Beginning in
their third year of operation, charter schools that did not use SIT
funding, receive the state's share of the 30-year amortized cost of a
"student station" in annual installments. In 1998-99, that figure
amounted to \$387 for each elementary school student, \$443 for each
middle school student, and \$587 for each high school student. Charter
schools can use capital outlay funds only for capital expenses.

**Cash Flow Assistance:** None available. School districts are not
allowed to advance funds to charter schools. Some school districts
require charter schools to secure a line of credit for start-up purposes
before a charter is granted.

**Administrative Fees:** School districts can charge administrative fees
of up to 5 percent, not to exceed the actual cost. Contract
administration includes technical assistance, monitoring compliance,
processing financial records, processing student records, special
education administration, test administration and processing of staff
certification records.

**Uniform Financial Reporting:** Beginning in 1997-98, charter schools
were included in Florida's Program Cost Reports submitted by school
districts to the state. Charter school information is prepared in the
same format and submitted as a separate exhibit in school district
audits. Both the Program Cost Report and school district audits are only
available from local school districts, a practice which seriously
compromises the usefulness of uniform reporting.

**Governmental Funds Accounting:** Charter schools are required to use a
governmental funds accounting model, and it is suggested that this model
align with Florida's "Red Book" accounts. Schools run by pre-existing
nonprofit organizations may use the accounting model of the parent
organization.

**Auditing Practice:** Independent financial audits are required and are
paid for by charter schools. Charter schools operated by a pre-existing
nonprofit organization can be audited as part of the organization's
financial statements.

**Federal Funds Accounting:** School districts are responsible for
oversight and accounting. School districts can provide services directly
to charter schools or provide the funding and require the charter school
to account for funds as if the school district spent the money.

**Responsibility for Debt:** The governing body of charter schools is
responsible for debt. School districts are prohibited from assuming the
debts of charter schools**.**

**Ownership and Disposition of Assets:** Charter schools are required to
keep property records that clearly distinguish between property
purchased with government funds and other property. If a charter is not
renewed or terminated, the public assets revert to the school district.

**Teacher Retirement:** Governing boards of charter schools may
participate in the state teacher retirement system, but almost all have
chosen not to do so.

<table>
<colgroup>
<col style="width: 3%" />
<col style="width: 25%" />
<col style="width: 3%" />
<col style="width: 8%" />
<col style="width: 9%" />
<col style="width: 9%" />
<col style="width: 1%" />
<col style="width: 9%" />
<col style="width: 9%" />
<col style="width: 1%" />
<col style="width: 9%" />
<col style="width: 9%" />
</colgroup>
<tbody>
<tr class="odd">
<td colspan="2"><strong>Florida</strong></td>
<td></td>
<td><strong>Cost Factor</strong></td>
<td colspan="2"><strong>Basic Elementary Charter School</strong></td>
<td></td>
<td colspan="2"><strong>Middle Cost K-12 Charter School</strong></td>
<td></td>
<td colspan="2"><blockquote>
<p><strong>Urban At-Risk Upper Grade</strong></p>
</blockquote></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td><strong>Weight</strong></td>
<td><strong>FTE</strong></td>
<td><strong>WFTE</strong></td>
<td></td>
<td><strong>FTE</strong></td>
<td><strong>WFTE</strong></td>
<td></td>
<td><strong>FTE</strong></td>
<td><strong>WFTE</strong></td>
</tr>
<tr class="odd">
<td colspan="2">Weighted FTE calculations</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td>Basic K-3</td>
<td></td>
<td>1.057</td>
<td>50</td>
<td>52.9</td>
<td></td>
<td>25</td>
<td>26.4</td>
<td></td>
<td>0</td>
<td>0.0</td>
</tr>
<tr class="odd">
<td></td>
<td>Basic 4-8</td>
<td></td>
<td>1.000</td>
<td>50</td>
<td>50.0</td>
<td></td>
<td>23</td>
<td>23.0</td>
<td></td>
<td>0</td>
<td>0.0</td>
</tr>
<tr class="even">
<td></td>
<td>Basic 9-12</td>
<td></td>
<td>1.138</td>
<td>0</td>
<td>0.0</td>
<td></td>
<td>19</td>
<td>21.6</td>
<td></td>
<td>36</td>
<td>41.0</td>
</tr>
<tr class="odd">
<td></td>
<td>Exceptional level 1</td>
<td></td>
<td>1.341</td>
<td>0</td>
<td>0.0</td>
<td></td>
<td>11</td>
<td>14.8</td>
<td></td>
<td>22</td>
<td>29.5</td>
</tr>
<tr class="even">
<td></td>
<td>Exceptional level 2</td>
<td></td>
<td>2.072</td>
<td>0</td>
<td>0.0</td>
<td></td>
<td>5</td>
<td>10.4</td>
<td></td>
<td>10</td>
<td>20.7</td>
</tr>
<tr class="odd">
<td></td>
<td>Exceptional level 3</td>
<td></td>
<td>3.287</td>
<td>0</td>
<td>0.0</td>
<td></td>
<td>2</td>
<td>6.6</td>
<td></td>
<td>4</td>
<td>13.1</td>
</tr>
<tr class="even">
<td></td>
<td>Exceptional level 4</td>
<td></td>
<td>4.100</td>
<td>0</td>
<td>0.0</td>
<td></td>
<td>1</td>
<td>4.1</td>
<td></td>
<td>1</td>
<td>4.1</td>
</tr>
<tr class="odd">
<td></td>
<td>Exceptional level 5</td>
<td></td>
<td>6.860</td>
<td>0</td>
<td>0.0</td>
<td></td>
<td>1</td>
<td>6.9</td>
<td></td>
<td>1</td>
<td>6.9</td>
</tr>
<tr class="even">
<td></td>
<td>Dropout prevention</td>
<td></td>
<td>1.399</td>
<td>0</td>
<td>0.0</td>
<td></td>
<td>4</td>
<td>5.6</td>
<td></td>
<td>8</td>
<td>11.2</td>
</tr>
<tr class="odd">
<td></td>
<td>Ed alternatives 9-12</td>
<td></td>
<td>1.138</td>
<td>0</td>
<td>0.0</td>
<td></td>
<td>1</td>
<td>1.1</td>
<td></td>
<td>2</td>
<td>2.3</td>
</tr>
<tr class="even">
<td></td>
<td>ESOL</td>
<td></td>
<td>1.201</td>
<td>0</td>
<td>0.0</td>
<td></td>
<td>4</td>
<td>4.8</td>
<td></td>
<td>8</td>
<td>9.6</td>
</tr>
<tr class="odd">
<td></td>
<td>Voc-Ed 6-12</td>
<td></td>
<td>1.240</td>
<td>0</td>
<td>0.0</td>
<td></td>
<td>4</td>
<td>5.0</td>
<td></td>
<td>8</td>
<td>9.9</td>
</tr>
<tr class="even">
<td></td>
<td>Total</td>
<td></td>
<td></td>
<td>100</td>
<td>102.9</td>
<td></td>
<td>100</td>
<td>130.2</td>
<td></td>
<td>100</td>
<td>148.3</td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td colspan="3">1. State and local base funding</td>
<td></td>
<td>$ 3,315</td>
<td>$ 3,223</td>
<td></td>
<td>$ 4,196</td>
<td>$ 3,223</td>
<td></td>
<td>$ 4,780</td>
<td>$ 3,223</td>
</tr>
<tr class="odd">
<td></td>
<td>District cost differential<sup>a</sup></td>
<td></td>
<td></td>
<td>x 1.00</td>
<td></td>
<td></td>
<td>x 1.00</td>
<td></td>
<td></td>
<td>x 1.05</td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td colspan="2">Adjusted for cost differential</td>
<td></td>
<td>$ 3,315</td>
<td></td>
<td></td>
<td>$ 4,196</td>
<td></td>
<td></td>
<td>$ 5,018</td>
<td></td>
</tr>
<tr class="odd">
<td colspan="2">2. Other equalized funding</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td>Discretionary lottery</td>
<td></td>
<td></td>
<td>$ 62</td>
<td></td>
<td></td>
<td>$ 78</td>
<td></td>
<td></td>
<td>$ 89</td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td>Program related<sup>b</sup></td>
<td></td>
<td></td>
<td>$ 27</td>
<td></td>
<td></td>
<td>$ 34</td>
<td></td>
<td></td>
<td>$ 39</td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td>All other</td>
<td></td>
<td></td>
<td>$ 29</td>
<td></td>
<td></td>
<td>$ 37</td>
<td></td>
<td></td>
<td>$ 42</td>
<td></td>
</tr>
<tr class="odd">
<td colspan="2">3. Categorical aid</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td>Instructional materials</td>
<td></td>
<td></td>
<td>$ 78</td>
<td></td>
<td></td>
<td>$ 78</td>
<td></td>
<td></td>
<td>$ 78</td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td>Public school technology</td>
<td></td>
<td></td>
<td>$ 34</td>
<td></td>
<td></td>
<td>$ 34</td>
<td></td>
<td></td>
<td>$ 34</td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td>Student transportation<sup>c</sup></td>
<td></td>
<td></td>
<td>$ 160</td>
<td></td>
<td></td>
<td>$ 160</td>
<td></td>
<td></td>
<td>$ 160</td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td>Other state categorical<sup>d</sup></td>
<td></td>
<td></td>
<td>$ 85</td>
<td></td>
<td></td>
<td>$ 85</td>
<td></td>
<td></td>
<td>$ 85</td>
<td></td>
</tr>
<tr class="even">
<td colspan="2">4. Federal funding</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td>Title I</td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td>$ 137</td>
<td></td>
<td></td>
<td>$ 264</td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td>Special education</td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td>$ 58</td>
<td></td>
<td></td>
<td>$ 116</td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td>Other federal programs</td>
<td></td>
<td></td>
<td>$ 54</td>
<td></td>
<td></td>
<td>$ 54</td>
<td></td>
<td></td>
<td>$ 54</td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td>Bilingual and immigrant</td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td>$ 7</td>
<td></td>
<td></td>
<td>$ 14</td>
<td></td>
</tr>
<tr class="odd">
<td colspan="2">Total revenue</td>
<td></td>
<td></td>
<td>$ 3,843</td>
<td></td>
<td></td>
<td>$ 4,958</td>
<td></td>
<td></td>
<td>$ 5,993</td>
<td></td>
</tr>
</tbody>
</table>

ASSUMPTIONS: Each school has 100 students. Basic elementary charter
school has no pupils generating program cost weightings. Middle cost
K-12 charter school has the same student population as the average
Florida district. At-risk upper grade charter school has twice the state
average concentration of students generating program weightings.

^a^ District cost differential corresponds to the cost of living and
ranges from .91 to 1.07.

^b^ Charter school must provide qualifying programs. Includes safe
schools, dropout prevention and remediation.

^c^ Average state aid per pupil. Actual amount is determined by formula.
Cost probably exceeds aid.

^d^ Florida state average assumed for each charter school. Must have
qualifying programs.

## Georgia

**Base** **Funding:** School districts authorize and fund charter
schools. Support includes transportation and capital when feasible. A
pupil weighting system drives the school district funding formula.
Funding for charter schools is not required to follow exactly the state
funding formula for school districts.[^47]

**Grade Level Funding:** The formula uses high school general education
as a base and offers slightly higher weights (about 1.02 or 2 percent
extra) for grades 4-8. Grades K-3 have larger weights (1.34 for FTE
kindergarten students and 1.26 for grades 1-3). Categorical programs
that only serve particular grade levels add to grade level differences.

**Special Education:** The pupil weighting system ranges from 2.2 (120
percent more funding) to 5.3 for the more severely handicapped children.
Districts are under no requirement to pass along the exact amount of
extra funding to charter schools, but they are required to fund charter
schools with special education needs as they would any other school.

**Gifted and Talented:** As part of the pupil weighting system, these
students are weighted at 1.6 and generate 60 percent extra funding.

**Limited-English Proficiency:** This categorical program is less than 1
percent of total state aid. In Atlanta in 1999, LEP funding generated
\$16 per pupil enrolled (not pupils receiving services).

**Compensatory Education:** A weight for remedial education in the base
funding formula helps fund programs for students performing below
benchmarks on standardized tests. In addition, there is a compensatory
education program for students in grades K-5 who have developmental
lags. Charter schools should receive funds for qualifying students.

**Other State Categorical Programs:** A charter school is eligible to
receive other aid, grants and revenue on the same basis as any other
school. Programs include professional development (\$30 to \$50 per
pupil) and media centers (\$135 to \$150 per pupil).

**Transportation:** To the extent feasible, school districts are
obligated to provide charter school transportation. In the estimate in
the accompanying table, the school district is assumed to spend its
average per-pupil transportation revenue on the charter students.

**State Start-Up Assistance:** None available.

**Capital Outlay and Facilities Funding:** Charter schools are not
guaranteed a separate flow of capital funding. School districts are,
however, obligated to share capital funding when possible. Given that
almost all charter schools use preexisting school district buildings,
facilities have not been a major issue.

**Timing of Payments:** Charter schools receive funding on the same
schedule as other schools in their district.

**Uniform Financial Reporting:** Not required. Financial reporting
requirements are determined in the charter agreement.

**Auditing Practice:** Blended with school district, although a charter
agreement could contain a provision for an independent financial audit.

**Responsibility for Debt:** In practice, school districts are assumed
to be responsible for debt, although this issue is not addressed
specifically in the law.

**Ownership and Disposition of Assets:** Not specifically addressed in
law or regulation. In the event of a charter school failure, it is
assumed that assets revert back to the district.

**Unexpended Funds:** Charter schools can carry fund balances from year
to year if the school district chooses to allocate funds in this manner.

**Teacher Retirement:** All charter schools currently participate in the
state teacher retirement system, but participation is not mandatory.
Charter school teachers employed by a local school board are eligible.
Charter schools contracted to private management will probably be
allowed to opt out.

<table>
<colgroup>
<col style="width: 3%" />
<col style="width: 27%" />
<col style="width: 0%" />
<col style="width: 0%" />
<col style="width: 8%" />
<col style="width: 2%" />
<col style="width: 10%" />
<col style="width: 1%" />
<col style="width: 9%" />
<col style="width: 2%" />
<col style="width: 10%" />
<col style="width: 1%" />
<col style="width: 9%" />
<col style="width: 2%" />
<col style="width: 11%" />
</colgroup>
<tbody>
<tr class="odd">
<td colspan="2"><strong>Georgia</strong></td>
<td colspan="2"></td>
<td colspan="3"><blockquote>
<p><strong>Basic Elementary Charter School</strong></p>
</blockquote></td>
<td></td>
<td colspan="3"><blockquote>
<p><strong>Middle Cost K-12 Charter School</strong></p>
</blockquote></td>
<td></td>
<td colspan="3"><blockquote>
<p><strong>Urban At-Risk Upper Grade</strong></p>
</blockquote></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td colspan="2"></td>
<td><strong>FTE</strong></td>
<td></td>
<td colspan="2"><strong>$/Member</strong></td>
<td><strong>FTE</strong></td>
<td></td>
<td colspan="2"><strong>$/Member</strong></td>
<td><strong>FTE</strong></td>
<td></td>
<td><strong>$/Member</strong></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td colspan="2"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td colspan="2">Total FTE enrollment</td>
<td colspan="2"></td>
<td>100</td>
<td></td>
<td></td>
<td></td>
<td>100</td>
<td></td>
<td></td>
<td></td>
<td>100</td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td colspan="2"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td colspan="2">1. Formula funding<sup>a</sup></td>
<td colspan="2"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td>Grades 1-3</td>
<td colspan="2"></td>
<td>60</td>
<td></td>
<td>$ 2,315</td>
<td></td>
<td>19</td>
<td></td>
<td>$ 733</td>
<td></td>
<td>0</td>
<td></td>
<td>$ -</td>
</tr>
<tr class="even">
<td></td>
<td>Grades 4-5</td>
<td colspan="2"></td>
<td>40</td>
<td></td>
<td>$ 1,168</td>
<td></td>
<td>13</td>
<td></td>
<td>$ 380</td>
<td></td>
<td>0</td>
<td></td>
<td>$ -</td>
</tr>
<tr class="odd">
<td></td>
<td>Grades 6-8</td>
<td colspan="2"></td>
<td>0</td>
<td></td>
<td>$ -</td>
<td></td>
<td>19</td>
<td></td>
<td>$ 574</td>
<td></td>
<td>0</td>
<td></td>
<td>$ -</td>
</tr>
<tr class="even">
<td></td>
<td>Grades 9-12</td>
<td colspan="2"></td>
<td>0</td>
<td></td>
<td>$ -</td>
<td></td>
<td>25</td>
<td></td>
<td>$ 749</td>
<td></td>
<td>52</td>
<td></td>
<td>$ 2,950</td>
</tr>
<tr class="odd">
<td></td>
<td>Special education level 1</td>
<td colspan="2"></td>
<td>0</td>
<td></td>
<td>$ -</td>
<td></td>
<td>1</td>
<td></td>
<td>$ 80</td>
<td></td>
<td>2</td>
<td></td>
<td>$ 303</td>
</tr>
<tr class="even">
<td></td>
<td>Special education level 2</td>
<td colspan="2"></td>
<td>0</td>
<td></td>
<td>$ -</td>
<td></td>
<td>3</td>
<td></td>
<td>$ 288</td>
<td></td>
<td>6</td>
<td></td>
<td>$ 1,092</td>
</tr>
<tr class="odd">
<td></td>
<td>Special education level 3</td>
<td colspan="2"></td>
<td>0</td>
<td></td>
<td>$ -</td>
<td></td>
<td>5</td>
<td></td>
<td>$ 627</td>
<td></td>
<td>10</td>
<td></td>
<td>$ 2,377</td>
</tr>
<tr class="even">
<td></td>
<td>Remedial</td>
<td colspan="2"></td>
<td>0</td>
<td></td>
<td>$ -</td>
<td></td>
<td>9</td>
<td></td>
<td>$ 373</td>
<td></td>
<td>30</td>
<td></td>
<td>$ 2,110</td>
</tr>
<tr class="odd">
<td></td>
<td>Gifted</td>
<td colspan="2"></td>
<td>0</td>
<td></td>
<td>$ -</td>
<td></td>
<td>6</td>
<td></td>
<td>$ 314</td>
<td></td>
<td>0</td>
<td></td>
<td>$ -</td>
</tr>
<tr class="even">
<td colspan="2">2. Categorical funding<sup>b</sup></td>
<td colspan="2"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td>Middle school</td>
<td colspan="2"></td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td></td>
<td>$ 64</td>
<td></td>
<td></td>
<td></td>
<td>$ -</td>
</tr>
<tr class="even">
<td></td>
<td>Special assistance</td>
<td colspan="2"></td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td></td>
<td>$ 153</td>
<td></td>
<td></td>
<td></td>
<td>$ -</td>
</tr>
<tr class="odd">
<td></td>
<td>Media center</td>
<td colspan="2"></td>
<td></td>
<td></td>
<td>$ 95</td>
<td></td>
<td></td>
<td></td>
<td>$ 95</td>
<td></td>
<td></td>
<td></td>
<td>$ 98</td>
</tr>
<tr class="even">
<td></td>
<td>Staff development</td>
<td colspan="2"></td>
<td></td>
<td></td>
<td>$ 27</td>
<td></td>
<td></td>
<td></td>
<td>$ 27</td>
<td></td>
<td></td>
<td></td>
<td>$ 26</td>
</tr>
<tr class="odd">
<td></td>
<td>In-school suspension</td>
<td colspan="2"></td>
<td></td>
<td></td>
<td>$ 25</td>
<td></td>
<td></td>
<td></td>
<td>$ 25</td>
<td></td>
<td></td>
<td></td>
<td>$ 21</td>
</tr>
<tr class="even">
<td></td>
<td colspan="2">Limited-English proficiency</td>
<td colspan="2"></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td></td>
<td>$ 5</td>
<td></td>
<td></td>
<td></td>
<td>$ 22</td>
</tr>
<tr class="odd">
<td></td>
<td>Grade 4-5 counselors</td>
<td colspan="2"></td>
<td></td>
<td></td>
<td>$ 68</td>
<td></td>
<td></td>
<td></td>
<td>$ 68</td>
<td></td>
<td></td>
<td></td>
<td>$ -</td>
</tr>
<tr class="even">
<td></td>
<td>Technology training</td>
<td colspan="2"></td>
<td></td>
<td></td>
<td>$ 8</td>
<td></td>
<td></td>
<td></td>
<td>$ 8</td>
<td></td>
<td></td>
<td></td>
<td>$ 9</td>
</tr>
<tr class="odd">
<td colspan="2">3. Transportation</td>
<td colspan="2"></td>
<td></td>
<td></td>
<td>$ `187</td>
<td></td>
<td></td>
<td></td>
<td>$ 167</td>
<td></td>
<td></td>
<td></td>
<td>$ 54</td>
</tr>
<tr class="even">
<td colspan="2">4. Federal funding</td>
<td colspan="2"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td>Title I</td>
<td colspan="2"></td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td></td>
<td>$ 135</td>
<td></td>
<td></td>
<td></td>
<td>$ 270</td>
</tr>
<tr class="even">
<td></td>
<td>Special education</td>
<td colspan="2"></td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td></td>
<td>$ 39</td>
<td></td>
<td></td>
<td></td>
<td>$ 2</td>
</tr>
<tr class="odd">
<td></td>
<td>Bilingual and immigrant</td>
<td colspan="2"></td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td></td>
<td>$ 1</td>
<td></td>
<td></td>
<td></td>
<td>$ 78</td>
</tr>
<tr class="even">
<td></td>
<td>Other federal programs</td>
<td colspan="2"></td>
<td></td>
<td></td>
<td>$ 52</td>
<td></td>
<td></td>
<td></td>
<td>$ 52</td>
<td></td>
<td></td>
<td></td>
<td>$ 52</td>
</tr>
<tr class="odd">
<td colspan="2">Total revenue</td>
<td colspan="2"></td>
<td>100</td>
<td></td>
<td>$ 3,925</td>
<td></td>
<td>100</td>
<td></td>
<td>$ 4,957</td>
<td></td>
<td>100</td>
<td></td>
<td>$ 9,464</td>
</tr>
</tbody>
</table>

ASSUMPTIONS: Basic elementary charter school enrolls only elementary
students who generate no extra funds. Middle cost K-12 charter school
has the same student population characteristics as the average Georgia
district. Basic and middle cost schools are located in Pickens, an
average spending school district. At-risk upper grade school has twice
the number of special education and at-risk students as the state
average and is located in Atlanta.

^a^ Estimates use per pupil revenues rather than formula funding
calculations. Local revenues are included and total revenues are
extrapolated from state allotments. See text for details.

^b^ Categorical aids based on average amount per pupil enrolled, not
served in a program.

## Hawaii

**Base Funding:** Similar to the District of Columbia, Hawaii has a
single statewide school system. Charter schools receive funding
equivalent to other public schools. No constitutionally or legislatively
prescribed formula allocates funding to any district schools. The state
board of education has no independent authority to raise funds or borrow
money, which all come through the state legislature. Historically, the
budgetary process has been a top-down, tri-level process. Legislation in
1994 shifted more authority for programs, curriculum and educational
needs to the school level, and charter school legislation is one
component of this shift. The original charter school legislation
specified that each school should receive the statewide per-pupil (ADA)
expenditure, listed as \$5,400 in the legislation. However, the \$5,400
figure was probably incorrect and contained legally restricted state and
federal funding such as federal programs for low-income students,
children with disabilities, and school lunch funds. In practice,
Hawaii's two charter schools get funding equivalent to other schools
similarly situated.

**Central Administration:** Central administration costs (not to exceed
6.5 percent of the board of education budget) are funded by a separate
appropriation. Like other public schools, charter schools do not include
any of this appropriation in the local school budget.

**Special Education:** For special education students, charter schools
should receive the same supplemental funding or services as other public
schools. The state spends about \$4,000 per special education student
(averaging \$300 per enrolled student); and only 7.5 percent of students
are identified as students with disabilities.

**Compensatory Education and Bilingual Education:** Programs for these
students average about \$100 per member. A program for low-achieving
schools also exists.

**Transportation:** Only about 5 percent of Hawaii's students are
transported, most for special education purposes. Transportation is
provided directly by the state, not through the board of education and
averages about \$130 per student (not user).

**Capital Outlay and Facilities Financing:** All charter schools are
conversion schools. All school building and capital improvement projects
in Hawaii are financed with cash and must be approved by the legislature
as part of the state's capital improvement appropriations bill. In
1993-94, capital spending averaged about \$500 per student (Thompson,
1995).

**State Start-Up Assistance:** None.

**Uniform Financial Reporting and Auditing Practice:** Same system as
other public schools.

**Responsibility for Debt:** No debt allowed. Even the board of
education cannot hold debt.

**Ownership of Assets:** Facilities and assets belong to the state of
Hawaii as do school facilities for regular schools.

