Charter schools are public schools that operate under charters (or contracts) specifying the terms by which they may operate. In general, they are established under state law, do not charge tuition, and are nonsectarian. State charter school laws and policies vary widely regarding the degree of autonomy provided to the schools, the number of charter schools that may be established, the qualifications of charter school applicants and teachers, and the accountability criteria that charter schools must meet. As of September 1997, 29 states and the District of Columbia had enacted laws authorizing charter schools, according to the Center for Education Reform. In school year 1996-97, over 100,000 students were enrolled in nearly 500 charter schools in 16 states and the District of Columbia. (App. II shows the states with charter school laws as of September 1997 and the number of charter schools operating during the school year by state.) To explore the effects of various education reform efforts, in January 1997, the Congress began holding hearings in Washington, D.C., and around the country. Among other reform efforts, the Congress has focused on the development of charter schools. Charter school operators and others at the hearings raised concerns about charter schools’ receiving the share of federal title I and IDEA grant funds they are eligible to receive. These concerns were raised in part because of differences in the way charter schools receive funds. Some charter schools receive funds directly from their states, while other charter schools depend on their local school districts for title I and IDEA program benefits. In addition to learning more about this issue, the Congress has expressed interest in learning how charter schools use federal funds intended to help them get started as new schools. To improve understanding of the charter school model, the Congress authorized the Public Charter Schools Program (start-up grants) as part of its 1994 reauthorization of ESEA. Under the program, the federal government provides financial assistance for the design and initial implementation of charter schools. The Department of Education has the authority to competitively award grants to states with laws authorizing the operation of charter schools. In evaluating state grant applications, the Department must use a peer review process and judge states’ applications on the basis of several criteria, including the (1) contribution that a state’s program will make toward helping educationally disadvantaged and other students in achieving state content and student performance standards, (2) degree of flexibility that a state will offer charter schools, and (3) likelihood that a state’s program will improve students’ educational results. States that receive grants, in turn, award subgrants to charter schools. (If a state does not apply for a grant, individual or groups of charter schools may apply directly for grants to the Department.) States may use up to 5 percent of their grant award for administration and may set aside 20 percent for establishing a charter school revolving loan fund. Grants awarded to charter schools must be used for either (1) the planning and design of a charter school, which may include establishing achievement and assessment standards and providing professional development for teachers and other staff, or (2) the initial implementation of a charter school, which may include informing the community about the school, acquiring equipment and supplies, developing curricula, or initial operational costs. Although dozens of financial aid programs exist for public elementary and secondary schools, two programs, title I and IDEA, are by far the largest federal programs. Under title I and IDEA, the Department allocates funds to state educational agencies (SEA), which then allocate funds to local educational agencies (LEA) or school districts. Charter schools receive title I and IDEA funds from their SEAs therefore in states that treat charter schools as LEAs (called the independent model). LEAs allocate title I funds to schools in their districts. In addition, LEAs provide special education and related services to eligible children enrolled in their schools and use IDEA funds to help pay the costs of doing so. Charter schools in states that treat these schools as dependents of an LEA (called the dependent model) benefit from the title I and IDEA programs on the same basis as do the LEAs’ other schools. The seven states in our review used both the independent and dependent funding models. Although Massachusetts and Minnesota consider all charter schools as independent LEAs, California and Colorado consider all charter schools as dependent members of a school district. Arizona, Michigan, and Texas use both models within their states depending on the particular program involved, the chartering authority, or other circumstances. Title I is the largest federal elementary and secondary education aid program. The program provides grants to school districts or LEAs to help them educate disadvantaged children—those with low academic achievement attending schools serving high-poverty areas. To be eligible for title I funds, LEAs must meet statutory and regulatory guidelines for minimum poverty thresholds. LEAs that have more than one school—including charter schools operating under the dependent model—allocate title I funds among their schools. The federal statute and regulations lay out complex criteria and conditions that LEAs use in deciding how to allocate funds to their schools, which results in shifting title I funds received by LEAs to individual schools with relatively higher percentages of students from low-income families. An individual school that is part of an LEA in a high-poverty area therefore might have to have enrolled a higher percentage of low-income children to receive title I funds than it would have if the school were treated as an independent LEA. In this case, a charter school that would have received title I funds as an independent LEA may not receive title I funds under the dependent model because other schools in the LEA served higher percentages of low-income children. The IDEA federal grant program is designed to help states pay for the costs of providing a free appropriate public education to all eligible children with disabilities between the ages of 3 and 21 living in the state, depending on state law or practice. The act requires, among other things, that states make such education available to all eligible children with disabilities in the least restrictive environment. Under the current formula, the Department of Education annually allocates funds to SEAs on the basis of their reported numbers of eligible children receiving special education and related services for the preceding fiscal year, the national average per pupil expenditure, and the amount the Congress appropriates for the program. The most funding that a state may receive for any fiscal year is capped at 40 percent of the national average per pupil expenditure multiplied by the number of eligible children with disabilities in the state who receive special education and related services. Under the current formula, states must distribute at least 75 percent of the IDEA funds they receive from the Department to LEAs and may reserve the rest for state-level activities. In general, SEAs allocate IDEA funds to eligible LEAs on the basis of their relative share of their state’s total number of eligible children receiving special education and related services. The benefits that individual schools may receive from IDEA funds vary by state. States may allocate IDEA funds to LEAs or to other agencies included in the act’s definition of LEAs. These other agencies include, for example, regional educational service agencies authorized by state law to develop, manage, and provide services or programs to LEAs. Some states allocate IDEA funds to regional educational service agencies for providing special education and related services to children with disabilities enrolled in the schools of one or more LEAs, including charter schools. Other states allocate IDEA funds directly to school districts, which then develop, manage, and provide their own such services to children with disabilities. A