**Unexpended Funds:** All unexpended funds revert to the central budget
at the conclusion of the fiscal year.

**Teacher Retirement:** Same employee retirement systems as all public
school employees.

<table>
<colgroup>
<col style="width: 3%" />
<col style="width: 26%" />
<col style="width: 1%" />
<col style="width: 8%" />
<col style="width: 2%" />
<col style="width: 10%" />
<col style="width: 1%" />
<col style="width: 8%" />
<col style="width: 2%" />
<col style="width: 10%" />
<col style="width: 1%" />
<col style="width: 8%" />
<col style="width: 2%" />
<col style="width: 11%" />
</colgroup>
<tbody>
<tr class="odd">
<td colspan="2"><strong>Hawaii</strong></td>
<td></td>
<td colspan="3"><blockquote>
<p><strong>Basic Elementary Charter School</strong></p>
</blockquote></td>
<td></td>
<td colspan="3"><blockquote>
<p><strong>Middle Cost Charter School</strong></p>
</blockquote></td>
<td></td>
<td colspan="3"><blockquote>
<p><strong>Urban At-Risk Upper Grade</strong></p>
</blockquote></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td><strong>FTE</strong></td>
<td></td>
<td colspan="2"><strong>$/Member</strong></td>
<td><strong>FTE</strong></td>
<td></td>
<td><strong>$/Member</strong></td>
<td></td>
<td><strong>FTE</strong></td>
<td></td>
<td><strong>$/Member</strong></td>
</tr>
<tr class="odd">
<td colspan="2">FTE enrollment</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td>Grades K-5</td>
<td></td>
<td>100</td>
<td></td>
<td></td>
<td></td>
<td>100</td>
<td></td>
<td></td>
<td></td>
<td>0</td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td>Grades 9-12</td>
<td></td>
<td>0</td>
<td></td>
<td></td>
<td></td>
<td>0</td>
<td></td>
<td></td>
<td></td>
<td>100</td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td>Special education</td>
<td></td>
<td>2</td>
<td></td>
<td></td>
<td></td>
<td>8</td>
<td></td>
<td></td>
<td></td>
<td>11</td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td colspan="2">Summary of total spending</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td>General</td>
<td></td>
<td></td>
<td></td>
<td>$ 2,733</td>
<td></td>
<td></td>
<td></td>
<td>$ 3,213</td>
<td></td>
<td></td>
<td></td>
<td>$ 3,793</td>
</tr>
<tr class="even">
<td></td>
<td>Special funds<sup>a</sup></td>
<td></td>
<td></td>
<td></td>
<td>$ 49</td>
<td></td>
<td></td>
<td></td>
<td>$ 28</td>
<td></td>
<td></td>
<td></td>
<td>$ 183</td>
</tr>
<tr class="odd">
<td></td>
<td>Central administration<sup>b</sup></td>
<td></td>
<td></td>
<td></td>
<td>$ 260</td>
<td></td>
<td></td>
<td></td>
<td>$ 260</td>
<td></td>
<td></td>
<td></td>
<td>$ 260</td>
</tr>
<tr class="even">
<td></td>
<td>Transportation<sup>c</sup></td>
<td></td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td></td>
<td>$ -</td>
</tr>
<tr class="odd">
<td></td>
<td>Federal funding<sup>d</sup></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td>Title 1</td>
<td></td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td></td>
<td>$ 96</td>
<td></td>
<td></td>
<td></td>
<td>$ 192</td>
</tr>
<tr class="odd">
<td></td>
<td>Special education</td>
<td></td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td></td>
<td>$ 32</td>
<td></td>
<td></td>
<td></td>
<td>$ 64</td>
</tr>
<tr class="even">
<td></td>
<td>Other federal programs</td>
<td></td>
<td></td>
<td></td>
<td>$ 32</td>
<td></td>
<td></td>
<td></td>
<td>$ 57</td>
<td></td>
<td></td>
<td></td>
<td>$ 57</td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2">Bilingual and immigrant</td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td></td>
<td>$ 6</td>
<td></td>
<td></td>
<td></td>
<td>$ 12</td>
</tr>
<tr class="even">
<td></td>
<td>Total revenue</td>
<td></td>
<td></td>
<td></td>
<td>$ 3,073</td>
<td></td>
<td></td>
<td></td>
<td>$ 3,692</td>
<td></td>
<td></td>
<td></td>
<td>$ 4,561</td>
</tr>
</tbody>
</table>

ASSUMPTIONS: Each school has 100 students. Data are reflective of
1997-98 school year. Basic elementary charter school (modeled after
Waialae charter school) enrolls few special education students and does
not qualify for Title I funding. Middle charter school (modeled after
Lanikai charter school) is an elementary school with a special education
population matching the Hawaiian average and gets Title I funding.
At-risk upper grade charter school (modeled after a regular high school
in Honolulu) has a high special education population and is assumed to
receive twice the state average Title I allocation.

^a^ Excludes restricted federal and state categorical funds.

^b^ Estimated central administration costs per pupil in the state.

^c^ Approximately 95 percent of Hawaiian students do not receive
transportation services.

^d^ Based on methodology applied to all other states. Current charter
schools do not have Title I programs and do not get federal funding in
the amounts listed in the table.

## Illinois

In 1997‑98, six of the seven operating charter schools were located in
Chicago. While funding generally flows through local school districts,
new legislation in 1998 allows rejected applicants to appeal to the
state board of education, and if approved by the state board, funding is
deducted from state aid payments to the host school districts.

**Base Funding:** School districts pay charter schools 75 percent to 125
percent of the school district's "per-capita tuition." The specific
amount within that range is specified in the contract.[^48] Per-capita
tuition, a very specific calculation uniquely derived from each school
district's annual financial report, represents the cost of education for
a regular student averaged across all grade levels. Charter schools
aside, per-capita tuition plays a key role in special education funding
when students are served by another school district. The tuition
calculation starts with total district expenditures and then subtracts
about 100 specific expenditure or revenue items, including revenue from
other districts, adult education, preschool, most state categorical aid,
special education, federal funding, community services, school lunch,
capital expenditures, debt costs, student activities, local fees and
revenues, and transportation.

**Grade Level Funding:** The general state aid formula for school
districts gives students in middle schools 10 percent more funding; and
in grades 9 to 12, students garner 30 percent more aid. Grade level
weights are not a factor in the charter school tuition calculation. The
absence of grade level funding adjustments could lead to overfunding
elementary charter schools and underfunding charter high schools if both
elementary and charter high schools receive the same funding---as in
Chicago in 1997-98. A system of separate K‑8 elementary

and 9‑12 high school districts exists in many parts of the state, which
renders grade level weights irrelevant in those districts. The 75
percent to 125 percent range of funding flexibility could be used by
K-12 unit districts to differentiate between elementary and high
schools, or provide more funding for specialized schools whose higher
costs may not be fully funded by state and federal categorical programs.

**Funding Based on School District Characteristics:** Despite an
equalization formula that substantially improved in 1997, Illinois is a
state with major spending inequities based on property wealth and tax
effort. High-spending wealthy school districts generate more funding for
all their students, including those in charter schools, than
impoverished school districts generate. In 1998‑99, per-capita tuition
averaged about \$5,500 in elementary districts, \$4,900 in K-12
districts, and \$8,900 in high school districts. The lowest per-capita
tuition in Illinois is about \$3,000 in elementary districts, \$3,300 in
K-12 districts, and \$4,500 in high school districts. The highest
per-capita tuition in Illinois is about \$18,000 in an elementary
district, about \$10,000 in a K-12 district, and \$16,000 in a high
school district.

**Special Education:** The contract between a charter school and the
school district delineates special education funding and services.
Chicago generally retains all special education services and centrally
funds and provides personnel and resources to charter schools as needed.
After consultation with the school district and the families involved,
charter schools may choose not to serve individual special education
students at that school if it cannot accommodate their needs consistent
with the charter. However, enrollment cannot be denied based on
disability.

**Transportation:** The charter school proposal must delineate plans for
transportation of low-income and at‑risk students, but otherwise charter
schools are not required to provide transportation. The local school
district is not required to provide transportation other than services
similarly provided to nonpublic school students, unless it agrees to
provide it as part of the charter agreement. State transportation aid
for school districts amounts to about \$95 per pupil (averaged over all
pupils, not pupils transported) and is allocated through an equalization
formula.

**Categorical Programs:** Charter schools are entitled to their
proportionate amount of federal and state categorical funding available
for eligible students who enroll in the charter school. Averaged across
all students enrolled, categorical aid amounts to about \$150 per pupil.

**Limited-English Proficiency:** Regular schools with more than 20 LEP
students are required to have a bilingual program. Chicago allocates
about \$450 in state funds per qualifying bilingual education pupil in
charter schools.

**Low-Income Students:** Supplemental general state aid (also known as
state Chapter 1 funding) provides substantial extra resources for
schools with low-income students. Charter schools in Chicago get \$767
from these funds for each low-income student. Approximately 80 percent
of Chicago students qualify.

**Capital Outlay and Facilities Assistance:** None provided in FY 1999.
The Illinois Facilities Fund (IFF), a nonprofit community development
loan institution, works with nonprofit organizations statewide to
address capital needs.

**Federal Funds:** School districts are required to allocate a portion
of their federal dollars to charter schools on the same basis that a
district allocates federal aid to other district schools.

**State Start-Up Assistance:** The charter school law authorizes a
\$500,000 revolving loan fund. On its own, the Chicago school district
established a \$2 million revolving loan fund administered through the
IFF.

**Timing of Payments:** School districts must pay tuition funds in four
equal quarterly payments beginning no later than July 1. By Oct.1,
charter schools have received half of their base funding.

**Financial Reporting:** Independent annual financial audits are
required. Other financial reporting is blended with school district
reporting.

**Debt Acquisition and** **Responsibility for Debt:** The nonprofit
corporation that runs a charter school is allowed to incur debt and is
responsible for paying off the school's debt to the extent possible. The
district is not responsible for any debt incurred by the charter school.

**Ownership and Disposition of Assets:** In the event of closure, a
charter school would also be required to refund to the local school
board any unspent funds received from the board. The law is silent with
respect to the ownership of property paid for with public funds.

**Teacher Retirement:** Personnel certified in Illinois, including
administrators, must participate in teacher retirement plans. Charter
schools do not have to pay pension pickups in school district labor
contracts (Chicago, for example, picks up 7 percent of the 8 percent
employee contribution). Like school districts in Illinois, charter
schools pay only the Medicare portion of Social Security for employees
already participating in state retirement systems.

<table>
<colgroup>
<col style="width: 3%" />
<col style="width: 27%" />
<col style="width: 1%" />
<col style="width: 8%" />
<col style="width: 2%" />
<col style="width: 9%" />
<col style="width: 1%" />
<col style="width: 8%" />
<col style="width: 2%" />
<col style="width: 9%" />
<col style="width: 2%" />
<col style="width: 8%" />
<col style="width: 2%" />
<col style="width: 10%" />
<col style="width: 2%" />
</colgroup>
<tbody>
<tr class="odd">
<td colspan="2"><strong>Illinois</strong></td>
<td></td>
<td colspan="3"><blockquote>
<p><strong>Basic Elementary Charter School</strong></p>
</blockquote></td>
<td></td>
<td colspan="3"><blockquote>
<p><strong>Middle Cost K-12 Charter School</strong></p>
</blockquote></td>
<td></td>
<td colspan="3"><blockquote>
<p><strong>Urban At-Risk Upper Grade</strong></p>
</blockquote></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td><strong>FTE</strong></td>
<td></td>
<td colspan="2"><strong>$/Member</strong></td>
<td><strong>FTE</strong></td>
<td></td>
<td colspan="2"><strong>$/Member</strong></td>
<td><strong>FTE</strong></td>
<td></td>
<td><strong>$/Member</strong></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td colspan="2">Total FTE enrollment</td>
<td></td>
<td>100</td>
<td></td>
<td></td>
<td></td>
<td>100</td>
<td></td>
<td></td>
<td></td>
<td>100</td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td colspan="2">1. Tuition per FTE member</td>
<td></td>
<td>100</td>
<td></td>
<td>$ 4,900<sup>a</sup></td>
<td></td>
<td>100</td>
<td></td>
<td>$ 4,900 <sup>b</sup></td>
<td></td>
<td>100</td>
<td></td>
<td>$ 4,200 <sup>c</sup></td>
<td></td>
</tr>
<tr class="odd">
<td colspan="3">State Chapter 1 (low income)<sup>d</sup></td>
<td></td>
<td></td>
<td>na</td>
<td></td>
<td></td>
<td></td>
<td>na</td>
<td></td>
<td>100</td>
<td></td>
<td>$ 767</td>
<td></td>
</tr>
<tr class="even">
<td colspan="2">Total tuition</td>
<td></td>
<td></td>
<td></td>
<td>$ 4,900</td>
<td></td>
<td></td>
<td></td>
<td>$ 4,900</td>
<td></td>
<td></td>
<td></td>
<td>$ 4,967</td>
<td></td>
</tr>
<tr class="odd">
<td colspan="2">2. Special education<sup>e</sup></td>
<td></td>
<td>0</td>
<td></td>
<td>$ -</td>
<td></td>
<td>12</td>
<td></td>
<td>$ 600</td>
<td></td>
<td>24</td>
<td></td>
<td>$ 1,200</td>
<td></td>
</tr>
<tr class="even">
<td colspan="2">3. LEP/bilingual<sup>f</sup></td>
<td></td>
<td>0</td>
<td></td>
<td>$ -</td>
<td></td>
<td>8</td>
<td></td>
<td>$ 36</td>
<td></td>
<td>15</td>
<td></td>
<td>$ 68</td>
<td></td>
</tr>
<tr class="odd">
<td colspan="2">4. Other state categorical<sup>g</sup></td>
<td></td>
<td></td>
<td></td>
<td>$ 150</td>
<td></td>
<td></td>
<td></td>
<td>$ 150</td>
<td></td>
<td></td>
<td></td>
<td>$ 150</td>
<td></td>
</tr>
<tr class="even">
<td colspan="2">5. Transportation</td>
<td></td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
</tr>
<tr class="odd">
<td colspan="2">4. Federal funding</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td colspan="2">Title I</td>
<td></td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td></td>
<td>$ 161</td>
<td></td>
<td></td>
<td></td>
<td>$ 302</td>
<td></td>
</tr>
<tr class="odd">
<td colspan="2">Special education</td>
<td></td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td></td>
<td>$ 52</td>
<td></td>
<td></td>
<td></td>
<td>$ 104</td>
<td></td>
</tr>
<tr class="even">
<td colspan="2">Bilingual and immigrant</td>
<td></td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td></td>
<td>$ 6</td>
<td></td>
<td></td>
<td></td>
<td>$ 12</td>
<td></td>
</tr>
<tr class="odd">
<td colspan="2">Other federal programs</td>
<td></td>
<td></td>
<td></td>
<td>$ 64</td>
<td></td>
<td></td>
<td></td>
<td>$ 64</td>
<td></td>
<td></td>
<td></td>
<td>$ 64</td>
<td></td>
</tr>
<tr class="even">
<td colspan="2">Total revenue (100% funding)</td>
<td></td>
<td></td>
<td></td>
<td>$ 5,114</td>
<td></td>
<td></td>
<td></td>
<td>$ 5,969</td>
<td></td>
<td></td>
<td></td>
<td>$ 6,867</td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td>Without special education</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td>$ 5,317</td>
<td></td>
<td></td>
<td></td>
<td>$ 5,563</td>
<td></td>
</tr>
</tbody>
</table>

ASSUMPTIONS: Basic elementary charter school enrolls only students who
are not at risk and have no special needs. Middle cost K-12 charter
school has the same student characteristics as the average Illinois
district. At-risk upper grade charter school is in Chicago with twice
the concentration of special education students as the Illinois average,
and all students qualify for state Chapter 1 (low income). ADA is
assumed to average 95 percent in the basic and middle cost charter
schools and 90 percent in the at-risk school.

^a^ Column represents a K-12 district with state average per capita
tuition (elementary districts average a per-capita tuition of about
\$5,500).

^b^ Column represents typical K-12 district.

^c^ Column represents funding for a typical charter school in Chicago.
The highest per capita tuition in an Illinois high school district is
\$16,000.

^d^ Also called supplemental general state aid, the state low income
weighting applies primarily to Chicago, where the low-income weighting
is treated as a separate component of the tuition calculation for
charter school funding.

^e^ Assumed that school districts either pay charter schools for the
extra costs of special education or provide the services in-kind. The
estimated value for the middle cost school is about 10 percent of the
state average operating cost. In the at-risk school, the estimated value
is about 20 percent of operating costs.

^f^ \$423 per bilingual pupil when schools have more than 20 pupils
needing a bilingual program.

^g^ Estimated state average of major categorical programs not otherwise
listed in table.

## Kansas

School districts approve charter schools. The state board also approves
each charter, which allows the board to approve specific waivers from
state regulations. The three-year federal charter school grant played a
strong role in developing the current 15 charter schools, the maximum
allowed by state law. None of the big cities in Kansas has charter
schools. Enrollment in school districts with charter schools ranges from
700 to 5,000 students. About half of the charter schools enroll students
from nearby cooperating school districts. Regional service centers
helped develop about half of the charter schools. Six of the 15 schools
serve at-risk high school students.

**Base** **Funding:** Charter school funding flows through the school
district in an amount determined in conjunction with the district. This
section describes how students generate funding for school districts,
not the funding entitlement for charter schools. The ability of school
districts to support charter schools varies widely; big differences in
per-pupil spending exist from one district to another. Operating
expenditures average about \$4,700 per pupil, but the high-cost
structures of small, rural districts add to expenditure variation. Among
the 15 districts hosting charter schools, per-pupil operating
expenditures range from about \$4,000 to nearly \$6,000, with the
typical district spending about \$4,800. Districts with the lowest
enrollment spend the most, and big cities spend substantially less than
the state average.

A system of pupil weights leads to much of the dispersion in the basic
spending guarantee.

  ---------------- --------------------------------------------------------
  Transportation   Based on density and cost analysis.

  Low-enrollment   For districts with fewer than 1,750 students. Linear
                   transition schedule based on historical costs of
                   districts of fewer than 100 students with declining
                   weights as district size increases. The weight for a
                   1,200-student school is about 0.15 or 15 percent extra
                   funding. The minimum weight or "correlation adjustment"
                   is 0.054 and applies to all school districts.

  Vocational       0.50 extra FTE

  Bilingual        0.20 extra FTE

  At-risk          0.08 extra FTE

  New facilities   0.25 first two years students are in a new facility.
  ---------------- --------------------------------------------------------

School districts may adopt local option budgets adding up to 25 percent
of base funding, some of it matched with state aid. School districts
with local option budgets tend to be larger ones with below average
spending levels.

**Special Education:** No specific formula guarantees a charter school's
special education funding. State categorical aid funds approximately 80
percent of added costs for special education.

**Low-Income and Bilingual Education:** Low-income and bilingual
students get extra weights in the general state aid formula as specified
above.

**Categorical Aid:** Two small categorical programs, which are awarded
to host districts and should get to charter schools, are: (1) in-service
grants averaging about \$5 per pupil, and (2) educational excellence
grants awarded on a competitive basis that average about \$3 per pupil
statewide.

**Transportation:** School districts in which a charter school operates
must provide transportation for pupils who qualify for free meals under
the national school lunch act and who live at least 2.5 miles from the
school. State transportation aid is part of the equalization formula
described above.

**Capital Outlay and Facilities Financing:** Charter schools are
generally housed in existing public school facilities.

**State Start-Up Assistance:** None.

**Uniform Financial Reporting:** Part of school district financial
reporting, so it is not possible to separate charter schools from
spending by other schools in the district.

**Auditing Practice:** Charter specifies manner in which annual
financial audits will be conducted. At a minimum, charter schools are a
component of the school district independent financial audit, which may
or may not separately report the financial results of a charter school.

**Ownership of Assets and Responsibility for Debt:** No debt allowed
because school districts are not allowed to incur debt except for
repayment of bonds. School district owns all assets**.**

**Teacher Retirement:** All employees who are participating in the
operation of a charter school and who qualify for membership in the
Kansas public employees retirement system remain members of the system.
Currently, all Kansas charter schools participate. However, if a charter
school is deemed not to be an instrumentality of the
government---perhaps through a private management
contract---participation may not be mandatory.

<table>
<colgroup>
<col style="width: 2%" />
<col style="width: 26%" />
<col style="width: 2%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 9%" />
<col style="width: 2%" />
<col style="width: 9%" />
<col style="width: 9%" />
<col style="width: 2%" />
<col style="width: 9%" />
<col style="width: 9%" />
</colgroup>
<tbody>
<tr class="odd">
<td colspan="2"><strong>Kansas</strong></td>
<td></td>
<td><strong>Cost Factor</strong></td>
<td colspan="2"><blockquote>
<p><strong>Basic Elementary Charter School</strong></p>
</blockquote></td>
<td></td>
<td colspan="2"><blockquote>
<p><strong>Middle Cost K-12 Charter School</strong></p>
</blockquote></td>
<td></td>
<td colspan="2"><blockquote>
<p><strong>Urban At-Risk Upper Grade</strong></p>
</blockquote></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td><strong>(Weight)</strong></td>
<td><strong>FTE</strong></td>
<td><strong>WFTE</strong></td>
<td></td>
<td><strong>FTE</strong></td>
<td><strong>WFTE</strong></td>
<td></td>
<td><strong>FTE</strong></td>
<td><strong>WFTE</strong></td>
</tr>
<tr class="odd">
<td colspan="2">Weighted FTE calculations</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td>Basic K-12</td>
<td></td>
<td>1.00</td>
<td>100</td>
<td>100.0</td>
<td></td>
<td>100</td>
<td>100.0</td>
<td></td>
<td>100</td>
<td>100.0</td>
</tr>
<tr class="odd">
<td></td>
<td>Transportation</td>
<td></td>
<td><sup>a</sup></td>
<td>35</td>
<td>5.8</td>
<td></td>
<td>35</td>
<td>5.8</td>
<td></td>
<td>0</td>
<td>0.0</td>
</tr>
<tr class="even">
<td></td>
<td>Low-enrollment</td>
<td></td>
<td><sup>b</sup></td>
<td>na</td>
<td>15.0</td>
<td></td>
<td>na</td>
<td>15.0</td>
<td></td>
<td>na</td>
<td>5.4</td>
</tr>
<tr class="odd">
<td></td>
<td>Bilingual</td>
<td></td>
<td>0.20</td>
<td>0</td>
<td>0.0</td>
<td></td>
<td>3</td>
<td>0.6</td>
<td></td>
<td>6</td>
<td>1.2</td>
</tr>
<tr class="even">
<td></td>
<td>At-risk</td>
<td></td>
<td>0.08</td>
<td>0</td>
<td>0.0</td>
<td></td>
<td>32</td>
<td>2.6</td>
<td></td>
<td>64</td>
<td>5.1</td>
</tr>
<tr class="odd">
<td></td>
<td>Vocational</td>
<td></td>
<td>0.50</td>
<td>0</td>
<td>0.0</td>
<td></td>
<td>4</td>
<td>2.0</td>
<td></td>
<td>8</td>
<td>4.0</td>
</tr>
<tr class="even">
<td></td>
<td>New facilities</td>
<td></td>
<td>0.25</td>
<td>0</td>
<td>0.0</td>
<td></td>
<td>0</td>
<td>0.0</td>
<td></td>
<td>0</td>
<td>0.0</td>
</tr>
<tr class="odd">
<td></td>
<td>Total weighted FTE</td>
<td></td>
<td></td>
<td></td>
<td>120.8</td>
<td></td>
<td></td>
<td>126.0</td>
<td></td>
<td></td>
<td>115.7</td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td colspan="3">1. Base state and local funding</td>
<td></td>
<td>$ 4,494</td>
<td>$ 3,720</td>
<td><sup>c</sup></td>
<td>$ 4,686</td>
<td>$ 3,720</td>
<td></td>
<td>$ 4,305</td>
<td>$ 3,720<sup>d</sup></td>
</tr>
<tr class="even">
<td colspan="3">2. Special education categorical<sup>e</sup></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td>$ 281</td>
<td></td>
<td></td>
<td>$ 517</td>
<td></td>
</tr>
<tr class="odd">
<td colspan="2">3. Other state categorical<sup>f</sup></td>
<td></td>
<td></td>
<td>$ 8</td>
<td></td>
<td></td>
<td>$ 8</td>
<td></td>
<td></td>
<td>$ 8</td>
<td></td>
</tr>
<tr class="even">
<td colspan="2">4. Federal funding</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td>Title I</td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td>$ 113</td>
<td></td>
<td></td>
<td>$ 226</td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td>Special education</td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td>$ 46</td>
<td></td>
<td></td>
<td>$ 92</td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td>Bilingual and immigrant</td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td>$ 3</td>
<td></td>
<td></td>
<td>$ 6</td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td>Other federal programs</td>
<td></td>
<td></td>
<td>$ 54</td>
<td></td>
<td></td>
<td>$ 54</td>
<td></td>
<td></td>
<td>$ 54</td>
<td></td>
</tr>
<tr class="odd">
<td colspan="2">Total revenue</td>
<td></td>
<td></td>
<td>$ 4,556</td>
<td></td>
<td></td>
<td>$ 5,191</td>
<td></td>
<td></td>
<td>$ 5,207</td>
<td></td>
</tr>
</tbody>
</table>

ASSUMPTIONS: Each school has 100 students. Basic elementary charter
school has no pupils generating weightings except for low enrollment and
transportation. Middle cost K-12 charter school has the same student
population as the average Kansas public school. At-risk upper grade
charter school has twice the concentration of at-risk, bilingual and
vocational students as the Kansas average and is located in Wichita.

^a^ Based on \$618 per student transported.

^b^ Represents the weight for a 1,200 student district except the urban
district, which has the minimum weight.

^c^ Represents basic elementary charter school in average district.
Lowest spending district with a charter school averages \$4,100 per
unweighted pupil.

^d^ Represents at-risk school in Wichita. Highest spending district with
a charter school averages \$5,700 per pupil.

^e^ Estimated at 6 percent of general operating revenue.

^f^ In service and educational excellence grants.

## Louisiana

**Base Funding:** Of the four types of Louisiana charter schools, school
districts authorize three.[^49] District-authorized schools receive a
per-pupil amount based on the average revenue of the authorizing
district excluding capital funding.[^50] Grade level funding and
weighted funding based on various student characteristics are part of
the funding calculation for school districts but not charter schools.
The weighting system for school districts includes adjustments for
at-risk students, vocational education, special education, gifted and
talented, and a weight for smaller districts to offset their loss of
economies of scale. The total school district revenue produced by the
weighted formula is then used to calculate an *average* student revenue
amount for charter schools.[^51] Each student brings to a charter school
the average revenue of the school district rather than the funding
actually generated by the student. A state-authorized school (Type 2)
receives all of its funds directly from the state, but it generally
mirrors the amount of funding for Type 1, 3 and 4 schools.[^52]

**Geographic Adjustments:** School districts with fewer than 5,000
students receive an

economy-of-scale adjustment. The maximum adjustment generates 12.5
percent more revenue per pupil and is calculated by taking the
difference between district enrollments

and the 5,000 student ceiling.[^53] Organized on a parish (county)
basis, few school districts qualify for the economy-of-scale adjustment.

**Special Education Revenue:** The law reads: "For each pupil who is
entitled to special education services, the state and federal funds for
special education for that pupil that would have been apportioned for
that pupil to the school system shall be apportioned to the charter
schools." In practice, charter school special education students do not
directly receive the funds commensurate to the state weighting. Instead
those funds are incorporated into the per-pupil *average* revenue
calculation used to fund each charter school student. A charter school
with a similar percentage of special education students as the district
would receive similar state special education funding.

**At-Risk Student Funding:** School districts obtain a 0.17 additional
funding weight (17 percent more) for at-risk students. Folded into the
average revenue calculation, the extra funds do not specifically follow
children to charter schools. Louisiana, however, requires that the
proportion of at-risk students in charter schools be at least 85 percent
of the proportion of at-risk students in the district. As a consequence,
charter school funding based on average revenue includes at-risk funding
that is somewhat the same as the school's at-risk population. A charter
school with very high concentrations of at-risk students, however, does
not receive the at-risk funding generated for the school districts by
its students.

**Gifted and Talented:** The funding weight of 0.68 for gifted and
talented children generates extra funding for school districts, but
gifted charter school students do not bring this revenue with them since
charter school funding already incorporates the average amount of all
revenues in the school district.

**Other State Categorical Aid:** Charter schools can apply for any state
funds that other public schools apply for. In the competitive grant
category, district-authorized charter schools submit applications
through the school district.

**Transportation:** School districts pay for transportation from general
operating funds, so revenues typically used by districts for
transportation are included in charter school funding. Charter schools
routinely contract with the local school district for transportation.
They are under no mandate, however, to supply transportation with the
exception of special education.

**State Start-Up Assistance:** A revolving loan fund allows charter
schools to borrow up to \$100,000 interest free. These funds must be
paid back over three years. No charter school has applied for funding.
The contractor that manages the fund requires financial statements from
charter school board members, and collateral for loans made for repairs.

**Capital Outlay and Facilities Financing:** Use of pre-existing public
school facilities may be negotiated with the local school board. Only
five schools were using such facilities in 1998-99.

**Federal Funds:** Charter schools are not school districts for purposes
of federal funding, but the state works to ensure that charter schools
receive their share of federal funding through school districts.

**Timing of Payments:** Charter schools receive their enrollment-based
funds in July, with a projection governing the precise amount paid. In
the subsequent winter, funding is adjusted based on actual pupil counts.

#  {#section-2}

**Uniform Financial Reporting:** Charter schools need to complete the
standard annual financial report (AFR). Even district-authorized charter
schools file a separate AFR, a practice put into place by the state
department of education.

**Independent Financial Audit:** The state department of education
audits district-sponsored charter schools as an entity of the school
district. An annual independent financial audit is required of
state-authorized charter schools.

**Responsibility for Debt:** The law is silent on this issue**.**

**Ownership and Disposition of Assets:** The charter document makes
provisions for the disposition of assets. For state-authorized charter
schools, assets purchased with state funds revert to the state.

**Unexpended Funds:** State-authorized charter schools are able to build
fund balances. Unexpended funds in the other types of charter schools
revert to the district unless an exception is made in the charter.

**Teacher Retirement:** Employees on leave from school districts must be
allowed to maintain their status in their retirement system. Otherwise,
charter schools can provide another retirement option. Only one charter
school has exercised the alternative retirement option.

<table>
<colgroup>
<col style="width: 3%" />
<col style="width: 23%" />
<col style="width: 2%" />
<col style="width: 8%" />
<col style="width: 9%" />
<col style="width: 9%" />
<col style="width: 1%" />
<col style="width: 9%" />
<col style="width: 9%" />
<col style="width: 1%" />
<col style="width: 9%" />
<col style="width: 10%" />
</colgroup>
<tbody>
<tr class="odd">
<td colspan="2"><strong>Louisiana</strong></td>
<td></td>
<td><strong>Cost Factor</strong></td>
<td colspan="2"><blockquote>
<p><strong>Basic Elementary Charter School</strong></p>
</blockquote></td>
<td></td>
<td colspan="2"><blockquote>
<p><strong>Middle Cost K-12 Charter School</strong></p>
</blockquote></td>
<td></td>
<td colspan="2"><blockquote>
<p><strong>Urban At-Risk Upper Grade</strong></p>
</blockquote></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td><strong>Weight</strong></td>
<td><strong>FTE</strong></td>
<td><strong>WFTE</strong></td>
<td></td>
<td><strong>FTE</strong></td>
<td><strong>WFTE</strong></td>
<td></td>
<td><strong>FTE</strong></td>
<td><strong>WFTE</strong></td>
</tr>
<tr class="odd">
<td colspan="3">Weighted FTE calculations</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td>Basic K-12<sup>a</sup></td>
<td></td>
<td>1.00</td>
<td>100</td>
<td>100.0</td>
<td></td>
<td>100</td>
<td>100.0</td>
<td></td>
<td>100</td>
<td>100.0</td>
</tr>
<tr class="odd">
<td></td>
<td>Special education<sup>b</sup></td>
<td></td>
<td>1.50</td>
<td>0</td>
<td>0.0</td>
<td></td>
<td>11</td>
<td>16.5</td>
<td></td>
<td>22</td>
<td>33.0</td>
</tr>
<tr class="even">
<td></td>
<td>At-risk</td>
<td></td>
<td>0.17</td>
<td>44</td>
<td>7.5</td>
<td></td>
<td>52</td>
<td>8.8</td>
<td></td>
<td>78</td>
<td>13.3</td>
</tr>
<tr class="odd">
<td></td>
<td>Gifted and talented</td>
<td></td>
<td>0.60</td>
<td>0</td>
<td>0.0</td>
<td></td>
<td>3</td>
<td>1.8</td>
<td></td>
<td>0</td>
<td>0.0</td>
</tr>
<tr class="even">
<td></td>
<td>Small district weight<sup>c</sup></td>
<td></td>
<td>na</td>
<td>0</td>
<td>0.0</td>
<td></td>
<td>0</td>
<td>0.0</td>
<td></td>
<td>0</td>
<td>0.0</td>
</tr>
<tr class="odd">
<td></td>
<td>Total weighted FTE</td>
<td></td>
<td></td>
<td></td>
<td>107.5</td>
<td></td>
<td></td>
<td>127.1</td>
<td></td>
<td></td>
<td>146.3</td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td colspan="2">Total FTE enrollment</td>
<td></td>
<td></td>
<td>100</td>
<td></td>
<td></td>
<td>100</td>
<td></td>
<td></td>
<td>100</td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td colspan="2">1. Base funding<sup>d</sup></td>
<td></td>
<td></td>
<td>$ 4,527</td>
<td></td>
<td></td>
<td>$ 4,527</td>
<td></td>
<td></td>
<td>$ 4,422</td>
<td></td>
</tr>
<tr class="even">
<td colspan="2">2. Special education<sup>e</sup></td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
</tr>
<tr class="odd">
<td colspan="2">3. At-risk<sup>e</sup></td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
</tr>
<tr class="even">
<td colspan="4">4. Limited-English proficient<sup>e</sup></td>
<td>$ -</td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
</tr>
<tr class="odd">
<td colspan="2">5. Other state categorical<sup>e</sup></td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
</tr>
<tr class="even">
<td colspan="2">6. Student transportation<sup>e</sup></td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
</tr>
<tr class="odd">
<td colspan="2">7. Federal funding</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td>Title I</td>
<td></td>
<td></td>
<td>$ 238</td>
<td></td>
<td></td>
<td>$ 238</td>
<td></td>
<td></td>
<td>$ 476</td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td>Special education</td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td>$ 45</td>
<td></td>
<td></td>
<td>$ 90</td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td colspan="2">Bilingual and immigrant</td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td>$ 3</td>
<td></td>
<td></td>
<td>$ 6</td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td>Other federal programs</td>
<td></td>
<td></td>
<td>$ 74</td>
<td></td>
<td></td>
<td>$ 74</td>
<td></td>
<td></td>
<td>$ 74</td>
<td></td>
</tr>
<tr class="even">
<td colspan="2">Total revenue</td>
<td></td>
<td></td>
<td>$ 4,839</td>
<td></td>
<td></td>
<td>$ 4,887</td>
<td></td>
<td></td>
<td>$ 5,068</td>
<td></td>
</tr>
</tbody>
</table>

ASSUMPTIONS: Each school has 100 students. Basic elementary charter
school enrolls 44 at-risk students (mandated minimum of 85 percent of
district average) but no other students with special needs. Middle cost
K-12 charter school has the same student population characteristics as
the average Louisiana district. The basic and average schools rely on
1997-98 revenue estimates for Red River Parish (increased by an
estimated 3 percent to reflect 1998-99 revenue). At-risk upper grade
charter school has twice the concentration of special education and
at-risk students as the Louisiana average and the same average revenue
as Orleans Parish.

^a^ The weighted FTE calculation shows how Louisiana charter schools
generate revenue for a school district. However, average school district
revenue per FTE is the basis for funding charter schools, not the pupil
weighting system.

^b^ All special education students are weighted the same.

^c^ Applies only to a few parishes with fewer than 5,000 students.

^d^ Based on estimated average school district expenditures for 1998-99.
The lowest expenditure for a school district is about \$3,840 in Acadia
Parish and the highest is \$5,600 in Cameron Parish.

^e^ Funding is incorporated into average cost based on characteristics
of the school district. Funding for grade level cost differences,
special education, at-risk programs, transportation and other programs
is effectively equivalent to the school district average no matter what
special needs students enroll in charter schools.

## Massachusetts

There are two types of charter schools in Massachusetts. Chartered by
the state board of education, the independent "commonwealth" charter
schools receive "tuition" based on average school district spending that
follows pupils from their district of residence. "Horace Mann" charter
schools chartered by the state but must be approved by a local school
committee, the local teacher's union president and the state board of
education. Horace Mann charter schools are exempt from state rules and
regulations to the same extent as commonwealth charter schools. Horace
Mann charter schools may also be exempt from local collective bargaining
agreements, provided that employees of the charter school remain members
of the collective bargaining unit, continue to accrue seniority and
receive, at a minimum, the salary and benefits established by the local
collective bargaining agreement.

### Commonwealth Charter Schools

**Base Funding:** Charter schools get "tuition" for enrollees that is
uniquely calculated for each "sending" school district (i.e., the school
district in which the student resides). Some charter schools enroll
students from as many as 20 school districts. For students residing in
school districts above the foundation budget (high-spending ones), the
tuition is the lower of the sending district's tuition or the tuition of
the district in which the charter school is physically located.

Although the legislation simply calls for charter schools to get the
average cost per student, administrative rules carefully define costs
included in the tuition calculation. Excluded costs are ones charter
schools do not normally incur. Based on school district budgets included
in the year-end annual financial report, the following types of costs
are excluded: (1) transportation, (2) community service and adult
education, (3) long-term debt service for construction financed by the
State Building Assistance Bureau, (4) most programs with other school
districts and private schools, (5) special education costs involving
private school placements, hospital teaching and preschool programs, (6)
school lunch and (7) federal programs.

**Funding Based on School District Characteristics:** Despite an
equalization formula, Massachusetts has substantial spending inequities
based on property wealth and tax effort. High-spending wealthy districts
generate more funding for charter schools than poor school districts. In
addition, charter schools inherit most of the funding that goes with the
enrollment characteristics of the sending school districts whether or
not the charter schools have the same kind of enrollment. These
categories include: (1) preschool, (2) kindergarten, (3) elementary, (4)
middle school, (5) high school, (6) special education, (7) bilingual,
(8) vocational and (9) low-income. State foundation funding also
contains a factor intended to compensate for the difference in wage
levels around the state. As described below, some kinds of special
education and preschool spending are subtracted from the tuition
calculation.

**Grade Level Funding Adjustments:** Although school districts generate
funding based on grade level, charter school funding does not
distinguish between grades. Some evidence indicates that charter high
schools or middle schools may be underfunded compared to regular high
schools and elementary charter schools. In six cities studied by
KPMG-Peat Marwick (1998), high schools spent between \$500 (Worcester)
and \$1,500 (Springfield and Lawrence) more per pupil at the high school
level. The state has chartered schools in a way that ensures a balance
among elementary and high school charter schools, thus minimizing the
impact of the incentive to operate elementary charter schools.

**School District Transition Aid:** To help ease the financial loss of
enrollment shifts to charter schools, and to assist school districts in
paying charter school tuition for students who had been in private
schools, school districts are partially "reimbursed" for tuition
increases. "Tuition increase" is the aggregate increase in tuition
generated by all students attending charter schools. The reimbursement
is 100 percent during the first year in which the increase occurs, 60
percent in the second year, and 40 percent in the third year. This
transition aid amounted to more than \$2,000 per enrolled charter school
pupil in 1998-99.

**Special Education:** Except for federal funding, the cost of private
placements for severely handicapped students, hospital teaching and
special education preschool, all of the special education *spending*
supported by state and local revenues is passed on to charter schools in
the tuition calculation. Therefore, charter schools get most resources
devoted to the special education in the sending districts regardless of
the actual number of special needs students or the severity of their
handicaps. State law exempts charter schools from paying for private
placements, and special education preschool (prototypes 502.5 and
greater). This system works equitably if charter school special
education enrollment approximates school district populations. The
effects of financial incentives are mitigated by the lottery admission
system, and charter schools cannot refuse to admit special education
students. Charter schools collectively enroll slightly fewer students
with individualized education plans (IEPs), but these students tend to
have low-cost handicaps requiring only resource teachers. (KPMG-Peat
Marwick, 1998).[^54] Students requiring self-contained classrooms almost
always stay in school districts.

**Categorical Programs:** Most programs, such as special education,
bilingual education and compensatory education, are factored into one or
more of the 11 enrollment categories included in the foundation funding
formula of the school districts. Subsequently, charter schools get most
of this money through the tuition calculation. This funding is based on
demographic characteristics of the sending schools district, not the
enrollment characteristics of the charter school.

**Bilingual Education:** Bilingual education is an enrollment category
in the general state aid formula, and the expenditures are passed on to
charter schools in the tuition calculation based on the bilingual
programs and students of the sending school district.

**Low-Income Students:** Low-income and compensatory education students
are included in two of the 11 enrollment categories in the foundation
formula. Based on the low-income characteristics of the sending school
districts, funding is passed on to charter schools at the same rate.

**Transportation:** Students who reside in the district in which the
charter school is physically located are entitled to transportation on
the same basis as other public school pupils. School districts must
accommodate all charter schools---even those having school days and
school years that are different from the district's. If a charter school
provides its own transportation, it gets the average cost per student
(not user) from the sending district for students actually transported.

**Capital Outlay and Facilities Financing:** In Massachusetts, only debt
service in excess of State Building Assistance Bureau (SBAB) grants for
debt retirement enters the charter school tuition calculation. SBAB
funds up to 90 percent of the debt retirement cost of new facilities in
cities where facilities construction is an integral component of a
racial desegregation plan; otherwise SBAB funds about half of debt
retirement costs for qualifying projects, or no funding at all. A
KPMG-Peat Marwick study of 33 school districts sending students to
charter schools found that two-thirds had some capital expenditure for
facilities included in tuition. On average, 63 percent of long-term debt
was included in the tuition calculation. In 1998-99, a one-time state
appropriation gave charter schools an additional \$260 per pupil for
facilities funding---approximately equivalent to the annual SBAB average
grant. Therefore, total facilities funding for the average charter
school approximated the state average in 1998-99. Charter schools can
use capital funding for general operating expenditures in Massachusetts.

**State Start-Up Assistance:** As with school districts, payments are
made to charter schools at the end of each quarter, except for the first
year of operation when the charter school's first payment is 45 days
after the beginning of the first quarter. Certification for advance
funding may also be obtained. The Massachusetts Industrial Finance
Agency has provided partial guarantees for cashflow loans for several
charter schools.

**Uniform Financial Reporting:** Beginning in 1998-99, charter schools
will provide uniform financial reporting in a format customized for
charter schools.

**Independent Financial Audit:** Required.

**Responsibility for Debt:** Charter school board is responsible for
debt.

**Ownership and Disposition of Assets:** Charter school governing boards
own assets. If a charter school is dissolved, the state would assume
control of all assets that belong to the school, would liquidate those
assets, and then address the claims of creditors.

**Teacher Retirement:** Certified teachers must participate in the state
retirement system. All charter schools participate.

<table>
<colgroup>
<col style="width: 2%" />
<col style="width: 22%" />
<col style="width: 2%" />
<col style="width: 3%" />
<col style="width: 8%" />
<col style="width: 2%" />
<col style="width: 9%" />
<col style="width: 1%" />
<col style="width: 8%" />
<col style="width: 2%" />
<col style="width: 9%" />
<col style="width: 2%" />
<col style="width: 8%" />
<col style="width: 2%" />
<col style="width: 9%" />
<col style="width: 2%" />
</colgroup>
<tbody>
<tr class="odd">
<td colspan="4"><strong>Massachusetts</strong></td>
<td colspan="3"><blockquote>
<p><strong>Basic Elementary Charter School</strong></p>
</blockquote></td>
<td></td>
<td colspan="3"><blockquote>
<p><strong>Middle Cost K-12 Charter School</strong></p>
</blockquote></td>
<td></td>
<td colspan="3"><blockquote>
<p><strong>Urban At-Risk Upper Grade</strong></p>
</blockquote></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td><strong>FTE</strong></td>
<td></td>
<td colspan="2"><strong>$/Member</strong></td>
<td><strong>FTE</strong></td>
<td></td>
<td colspan="2"><strong>$/Member</strong></td>
<td><strong>FTE</strong></td>
<td></td>
<td colspan="2"><strong>$/Member</strong></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td colspan="2">Total FTE enrollment</td>
<td></td>
<td></td>
<td>100</td>
<td></td>
<td></td>
<td></td>
<td>100</td>
<td></td>
<td></td>
<td></td>
<td>100</td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td colspan="2">1. Tuition</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td>$ 7,000<sup>a</sup></td>
<td></td>
<td></td>
<td></td>
<td>$ 7,000<sup>a</sup></td>
<td></td>
<td></td>
<td></td>
<td>$ 8,200<sup>b</sup></td>
<td></td>
</tr>
<tr class="odd">
<td colspan="2">2. Special education<sup>c</sup></td>
<td></td>
<td></td>
<td>0</td>
<td></td>
<td>$ -</td>
<td></td>
<td>17</td>
<td></td>
<td>$ -</td>
<td></td>
<td>34</td>
<td></td>
<td>$ -</td>
<td></td>
</tr>
<tr class="even">
<td colspan="2">3. Low income<sup>c</sup></td>
<td></td>
<td></td>
<td>0</td>
<td></td>
<td>$ -</td>
<td></td>
<td>30</td>
<td></td>
<td>$ -</td>
<td></td>
<td>60</td>
<td></td>
<td>$ -</td>
<td></td>
</tr>
<tr class="odd">
<td>4.</td>
<td>Bilingual<sup>c</sup></td>
<td></td>
<td></td>
<td>0</td>
<td></td>
<td>$ -</td>
<td></td>
<td>5</td>
<td></td>
<td>$ -</td>
<td></td>
<td>10</td>
<td></td>
<td>$ -</td>
<td></td>
</tr>
<tr class="even">
<td colspan="3">5. Other state categorical<sup>c</sup></td>
<td></td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
</tr>
<tr class="odd">
<td colspan="2">6. Student transportation<sup>d</sup></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td>$ 190</td>
<td></td>
<td></td>
<td></td>
<td>$ 190</td>
<td></td>
<td></td>
<td></td>
<td>$ 190</td>
<td></td>
</tr>
<tr class="even">
<td colspan="2">7. Federal funding</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td>Title I</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td></td>
<td>$ 147</td>
<td></td>
<td></td>
<td></td>
<td>$ 294</td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td colspan="2">Other federal programs</td>
<td></td>
<td></td>
<td></td>
<td>$ 65</td>
<td></td>
<td></td>
<td></td>
<td>$ 65</td>
<td></td>
<td></td>
<td></td>
<td>$ 65</td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td>Special education</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td></td>
<td>$ 64</td>
<td></td>
<td></td>
<td></td>
<td>$ 128</td>
<td></td>
</tr>
<tr class="even">
<td colspan="2">Total revenue</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td>$ 7,255</td>
<td></td>
<td></td>
<td></td>
<td>$ 7,466</td>
<td></td>
<td></td>
<td></td>
<td>$ 8,877</td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td colspan="3">One-time facilities funding<sup>e</sup></td>
<td></td>
<td></td>
<td></td>
<td>$ 260</td>
<td></td>
<td></td>
<td></td>
<td>$ 260</td>
<td></td>
<td></td>
<td></td>
<td>$ 260</td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td colspan="6">Transition aid for districts (sending
districts)<sup>f</sup></td>
<td>$ 2,170</td>
<td></td>
<td></td>
<td></td>
<td>$ 2,170</td>
<td></td>
<td></td>
<td></td>
<td>$ 2,542</td>
<td></td>
</tr>
</tbody>
</table>

ASSUMPTIONS: All schools are commonwealth charter schools. Basic
elementary charter school enrolls only students who are not at risk and
have no special needs. Middle cost K-12 charter school has the same
student population characteristics as the average Massachusetts
district. At-risk upper grade charter school has twice the concentration
of special education and at-risk students as the Massachusetts average
and the same tuition as Boston.

^a^ Based on actual average charter school tuition for 1998-99. The
lowest average tuition for a charter school is about \$5,700, and the
lowest payment by a sending district is \$4,460 per pupil.

^b^ Based on tuition in Boston The highest average tuition for a charter
school is \$10,400, and the highest payment from a sending district is
\$12,250 per pupil.

^c^ Incorporated into tuition based on characteristics of the sending
districts. Categorical-type programs are included in the 11 enrollment
categories that are part of the general state aid formula. Special
education costs average 18 percent of operating costs statewide.
Bilingual costs average 3 percent of operating costs statewide.

^d^ Estimated state average transportation costs per enrolled pupil (not
user).

^e^ One-time appropriation of state building funds for 1998-99. Not
included in revenue total.

^f^ Received by school districts, not charter schools. Estimated to
average 31 percent of tuition for 1998-99.

### Horace Mann Charter Schools

Horace Mann charter schools are chartered by the state, but must
approved by a local school committee, the local teacher's union
president and the state board of education. Horace Mann charter schools
are exempt from state rules and regulations to the same extent as
commonwealth charter schools. They may also be exempt from local
collective bargaining agreements, provided that employees of the charter
school remain members of the collective bargaining unit, continue to
accrue seniority and receive, at a minimum, the salary and benefits
established by the local collective bargaining agreement.

**Base Funding:** Although funding is reached through a combination of
negotiations and implementation of the regular school district budget
allocation formula, Horace Mann schools cannot receive less than they
would secure under the standard school district budget allocation
procedure. A school can appeal a disproportionately small budget to the
Massachusetts Department of Education.

**Special Education, Limited-English Proficiency, and Low-Income
Students:** Horace Mann charter schools are likely to get funding
specifically for special needs students in the school. Exact funding
levels are the product of a combination of negotiations and
implementation of the regular school district budget allocation formula.

**Transportation:** Transportation is provided to Horace Mann charter
schools on the same basis as regular distinct schools, but the law does
not prevent alternative arrangements.

**Capital Outlay and Facilities Financing:** School districts are
responsible for facilities. Horace Mann charter schools are often housed
in existing public school facilities, but they may also acquire property
with the permission of the local school committee.

**Federal Funding:** Depending on the agreement with the school
district, a Horace Mann school could apply for and receive its federal
funding directly from state and federal authorities. Otherwise, federal
funding flows through the regular budgeting process in the district.
Horace Mann schools also qualify for federal start-up funding.

**State Start-Up Assistance:** None from state sources.

**Uniform Financial Reporting and Auditing Practice:** Like Commonwealth
charter schools, however, Horace Mann schools must complete an annual
report and an independent financial audit. School districts are likely
to incorporate Horace Mann schools into the school district reporting
and auditing process, although other arrangements are possible.

**Responsibility for Debt and Ownership of Assets:** Resides with school
district.

## Michigan

**Base Funding:** School district funding is driven by the "foundation
allowance," a per-pupil guaranteed funding level determined uniquely for
each school district. The proceeds of an 18 mill local property tax levy
are subtracted from the guaranteed funding level and the balance of
school district funding comes from state revenue. The 1998-99 foundation
allowance for most school districts is based on the 1993-94 (the year
before a major state school finance overhaul) foundation allowance as
updated on an annual basis. The legislature allowed the foundation
allowance of several low-spending school districts to increase at a
faster rate in order to reduce spending disparities among school
districts. High tax effort and high wealth school districts, usually
located in suburban areas, had the highest foundation allowances in
1998-99, as was the case in 1993-94.

Charter schools, which can only operate as a single-site facility,
receive the per-pupil foundation allowance of the school district in
which they are physically located, not to exceed \$5,962 in 1998-99
(coincidentally, this figure is about the same as the state average).
Approximately 100 of the state's 140 charter schools receive the maximum
amount. Two charter schools receive the minimum allowance of \$5,170,
the same as the school districts in which they are located. Unless
chartered by a school district, charter schools can enroll students
outside the boundaries of the school district in which the charter
school is physically located.

**Funding Based on School District Characteristics:** Variations in
school spending have narrowed since 1993-94. Low-spending districts are
allowed to increase their funding at a rate faster than the average, so
charter schools in low-spending school districts also show more rapid
revenue growth. Charter school funding is based on the geographic
location of the school building, creating an incentive to locate charter
schools in school districts that spend at least \$5,962, the state
maximum charter school payment. Not surprisingly, 70 percent of charter
schools get maximum funding.

**Special Education:** Charter schools are eligible for special
education categorical funding on the same basis as school districts.
Some special education costs in school districts come from foundation
allowance funds. About \$150 per enrolled pupil (not per handicapped
student) is available through state categorical aid (a two-year funding
lag exists) as well as

\$50 per enrolled pupil through federal funding. The state also provides
about \$350 per pupil (averaged across all pupils in the state) directly
to intermediate service districts. ISDs are also allowed to levy a
property tax. Overall, state support for special education averages
about 8 percent of the foundation level; charter schools without special
education students receive none of this funding.

**Limited-English Proficiency:** The state has a small appropriation
(\$4.2 million) to partially reimburse school districts and charter
schools based on a per-pupil application.

**Low-Income Students:** Like school districts, charter schools receive
a payment equal to 11.5 percent of the foundation allowance for each
student eligible for free breakfast, lunch or milk.

**Categorical Programs:** Charter schools are eligible for state
categorical support (in the same manner as local school districts) for
vocational education, gifted and talented, professional development,
school-to-work transition, and other small programs. Charter schools
must provide qualifying programs.

**Transportation:** No state transportation aid is available to either
school districts or charter schools, so transportation is financed
entirely from the foundation allowance. Like school districts, charter
schools do not have to provide transportation. Most charter schools do
not provide transportation, while most school districts do. In effect,
charter schools get transportation funding whether or not they provide
transportation.

**Capital Outlay and Facilities Financing:** While no state facilities
assistance is provided, the state charter school law specifically allows
charter schools to issue tax-exempt securities. Based on an Internal
Revenue Service ruling that did not specifically disallow the practice,
numerous charter schools have successfully obtained tax-exempt financing
to purchase or build facilities. Typically, an investment company
secures financing for the charter school and gets a fee of approximately
5 percent of the amount financed. In addition to interest, the lender
receives "points" approximating 5 percent. Typically, the lender holds a
"reserve" of 10 percent. The fees and reserve are capitalized into the
financing so no down payment or other up front money is required. In
order to build a \$1.0 million facility, a charter school would obtain
tax-exempt financing for \$1.2 million. The universities that authorize
charter schools usually must agree to forward payments directly to
lenders on behalf of the charter school. Although tax exempt, the higher
risk carried by charter school securities results in interest rates
substantially higher than those obtained by school districts.

**State Start-Up Assistance:** None.

**Administrative Fees:** Charter authorizers can collect 3 percent of
funding to cover monitoring and administrative expenses.

**Uniform Financial Reporting:** Charter schools submit Form B, the
uniform financial reporting form used by all school districts. Private
management companies are exempt from many aspects of Michigan's Freedom
of Information Act, which limits the usefulness of Form B reporting
limited due to lack of detail. Form B reporting is also misleading
because facility leases are categorized under the broader category of
administrative costs.

**Auditing Practice:** Every charter school is required to have an
annual independent financial audit, which are subject to accounting
standards approved by the Michigan Department of Education.

**Responsibility for Debt:** Charter schools can incur debt and use
general school aid revenue to acquire buildings or pay debt.

**Ownership and Disposition of Assets:** Property purchased by a charter
school remains the property of the charter school. No specific rules
exist for disposing of property for dissolved charter schools.

**Teacher Retirement:** Participation is required unless private
contractors manage schools. Reflecting the high percentage of private
management contracts in Michigan, only 50 of 141 charter schools
participate.

<table>
<colgroup>
<col style="width: 3%" />
<col style="width: 25%" />
<col style="width: 3%" />
<col style="width: 8%" />
<col style="width: 2%" />
<col style="width: 9%" />
<col style="width: 1%" />
<col style="width: 8%" />
<col style="width: 2%" />
<col style="width: 9%" />
<col style="width: 2%" />
<col style="width: 8%" />
<col style="width: 2%" />
<col style="width: 11%" />
</colgroup>
<tbody>
<tr class="odd">
<td colspan="2"><strong>Michigan</strong></td>
<td></td>
<td colspan="3"><blockquote>
<p><strong>Basic Elementary Charter School</strong></p>
</blockquote></td>
<td></td>
<td colspan="3"><blockquote>
<p><strong>Middle Cost K-12 Charter School</strong></p>
</blockquote></td>
<td></td>
<td colspan="3"><blockquote>
<p><strong>Urban At-Risk Upper Grade</strong></p>
</blockquote></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td><strong>FTE</strong></td>
<td></td>
<td colspan="2"><strong>$/Member</strong></td>
<td><strong>FTE</strong></td>
<td></td>
<td colspan="2"><strong>$/Member</strong></td>
<td><strong>FTE</strong></td>
<td></td>
<td><strong>$/Member</strong></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td colspan="2">Total FTE enrollment</td>
<td></td>
<td>100</td>
<td></td>
<td></td>
<td></td>
<td>100</td>
<td></td>
<td></td>
<td></td>
<td>100</td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td colspan="2">1. Foundation allowance<sup>a</sup></td>
<td></td>
<td></td>
<td></td>
<td>$ 5,962</td>
<td></td>
<td></td>
<td></td>
<td>$ 5,962</td>
<td></td>
<td></td>
<td></td>
<td>$ 5,962</td>
</tr>
<tr class="odd">
<td colspan="3">2. State special education aid<sup>b</sup></td>
<td>0</td>
<td></td>
<td>$ -</td>
<td></td>
<td>11</td>
<td></td>
<td>$ 155</td>
<td></td>
<td>22</td>
<td></td>
<td>$ 310</td>
</tr>
<tr class="even">
<td colspan="2">3. At-risk @11.5%<sup>c</sup></td>
<td></td>
<td>0</td>
<td></td>
<td>$ -</td>
<td></td>
<td>30</td>
<td></td>
<td>$ 206</td>
<td></td>
<td>60</td>
<td></td>
<td>$ 411</td>
</tr>
<tr class="odd">
<td colspan="2">4. LEP<sup>d</sup></td>
<td></td>
<td>0</td>
<td></td>
<td>$ -</td>
<td></td>
<td>3</td>
<td></td>
<td>$ 2</td>
<td></td>
<td>6</td>
<td></td>
<td>$ 5</td>
</tr>
<tr class="even">
<td colspan="2">5. Other state categorical<sup>e</sup></td>
<td></td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td></td>
<td>$ 24</td>
<td></td>
<td></td>
<td></td>
<td>$ 24</td>
</tr>
<tr class="odd">
<td colspan="2">6. Student transportation<sup>f</sup></td>
<td></td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td></td>
<td>$ -</td>
</tr>
<tr class="even">
<td colspan="2">7. Federal funding</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td>Title I</td>
<td></td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td></td>
<td>$ 195</td>
<td></td>
<td></td>
<td></td>
<td>$ 390</td>
</tr>
<tr class="even">
<td></td>
<td>Special education</td>
<td></td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td></td>
<td>$ 46</td>
<td></td>
<td></td>
<td></td>
<td>$ 46</td>
</tr>
<tr class="odd">
<td></td>
<td>Other federal programs</td>
<td></td>
<td></td>
<td></td>
<td>$ 69</td>
<td></td>
<td></td>
<td></td>
<td>$ 69</td>
<td></td>
<td></td>
<td></td>
<td>$ 69</td>
</tr>
<tr class="even">
<td colspan="2">Total revenue</td>
<td></td>
<td></td>
<td></td>
<td>$ 6,031</td>
<td></td>
<td></td>
<td></td>
<td>$ 6,659</td>
<td></td>
<td></td>
<td></td>
<td>$ 7,217</td>
</tr>
</tbody>
</table>

ASSUMPTIONS: Basic elementary charter school enrolls only students who
are not at risk and have no special needs. Middle cost K-12 charter
school has the same student characteristics as the average Michigan
district. At-risk upper grade charter school, located in Detroit, has
twice the concentration of special education and at-risk students as the
Michigan average. Host district foundation level is at least \$5,962.

^a^ Maximum foundation allowance (received by 70 percent of charter
schools). Lowest possible foundation allowance (received by two charter
schools) in 1998-99 is \$5,170.

^b^ The state allocates another \$350 per member (not handicapped pupils
served) to intermediate school districts (ISDs) to provide special
education. ISDs also benefit from a property tax levy. Charter schools
are eligible to use IDS special education services. School districts
also expend part of the foundation allowance for special education.

^c^ Each at-risk child generates \$657. The entry is total school
at-risk funding divided by 100 students.

^d^ Michigan appropriated \$78 per child for limited-English
proficiency.

^e^ Includes gifted and talented and vocational categoricals.

^f^ For both charter schools and school districts, transportation costs
come from the foundation allowance. On average, Michigan schools spend
about \$275 of the foundation allowance for transportation.

## Minnesota

**Base** **Funding:** Based on state averages, charter schools receive
the same base funding regardless of their location. The funding system
resembles the one for school districts except that charter schools have
an option on transportation services. In 1998-99, schools received basic
state aid of \$3,530 per pupil plus an amount equal to the average state
funding for:

-   Training and experience---provides more state aid for school
    districts with mature teaching staffs.

-   Operating capital---a separate component of the general aid formula.

-   Sparsity---provides more aid for sparsely populated school
    districts.

-   Graduation standards funding.[^55]

Per-pupil base funding totaled \$3,759 in 1998-99.

**Grade Level Funding:** Per-pupil base funding is multiplied by a
weighting formula that counts elementary school students at 1.06 and
middle and high school students at 1.30.

**Special Education:** The state funds about two-thirds of special
education costs. School districts may levy local property taxes for the
remainder. If so, charter schools allocate their special education
population back to their resident districts for levy purposes and then
bill the district for its share of the levy funding as if the district
were participating in a Board of Cooperative Educational Services.[^56]
Funding is based on the second prior year's expenditures. The state pays
additional money for 68 percent of the actual salary of each person
providing special education instructional services and 47 percent of the
cost of

supplies and equipment, not to exceed \$47 per disabled student. The
state also covers 52 percent of the additional cost of a contract for
instruction and supplemental services.[^57]

**Limited-English Proficiency:** LEP funding is based both on the number
of LEP students and the concentration of LEP students in a school
district or charter school. Basic LEP funding is either: (1) 68 percent
of one-half the salary of each teacher for every 40 LEP pupils, or (2)
68 percent of one-half the salary for a teacher in a district with 20 or
fewer LEP pupils. The state also pays for 47 percent of the costs of
supplies and equipment not to exceed an average of \$47 per pupil. As in
special education, school districts can use a levy for the LEP costs not
funded by the state. Charter schools allocate their LEP populations to
the resident districts of the pupils attending the charter school for
levy purposes and bill the school district. LEP concentration revenue is
based on a formula.[^58] The maximum concentration revenue is \$149 per
LEP pupil.

**Low-Income or Compensatory Education:** Charter schools, like school
districts, may qualify for compensatory education money, which is a
component of Basic Skills Revenue. To qualify, charter schools have to
meet reporting requirements for basic skills expenditures. The basic
revenue is \$3,530 multiplied by a concentration percentage, which is
then multiplied by the number of students qualifying for free or
reduced-price lunch. Finally this amount is multiplied by .6.[^59] There
also is a basic skills match of up to \$22.50 in state aid per student.

**Categorical Funding:** Charter schools are eligible to receive other
aids, grants and revenue as though it were a school district. These
include: Secondary Vocational Students with Disabilities revenue,
Secondary Vocational revenue, Teacher Education Improvement grants,
Teacher Mentorship grants, First Grade Preparedness (full-day
kindergarten), Family Connections Program, Wide Area Transportation,
Advanced Placement and International Baccalaureate, Violence Prevention
grants, Family Service Collaboratives, and a number of technology
programs. However, charter schools may not receive funds for which a
levy is required.

**Transportation:** If a charter school provides transportation, then
the charter school has a base funding adjustment of \$171 per *weighted*
student. High school students generate 130 percent of this revenue, and
elementary school students generate 106 percent of \$171. Transportation
Sparsity and Transition Revenues that vary by district supplement base
transportation funding. Low-income family transportation reimbursements
go to families in open enrollment options including charter schools. In
general, parents of students attending charter schools outside their
district of residence are responsible for bringing their children to the
district border.

**State Start-Up Assistance:** During the first two years of operation,
charter schools are eligible for aid for start-up costs and additional
operating costs of \$500 per pupil, with a minimum of \$50,000.

**Capital Outlay and Facilities Assistance:** In 1998-99, charter
schools received building lease aid equal to the lesser of either 80
percent of approved leasing costs, or state average capital funding. The
state estimate for average capital funding was \$465 per pupil. In
1999-2000, lease and increases to 90 percent of approved costs up to
\$1,500 per pupil.

**Timing of Payments:** A charter school preparing for its first year of
operation receives 10 percent of its funds on July 15 to help deal with
cash flow problems. The next 80 percent of its funds are distributed in
22 equal bimonthly installments. The final 10 percent is distributed in
October of the subsequent year. After the first year of operation,
charter schools receive 90 percent of their funds in 23 equal bimonthly
installments starting on July 15, and the final 10 percent is
distributed in October of the subsequent school year.

**Uniform Financial Reporting:** Charter schools participate in the
Integrated District Education Aids System (IDEAS). This is the
computerized system used for school district financial reporting.

**Auditing Practice:** Charter schools are subject to the same financial
audits, audit procedures and audit requirements as a school district.
The Department of Children, Families and Learning; state auditor; or
legislative auditor may conduct financial, program or compliance audits.

**Responsibility for Debt:** Charter schools are governed under the
Minnesota law for nonprofit corporations or cooperatives. The charter
school's nonprofit corporation is responsible for debt.

**Ownership of Assets:** State funds cannot be used to buy facilities. A
charter can buy facilities with funds from non-state sources. Assets
belong to the non-profit corporation.

**Teacher Retirement:** Charter school employees take part in the
appropriate public retirement system.

**Private Contributions:** Charter schools can accept private
contributions, but only for start-up purposes of capital facilities and
must report them to the state.

<table style="width:100%;">
<colgroup>
<col style="width: 2%" />
<col style="width: 27%" />
<col style="width: 7%" />
<col style="width: 8%" />
<col style="width: 9%" />
<col style="width: 1%" />
<col style="width: 9%" />
<col style="width: 9%" />
<col style="width: 2%" />
<col style="width: 9%" />
<col style="width: 9%" />
</colgroup>
<tbody>
<tr class="odd">
<td colspan="2"><strong>Minnesota</strong></td>
<td><strong>Cost Factor</strong></td>
<td colspan="2"><blockquote>
<p><strong>Basic Elementary Charter School</strong></p>
</blockquote></td>
<td></td>
<td colspan="2"><blockquote>
<p><strong>Middle Cost K-12 Charter School</strong></p>
</blockquote></td>
<td></td>
<td colspan="2"><blockquote>
<p><strong>Urban At-Risk Upper Grade</strong></p>
</blockquote></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td><strong>Weight</strong></td>
<td><strong>FTE</strong></td>
<td><strong>WFTE</strong></td>
<td></td>
<td><strong>FTE</strong></td>
<td><strong>WFTE</strong></td>
<td></td>
<td><strong>FTE</strong></td>
<td><strong>WFTE</strong></td>
</tr>
<tr class="odd">
<td colspan="2">Weighted FTE calculations</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td>Grades 1-6</td>
<td>1.06</td>
<td>100</td>
<td>106.0</td>
<td></td>
<td>50</td>
<td>53.0</td>
<td></td>
<td>0</td>
<td>0.0</td>
</tr>
<tr class="odd">
<td></td>
<td>Grades 7-12</td>
<td>1.30</td>
<td>0</td>
<td>0.0</td>
<td></td>
<td>50</td>
<td>65.0</td>
<td></td>
<td>100</td>
<td>130.0</td>
</tr>
<tr class="even">
<td></td>
<td>Total weighted FTE</td>
<td></td>
<td>100</td>
<td>106.0</td>
<td></td>
<td>100</td>
<td>118.0</td>
<td></td>
<td>100</td>
<td>130.0</td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td colspan="2">1. Base funding per FTE<sup>a</sup></td>
<td></td>
<td>$ 3,935</td>
<td>$ 3,712</td>
<td></td>
<td>$ 4,380</td>
<td>$ 3,712</td>
<td></td>
<td>$ 4,826</td>
<td>$ 3,712</td>
</tr>
<tr class="odd">
<td colspan="2">2. Limited-English proficiency<sup>b</sup></td>
<td></td>
<td>$ -</td>
<td>(0 FTE)</td>
<td></td>
<td>$ 105</td>
<td>(3 FTE)</td>
<td></td>
<td>$ 109</td>
<td>(6 FTE)</td>
</tr>
<tr class="even">
<td colspan="2">3. Special education<sup>b</sup></td>
<td></td>
<td>$ -</td>
<td>(0 FTE)</td>
<td></td>
<td>$ 345</td>
<td>(11FTE)</td>
<td></td>
<td>$ 690</td>
<td>(22 FTE)</td>
</tr>
<tr class="odd">
<td colspan="2">4. Compensatory education<sup>c</sup></td>
<td></td>
<td>$ -</td>
<td>(0 FTE)</td>
<td></td>
<td>$ 133</td>
<td>(26 FTE)</td>
<td></td>
<td>$ 536</td>
<td>(52 FTE)</td>
</tr>
<tr class="even">
<td colspan="2">5. Basic skills aid</td>
<td></td>
<td>$ 23</td>
<td></td>
<td></td>
<td>$ 23</td>
<td></td>
<td></td>
<td>$ 23</td>
<td></td>
</tr>
<tr class="odd">
<td colspan="2">6. Transportation<sup>d</sup></td>
<td></td>
<td>$ 238</td>
<td></td>
<td></td>
<td>$ 265</td>
<td></td>
<td></td>
<td>$ 292</td>
<td></td>
</tr>
<tr class="even">
<td colspan="2">7. Federal funding</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td>Title I</td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td>$ 102</td>
<td></td>
<td></td>
<td>$ 204</td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td>Bilingual and immigrant</td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td>$ 2</td>
<td></td>
<td></td>
<td>$ 4</td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td>Special education</td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td>$ 47</td>
<td></td>
<td></td>
<td>$ 96</td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td>Other federal programs</td>
<td></td>
<td>$ 53</td>
<td></td>
<td></td>
<td>$ 53</td>
<td></td>
<td></td>
<td>$ 53</td>
<td></td>
</tr>
<tr class="odd">
<td colspan="2">Total revenue</td>
<td></td>
<td>$ 4,248</td>
<td></td>
<td></td>
<td>$ 5,455</td>
<td></td>
<td></td>
<td>$ 6,833</td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td colspan="2">Facilities lease aid</td>
<td></td>
<td>$ 465</td>
<td></td>
<td></td>
<td>$ 465</td>
<td></td>
<td></td>
<td>$ 465</td>
<td></td>
</tr>
</tbody>
</table>

ASSUMPTIONS: Each school has 100 students. Basic elementary charter
school enrolls only students who are not at risk and have no special
needs. Middle cost K-12 charter school has the same student population
characteristics as the average Minnesota district. At-risk upper grade
charter school has twice the concentration of special education and
at-risk students as the Minnesota average.

^a^ Base funding pays for about 40 percent of special education and LEP
costs. Pension adjustment of \$47 per weighted pupil has been subtracted
from basic weighting allowance of \$3,759.

^b^ State LEP, special education and compensatory aid calculations are
described in the footnotes in the accompanying text.

^c^ Estimated at \$513 per compensatory education pupil in middle cost
school and \$1,031 per pupil at upper grade school.

^d^ Transportation sparsity and transition revenue are estimated to be
\$53.46 per pupil. This calculation is based on data for the Skills for
Tomorrow Charter School supplied by the Minnesota Department of
Children, Families and Learning. Transportation funding does not include
the value of services provided to low income families.

## New Jersey

**Base Funding:** Charter schools receive per-pupil funding based on
revenue that would have been generated by charter school students in
their districts of residence. The state calculates base funding adjusted
for grade level differences based on a weighting formula. Revenue
allotted to special education, transportation of district students (5.4
percent of spending), and transportation provided to private school
students (1.4 percent of spending) is included in the base amount.
Charter schools get 90 percent of this amount. The state commissioner of
education can, however, increase the percentage. The commissioner has
exercised this power in a handful of cases, e.g., for a charter school
that offered full-day kindergarten.

**Grade Level Funding:** Per-pupil base funding is multiplied by a
weighting formula that counts elementary school students at 1.00, grades
6 to 8 as 1.12, and high school students at 1.20.

**Funding Based on School District Characteristics:** Despite an
equalization aid formula that has been under judicial review for
decades, New Jersey is a state with spending inequities based on
property wealth and tax effort. High-spending, wealthy school districts
generate more funding for charter schools than impoverished school
districts.

**Special Education Revenue:** School districts are responsible for
turning state funds over to the charter school for special education
students residing in the district and attending that charter school. The
state funding system has two categories: Tier I (\$150 per pupil) and
Tier II (\$3,024 per pupil). State aid is generally insufficient to pay
for all special education costs.

**Limited-English Proficiency:** School districts send funds to the
charter school to cover categorical aid assigned to bilingual education
students (about \$1,100 per bilingual student) residing in the district
and attending that charter school.

**Low-Income or Compensatory Education:** School districts send funds to
the charter school for compensatory education for eligible students
residing in the district who attend that charter school. Charter schools
in districts with high concentrations of at-risk students receive
Demonstrably Effective Program aid for every student in the school.
Schools in districts without a high concentration of at-risk students
get Instructional Supplement aid available only for qualifying students.

**Other State Categorical Aid:** A charter pupil's district of residence
is responsible for transferring to the charter school aid attributable
to that student for special education, bilingual education,
Instructional Supplement aid and Distance Learning Network aid. Other
programs are included in the basic allotment.

**Transportation:** Students attending a charter school in their
district of residence receive transportation services from the district
on the same basis as other students in the district. Regulations require
that students attending a charter school outside of their residential
district boundary receive services from their district of residence in
value up to a statutorily determined amount. If the amount required to
transport them exceeds this cap, parents can agree to provide the extra
funding, or the district can forward the cap amount to the parent in the
form of transportation aid, and parents can provide services themselves.

**State Start-Up Assistance:** None.

**Capital Outlay and Facilities Financing:** No program.

**Uniform Financial Reporting:** Required.

**Auditing Practice:** The annual report must contain a comprehensive
annual financial report including a balance sheet, an operational
statement of revenues and expenditures, and a cash flow analysis.

**Responsibility for Debt:** Responsibility is not specifically
addressed in law.

**Ownership and Disposition of Assets:** If a charter is revoked or
becomes insolvent, the assets remaining after satisfaction of creditors
will be distributed by the state commissioner of education among
districts sending students to the charter school. Charter schools must
include this provision in their bylaws.

**Unexpended Funds:** Charter schools keep unexpended funds. However,
school districts can request that the charter school's allotment be
reexamined in the event of excessive surpluses.

**Timing of Payments:** Charter school aid is split between the district
average local tax levy and the district average state aid attached to
each student. The local portion is paid to the district(s) of residence
in 12 monthly installments beginning July 15. Thus, two payments arrive
before school starts. The resident district also pays the average state
aid portion in 20 installments on the second and 16th of each month from
September through June.

**Teacher Retirement:** All certified teachers must participate in the
retirement program. All charter school teachers must be certified.

<table>
<colgroup>
<col style="width: 2%" />
<col style="width: 21%" />
<col style="width: 3%" />
<col style="width: 7%" />
<col style="width: 9%" />
<col style="width: 9%" />
<col style="width: 3%" />
<col style="width: 9%" />
<col style="width: 9%" />
<col style="width: 3%" />
<col style="width: 10%" />
<col style="width: 9%" />
</colgroup>
<tbody>
<tr class="odd">
<td colspan="2"><strong>New Jersey</strong></td>
<td></td>
<td><strong>Cost Factor</strong></td>
<td colspan="3"><blockquote>
<p><strong>Basic Elementary Charter School</strong></p>
</blockquote></td>
<td colspan="3"><strong>Middle Cost K-12 Charter School</strong></td>
<td colspan="2"><blockquote>
<p><strong>Urban At-Risk Upper Grade</strong></p>
</blockquote></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td><strong>Weight</strong></td>
<td><strong>FTE</strong></td>
<td><strong>WFTE</strong></td>
<td></td>
<td><strong>FTE</strong></td>
<td><strong>WFTE</strong></td>
<td></td>
<td><strong>FTE</strong></td>
<td><strong>WFTE</strong></td>
</tr>
<tr class="odd">
<td colspan="3">Weighted FTE calculations</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td>Grades 1-5</td>
<td></td>
<td>1.00</td>
<td>100</td>
<td>100.0</td>
<td></td>
<td>34</td>
<td>34.0</td>
<td></td>
<td>0</td>
<td>0.0</td>
</tr>
<tr class="odd">
<td></td>
<td>Grades 6-8</td>
<td></td>
<td>1.12</td>
<td>0</td>
<td>0.0</td>
<td></td>
<td>33</td>
<td>37.0</td>
<td></td>
<td>50</td>
<td>56.0</td>
</tr>
<tr class="even">
<td></td>
<td>Grades 9-12</td>
<td></td>
<td>1.20</td>
<td>0</td>
<td>0.0</td>
<td></td>
<td>33</td>
<td>39.6</td>
<td></td>
<td>50</td>
<td>60.0</td>
</tr>
<tr class="odd">
<td></td>
<td>Total weighted FTE</td>
<td></td>
<td></td>
<td></td>
<td>100.0</td>
<td></td>
<td></td>
<td>110.6</td>
<td></td>
<td></td>
<td>116.0</td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td>Base funding<sup>a</sup></td>
<td></td>
<td></td>
<td>$ 7,457</td>
<td>$ 7,457</td>
<td></td>
<td>$ 8,244</td>
<td>$ 7,457</td>
<td></td>
<td>$ 9,820</td>
<td>$ 8,466</td>
</tr>
<tr class="even">
<td></td>
<td>90 percent funding</td>
<td></td>
<td></td>
<td>x .90</td>
<td></td>
<td></td>
<td>x .90</td>
<td></td>
<td></td>
<td>x .90</td>
<td></td>
</tr>
<tr class="odd">
<td colspan="2">1. Base funding @ 90%</td>
<td></td>
<td></td>
<td>$ 6,711</td>
<td></td>
<td></td>
<td>$ 7,420</td>
<td></td>
<td></td>
<td>$ 8,838</td>
<td></td>
</tr>
<tr class="even">
<td colspan="2">2. Special education</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td>Tier I<sup>b</sup></td>
<td></td>
<td></td>
<td>$ -</td>
<td>(0 FTE)</td>
<td></td>
<td>$ 8</td>
<td>(5 FTE)</td>
<td></td>
<td>$ 15</td>
<td>(10 FTE)</td>
</tr>
<tr class="even">
<td></td>
<td>Tier II<sup>c</sup></td>
<td></td>
<td></td>
<td>$ -</td>
<td>(0 FTE)</td>
<td></td>
<td>$ 121</td>
<td>(4 FTE)</td>
<td></td>
<td>$ 242</td>
<td>(8 FTE)</td>
</tr>
<tr class="odd">
<td colspan="2">3. Bilingual education<sup>d</sup></td>
<td></td>
<td></td>
<td>$ -</td>
<td>(0 FTE)</td>
<td></td>
<td>$ 44</td>
<td>(4 FTE)</td>
<td></td>
<td>$ 88</td>
<td>(8 FTE)</td>
</tr>
<tr class="even">
<td colspan="2">4. At-risk<sup>e</sup></td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td>$ 436</td>
<td></td>
</tr>
<tr class="odd">
<td colspan="2">5. Distance learning</td>
<td></td>
<td></td>
<td>$ 41</td>
<td></td>
<td></td>
<td>$ 41</td>
<td></td>
<td></td>
<td>$ 41</td>
<td></td>
</tr>
<tr class="even">
<td colspan="2">6. Transportation<sup>f</sup></td>
<td></td>
<td></td>
<td>$ 362</td>
<td></td>
<td></td>
<td>$ 401</td>
<td></td>
<td></td>
<td>$ 477</td>
<td></td>
</tr>
<tr class="odd">
<td colspan="2">7. Federal funding</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td>Title I</td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td>$ 123</td>
<td></td>
<td></td>
<td>$ 246</td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2">Bilingual and immigrant</td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td>$ 4</td>
<td></td>
<td></td>
<td>$ 8</td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td>Special education</td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td>$ 63</td>
<td></td>
<td></td>
<td>$ 126</td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2">Other federal programs</td>
<td></td>
<td>$ 40</td>
<td></td>
<td></td>
<td>$ 40</td>
<td></td>
<td></td>
<td>$ 40</td>
<td></td>
</tr>
<tr class="even">
<td colspan="2">Total revenue</td>
<td></td>
<td></td>
<td>$ 7,154</td>
<td></td>
<td></td>
<td>$ 8,264</td>
<td></td>
<td></td>
<td>$10,558</td>
<td></td>
</tr>
</tbody>
</table>

ASSUMPTIONS: Each school has 100 students. Basic elementary charter
school has no at-risk or special needs students. Middle cost K-12
charter school has the same student population as the average New Jersey
district. At-risk upper grade charter school has twice the concentration
of special needs students as the New Jersey average. The basic and
middle cost schools use base funding for Nutley, an average New Jersey
school district. The at risk school uses base funding for Newark.

^a^ Includes a majority of special education and transportation costs.

^b^ \$154 per eligible pupil.

^c^ \$3,024 per eligible pupil.

^d^ \$1,103 per eligible pupil.

^e^ \$436 per student in eligible schools.

^f^ In-kind value of district-provided transportation estimated at state
average of 5.4 percent.

## New Mexico

**Base** **Funding:** More than 90 percent of education funding comes
from the state equalization aid program. While the base funding amount
was \$2,322 in 1998-99, an extensive system of weights increased average
funding to about \$4,400. This formula adjusts for size, grade level,
special education and other student characteristics, enrollment growth,
and staff training and experience (T&E). The T&E factor is a multiplier
applied after the basic weighting calculation. In 1998-99, charter
schools were authorized and funded by school districts. The state
requires that its basic funding formula amount be given to the charter
school on a per-pupil basis. Districts can then add additional funds.

**Grade Level Weights:** At the elementary level, grade level weights
range from 1.20 in first grade to 1.05 in grades 4 to 6. Middle and high
school students are weighted at 1.25.

**School and District Size Factors:** New Mexico has a complicated
system of size adjustments that should provide more funding to charter
schools in small school districts. In the average district, these
adjustments account for about 12 percent of school district revenue. The
size adjustment recognizes only diseconomies of small scale and not the
high costs of urban education, so Albuquerque gets no extra funding.

**Training and Experience Factor:** An adjustment for the higher costs
faced by school districts with a better trained and more experienced
staff averages about 9 percent of revenue.

**Special Education Revenue:** Nearly one in five students qualifies for
special education services. Weights based on the intensity of services
drive special education funding. A separate component of funding,
related services, adds 14 percent to base funding in the average school
district. Overall, special education funding averages well over \$1,000
per student. The "add-on" weighting for Type A and B students is 0.7.
The weighting for Type C students is 1.0, and the weighting for Type D
students is 2.0.

**Gifted and Talented:** Gifted and talented children receive funding as
class B and C special education students.

**Limited-English Proficiency:** The additional weighting in the formula
is 0.5, and about 5 percent of students qualify.

**Low-Income or Compensatory Education:** The formula has an at-risk
index that generates about 8 percent of revenues in the average school
district. The index for Albuquerque adds 16 percent to funding. Since
the funding is not directed at specific schools or students, charter
schools should benefit from this source of funding regardless of the
exact number of at-risk students enrolled.

**Categorical Funding:** Charter schools are entitled to their fair
share of categorical funding. The main categorical program is
Instructional Materials, amounting to \$46 per pupil in 1998-99.

**Transportation:** Transportation arrangements are negotiated. In
Albuquerque, the school district provides transportation to charter
schools on the same basis as any other school.

**State Start-Up Assistance:** None.

**Capital Outlay and Facilities Financing:** Facilities issues are
negotiated between the district and charter school. In Albuquerque,
charter schools have some access to locally raised capital funding for
maintenance and repairs.

**Timing of Payments:** Charter schools receive funds on the same basis
as other schools in the district.

#  {#section-3}

**Uniform Financial Reporting:** The reporting requirements are the same
as for any other public school, and charter finance is subsumed in the
district's reporting.

**Auditing Practice:** The audit requirements are the same as for any
other public school; charter schools are audited as part of their host
school district.

**Responsibility for Debt:** Charter schools cannot acquire debt.

**Ownership of Assets:** All assets belong to the school district in the
event of closure.

**Unexpended Funds:** Funds revert to the school district at the end of
the fiscal year.

**Teacher Retirement:** Charter school employees are public employees
who participate in the teacher retirement system.

<table>
<colgroup>
<col style="width: 3%" />
<col style="width: 23%" />
<col style="width: 3%" />
<col style="width: 7%" />
<col style="width: 8%" />
<col style="width: 9%" />
<col style="width: 2%" />
<col style="width: 9%" />
<col style="width: 9%" />
<col style="width: 1%" />
<col style="width: 9%" />
<col style="width: 9%" />
</colgroup>
<tbody>
<tr class="odd">
<td colspan="2"><strong>New Mexico</strong></td>
<td></td>
<td><strong>Cost Factor</strong></td>
<td colspan="2"><strong>Basic Elementary Charter School</strong></td>
<td></td>
<td colspan="2"><strong>Middle Cost K-12 Charter School</strong></td>
<td></td>
<td colspan="2"><blockquote>
<p><strong>Urban At-Risk Upper Grade</strong></p>
</blockquote></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td><strong>Weight</strong></td>
<td><strong>FTE</strong></td>
<td><strong>WFTE</strong></td>
<td></td>
<td><strong>FTE</strong></td>
<td><strong>WFTE</strong></td>
<td></td>
<td><strong>FTE</strong></td>
<td><strong>WFTE</strong></td>
</tr>
<tr class="odd">
<td colspan="2">Weighted FTE calculations</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td>Grade 1</td>
<td></td>
<td>1.20</td>
<td>20</td>
<td>24.0</td>
<td></td>
<td>10</td>
<td>12.0</td>
<td></td>
<td>0</td>
<td>0.0</td>
</tr>
<tr class="odd">
<td></td>
<td>Grades 2-3</td>
<td></td>
<td>1.18</td>
<td>40</td>
<td>47.2</td>
<td></td>
<td>20</td>
<td>23.6</td>
<td></td>
<td>0</td>
<td>0.0</td>
</tr>
<tr class="even">
<td></td>
<td>Grades 4-6</td>
<td></td>
<td>1.05</td>
<td>40</td>
<td>41.8</td>
<td></td>
<td>20</td>
<td>20.9</td>
<td></td>
<td>0</td>
<td>0.0</td>
</tr>
<tr class="odd">
<td></td>
<td>Grades 7-12</td>
<td></td>
<td>1.25</td>
<td>0</td>
<td>0.0</td>
<td></td>
<td>50</td>
<td>62.5</td>
<td></td>
<td>100</td>
<td>125.0</td>
</tr>
<tr class="even">
<td></td>
<td>Special education A/B</td>
<td></td>
<td>0.70</td>
<td>0</td>
<td>0.0</td>
<td></td>
<td>11</td>
<td>7.7</td>
<td></td>
<td>11</td>
<td>7.7</td>
</tr>
<tr class="odd">
<td></td>
<td>Special education C</td>
<td></td>
<td>1.00</td>
<td>0</td>
<td>0.0</td>
<td></td>
<td>4</td>
<td>4.0</td>
<td></td>
<td>8</td>
<td>8.0</td>
</tr>
<tr class="even">
<td></td>
<td>Special education D</td>
<td></td>
<td>2.00</td>
<td>0</td>
<td>0.0</td>
<td></td>
<td>4</td>
<td>8.0</td>
<td></td>
<td>8</td>
<td>16.0</td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2">Sp. educ. related services</td>
<td><sup>a</sup></td>
<td>na</td>
<td>0.0</td>
<td></td>
<td>na</td>
<td>14.0</td>
<td></td>
<td>na</td>
<td>28.0</td>
</tr>
<tr class="even">
<td></td>
<td colspan="2">Limited-English proficient</td>
<td>0.50</td>
<td>0</td>
<td>0.0</td>
<td></td>
<td>5</td>
<td>2.5</td>
<td></td>
<td>10</td>
<td>5.0</td>
</tr>
<tr class="odd">
<td></td>
<td>Subtotal</td>
<td></td>
<td></td>
<td></td>
<td>113.0</td>
<td></td>
<td></td>
<td>155.2</td>
<td></td>
<td></td>
<td>189.7</td>
</tr>
<tr class="even">
<td></td>
<td colspan="2">Training &amp; experience factor</td>
<td><sup>a</sup></td>
<td>na</td>
<td>x 1.093</td>
<td></td>
<td>na</td>
<td>x 1.093</td>
<td></td>
<td>na</td>
<td>x 1.097</td>
</tr>
<tr class="odd">
<td></td>
<td>Subtotal</td>
<td></td>
<td></td>
<td></td>
<td>123.5</td>
<td></td>
<td></td>
<td>169.6</td>
<td></td>
<td></td>
<td>208.1</td>
</tr>
<tr class="even">
<td></td>
<td>At-risk index</td>
<td></td>
<td><sup>a</sup></td>
<td>na</td>
<td>0.0</td>
<td></td>
<td>na</td>
<td>8.0</td>
<td></td>
<td>na</td>
<td>16.0</td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2">School &amp; district size factors</td>
<td><sup>a</sup></td>
<td>na</td>
<td>12.0</td>
<td></td>
<td>na</td>
<td>12.0</td>
<td></td>
<td>na</td>
<td>0.0</td>
</tr>
<tr class="even">
<td></td>
<td>Total weighted FTE</td>
<td></td>
<td></td>
<td></td>
<td>135.5</td>
<td></td>
<td></td>
<td>189.6</td>
<td></td>
<td></td>
<td>224.1</td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td colspan="2">1. Base funding</td>
<td></td>
<td><sup>b</sup></td>
<td>$ 3,147</td>
<td>$ 2,322</td>
<td></td>
<td>$ 4,403</td>
<td>$ 2,322</td>
<td></td>
<td>$ 5,204</td>
<td>$ 2,322</td>
</tr>
<tr class="odd">
<td colspan="2">2. Transportation</td>
<td></td>
<td><sup>c</sup></td>
<td>$ 270</td>
<td></td>
<td></td>
<td>$ 270</td>
<td></td>
<td></td>
<td>$ 270</td>
<td></td>
</tr>
<tr class="even">
<td colspan="2">3. Instructional materials</td>
<td></td>
<td></td>
<td>$ 46</td>
<td></td>
<td></td>
<td>$ 46</td>
<td></td>
<td></td>
<td>$ 46</td>
<td></td>
</tr>
<tr class="odd">
<td colspan="2">4. Federal funding</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td>Title 1</td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td>$ 172</td>
<td></td>
<td></td>
<td>$ 344</td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td>Special education</td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td>$ 54</td>
<td></td>
<td></td>
<td>$ 108</td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td>Other federal programs</td>
<td></td>
<td></td>
<td>$ 46</td>
<td></td>
<td></td>
<td>$ 46</td>
<td></td>
<td></td>
<td>$ 46</td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td>Bilingual and immigrant</td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td>$ 20</td>
<td></td>
<td></td>
<td>$ 40</td>
<td></td>
</tr>
<tr class="even">
<td colspan="2">Total revenue</td>
<td></td>
<td></td>
<td>$ 3,509</td>
<td></td>
<td></td>
<td>$ 5,011</td>
<td></td>
<td></td>
<td>$ 6,058</td>
<td></td>
</tr>
</tbody>
</table>

ASSUMPTIONS: Each school has 100 students. Basic elementary charter
school has no pupils generating program cost weightings. Middle cost
K-12 charter school has the same student population as the average New
Mexico school district. At-risk upper grade charter school has twice the
concentration of students at each special education level as the New
Mexico average and is located in Albuquerque.

^a^ Based on indexes, not pupil counts. Basic and middle cost schools
use state average indexes. At-risk charter school uses indexes for
Albuquerque.

^b^ Weighted FTE per pupil funding of \$2,322 applies to all school
districts. All variation in FTE spending depends on pupil weightings and
indexes for training and experience, at-risk students and size factors.

^c^ Represents state aid per enrolled pupil, which covers all
transportation costs in most districts.

## North Carolina

**Base Funding:** Charter schools receive an amount equal to the state
per-pupil allocation of operating funds to the school district in which
the student was previously enrolled minus special education funds.
School district operating funds include financial support for vocational
education, gifted education, transportation and at-risk programs. Except
for special education, charter schools get the school district average
whether or not they enroll students or provide programs generating the
funds. This funding scheme works to the disadvantage of charter schools
with high-cost students. In addition to state allotments for a variety
of purposes, charter schools receive "local" funds that average about
\$1,000 and range from \$500 to \$1,800.

**Grade Level Funding Adjustments:** Although school districts generate
funding based on grade level, charter school funding does not
distinguish between grades**.** For school districts, the weighting
occurs in the formula allocating classroom teachers. Funding is based on
teacher to pupil ratios of 1:23 for kindergarten, 1:26 for grades 1-9,
and 1:28 in grades 10-12. Classroom teacher assistants are allocated to
K-3 grades only. Charter high schools or middle schools do not get grade
level weights and may be underfunded compared to regular high schools
and elementary charter schools.

**Funding Based on School District Characteristics:** Funding is
adjusted for geographic isolation. The formula is based on the
property-weighted sales potential, agricultural use value, existing
utilities and county personal property.

**Special Education:** In 1998-99, school districts obtained \$2,346 per
special needs student, with funding capped at 12.5 percent of
enrollment. Thus, when the percentage of students who are handicapped
exceeds 12.5 percent, the funding per pupil served falls below \$2,346.
One school district obtained only \$1,763 per handicapped pupil served.
Charter schools receive the average special education revenue per child
actually served from the school district the disabled student previously
attended. Funding could range from \$1,763 to \$2,346 per special needs
student. Charter schools obtain less special education funding when
disabled students come from school districts with a high proportion of
special needs

students. Although the funding cap eliminates the incentive for school
districts to identify more children as handicapped in order to obtain
extra funding, charter school funding is not capped. Additionally,
funding is the same both for low- and for high-cost special needs
students. As a consequence, a financial incentive exists for charter
schools to enroll students with low-cost disabilities. State funds for
children with disabilities are allotted based on the number of students
who were included in the April 1 head count. If a child was not included
in a school district head count, the charter school will not receive
funds for that child. Each subsequent year, charter schools submit their
own head count on

April 1.

**Other State Categorical Funding:** Categorical programs in North
Carolina include gifted and talented (about \$31 per member), vocational
education (ranging from \$184 to \$204 per enrolled student), staff
development, transportation and at-risk funding. Categorical aid is
incorporated into the average per-pupil operating fund calculation.
Thus, charter schools are funded at the same level as an average
district school regardless of the charters' programs or student
characteristics.

**At-Risk Students:** Funding for at-risk students amounts to about \$95
per pupil enrolled.

**Bilingual:** The state does not provide additional funds for bilingual
education.

**Transportation:** School districts receive state transportation
funding based on factors such as number of pupils, fuel costs and number
of buses. Charter schools receive school district average transportation
funding, since it is a component of operating funds, and can spend the
transportation money for any legitimate purpose. For the school
districts profiled in the following table, the transportation component
of state aid ranged from \$144 to \$174 per enrolled pupil. Additional
funds from local revenue supplement the state aid. Charter schools are
required to provide a transportation plan for their students. The plan
could consist of car pools or other alternative methods of
transportation.

**Capital Outlay and Facilities Financing:** Charter schools have no
access to the facilities financing or debt service funds of school
districts. North Carolina includes a small amount of capital outlay
spending in the average per-pupil operating funds used to derive charter
school funding. North Carolina expanded the mandate of the Educational
Facilities Finance Agency to include any "nonprofit institution within
the State of North Carolina authorized by law and engaged or to be
engaged in the providing of kindergarten, elementary, or secondary
education, or any combination thereof." Including charter schools in the
act may open the door to tax-exempt financing for charter school
facilities. To date, the authority has not been willing to actually
issue any bonds for charter schools.

**State Start-Up Assistance:** None.

**Timing of Payments:** Charter schools begin receiving state funds
after the general assembly passes a budget. Funds are received as early
as July 1 of each year. Charter school allocations are made one week
after the initial allotments are distributed to school districts.

**Uniform Financial Reporting:** Charter schools must comply with
reporting requirements from the state's Uniform Education Reporting
System.

**Independent Financial Audit:** Required.

**Ownership of and Disposition of Assets:** Charter schools are not
permitted to use state funds to purchase land or buildings but may use
local funds (which average about \$1,000 per student) and private
sources. Upon dissolution or non-renewal of the charter school, all
assets of the charter school become assets of the local school district
in which the charter school was located.

**Teacher Retirement:** The charter school board decides whether to
participate in the teacher retirement system; in 1998-99, 16 out of 57
charter schools participated in the teacher retirement system.

<table>
<colgroup>
<col style="width: 2%" />
<col style="width: 27%" />
<col style="width: 3%" />
<col style="width: 8%" />
<col style="width: 2%" />
<col style="width: 9%" />
<col style="width: 2%" />
<col style="width: 8%" />
<col style="width: 2%" />
<col style="width: 9%" />
<col style="width: 2%" />
<col style="width: 8%" />
<col style="width: 2%" />
<col style="width: 11%" />
</colgroup>
<tbody>
<tr class="odd">
<td colspan="2"><strong>North Carolina</strong></td>
<td></td>
<td colspan="3"><blockquote>
<p><strong>Basic Elementary Charter School</strong></p>
</blockquote></td>
<td></td>
<td colspan="3"><blockquote>
<p><strong>Middle Cost K-12 Charter School</strong></p>
</blockquote></td>
<td></td>
<td colspan="3"><blockquote>
<p><strong>Urban At-Risk Upper Grade</strong></p>
</blockquote></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td><strong>FTE</strong></td>
<td></td>
<td colspan="2"><strong>$/Member</strong></td>
<td><strong>FTE</strong></td>
<td></td>
<td colspan="2"><strong>$/Member</strong></td>
<td><strong>FTE</strong></td>
<td></td>
<td><strong>$/Member</strong></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td colspan="2">Total FTE enrollment</td>
<td></td>
<td>100</td>
<td></td>
<td></td>
<td></td>
<td>100</td>
<td></td>
<td></td>
<td></td>
<td>100</td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td colspan="2">Components of state allotment<sup>a</sup></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td>Classroom teachers</td>
<td></td>
<td></td>
<td></td>
<td>$ 1,853</td>
<td></td>
<td></td>
<td></td>
<td>$ 1,853</td>
<td></td>
<td></td>
<td></td>
<td>$ 1,796</td>
</tr>
<tr class="odd">
<td></td>
<td>Central office administration</td>
<td></td>
<td></td>
<td></td>
<td>$ 97</td>
<td></td>
<td></td>
<td></td>
<td>$ 97</td>
<td></td>
<td></td>
<td></td>
<td>$ 34</td>
</tr>
<tr class="even">
<td></td>
<td>Non-instructional support</td>
<td></td>
<td></td>
<td></td>
<td>$ 192</td>
<td></td>
<td></td>
<td></td>
<td>$ 192</td>
<td></td>
<td></td>
<td></td>
<td>$ 192</td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2">School building administration</td>
<td></td>
<td></td>
<td>$ 211</td>
<td></td>
<td></td>
<td></td>
<td>$ 211</td>
<td></td>
<td></td>
<td></td>
<td>$ 166</td>
</tr>
<tr class="even">
<td></td>
<td>Instructional support</td>
<td></td>
<td></td>
<td></td>
<td>$ 210</td>
<td></td>
<td></td>
<td></td>
<td>$ 210</td>
<td></td>
<td></td>
<td></td>
<td>$ 232</td>
</tr>
<tr class="odd">
<td></td>
<td>Vocational education</td>
<td></td>
<td></td>
<td></td>
<td>$ 204</td>
<td></td>
<td></td>
<td></td>
<td>$ 204</td>
<td></td>
<td></td>
<td></td>
<td>$ 184</td>
</tr>
<tr class="even">
<td></td>
<td>Teacher assistants</td>
<td></td>
<td></td>
<td></td>
<td>$ 248</td>
<td></td>
<td></td>
<td></td>
<td>$ 248</td>
<td></td>
<td></td>
<td></td>
<td>$ 259</td>
</tr>
<tr class="odd">
<td></td>
<td>Staff development</td>
<td></td>
<td></td>
<td></td>
<td>$ 5</td>
<td></td>
<td></td>
<td></td>
<td>$ 5</td>
<td></td>
<td></td>
<td></td>
<td>$ 3</td>
</tr>
<tr class="even">
<td></td>
<td>Low-wealth supplement</td>
<td></td>
<td></td>
<td></td>
<td>$ 4</td>
<td></td>
<td></td>
<td></td>
<td>$ 4</td>
<td></td>
<td></td>
<td></td>
<td>$ -</td>
</tr>
<tr class="odd">
<td></td>
<td>Gifted program</td>
<td></td>
<td></td>
<td></td>
<td>$ 31</td>
<td></td>
<td></td>
<td></td>
<td>$ 31</td>
<td></td>
<td></td>
<td></td>
<td>$ 31</td>
</tr>
<tr class="even">
<td></td>
<td>Transportation</td>
<td></td>
<td></td>
<td></td>
<td>$ 144</td>
<td></td>
<td></td>
<td></td>
<td>$ 144</td>
<td></td>
<td></td>
<td></td>
<td>$ 174</td>
</tr>
<tr class="odd">
<td></td>
<td>Classroom materials</td>
<td></td>
<td></td>
<td></td>
<td>$ 41</td>
<td></td>
<td></td>
<td></td>
<td>$ 41</td>
<td></td>
<td></td>
<td></td>
<td>$ 41</td>
</tr>
<tr class="even">
<td></td>
<td colspan="2">Regional technical assistance</td>
<td></td>
<td></td>
<td>$ 7</td>
<td></td>
<td></td>
<td></td>
<td>$ 7</td>
<td></td>
<td></td>
<td></td>
<td>$ 1</td>
</tr>
<tr class="odd">
<td></td>
<td>At-risk funding</td>
<td></td>
<td></td>
<td></td>
<td>$ 95</td>
<td></td>
<td></td>
<td></td>
<td>$ 95</td>
<td></td>
<td></td>
<td></td>
<td>$ 93</td>
</tr>
<tr class="even">
<td></td>
<td>Textbooks</td>
<td></td>
<td></td>
<td></td>
<td>$ 47</td>
<td></td>
<td></td>
<td></td>
<td>$ 47</td>
<td></td>
<td></td>
<td></td>
<td>$ 47</td>
</tr>
<tr class="odd">
<td></td>
<td>School technology</td>
<td></td>
<td></td>
<td></td>
<td>$ 16</td>
<td></td>
<td></td>
<td></td>
<td>$ 16</td>
<td></td>
<td></td>
<td></td>
<td>$ 16</td>
</tr>
<tr class="even">
<td></td>
<td>Other state funding</td>
<td></td>
<td></td>
<td></td>
<td>$ 82</td>
<td></td>
<td></td>
<td></td>
<td>$ 82</td>
<td></td>
<td></td>
<td></td>
<td>$ 83</td>
</tr>
<tr class="odd">
<td colspan="2">Local revenue<sup>b</sup></td>
<td></td>
<td></td>
<td></td>
<td>$ 1,000</td>
<td></td>
<td></td>
<td></td>
<td>$ 1,000</td>
<td></td>
<td></td>
<td></td>
<td>$ 1,700</td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td colspan="2">1. Base funding per FTE</td>
<td></td>
<td></td>
<td></td>
<td>$ 4,487</td>
<td></td>
<td></td>
<td></td>
<td>$ 4,487</td>
<td></td>
<td></td>
<td></td>
<td>$ 5,052</td>
</tr>
<tr class="even">
<td colspan="2">2. Special education<sup>c</sup></td>
<td></td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td></td>
<td>$ 282</td>
<td></td>
<td></td>
<td></td>
<td>$ 563</td>
</tr>
<tr class="odd">
<td colspan="2">3. Federal funding</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td>Title I</td>
<td></td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td></td>
<td>$ 106</td>
<td></td>
<td></td>
<td></td>
<td>$ 212</td>
</tr>
<tr class="odd">
<td></td>
<td>Bilingual and immigrant</td>
<td></td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td></td>
<td>$ -</td>
</tr>
<tr class="even">
<td></td>
<td>Special education</td>
<td></td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td></td>
<td>$ 47</td>
<td></td>
<td></td>
<td></td>
<td>$ 94</td>
</tr>
<tr class="odd">
<td></td>
<td>Other federal programs</td>
<td></td>
<td></td>
<td></td>
<td>$ 51</td>
<td></td>
<td></td>
<td></td>
<td>$ 51</td>
<td></td>
<td></td>
<td></td>
<td>$ 51</td>
</tr>
<tr class="even">
<td colspan="2">Total revenue</td>
<td></td>
<td></td>
<td></td>
<td>$ 4,538</td>
<td></td>
<td></td>
<td></td>
<td>$ 4,973</td>
<td></td>
<td></td>
<td></td>
<td>$ 5,972</td>
</tr>
</tbody>
</table>

ASSUMPTIONS: Basic elementary charter school is funded though a school
district with state average

spending and no special needs students. Middle cost K-12 charter school
is funded through a school district with state average spending and
pupil characteristics. Urban at-risk upper grade charter school is
funded through an urban school district and has twice the state average
concentration of special needs students.

^a^ The average state appropriated funds per pupil is \$3,457 for
1998-99, and ranges between \$3,000 and \$5,500 depending on the size
and wealth of the district.

^b^ Local funds vary from \$400 to \$1,800, which averages about \$1,000
per child.

^c^ The average special education revenue is \$2,346. Charter schools
receive the average revenue per special education student from sending
school districts regardless of student disability. Middle cost K-12
school is assumed to enroll 12 special education students, and the
at-risk school is assumed to enroll 24 special education students.

## Pennsylvania

**Base Funding:** Charter school revenue is based on the expenditure of
the districts in which its students reside. Charter schools receive the
amount the district would spend on each student minus the average
per-student expenditure for special education programs, non-public
school programs, adult education programs, community/junior college
programs, and transportation. Also excluded are expenditures for
facilities acquisition, construction and improvement debt service and
payments to charter schools. Base payments to charter schools apparently
include non-special education payments to other charter schools (since
these are recorded in the instructional program lines), as well as
expenditures on non-public school programs.[^60] The school district
performs this calculation, which the state then audits.

**Grade Level Funding:** None.

**Funding Based on School District Characteristics:** Despite an
equalization aid formula, Pennsylvania is a state with substantial
spending inequities based on property wealth and tax effort.
High-spending, wealthy school districts generate more funding for
charter schools than poor school districts.[^61]

**Special Education:** For each special education student, charter
schools receive the average special education spending per pupil in the
sending school district in addition to the base payment. The average
special education expenditure is calculated by dividing budgeted special
education costs by a flat 16% of ADM. This average incorporates spending
for all special needs students regardless of the charter school
student's specific disability. As with school districts, charter schools
can draw on additional state funds if a particular disability requires
an ultra high-cost accommodation.

**Limited-English Proficiency:** No state funding for charter schools or
school districts.

**Low-Income or Compensatory Education:** In the basic formula, school
districts receive extra money per child qualified for AFDC (federally
funded Aid for Families with Dependent Children). Because this funding
is part of school district expenditures, every charter school student
brings a share of this funding with him or her regardless of the
student's AFDC status or the AFDC status of the charter school the child
attends. Charter schools serving a predominantly low-income population
may be underfunded.

**Other State Categorical Funds:** Because categorical programs are not
excluded from the base district spending calculations as part of their
base allotment, charter schools receive a share of all the categorical
funds received in the district. Charter schools receive funding even if
they do not provide qualifying programs.

**Transportation:** Transportation is provided for students in charter
schools located within the district boundary in the same manner that
transportation is provided to other schools in the districts.
Additionally, school districts provide transportation services up to 10
miles beyond the district border to residents attending an
out-of-district charter school. This matches school district obligations
to transport resident children to private schools.

**Start-Up Assistance:** A one-time payment from federal and state funds
of approximately \$800 per student is allocated to new charter schools.
In addition, the state sends \$800 per additional student to established
charter schools that have increased their enrollment. The goal is to
limit the incentive for schools to pack in students in the first year to
maximize start-up funding, thereby allowing them to grow more naturally.

**Timing of Payments:** The district pays in 12 equal monthly payments.
For start-up funds, 70 percent of the payments are made upon completion
of forms; and the remainder upon receipt of the Oct.1 enrollment report.

**Capital Outlay and Facilities Financing:** None.

**Uniform Financial Reporting:** Charter schools provide an annual
financial report and complete a budget form. School districts face the
same reporting requirements.

**Auditing Practice:** Charter schools must have an annual audit
completed by a licensed or certified public accountant in conformance
with generally accepted accounting standards. The Pennsylvania auditor
general may also conduct audits. The charter application must contain
provisions made for auditing the school under section 437 of the
Pennsylvania code.

**Responsibility for Debt:** Charter schools are responsible for their
own debt.

**Ownership and Disposition of Assets:** Charter schools own their
assets. If a charter dissolves, the assets are first used to satisfy
creditors. Any remaining assets revert back to the school district.

**Teacher Retirement:** All charter employees must be enrolled in the
state retirement system unless the sponsoring organization has an
alternative retirement program. Participation in the state system is
very high with 28 of 31 charter schools participating in 1998-99.

<table>
<colgroup>
<col style="width: 3%" />
<col style="width: 21%" />
<col style="width: 6%" />
<col style="width: 6%" />
<col style="width: 2%" />
<col style="width: 10%" />
<col style="width: 3%" />
<col style="width: 3%" />
<col style="width: 4%" />
<col style="width: 2%" />
<col style="width: 10%" />
<col style="width: 3%" />
<col style="width: 3%" />
<col style="width: 4%" />
<col style="width: 1%" />
<col style="width: 1%" />
<col style="width: 10%" />
</colgroup>
<tbody>
<tr class="odd">
<td colspan="3"><strong>Pennsylvania</strong></td>
<td colspan="3"><strong>Basic Elementary Charter School</strong></td>
<td></td>
<td colspan="4"><blockquote>
<p><strong>Middle Cost K-12 Charter School</strong></p>
</blockquote></td>
<td></td>
<td colspan="5"><blockquote>
<p><strong>Urban At-Risk Upper Grade</strong></p>
</blockquote></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td><strong>FTE</strong></td>
<td></td>
<td colspan="3"><strong>$/Member</strong></td>
<td colspan="2"><strong>FTE</strong></td>
<td colspan="3"><strong>$/Member</strong></td>
<td colspan="2"><strong>FTE</strong></td>
<td colspan="2"><strong>$/Member</strong></td>
</tr>
<tr class="odd">
<td colspan="2">Total FTE enrollment</td>
<td></td>
<td>100</td>
<td></td>
<td></td>
<td></td>
<td colspan="2">100</td>
<td></td>
<td></td>
<td></td>
<td colspan="2">100</td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td colspan="2"></td>
<td></td>
<td></td>
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="odd">
<td colspan="2">1. Base funding<sup>a</sup></td>
<td></td>
<td></td>
<td></td>
<td>$ 5,939</td>
<td></td>
<td colspan="2"></td>
<td></td>
<td>$ 5,939</td>
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td>$ 5,488</td>
</tr>
<tr class="even">
<td colspan="2">2. Special education<sup>b</sup></td>
<td></td>
<td>0</td>
<td></td>
<td>$ -</td>
<td></td>
<td colspan="2">12</td>
<td></td>
<td>$ 966</td>
<td></td>
<td colspan="2">24</td>
<td colspan="2"></td>
<td>$ 1,076</td>
</tr>
<tr class="odd">
<td colspan="2">3. Transportation<sup>c</sup></td>
<td></td>
<td></td>
<td></td>
<td>$ 232</td>
<td></td>
<td colspan="2"></td>
<td></td>
<td>$ 232</td>
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td>$ 232</td>
</tr>
<tr class="even">
<td colspan="2">4. Federal funding</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td colspan="2"></td>
<td></td>
<td></td>
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td>Title I</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td colspan="2"></td>
<td></td>
<td>$ 175</td>
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td>$ 350</td>
</tr>
<tr class="even">
<td></td>
<td>Special education</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td colspan="2"></td>
<td></td>
<td>$ 46</td>
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td>$ 92</td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2">Other federal programs</td>
<td></td>
<td></td>
<td>$ 50</td>
<td></td>
<td colspan="2"></td>
<td></td>
<td>$ 51</td>
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td>$ 51</td>
</tr>
<tr class="even">
<td colspan="2">Total revenue</td>
<td></td>
<td></td>
<td></td>
<td>$ 6,221</td>
<td></td>
<td colspan="2"></td>
<td></td>
<td>$ 7409</td>
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td>$ 7,289</td>
</tr>
</tbody>
</table>

ASSUMPTIONS: Basic elementary charter school has no special needs
students. Middle cost K-12 charter school has the same student
population as the average Pennsylvania school district. At-risk upper
grade charter school has twice the concentration of low income and
special education students as the Pennsylvania average and is located in
Philadelphia.

^a^ Revenue based on average operating expenditures after subtracting
special education costs. Basic and middle cost school expenditures use
estimates for William Penn school district. At-risk school is based on
Philadelphia's spending. About 80 percent of school districts spend
between \$5,310 (Penncrest) and \$7,682 (Gateway).

^b^ Average special education costs in middle cost school are \$1,743,
and \$4,485 at the upper grade school.

^c^ Estimate of the value of district-provided transportation per
member, not user, is based on the state average.

## Rhode Island

**Base Funding:** Charter schools receive the average per-pupil cost
from the student's district of residence. Funding based on expenditures
includes financial support for special education (including infant,
toddler and preschool programs), private school transportation,
community service, adult education and student activities including
athletics. Charter schools pay back to the sending district 5 percent of
charter school funding to acknowledge that when a student moves to a
charter school, the sending district is not able to reduce costs by 100
percent. The state calculates the average state aid per pupil, weighted
for poverty and tax effort, and pays the funds to the charter school.
The district pays the average local revenue per pupil from each student
in a district enrolled in a charter school. If the local school district
is more than 30 days late in making local share payments to a charter
school, the state deducts the amount from state aid and directly pays
the charter school.

**Grade Level Funding Adjustments:** None exist for school districts or
charter schools.

**Funding Based on School District Characteristics:** No adjustments for
sparsity, school size or enrollment growth.

**Special Education:** All special education spending (averaging about
\$1,100 per pupil or about 15 percent to 20 percent of total spending)
is included in per-pupil charter school funding. The law mandates that
charter schools reflect the diversity of students in the school district
and as such, reflect the district's average special education
population. In a typical school district in Rhode Island, approximately
20 percent of special education spending is devoted to the homebound,
intensive disabilities, non-public day school, preschool and residential
special education students. Charter schools receive this portion of
special education spending even though it is highly unlikely that
charter schools will or should ever serve these types of students.

**Categorical Funding:** As a component of average cost per pupil,
categorical funding is distributed to charter schools based on prior
year per-pupil average categorical program expenditure. Categorical
programs support literacy, student equity, early childhood, technology,
professional development, language assistance, instructional equity and
targeted aid programs. Charter schools receive average categorical
funding whether or not their student population is participating in the
funded programs.

**Transportation:** Charter schools receive the school district average
expenditure for public, non-public and special education transportation
no matter whether the charter schools have a transportation need that is
greater or less than the average. Charter schools can negotiate with the
district to provide transportation, or charter schools devise their own
plan.

**Capital Outlay and Facilities Funding:** A little less than \$100 per
student in capital outlay funding is in a school district's general
operating fund. This money flows to charter schools. Additionally, a
facilities funding program reimburses local districts and charter
schools for debt service related to capital projects. Considered on a
case by case basis, charter schools may be eligible for a minimum 30
percent reimbursement of costs associated with support for facilities.

**State Start-Up Assistance:** The state will provide start-up
loans---repayable over five years---if no federal funds are available.

**Timing of Payments:** Some funding is available before school starts.
Rhode Island charter schools get payments from both the state and local
school districts. State payments are distributed quarterly beginning
July 1. School district payments are provided quarterly beginning
Aug.15.

**Uniform Financial Reporting:** The charter school budget is usually
included in the school district budget. Starting in 1999-2000, charter
schools are required to provide individual uniform financial reports.

**Auditing Practices:** Charter schools are required to have an annual
audit.

**Ownership of Property and Disposition of Assets:** Charter schools are
eligible to own property. Details are set in the charter.

**Teacher Retirement:** Charter schools are required to participate in
the state teacher retirement system.

<table style="width:100%;">
<colgroup>
<col style="width: 2%" />
<col style="width: 29%" />
<col style="width: 3%" />
<col style="width: 7%" />
<col style="width: 2%" />
<col style="width: 9%" />
<col style="width: 3%" />
<col style="width: 7%" />
<col style="width: 2%" />
<col style="width: 9%" />
<col style="width: 3%" />
<col style="width: 7%" />
<col style="width: 2%" />
<col style="width: 10%" />
</colgroup>
<tbody>
<tr class="odd">
<td colspan="2"><strong>Rhode Island</strong></td>
<td></td>
<td colspan="3"><blockquote>
<p><strong>Basic Elementary Charter School</strong></p>
</blockquote></td>
<td></td>
<td colspan="3"><blockquote>
<p><strong>Middle Cost K-12 Charter School</strong></p>
</blockquote></td>
<td></td>
<td colspan="3"><blockquote>
<p><strong>Urban At-Risk Upper Grade</strong></p>
</blockquote></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td><strong>FTE</strong></td>
<td></td>
<td colspan="2"><strong>$/Member</strong></td>
<td><strong>FTE</strong></td>
<td></td>
<td colspan="2"><strong>$/Member</strong></td>
<td><strong>FTE</strong></td>
<td></td>
<td><strong>$/Member</strong></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td colspan="2">Total FTE enrollment</td>
<td></td>
<td>100</td>
<td></td>
<td></td>
<td></td>
<td>100</td>
<td></td>
<td></td>
<td></td>
<td>100</td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td colspan="2">Components of operating costs</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td>General fund<sup>a</sup></td>
<td></td>
<td></td>
<td></td>
<td>$ 5,311</td>
<td></td>
<td></td>
<td></td>
<td>$ 5,311</td>
<td></td>
<td></td>
<td></td>
<td>$ 5,056</td>
</tr>
<tr class="odd">
<td></td>
<td>Disadvantaged<sup>b</sup></td>
<td></td>
<td>0</td>
<td></td>
<td>$ 103</td>
<td></td>
<td>33</td>
<td></td>
<td>$ 103</td>
<td></td>
<td>64</td>
<td></td>
<td>$ 525</td>
</tr>
<tr class="even">
<td></td>
<td>Special education<sup>c</sup></td>
<td></td>
<td>0</td>
<td></td>
<td>$ 890</td>
<td></td>
<td>18</td>
<td></td>
<td>$ 890</td>
<td></td>
<td>36</td>
<td></td>
<td>$ 917</td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2">Special education infant, preschool, &amp; private
school tuition</td>
<td></td>
<td></td>
<td>$ 195</td>
<td></td>
<td></td>
<td></td>
<td>$ 195</td>
<td></td>
<td></td>
<td></td>
<td>$ 197</td>
</tr>
<tr class="even">
<td></td>
<td>Transportation<sup>d</sup></td>
<td></td>
<td></td>
<td></td>
<td>$ 408</td>
<td></td>
<td></td>
<td></td>
<td>$ 408</td>
<td></td>
<td></td>
<td></td>
<td>$ 365</td>
</tr>
<tr class="odd">
<td></td>
<td>Private school transportation</td>
<td></td>
<td></td>
<td></td>
<td>$ 36</td>
<td></td>
<td></td>
<td></td>
<td>$ 36</td>
<td></td>
<td></td>
<td></td>
<td>$ 18</td>
</tr>
<tr class="even">
<td></td>
<td>Research and analysis<sup>e</sup></td>
<td></td>
<td></td>
<td></td>
<td>$ 15</td>
<td></td>
<td></td>
<td></td>
<td>$ 15</td>
<td></td>
<td></td>
<td></td>
<td>$ 86</td>
</tr>
<tr class="odd">
<td></td>
<td>Community service<sup>f</sup></td>
<td></td>
<td></td>
<td></td>
<td>$ 21</td>
<td></td>
<td></td>
<td></td>
<td>$ 21</td>
<td></td>
<td></td>
<td></td>
<td>$ 5</td>
</tr>
<tr class="even">
<td></td>
<td>Student activities and athletics</td>
<td></td>
<td></td>
<td></td>
<td>$ 45</td>
<td></td>
<td></td>
<td></td>
<td>$ 45</td>
<td></td>
<td></td>
<td></td>
<td>$ 27</td>
</tr>
<tr class="odd">
<td></td>
<td>Capital outlay<sup>g</sup></td>
<td></td>
<td></td>
<td></td>
<td>$ 82</td>
<td></td>
<td></td>
<td></td>
<td>$ 82</td>
<td></td>
<td></td>
<td></td>
<td>$ 42</td>
</tr>
<tr class="even">
<td colspan="2">Total operating costs</td>
<td></td>
<td></td>
<td></td>
<td>$ 7,106</td>
<td></td>
<td></td>
<td></td>
<td>$ 7,106</td>
<td></td>
<td></td>
<td></td>
<td>$ 7,238</td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td>95 percent funding</td>
<td></td>
<td></td>
<td></td>
<td>x .95</td>
<td></td>
<td></td>
<td></td>
<td>x .95</td>
<td></td>
<td></td>
<td></td>
<td>x .95</td>
</tr>
<tr class="odd">
<td colspan="2">1. Base funding @ 95%</td>
<td></td>
<td></td>
<td></td>
<td>$ 6,751</td>
<td></td>
<td></td>
<td></td>
<td>$ 6,751</td>
<td></td>
<td></td>
<td></td>
<td>$ 6,876</td>
</tr>
<tr class="even">
<td colspan="2">2. Federal funding</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td>Other federal programs</td>
<td></td>
<td></td>
<td></td>
<td>$ 84</td>
<td></td>
<td></td>
<td></td>
<td>$ 84</td>
<td></td>
<td></td>
<td></td>
<td>$ 84</td>
</tr>
<tr class="even">
<td></td>
<td>Special education</td>
<td></td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td></td>
<td>$ 62</td>
<td></td>
<td></td>
<td></td>
<td>$ 126</td>
</tr>
<tr class="odd">
<td></td>
<td>Bilingual and immigrant</td>
<td></td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td></td>
<td>$ 10</td>
<td></td>
<td></td>
<td></td>
<td>$ 20</td>
</tr>
<tr class="even">
<td></td>
<td>Title I</td>
<td></td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td></td>
<td>$ 152</td>
<td></td>
<td></td>
<td></td>
<td>$ 304</td>
</tr>
<tr class="odd">
<td colspan="2">Total revenue</td>
<td></td>
<td></td>
<td></td>
<td>$ 6,835</td>
<td></td>
<td></td>
<td></td>
<td>$ 7,059</td>
<td></td>
<td></td>
<td></td>
<td>$ 7,410</td>
</tr>
</tbody>
</table>

ASSUMPTIONS: Basic elementary charter school has no at-risk or special
needs students. Middle cost K-12 charter school reflects the state
average student population. At-risk upper grade charter school has twice
the state average concentration of special needs students. The figures
above are actual 1997-98 average operating funds used to determine
charter school funding for the1998-99 school year. For this example,
Providence is the urban school district hosting the at-risk charter
school, and Cranston represents an average school district for the other
two hypothetical charter schools.

^a^ General fund comprises instruction, instructional improvement,
gifted, attendance, guidance programs, school management, staff and
fiscal services, and administrative support.

^b^ Disadvantaged expenditures includes bilingual and compensatory
education.

^c^ Special education expenditures include intensive education and
homebound.

^d^ Transportation expenditures also include special education
transportation.

^e^ Research and analysis costs include information, data processing and
statistical services.

^f^ Community service includes non-public school textbooks, student and
adult continuing education.

^g^ Capital outlay has been extracted from many of the categories to
create a separate expenditure.

## South Carolina

**Base Funding:** Charter schools receive funding in a manner similar to
school districts. Authorized by local school boards, charter schools
obtain funding based on the school district's audited total general fund
expenditures from the previous year updated for inflation. The
expenditure calculation includes capital outlay and maintenance but
excludes bonded indebtedness and debt service. Students in grades 1 to
3, high school, special education or compensatory education get weights
to reflect higher educational costs. Base funding for charter schools is
expressed in *weighted* pupil units of the school district. In the
average school district, expenditures per weighted student are about
one-third lower than the unweighted per-pupil expenditures (adding
weights inflates the actual number of pupils). A charter school
multiplies the school district's weighted per-pupil expenditures by the
charter's own weighted student count to ascertain revenue. If a charter
school's student population matches the school district's, per-pupil
funding is identical to the school district. Charter schools with
high-cost students get more funding.

**Grade Level Funding:** Compared to grades 4 to 8, students in grades 1
to 3 or in high school generate about 25 percent more revenue for both
school districts and charter schools.

**Special Education:** Pupil weightings for specific disabilities
increase the number of weighted pupil units. Students with learning
disabilities, for example, generate 75 percent more funding in grades 4
to 8. Due to grade level weights, the extra funding is less in grades
1-3 and high school. A student may only be assigned to one weighting
category; if a student is receiving services from two different
classifications, the student is classified in the higher of the two
weightings.[^62]

**Limited-English Proficiency:** South Carolina provides no funding for
bilingual education.

**Categorical Programs:** Charter schools receive categorical funding
for eligible students enrolled. Funding is available for many programs
including academic assistance, gifted and talented, and school
improvement/innovation. The charter school's share of funding is
negotiated between the school district and the charter school.

**Transportation:** The state directly provides transportation for
students in South Carolina. School districts pay for approximately 33
percent of total transportation costs. Charter schools receive the
district's share of transportation expenditures as part of their
per-pupil funding, but not the state share. Charter schools have three
transportation options: (1) The school district can permit the use of
state school buses at the rate of 80 cents per mile plus all driver
salary costs. The charter school is responsible for total costs. (2) The
charter school can purchase and operate school buses. (3) The charter
school can develop a transportation plan and require parents to provide
transportation. The charter school's transportation plan is subject to
school board approval.

**Capital Outlay and Facilities Funding:** Charter schools are not
eligible for capital financing or debt service funding. However, base
funding includes money for capital outlay and maintenance normally
included in general operating funds.

**State Start-Up Assistance:** None available.

**Timing of Payments:** All state and local funding is distributed
monthly beginning in July.

**Uniform Financial Reporting:** A charter school may maintain its own
financial records or negotiate these services with the authorizing
district. The records must be accounted for in accordance with the state
department of education's Financial Accounting Handbook and Funding
Manual. All revenue should be accounted for in the sponsoring district's
financial statements. Detailed expenditure data are kept in the charter
school's financial records.

**Auditing Practice:** Charter schools are required to have an annual
independent audit.

**Responsibility for Debt:** Charter schools may incur debt. The charter
school authorizer, usually the school district, is not liable for debts
of a charter school and is immune from civil and criminal liability with
respect to all activities related to a charter school.

**Ownership and Disposition of Assets:** Charter schools may acquire
buildings or property. Upon dissolution of a charter school, its assets
may not be used to benefit any private person. Assets obtained by
restricted agreements with a donor through awards, grants or gifts will
be returned. All other assets become property of the charter school
authorizer.

**Technical Assistance:** School districts must provide technical
assistance at no expense to groups preparing or revising a charter
application. School districts distribute local, state and federal funds
to charter schools. Other services centrally provided by the school
districts are subject to negotiation between the charter school and the
school district.

**Teacher Retirement:** Conversion charter schools are considered public
entities and must participate in the state teacher retirement system.
Start-up charter schools are not required to participate in the teacher
retirement system but may elect to do so in their charter.

<table>
<colgroup>
<col style="width: 2%" />
<col style="width: 30%" />
<col style="width: 0%" />
<col style="width: 0%" />
<col style="width: 7%" />
<col style="width: 1%" />
<col style="width: 8%" />
<col style="width: 9%" />
<col style="width: 1%" />
<col style="width: 8%" />
<col style="width: 9%" />
<col style="width: 0%" />
<col style="width: 8%" />
<col style="width: 9%" />
</colgroup>
<tbody>
<tr class="odd">
<td colspan="2"><strong>South Carolina</strong></td>
<td colspan="2"></td>
<td><strong>Cost Factor</strong></td>
<td></td>
<td colspan="2"><strong>Basic Elementary Charter School</strong></td>
<td></td>
<td colspan="2"><blockquote>
<p><strong>Middle Cost K-12 Charter School</strong></p>
</blockquote></td>
<td></td>
<td colspan="2"><strong>Urban At-Risk Upper Grade</strong></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td colspan="2"></td>
<td><strong>Weight</strong></td>
<td></td>
<td><strong>FTE</strong></td>
<td><strong>WFTE</strong></td>
<td></td>
<td><blockquote>
<p><strong>FTE</strong></p>
</blockquote></td>
<td><strong>WFTE</strong></td>
<td></td>
<td><strong>FTE</strong></td>
<td><strong>WFTE</strong></td>
</tr>
<tr class="odd">
<td colspan="2">Weighted FTE calculations</td>
<td colspan="2"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td>Kindergarten</td>
<td colspan="2"></td>
<td>1.30</td>
<td></td>
<td>0</td>
<td>0.0</td>
<td></td>
<td><blockquote>
<p>5</p>
</blockquote></td>
<td>6.5</td>
<td></td>
<td>0</td>
<td>0.0</td>
</tr>
<tr class="odd">
<td></td>
<td>Grades 1-3</td>
<td colspan="2"></td>
<td>1.24</td>
<td></td>
<td>50</td>
<td>62.0</td>
<td></td>
<td><blockquote>
<p>25</p>
</blockquote></td>
<td>31.0</td>
<td></td>
<td>0</td>
<td>0.0</td>
</tr>
<tr class="even">
<td></td>
<td>Grades 4-8</td>
<td colspan="2"></td>
<td>1.00</td>
<td></td>
<td>50</td>
<td>50.0</td>
<td></td>
<td><blockquote>
<p>35</p>
</blockquote></td>
<td>35.0</td>
<td></td>
<td>0</td>
<td>0.0</td>
</tr>
<tr class="odd">
<td></td>
<td>Grades 9-12</td>
<td colspan="2"></td>
<td>1.25</td>
<td></td>
<td>0</td>
<td>0.0</td>
<td></td>
<td><blockquote>
<p>25</p>
</blockquote></td>
<td>31.3</td>
<td></td>
<td>80</td>
<td>100.0</td>
</tr>
<tr class="even">
<td></td>
<td colspan="2">Learning disabilities and educable</td>
<td colspan="2">1.74</td>
<td></td>
<td>0</td>
<td>0.0</td>
<td></td>
<td><blockquote>
<p>4</p>
</blockquote></td>
<td>7.0</td>
<td></td>
<td>8</td>
<td>13.9</td>
</tr>
<tr class="odd">
<td></td>
<td>EMH, trainable, and orthopedic</td>
<td colspan="2"></td>
<td>2.04</td>
<td></td>
<td>0</td>
<td>0.0</td>
<td></td>
<td><blockquote>
<p>3</p>
</blockquote></td>
<td>6.1</td>
<td></td>
<td>6</td>
<td>12.2</td>
</tr>
<tr class="even">
<td></td>
<td>Speech</td>
<td colspan="2"></td>
<td>1.90</td>
<td></td>
<td>0</td>
<td>0.0</td>
<td></td>
<td><blockquote>
<p>3</p>
</blockquote></td>
<td>5.7</td>
<td></td>
<td>6</td>
<td>11.4</td>
</tr>
<tr class="odd">
<td></td>
<td>Hearing, vision, autism</td>
<td colspan="2"></td>
<td>2.57</td>
<td></td>
<td>0</td>
<td>0.0</td>
<td></td>
<td><blockquote>
<p>0</p>
</blockquote></td>
<td>0.0</td>
<td></td>
<td>0</td>
<td>0.0</td>
</tr>
<tr class="even">
<td></td>
<td>Total FTE or WFTE</td>
<td colspan="2"></td>
<td></td>
<td></td>
<td>100</td>
<td>112.0</td>
<td></td>
<td><blockquote>
<p>100</p>
</blockquote></td>
<td>122.5</td>
<td></td>
<td>100</td>
<td>137.6</td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td colspan="2"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td colspan="2">1. Host district general fund<sup>a</sup></td>
<td colspan="2"></td>
<td></td>
<td></td>
<td>$4,743<sup>b</sup></td>
<td>$ 4,235<sup>b</sup></td>
<td></td>
<td><blockquote>
<p>$ 5,189<sup>b</sup></p>
</blockquote></td>
<td>$ 4,235<sup>b</sup></td>
<td></td>
<td>$ 4,746<sup>b</sup></td>
<td>$ 3,450<sup>b</sup></td>
</tr>
<tr class="odd">
<td colspan="2">2. Categorical aid</td>
<td colspan="2"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td colspan="4">Academic assistance (K-12 average)</td>
<td></td>
<td>$ -</td>
<td>(0 FTE)</td>
<td></td>
<td><blockquote>
<p>$ 181</p>
</blockquote></td>
<td>(40 FTE)</td>
<td></td>
<td>$ 362</td>
<td>(80 FTE)</td>
</tr>
<tr class="odd">
<td></td>
<td colspan="4">Continuous improvement/innovation</td>
<td></td>
<td>$ 5</td>
<td></td>
<td></td>
<td><blockquote>
<p>$ 5</p>
</blockquote></td>
<td></td>
<td></td>
<td>$ 5</td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td>Increase high school diploma</td>
<td colspan="2"></td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td><blockquote>
<p>$ 28</p>
</blockquote></td>
<td></td>
<td></td>
<td>$ 28</td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td>School innovation funds</td>
<td colspan="2"></td>
<td></td>
<td></td>
<td>$ 33</td>
<td></td>
<td></td>
<td><blockquote>
<p>$ 33</p>
</blockquote></td>
<td></td>
<td></td>
<td>$ 33</td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td>Gifted and talented</td>
<td colspan="2"></td>
<td></td>
<td></td>
<td>-</td>
<td></td>
<td></td>
<td><blockquote>
<p>$ 45</p>
</blockquote></td>
<td></td>
<td></td>
<td>$ 45</td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td>Principal/ teacher specialist</td>
<td colspan="2"></td>
<td></td>
<td></td>
<td>$ 7</td>
<td></td>
<td></td>
<td><blockquote>
<p>$ 7</p>
</blockquote></td>
<td></td>
<td></td>
<td>$ 7</td>
<td></td>
</tr>
<tr class="even">
<td colspan="2">3. Transportation<sup>c</sup></td>
<td colspan="2"></td>
<td></td>
<td></td>
<td>$ 62</td>
<td></td>
<td></td>
<td><blockquote>
<p>$ 62</p>
</blockquote></td>
<td></td>
<td></td>
<td>$ 62</td>
<td></td>
</tr>
<tr class="odd">
<td colspan="2">4. Federal funding</td>
<td colspan="2"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td>Title I</td>
<td colspan="2"></td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td><blockquote>
<p>$ 140</p>
</blockquote></td>
<td></td>
<td></td>
<td>$ 280</td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td>Special education</td>
<td colspan="2"></td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td><blockquote>
<p>$ 53</p>
</blockquote></td>
<td></td>
<td></td>
<td>$ 106</td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td>Bilingual and immigrant</td>
<td colspan="2"></td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td><blockquote>
<p>$ -</p>
</blockquote></td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td>Other federal programs</td>
<td colspan="2"></td>
<td></td>
<td></td>
<td>$ 59</td>
<td></td>
<td></td>
<td><blockquote>
<p>$ 59</p>
</blockquote></td>
<td></td>
<td></td>
<td>$ 59</td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td colspan="2"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td colspan="2">Total revenue</td>
<td colspan="2"></td>
<td></td>
<td></td>
<td>$4,909</td>
<td></td>
<td></td>
<td><blockquote>
<p>$ 5,802</p>
</blockquote></td>
<td></td>
<td></td>
<td>$ 5,733</td>
<td></td>
</tr>
</tbody>
</table>

ASSUMPTIONS: Financial figures represent 1997-98 school year. Basic
elementary charter school enrolls only elementary students who are not
at risk and have no special needs. Middle cost K-12 charter school has
the same student population as the South Carolina average. At-risk upper
grade charter school has twice the concentration of at-risk and special
needs students as an average South Carolina school and is located in an
urban area.

^a^ Charter school funding is based on prior year's host district
general fund expenditure updated for inflation.

^b^ The lowest expenditure per weighted pupil in South Carolina is
\$3,424, about \$800 below the state average of about \$4,235.

^c^ The district's share of transportation expenditures, averaging \$62
per member is included in the host district general fund expenditure.
The state provides no support for charter school transportation.

## Texas

Texas provides for "open enrollment" and "campus" charter schools.
Authorized by school districts, campus charter schools obtain funding
through the normal budget allocation process of the school district.
Open enrollment charter schools resemble the autonomous charter schools
in many other states and account for more than 90 percent of Texas
charter schools in 1999-2000. This section describes funding for open
enrollment charter schools only.

**Base** **Funding:** Revenue for charter schools is based on the
foundation allowance generated in the school districts in which students
reside. [^63] The foundation allowance, starting at \$2,396 in 1997-98,
incorporates a number of funding variables unique to each school
district. The formula also has weights for special education,
limited-English proficiency and at-risk factors (see table) based on
student characteristics of charter schools.[^64] Although a charter
school receives all of its funding from the state, the state recovers an
equivalent amount from the sending school districts because the student
is no longer counted as a student in the district.

**Pupil Count:** Unlike most states, Texas charter schools base funding
on *average daily attendance* (ADA). Charter schools with low attendance
rates receive less funding. The alternative method, *average daily
membership* (ADM) was used in every state with charter schools in
1997-98 except California. Low-income and at-risk students usually have
the highest absence rates. ADA funding discourages the establishment of
charter schools serving these high-cost children, and probably leads to
funding problems for charter schools that choose to enroll these
students.

**District Size Adjustments:** The small district (fewer than 1,600
students) adjustment factor depends on enrollment, grade taught, and
whether school district area exceeds 300 square miles. A mid-size
district (between 1,600 and 5,000 students) adjustment factor is based
on enrollment alone. Funds generated by district size adjustments are
passed on to charter schools.

**Funding Based on School District Characteristics:** The base funding
formula for school districts accounts for geographic variations in
resources costs using a Cost of Education Index (CEI). The CEI is
incorporated into the foundation allowance applying to charter schools.
Despite an equalization aid formula that has gradually reduced spending
inequalities in recent years, Texas still has substantial spending
inequities based on property wealth and tax effort. Charter school
funding reflects the remaining inequalities. In Texas, 80 percent of
districts have a foundation allowance between \$3,900 and \$5,400.

**Special Education:** A pupil weighting system provides more funding
for a variety of special needs including speech, resource room, and
self-contained settings (see the following table). For example,
mainstreamed special education students are weighted as an additional
1.1 student (totaling 2.1 students).

**Gifted and Talented:** Schools receive an additional allotment of 0.12
(12 percent extra) for gifted and talented students, but not more than 5
percent of students can be funded as gifted.

**Limited-English Proficiency:** LEP students secure 10 percent extra
funding through the weighting system.

**Low-Income or Compensatory Education:** Compensatory education
students receive 20 percent extra funding through the weighting system.
Eligibility is based on enrollment in the free and reduced-price lunch
program.

**Career and Technology Education**. Students served in career and
technology programs obtain 67 percent more funding through the Texas
financing system. These programs are concentrated in high schools and
the many Texas charter high schools with alternative programs should
benefit. In 1997-98, the 19 charter schools in Texas averaged 23.4
percent of enrollment in career and technology programs compared to 5
percent statewide.

**Categorical Aid:** Charter schools can apply for all categorical
programs with the exception of funds for facilities assistance. A
"technology allotment" of \$30 per pupil is the only program routinely
available to all school districts including charter schools.

**Transportation:** No Texas public school district is required to
provide transportation, so charter schools are also exempt. Funding for
eligible students is available if transportation is provided. The state
also provides additional funding for special education transportation.
Wealthy districts get less state funding because transportation is
funded on an equalized basis.

**State Start-Up Assistance:** None provided.

**Capital Outlay and Facilities Financing:** State funding for
facilities assistance is not available to charter schools. Recently, the
Texas legislature specifically allowed charter schools to issue
tax-exempt securities. North Hills Prep became the first charter school
in Texas to secure tax-exempt financing. Charter schools directly issue
the securities with the help of investment banking firms as in Michigan
(see Michigan section of Appendix), rather than through a conduit
bonding authority as in Colorado (see Colorado section of this
Appendix).

**Timing of Payments:** Funding is delivered in the first month that
students are in school. Payment is monthly, although an extra payment is
made in September for a total of 13. The attendance counts are adjusted
every six weeks.

**Uniform Financial Reporting:** Charter schools have to maintain a
financial accounting system that meets the Public Education Information
Management System (PEIMS) data standards. These standards have been
adapted for charter schools.

**Auditing Practice:** An independent audit is required and must include
procedures for reviewing the accuracy of the fiscal information provided
by charter schools' PEIMS.

**Responsibility for Debt:** The Texas Education Agency treats charter
schools like school districts, so charter holders are responsible for
debt.

**Ownership and Disposition of Assets:** If a charter closes, equipment
purchased with state or federal funds reverts to the state for
distribution.

**Teacher Retirement:** If the charter school itself is the agent of
employment, it must participate in the state retirement system. If the
school uses a management agency, then it is exempt from the state
retirement system. The management agency functions like an employment
agency and may choose to offer its own benefits package. In 1998-99, 82
of 87 charter schools participated in the state retirement system.

<table>
<colgroup>
<col style="width: 2%" />
<col style="width: 27%" />
<col style="width: 3%" />
<col style="width: 7%" />
<col style="width: 8%" />
<col style="width: 9%" />
<col style="width: 1%" />
<col style="width: 9%" />
<col style="width: 9%" />
<col style="width: 2%" />
<col style="width: 9%" />
<col style="width: 9%" />
</colgroup>
<tbody>
<tr class="odd">
<td colspan="2"><strong>Texas</strong></td>
<td></td>
<td><strong>Cost Factor</strong></td>
<td colspan="2"><blockquote>
<p><strong>Basic Elementary Charter School</strong></p>
</blockquote></td>
<td></td>
<td colspan="2"><blockquote>
<p><strong>Middle Cost K-12 Charter School</strong></p>
</blockquote></td>
<td></td>
<td colspan="2"><blockquote>
<p><strong>Urban At-Risk Upper Grade</strong></p>
</blockquote></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td><strong>Weight</strong></td>
<td><strong>FTE</strong></td>
<td><strong>WFTE</strong></td>
<td></td>
<td><strong>FTE</strong></td>
<td><strong>WFTE</strong></td>
<td></td>
<td><strong>FTE</strong></td>
<td><strong>WFTE</strong></td>
</tr>
<tr class="odd">
<td colspan="2">Weighted ADA calculations</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td>Basic K-12</td>
<td></td>
<td>1.00</td>
<td>100</td>
<td>100.0</td>
<td></td>
<td>100</td>
<td>100.0</td>
<td></td>
<td>100</td>
<td>100.0</td>
</tr>
<tr class="odd">
<td></td>
<td>Limited-English proficiency</td>
<td></td>
<td>0.10</td>
<td>0</td>
<td>0.0</td>
<td></td>
<td>12</td>
<td>1.2</td>
<td></td>
<td>24</td>
<td>2.4</td>
</tr>
<tr class="even">
<td></td>
<td>Special education weight 1<sup>a</sup></td>
<td></td>
<td>0.16</td>
<td>0</td>
<td>0.0</td>
<td></td>
<td>4</td>
<td>0.6</td>
<td></td>
<td>8</td>
<td>1.3</td>
</tr>
<tr class="odd">
<td></td>
<td>Special education weight 2</td>
<td></td>
<td>0.95</td>
<td>0</td>
<td>0.0</td>
<td></td>
<td>4</td>
<td>3.8</td>
<td></td>
<td>8</td>
<td>7.6</td>
</tr>
<tr class="even">
<td></td>
<td>Special education weight 3</td>
<td></td>
<td>1.20</td>
<td>0</td>
<td>0.0</td>
<td></td>
<td>1</td>
<td>1.2</td>
<td></td>
<td>2</td>
<td>2.4</td>
</tr>
<tr class="odd">
<td></td>
<td>Mainstream allotment</td>
<td></td>
<td>1.10</td>
<td>0</td>
<td>0.0</td>
<td></td>
<td>3</td>
<td>3.3</td>
<td></td>
<td>6</td>
<td>6.6</td>
</tr>
<tr class="even">
<td></td>
<td>Compensatory education</td>
<td></td>
<td>0.20</td>
<td>0</td>
<td>0.0</td>
<td></td>
<td>48</td>
<td>9.6</td>
<td></td>
<td>85</td>
<td>17.0</td>
</tr>
<tr class="odd">
<td></td>
<td>Career and technology</td>
<td></td>
<td>0.67</td>
<td>0</td>
<td>0.0</td>
<td></td>
<td>5</td>
<td>3.4</td>
<td></td>
<td>10</td>
<td>6.7</td>
</tr>
<tr class="even">
<td></td>
<td>Gifted</td>
<td></td>
<td>0.12</td>
<td>0</td>
<td>0.0</td>
<td></td>
<td>8</td>
<td>1.0</td>
<td></td>
<td>0</td>
<td>0.0</td>
</tr>
<tr class="odd">
<td colspan="2">Total weighted FTE</td>
<td></td>
<td></td>
<td></td>
<td>100.0</td>
<td></td>
<td></td>
<td>124.1</td>
<td></td>
<td></td>
<td>144.0</td>
</tr>
<tr class="even">
<td colspan="2">Attendance rate<sup>b</sup></td>
<td></td>
<td></td>
<td></td>
<td>95%</td>
<td></td>
<td></td>
<td>95%</td>
<td></td>
<td></td>
<td>80%</td>
</tr>
<tr class="odd">
<td colspan="2">Total weighted ADA</td>
<td></td>
<td></td>
<td></td>
<td>95.0</td>
<td></td>
<td></td>
<td>117.9</td>
<td></td>
<td></td>
<td>115.2</td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td colspan="2">1. Foundation allowance<sup>c</sup></td>
<td></td>
<td></td>
<td>$ 4,119</td>
<td>$ 4,336</td>
<td></td>
<td>$ 5,111</td>
<td>$ 4,336</td>
<td></td>
<td>$ 4,607</td>
<td>$ 3,999</td>
</tr>
<tr class="even">
<td colspan="2">2. Transportation<sup>d</sup></td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
</tr>
<tr class="odd">
<td colspan="2">3. Categorical funding<sup>e</sup></td>
<td></td>
<td></td>
<td>$ 30</td>
<td></td>
<td></td>
<td>$ 30</td>
<td></td>
<td></td>
<td>$ 30</td>
<td></td>
</tr>
<tr class="even">
<td colspan="2">4. Federal funding</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td>Title I</td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td>$ 155</td>
<td></td>
<td></td>
<td>$ 310</td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td>Bilingual and immigrant</td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td>$ 6</td>
<td></td>
<td></td>
<td>$ 12</td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td>Special education</td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td>$ 45</td>
<td></td>
<td></td>
<td>$ 90</td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td>Other federal programs</td>
<td></td>
<td></td>
<td>$ 42</td>
<td></td>
<td></td>
<td>$ 42</td>
<td></td>
<td></td>
<td>$ 42</td>
<td></td>
</tr>
<tr class="odd">
<td colspan="2">Total revenue</td>
<td></td>
<td></td>
<td>$ 4,191</td>
<td></td>
<td></td>
<td>$ 5,389</td>
<td></td>
<td></td>
<td>$ 5,091</td>
<td></td>
</tr>
</tbody>
</table>

ASSUMPTIONS: Each school has 100 students. Basic elementary charter
school has no pupils generating program cost weightings. Middle cost
K-12 charter school has the same student population as the average Texas
district. At-risk upper grade charter school has twice the concentration
of special needs students and the fiscal characteristics of Houston.

^a^ Special education weighting in table combines several categories
that have the same weight.

^b^ Funding in Texas is based on weighted average daily attendance.
Attendance is assumed to be 95 percent at the basic and middle cost
schools and 80 percent at the at-risk upper grade school.

^c^ Basic and middle cost school are in a typical district like
Pottsboro (\$4,336). In Texas, 80 percent of districts have a foundation
allowance between \$3,922 (Hale) and \$5,389 (Westhoff).

^d^ Transportation costs averaging about \$214 per pupil (4 percent of
middle cost charter school) are included in the foundation allowance.

^e^ Includes only the technology allotment.

## Wisconsin 

Wisconsin has two charter school laws. The older law applies to the
entire state. Only school districts are allowed to authorize charter
schools, which are funded in about the same way as other district
schools. Applying only to Milwaukee, the newest law allows the city,
universities or technical colleges to authorize charter schools, and
guarantees funding based on a specific definition of average
expenditures called "shared costs." (Milwaukee is treated separately
after describing the state charter school funding system).

### School-District Sponsored Charter Schools

**Base Funding:** Charter schools sponsored by local school boards are
funded the same way as other district schools. In 1997-98, most of the
18 schools in operation were public school conversions. The budgets for
these charter schools are a part of school district budgets, and
districts usually provide in-kind services such as central
administration, transportation and food service. In combination with
local property taxes, school districts receive state aid based on an
equalization formula that depends on the number of pupils in their
schools (including charter schools), tax effort and the wealth of the
district. Districts distribute money to charter schools; the amounts
vary from district to district.

**Grade Level Funding:** None.

**Special Education:** Special education funding follows students
according to normal district budgetary procedures. Charter schools
providing special education services negotiate for their share of
special education funding or receive services in kind from the district.
The state reimburses districts for about 40 percent of prior year costs
for educating and transporting pupils enrolled in special education. The
local special education costs that are not reimbursed through state aid
are financed by general operating funds (financed in part by state aid
from the general aid formula).

**Limited-English Proficiency:** Charter schools are eligible to receive
bilingual education funding if they provide services to LEP students.
The state reimburses school districts for 63 percent of costs (subject
to sufficient state appropriations). Charter schools negotiate for the
funding or receive it in kind from the district. Funding for 1997-98
averages approximately \$10 per enrolled pupil (not pupils served).

**Compensatory Education:** Charter schools are eligible to receive
compensatory education grants for grades K-5. Grants are awarded on a
competitive basis to schools based on high numbers of dropouts and
low-income students. The funding for 1997-98 averaged \$8 per member
(not students served).

**At-Risk Students:** Charter schools qualify for funds equal to
approximately 10 percent of shared costs if they educate children
meeting one of several definitions for at-risk children. In 1997-98,
funding for at-risk students was approximately \$4 per member (not
students served).

**Transportation:** State law requires districts to provide
transportation services to charter schools. The state pays a flat amount
per transported pupil based on the distance traveled ranging from \$12
(hazardous, under two miles) to \$85 (over 18 miles). On average, state
aid pays for about 15 percent of transportation, or \$20 per member. The
other 85 percent of transportation costs are financed from general
operating funds.

**Capital Outlay and Facilities Funding:** Facilities are arranged
through the school district. Most charter schools are conversion
schools.

**State Start-Up Assistance:** No state start-up funding is available.

**Timing of Payments:** Charter schools payments are made on the same
schedule as other schools in the district.

**Uniform Financial Reporting:** Blended with school district.

**Auditing Practice:** Independent financial audits are blended with
school district audits unless otherwise specified in the charter. The
Joint Legislative Audit Committee may direct the Legislative Audit
Bureau to perform a financial and performance evaluation of the charter
school.[^65]

**Teacher Retirement:** Charter schools that are instrumentalities of a
school district are required to participate. Charter schools that are
independent of a school district are prohibited from participation. The
general view is that independent charter schools do not employ public
employees, and federal pension guidelines prohibit inclusion of private
employees. All but one school outside of Milwaukee are instrumentalities
of a school district.

<table>
<colgroup>
<col style="width: 3%" />
<col style="width: 26%" />
<col style="width: 3%" />
<col style="width: 7%" />
<col style="width: 2%" />
<col style="width: 10%" />
<col style="width: 3%" />
<col style="width: 7%" />
<col style="width: 2%" />
<col style="width: 10%" />
<col style="width: 1%" />
<col style="width: 7%" />
<col style="width: 2%" />
<col style="width: 11%" />
</colgroup>
<tbody>
<tr class="odd">
<td colspan="2"><strong>Wisconsin</strong></td>
<td></td>
<td colspan="4"><strong>Basic Elementary Charter School</strong></td>
<td colspan="3"><blockquote>
<p><strong>Middle Cost K-12 Charter School</strong></p>
</blockquote></td>
<td></td>
<td colspan="3"><blockquote>
<p><strong>Urban At-Risk Upper Grade</strong></p>
</blockquote></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td><strong>FTE</strong></td>
<td></td>
<td colspan="2"><strong>$/Member</strong></td>
<td><strong>FTE</strong></td>
<td></td>
<td colspan="2"><strong>$/Member</strong></td>
<td><strong>FTE</strong></td>
<td></td>
<td><strong>$/Member</strong></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td colspan="2">Total FTE enrollment</td>
<td></td>
<td>100</td>
<td></td>
<td></td>
<td></td>
<td>100</td>
<td></td>
<td></td>
<td></td>
<td>100</td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td colspan="2">1. Shared costs<sup>a</sup></td>
<td></td>
<td></td>
<td></td>
<td>$ 6,300</td>
<td></td>
<td></td>
<td></td>
<td>$ 6,300</td>
<td></td>
<td></td>
<td></td>
<td>$ 6,053</td>
</tr>
<tr class="odd">
<td colspan="3">2. Special education aid</td>
<td>0</td>
<td></td>
<td>$ -</td>
<td></td>
<td>13</td>
<td></td>
<td>$ 320<sup>b</sup></td>
<td></td>
<td>26</td>
<td></td>
<td>$ 740</td>
</tr>
<tr class="even">
<td colspan="3">3. State transportation aid</td>
<td></td>
<td></td>
<td>$ 20</td>
<td></td>
<td></td>
<td></td>
<td>$ 20<sup>b</sup></td>
<td></td>
<td></td>
<td></td>
<td>$ 24</td>
</tr>
<tr class="odd">
<td colspan="2">4. State categorical aid</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td>At-risk</td>
<td></td>
<td>0</td>
<td></td>
<td>$ -</td>
<td></td>
<td>26</td>
<td></td>
<td>$ 4<sup>b</sup></td>
<td></td>
<td>52</td>
<td></td>
<td>$ 46</td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2">Low income (pre K - 5)</td>
<td>0</td>
<td></td>
<td>$ -</td>
<td></td>
<td>26</td>
<td></td>
<td>$ 8<sup>b</sup></td>
<td></td>
<td>0</td>
<td></td>
<td>$ -</td>
</tr>
<tr class="even">
<td></td>
<td colspan="2">Limited-English proficient</td>
<td>0</td>
<td></td>
<td>$ -</td>
<td></td>
<td>2</td>
<td></td>
<td>$ 10<sup>b</sup></td>
<td></td>
<td>10</td>
<td></td>
<td>$ 44</td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2">School library aid</td>
<td></td>
<td></td>
<td>$ 16</td>
<td></td>
<td></td>
<td></td>
<td>$ 17<sup>b</sup></td>
<td></td>
<td></td>
<td></td>
<td>$ 16</td>
</tr>
<tr class="even">
<td colspan="2">5. Federal funding</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td>Title I</td>
<td></td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td></td>
<td>$ 147</td>
<td></td>
<td></td>
<td></td>
<td>$ 375</td>
</tr>
<tr class="even">
<td></td>
<td>Special education</td>
<td></td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td></td>
<td>$ 51</td>
<td></td>
<td></td>
<td></td>
<td>$ 102</td>
</tr>
<tr class="odd">
<td></td>
<td>Other federal programs</td>
<td></td>
<td></td>
<td></td>
<td>$ 63</td>
<td></td>
<td></td>
<td></td>
<td>$ 64</td>
<td></td>
<td></td>
<td></td>
<td>$ 64</td>
</tr>
<tr class="even">
<td colspan="2">Total revenue</td>
<td></td>
<td></td>
<td></td>
<td>$ 6,399</td>
<td></td>
<td></td>
<td></td>
<td>$ 6,941</td>
<td></td>
<td></td>
<td></td>
<td>$ 7,464</td>
</tr>
</tbody>
</table>

ASSUMPTIONS: Financial figures represent 1997-98 school year. Basic
elementary charter school enrolls only students who are not at risk and
have no special needs. Middle cost K-12 charter school has the same
student population statistics as the Wisconsin average. At-risk upper
grade charter school is located in Milwaukee.

^a^ In the average Wisconsin school district, approximately \$435 of
shared cost is devoted to special education, and \$133 is devoted to
transportation (per pupil enrolled, not for each student receiving
services). In the upper grade at-risk school, approximately \$1,110 of
shared cost is devoted to special education (doubled from the \$555
Milwaukee average to reflect an at-risk school), and \$176 is devoted to
transportation.

^b^ Categorical aids are state averages per pupil enrolled, not for each
student receiving services.

### Milwaukee Charter Schools

#  {#section-4}

**Base Funding:** Charter schools authorized by the city of Milwaukee,
University of Wisconsin-Milwaukee, or Milwaukee Area Technical College
are paid an amount equal to Milwaukee Public Schools' "shared costs," a
component of the general state aid formula. In 1997-98 Milwaukee's
shared cost was calculated at \$6,053. The calculation starts with total
expenditures, which averaged about \$7,636. All debt services and
facility costs are added. However, most school facilities are financed
by the city of Milwaukee, and the capital costs included in charter
school funding totaled only \$91 per pupil. Revenues excluded from the
calculation include federal funds, restricted state categorical funds,
gifts and donations, together totaling \$1,674. Shared costs include
about 60 percent of actual special education and bilingual education
costs, and approximately 85 percent of actual transportation costs.

**Special Education:** Charter schools receive state and federal funding
if they provide services. The state reimburses districts for about 40
percent of prior year costs for educating and transporting pupils
enrolled in special education. Shared costs include about 60 percent of
actual special education costs. In Milwaukee, a dispute arose over
whether charter schools are eligible for special education dollars in
the shared cost calculation if charter schools do not actually enroll an
equivalent special education population. Until this dispute is resolved,
the special education portion (approximately \$555 per member) is being
held back from charter schools by the State Department of Public
Instruction.

**Limited-English Proficiency:** Charter schools are eligible to receive
bilingual education funding if they provide services to LEP students.
Funding for bilingual education in Milwaukee was approximately \$22 per
member (not pupils served).

**Compensatory Education:** Charter schools are eligible to receive
compensatory education aid for students in grades K-5. Grants are
awarded on a competitive basis to schools based on high numbers of
dropouts and low-income students. Funding for this program in Milwaukee
was approximately \$43 per member (not pupils served).

**At-Risk Students:** Charter schools qualify for funds if they educate
children at risk of not completing high school. In 1997-98, funding for
at-risk students was approximately \$23 per member.

**Transportation:** Charter schools are not required to provide
transportation services to students. The state provides about 15 percent
of transportation funding in Milwaukee, and about 85 percent of
transportation costs are paid out of shared costs. In effect, charter
schools get funding that Milwaukee devotes to transportation.

**Other State Categorical Aids:** Other than the categorical aids
already mentioned, the only program of significant dollar value that
could apply generally to charter schools is school library aid
(approximately \$16 per pupil).

**Capital Outlay and Facilities Financing:** School district capital
outlay and debt service costs are included in the shared cost-per-member
calculation (about \$90 per student). Most facilities however, are owned
and financed by the city of Milwaukee.

**State Start-Up Assistance:** No state start-up funding available.

**Timing of Payments:** Charter schools are paid quarterly in September,
December, February and June.

**Uniform Financial Reporting:** Not required.

**Audit Requirements:** No independent financial audit currently is
required.

**Responsibility for Debt:** Charter schools can incur debt and use
general school aid revenue to acquire buildings or to pay debt.

**Ownership and Disposition of Assets:** Property purchased by a charter
school remains the property of the charter school. No specific rules
exist for disposing of property for dissolved charter schools.

**Teacher Retirement:** Charter schools that are instrumentalities of a
school district are required to participate. Charter schools that are
independent of a school district are prohibited from involvement. It is
expected that many Milwaukee charter schools will be run by private
contractors and will not be allowed to participate in the state teacher
retirement system.

<table>
<colgroup>
<col style="width: 3%" />
<col style="width: 23%" />
<col style="width: 3%" />
<col style="width: 7%" />
<col style="width: 2%" />
<col style="width: 10%" />
<col style="width: 3%" />
<col style="width: 7%" />
<col style="width: 2%" />
<col style="width: 10%" />
<col style="width: 3%" />
<col style="width: 7%" />
<col style="width: 2%" />
<col style="width: 11%" />
</colgroup>
<tbody>
<tr class="odd">
<td colspan="2"><strong>Milwaukee</strong></td>
<td></td>
<td colspan="3"><blockquote>
<p><strong>Basic Elementary Charter School</strong></p>
</blockquote></td>
<td></td>
<td colspan="3"><blockquote>
<p><strong>Middle Cost K-12 Charter School</strong></p>
</blockquote></td>
<td></td>
<td colspan="3"><blockquote>
<p><strong>Urban At-Risk Upper Grade</strong></p>
</blockquote></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td><strong>FTE</strong></td>
<td></td>
<td colspan="2"><strong>$/Member</strong></td>
<td><strong>FTE</strong></td>
<td></td>
<td colspan="2"><strong>$/Member</strong></td>
<td><strong>FTE</strong></td>
<td></td>
<td><strong>$/Member</strong></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td colspan="2">Total FTE enrollment</td>
<td></td>
<td>100</td>
<td></td>
<td></td>
<td></td>
<td>100</td>
<td></td>
<td></td>
<td></td>
<td>100</td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td colspan="2">1. Shared costs<sup>a</sup></td>
<td></td>
<td></td>
<td></td>
<td>$ 6,053</td>
<td></td>
<td></td>
<td></td>
<td>$ 6,053</td>
<td></td>
<td></td>
<td></td>
<td>$ 6,053</td>
</tr>
<tr class="odd">
<td colspan="3">2. Special education aid</td>
<td>0</td>
<td></td>
<td>$ -</td>
<td></td>
<td>13</td>
<td></td>
<td>$ 370<sup>b</sup></td>
<td></td>
<td>26</td>
<td></td>
<td>$ 740</td>
</tr>
<tr class="even">
<td colspan="4">3. State transportation aid</td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td></td>
<td>$ 24<sup>b</sup></td>
<td></td>
<td></td>
<td></td>
<td>$ 24</td>
</tr>
<tr class="odd">
<td colspan="2">4. State categorical aid</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td colspan="2">At-risk</td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td></td>
<td>$ 23<sup>b</sup></td>
<td></td>
<td></td>
<td></td>
<td>$ 46</td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2">Low income (Pre K - 5)</td>
<td>0</td>
<td></td>
<td>$ -</td>
<td></td>
<td>78</td>
<td></td>
<td>$ 43<sup>b</sup></td>
<td></td>
<td>0</td>
<td></td>
<td>$ -</td>
</tr>
<tr class="even">
<td></td>
<td colspan="2">Limited-English proficiency</td>
<td>0</td>
<td></td>
<td>$ -</td>
<td></td>
<td>5</td>
<td></td>
<td>$ 22<sup>b</sup></td>
<td></td>
<td>10</td>
<td></td>
<td>$ 44</td>
</tr>
<tr class="odd">
<td></td>
<td colspan="3">School library aid</td>
<td></td>
<td>$ 16</td>
<td></td>
<td></td>
<td></td>
<td>$ 16<sup>b</sup></td>
<td></td>
<td></td>
<td></td>
<td>$ 16</td>
</tr>
<tr class="even">
<td colspan="2">5. Federal funding</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td>Title I</td>
<td></td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td></td>
<td>$ 300</td>
<td></td>
<td></td>
<td></td>
<td>$ 375</td>
</tr>
<tr class="even">
<td></td>
<td>Special education</td>
<td></td>
<td></td>
<td></td>
<td>$ -</td>
<td></td>
<td></td>
<td></td>
<td>$ 51</td>
<td></td>
<td></td>
<td></td>
<td>$ 102</td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2">Other federal programs</td>
<td></td>
<td></td>
<td>$ 63</td>
<td></td>
<td></td>
<td></td>
<td>$ 63</td>
<td></td>
<td></td>
<td></td>
<td>$ 63</td>
</tr>
<tr class="even">
<td colspan="2">Total revenue</td>
<td></td>
<td></td>
<td></td>
<td>$ 6,132</td>
<td></td>
<td></td>
<td></td>
<td>$ 6,965</td>
<td></td>
<td></td>
<td></td>
<td>$ 7,463</td>
</tr>
</tbody>
</table>

ASSUMPTIONS: Financial figures represent 1997-98 school year. Basic
elementary charter school enrolls only elementary students who are not
at risk and have no special needs. Middle cost K-12 charter school has
the same student population characteristics as the average Milwaukee
school. At-risk upper grade charter school has twice the concentration
of special education and at-risk students as the Milwaukee average.

^a^ Approximately \$555 of shared cost is devoted to special education,
and \$176 is devoted to transportation per pupil enrolled, not for each
student receiving services.

^b^ Categorical aids are 1997-98 Milwaukee averages per pupil enrolled,
not for each student receiving services.

[^1]: Subsequent reports of the National Charter School Finance Study
    will examine the actual amounts of funding received by charter
    schools and schools districts in six states and probe the financial
    effects charter schools and school districts have on each other.

[^2]: Michigan officially refers to its charter schools as "public
    school academies." For consistency, the generic term "charter
    school" is used throughout this report.

[^3]: The foundation allowance is the funding guaranteed by the state
    that is comprised of a combination of local and state revenues.

[^4]: Some analysts argue that the administrative fees of state
    chartering authorities should not be accounted for as administration
    costs of charter schools. A similar accounting issue arises in some
    states over administrative fees assessed by school districts that
    authorize charter schools.

[^5]: Nonprofit charter school boards often contract with private
    management firms. Researchers use a wide variety of terms to
    describe these schools, e.g., firm-run schools, business-run
    schools, education management organizations (EMOs), and chain
    schools.

[^6]: This conclusion may be compromised by problems with the way
    management companies report financial data to the state. Charter
    school facility costs and payments to private contractors for
    instructional support are misleadingly classified as business and
    administration expenditures (Wolfram, 1999).

[^7]: According to the National Charter School Study (RPP, 1999), 34
    percent of Michigan charter school students qualified for federal
    free-lunch programs compared to the 29 percent state average. About
    5 percent of charter school students qualified for special education
    services compared to about 11 percent statewide. Some argue that
    charter schools should be compared to surrounding school districts.
    Since Michigan charter schools tend to be located near urban areas,
    charter school populations probably reflect student characteristics
    in surrounding school districts.

[^8]: Information on Form B, the financial report school districts and
    charter schools file with the state, is available at
    www.state.mi.us/mde/forms/. Bulletin 1014, which summarizes
    information from Form B is posted at
    www.state.mi.us/mde/reports/B1014/index.html

[^9]: Protheroe, (1997) found that the net cost of food service to
    school districts was \$13 per pupil per year or 0.2 percent of
    expenditures.

[^10]: This article generated a series of responses, replies and
    rejoinders. In particular, see Zigmond (1999) for a defense of the
    quality of special education service in one for-profit school and
    the response by Ramanathan and Zollers (2000).

[^11]: For a critique of the UCLA study see Premack (1998). None of the
    financial issues raised in our review of the UCLA study are directly
    addressed in Premack's review.

[^12]: Federal funding is insufficient to provide Title I programs for
    all eligible children in most school districts. Districts develop
    plans to ration funding. Typically, funding goes to schools with the
    highest concentration of poor children. Under most plans, elementary
    schools are more likely to receive funds than high schools.

[^13]: In subsequent reports, the National Charter School Finance Study
    will collect and analyze revenue data in all states with charter
    schools operating in 1997-98. Detailed expenditure data will be
    collected in Arizona, Colorado, Florida, Massachusetts, Michigan and
    Texas.

[^14]: This generalization does not apply to the District of Columbia
    and some school districts in Connecticut. In 1998-99, a separate
    appropriation from Congress supported a majority of District of
    Columbia charter school funding. A system of state aid minimums
    protects most Connecticut schools from losing state aid for any
    reason.

[^15]: The only exceptions to this generalization among the states
    examined in this report are the District of Columbia and Hawaii,
    where there is only one school district in the state, and North
    Carolina and Delaware, states without foundation funding formulas.
    In North Carolina, school districts pay charter schools the average
    local revenue while states pay the average state aid for the school
    district in which the charter school is located.

[^16]: Under Method 2, school districts surrender only the foundation
    allowance. Local revenues in excess of those included in the
    foundation allowance, such as local option taxes and most debt
    retirement levies, remain with the school district. Very wealthy
    districts that receive no state aid do not lose any revenue to
    charter schools.

[^17]: State aid is sometimes based on enrollment from the previous year
    as in Illinois and Massachusetts. Thus, for one year, there would be
    no new state aid for students coming from private schools. For this
    reason, Massachusetts pays the entire tuition of charter school
    students coming from private schools for one year. In Illinois, the
    school district absorbs the one-year loss of revenue.

[^18]: Some very wealthy school districts may receive no state
    foundation aid, so changes in enrollment do not generate revenue
    gains or losses. Other conclusions reached in this section may not
    apply to wealthy school districts receiving no state foundation aid.

[^19]: Florida adjusts its foundation level four times a year based on
    changes in total state enrollment. Rapid enrollment gains in Miami
    during the school year, for example, are financed by reducing the
    foundation level and state aid for all students in the state.

[^20]: Delaware is one of the these states, but because the state
    formula uses pupil enrollment to determine staff counts, it is
    included in Table 3 as an ADM/enrollment state.

[^21]: In effect, charter schools receive funding based only on the
    overall attendance rate of the school district. In Texas and
    California, charter school funding also varies with the charter
    schools' own attendance figures.

[^22]: Colorado mandates that charter schools receive at least 80
    percent of the school district average per-pupil operating funds,
    but about one-third receive more than the district average (the ones
    that get capital outlay funding), and at least one charter school is
    receiving 120 percent funding.

[^23]: Massachusetts however, specifically excludes school district
    special education for preschool, hospital services and tuition.

[^24]: This is not to say that all charter schools will respond
    primarily to financial incentives. The funding systems in these
    states are generous enough to allow special education programs.
    School profiles in Massachusetts, for instance, show that a number
    of charter schools are providing special education for a
    considerable number of students. However, the number of costly
    students served by charter schools is, on average, not in proportion
    to the size of the special education population in sending districts
    (KPMG-Peat Marwick, 1998).

[^25]: An inspection of charter school names in the Common Core Data
    (CCD) of the U.S. Department of Education reveals at least 25
    multi-campus charter schools in Arizona for school year 1997-98.

[^26]: Includes the nine listed in the first column plus Delaware,
    Alaska and Georgia.

[^27]: Charter school transportation is similar to the funding that
    districts provide for parochial school transportation. See the
    appendix entry for Pennsylvania. Some school districts report that
    the extra state funding for the transportation of charter school
    students is sufficient in their districts.

[^28]: State-sponsored charter schools in Connecticut get approximately
    the state average general operating revenues and therefore receive
    approximately the state average transportation funding paid from
    general operating revenues. Charter school students residing in the
    same district in which the charter school is located are also
    entitled to district-provided transportation.

[^29]: Another suggestion for reforming the loophole is to reimburse
    charter schools for parent transportation at the same level as the
    IRS mileage deduction, now about 32.5 cents a mile.

[^30]: Includes school improvement program, LEP, instructional
    materials, class size reduction, mentor teacher state compensatory
    education and others. Excludes lottery funds, COLA and economic
    impact aid, funds for which charter schools may also qualify.

[^31]: These programs amount to less than 2 percent of total state and
    local funding (Mueller et al., 1995). In 1999 the law was changed to
    give charter schools access to the state share.

[^32]: Under the original state legislation, Arizona created a "stimulus
    fund" earmarked for start-up and facility costs. The upper limit for
    state start-up grants was up to \$100,000, but the average grant
    size was \$21,000. The state legislature has not appropriated state
    start-up funds since 1997. In 1995, Arizona received a three-year
    federal start-up grant. After the initial grant period, the state
    chose not to reapply for this federal start-up grant in response to
    a court case brought by the Bureau of Indian Affairs (BIA) against
    the state. The BIA-funded schools challenged a state statute that
    authorizes the state to deduct federal start-up funding from the
    basic state aid for BIA-funded schools. The state won the case.
    State-authorized charter schools now apply directly to the federal
    government for start-up funds. Under some district contracts,
    however, the district applies on behalf of the charter schools,
    whereas in other authorizing districts individual charter schools
    apply separately.

[^33]: In Pennsylvania, state funding is mixed with the federal grant
    program.

[^34]: When debt is refinanced to obtain a lower interest rate, the
    amount refinanced is often counted as debt retirement. Consequently,
    the figures in this paragraph may be inflated.

[^35]: Charter schools authorized by school districts do not benefit
    from grade level and size weightings, but they benefit from
    lucrative transportation funding not available to state-authorized
    charter schools.

[^36]: Private funding from individuals or foundations is not separately
    reported in federal data collections and is usually recorded as
    local or miscellaneous revenue. Information is available for
    Massachusetts from preliminary work on subsequent tasks of the
    National Charter School Finance Study. Based on state uniform
    financial reporting, we calculate that "private funding" totaled \$8
    per pupil in the host school districts of charter schools in
    1997-98. Based on audited financial statements, charter schools
    averaged \$147 in private foundation funding and \$140 from
    fundraising and donations.

[^37]: The schools examined were the SABIS International School,
    Neighborhood House Charter School, Lawrence Family Development
    Charter School, Francis W. Parker Charter School, Community Day
    Charter School, City on a Hill Charter School, Chelmsford Public
    Charter School, Atlantis Charter School, Boston Renaissance Charter
    School and the Academy of the Pacific Rim.

[^38]: The Florida schools examined were the Orange Avenue Charter
    School, Rays of Hope Charter School, Okaloosa Academy, Micanopy
    Charter School, Academie Da Vinci Charter School and the One Room
    School House.

[^39]: In Charter Schools: Issues Affecting Access to Federal Funds
    (U.S. GAO, 1997), the GAO noted that Title I funds for low-income
    children and special education funds are allocated to schools that
    meet established federal, state and local demographic criteria.
    Although charter schools treated as school districts avoid having to
    meet additional criteria used to distribute funds beyond the
    district level, these charter schools are no more likely to have
    received Title I and special education funding than are the charter
    schools which are treated as components of existing school
    districts.

[^40]: Districts provide transportation services directly to charter
    schools, so including transportation in the allocation as well would
    be a double payment. The percentage data for New Jersey are from
    Wynn (1995).

[^41]: In states, like California, Illinois and Massachusetts, some K-12
    charter schools may get funding from elementary school districts or
    high school districts. These situations are not considered.

[^42]: See for example Levin, 1999. There may well be instances,
    however, where elementary programs are more expensive because of
    lowered class sizes and intensive education programs.

[^43]: A new funding system effective in 1999-2000 simplifies the
    current system by giving charter schools "block grants" composed of
    revenue limit resources and most state categorical programs. Block
    grants are fixed for all charter schools and vary only by grade
    level. Transferring funding from categorical programs into block
    grants releases charter schools from regulatory strings typically
    attached to state categorical programs. Some categorical programs
    (e.g., teacher salary bonuses, English language acquisition programs
    and all federal programs) are not included in the block grant, and
    charter schools may apply for them individually. The state
    apportions funds directly to charter schools unless individual
    schools choose to get funding through their sponsor districts. As in
    the original funding system, block grants are apportioned based on
    average daily attendance.

[^44]: Even though state aid supports only about one-third of the
    foundation level in the average school district, losing students to
    charter schools increases the wealth-per-pupil component of the
    state aid formula. Mathematically, the result is the loss of the
    entire foundation level, not just the state aid component.

[^45]: The program, funded by a one-time appropriation of \$200 million,
    rewards school districts for finding appropriate alternatives to
    building new facilities by paying them half of the cost of building
    a "student station." Charter schools that are not located in public
    facilities constitute one alternative to building a new facility.

[^46]: The estimated per-pupil cost of a new school in 1998-99 was
    \$11,600 for elementary students and \$17,600 for high school
    students. SIT pays out half of the estimated cost.

[^47]: Rather than calculate funding estimates from the formula for
    school districts, the following table is based on state aid
    allotments from the state funding formula for 1998-99. These amounts
    incorporate the locally funded part of the allotment called "fair
    share." Based on data from Georgia's Financial Data Collection
    System, an estimate of additional local revenue is derived. It is
    assumed that the proportion of local to state revenue is the same in
    1998-99 as in 1996-97. The school finance office of the Georgia
    Department of Education adjusted the special education numbers for
    Atlanta.

[^48]: The initial charter school legislation called for funding in the
    range of 95 percent to 105 percent of per-capita tuition. Chicago
    interpreted the law as allowing differential funding for different
    types of students. In particular, Chicago withheld special education
    funds. The most recent legislation expanded the range from 75
    percent to 125 percent, which allows greater funding for specialized
    charter schools serving more costly students.

[^49]: Type 1 charters result from an agreement between a nonprofit
    corporation and a local school board. Type 2 charters result from an
    agreement between a nonprofit corporation and the state board of
    elementary and secondary education. Type 3 is a conversion school
    that is the result of an agreement between a local board and a
    nonprofit corporation. Type 4 is a conversion school resulting from
    an agreement between a local board and the state board.

[^50]: Louisiana law states that schools of Types 1, 3 and 4 receive "an
    amount for each pupil based on average daily membership in the
    charter school that is equal to the average current operating
    expenditure per pupil received by the local school board pursuant to
    the most recent legislative approved minimum foundation program
    formula, including appropriate weighted factors."

[^51]: The range of basic revenue available to charter schools varies
    substantially. Using 1997 data, St. Landry Parish ranked at the
    lower end (approximately 10th percentile of parishes). Its average
    funding was \$3,870 per pupil. Red River was ranked as a middle
    range parish, with revenue of \$4,395. Ascension was ranked as a
    high revenue parish (approximately 90th percentile), with revenue of
    \$5,088.

[^52]: These funds come from a separate state appropriation and are not
    billed back to the district. However, the state recoups most of this
    funding because charter school students no longer count as funded
    students in the parish.

[^53]: If the district had 1,000 students, then the difference from the
    5,000 ceiling is 4,000. Dividing 4,000 by a constant of 40,000
    equals 0.10 or a 10 percent added weight.

[^54]: In 1996-97, according to KPMG-Peat Marwick, the state average
    special education enrollment (prototypes 502.1 to 502.4) was 15.2
    percent compared to 11.1 percent in charter schools. Almost the
    entire differential occurred in the two most involved and expensive
    categories where the state average is 4.5 percent of enrollment, and
    the charter school average is 1.8 percent. The 1998 annual report of
    the state charter school office reports that 13 percent of charter
    school students had IEPs compared to the 16 percent state average.
    The National Charter School Survey (RPP, 1999) reports a 9.9 percent
    special education population in Massachusetts charter schools.

[^55]: Graduation standards funding (\$84.37 per pupil) must be spent on
    a number of specific purposes including technology and gifted and
    talented education.

[^56]: Estimates for special education in the middle cost charter school
    in the following table begin first by taking the cost of a full time
    teacher and paraprofessional (estimated at \$50,000) and multiplied
    by .68. This is the salary base of \$34,000 supported by the state,
    totaling \$3,191 per pupil. The state funds an additional \$47 per
    pupil for materials. No costs for contracting out are included.
    Calculations are similar for the school for at-risk students. With
    twice as many students, costs are doubled.

[^57]: "Additional" cost is determined by subtracting the regular
    classroom cost of a student from the special education contract for
    the fraction of the school day that the student receives services.

[^58]: The middle cost charter school in the following table is assumed
    to get \$47 per pupil for material. The school also gets one-half of
    68 percent of the estimated \$30,000 salary of one FTE teacher (.5 x
    .68 x \$30,000) or \$10,200. This is \$3,447 per LEP pupil. In
    addition there is concentration revenue. The concentration
    percentage of 3 (which is 100 x LEP/ADM) is divided by the constant
    11.5 for a quotient of .261. This quotient is multiplied by the
    number of LEP students and the concentration revenue amount (\$149
    in 1998-99) yielding \$117 dollars or \$38.89 per LEP child. Since
    the at-risk school with six LEP students will have the same amount
    of staff as one with three LEP students, per-pupil funding drops.
    The \$10,200 for staff equals only \$1,700 per LEP pupil. Funding
    for materials adds \$1,747 per pupil. There is slightly more
    concentration funding, however (6/11.5 x 6 x 149), coming to \$467
    in total concentration revenue, or \$78 per pupil. Total additional
    funding is \$1,825 per LEP pupil.

[^59]: In the middle cost charter school in the following table, 26
    students qualify for compensatory education (19 for free lunch and 7
    for reduced-price lunch). The concentration percentage is 22.5 (100
    percent of free lunch, plus 50 percent reduced lunch, divided by
    school enrollment and multiplied by 100). The pupil weighting factor
    is the concentration percentage divided by 80, or .281. This
    weighting is multiplied by the pupil count (22.5) and .6 for a total
    of 3.7969. This amount is then multiplied by \$3,530. Total
    compensatory education funding is \$13,403, or \$513 for each of the
    26 compensatory education students. Since compensatory education is
    based on a concentration formula, the per-pupil funding will be
    higher for a disadvantaged school. The concentration percentage for
    the at-risk charter school in the following table is .45. The pupil
    weighting factor is .5625. This amount is multiplied by the pupil
    count (45) and .6 for a total of 15.1875, which is then multiplied
    by \$3,530. Total compensatory education funding is \$53,611.
    Dividing among the 52 students yields \$1,031 additional per
    student.

[^60]: At least one state document reviewed for this study indicates
    that district funds used for payment to private schools and charter
    schools are withheld from the funding calculation, but the state\'s
    own worksheets do not reflect this. In fact the private school
    funding line of the budget is specifically included in the
    calculation of charter school revenue.

[^61]: For calculations in the following table, the hypothetical basic
    elementary and middle cost charter schools are located in William
    Penn school district, an average-spending Pennsylvania district,
    where charter schools receive \$5,939 per pupil. Approximately 80
    percent of school districts allocate to charter schools between
    \$5,310 per pupil (Penncrest school district) and \$7,682 (Gateway
    school district). These figures exclude special education and other
    expenditures listed in the paragraph on base funding.

[^62]: Figures in the following table reflect this convention. A student
    with learning disabilities gets a weight of 1.74, but the additional
    funding is only 74 percent.

[^63]: In the following table, it is assumed that all students come from
    the same school district, but charter schools often enroll students
    from several districts.

[^64]: Texas supplies an online tool for calculating charter school
    funding in specific school districts based on the educational and
    demographic characteristics of student enrollment. The Web site is
    \<www.tea.state.tx.us/school.finance/funding/charter.html\>.

[^65]: The estimates of per-pupil expenditures provided in the
    Legislative Audit Bureau Report (1998) are not an accurate
    representation of what it costs to run a charter school. The
    estimates did not include indirect costs incurred by charter schools
    or school districts, and in some cases only accounted for a portion
    of the year's expenditures.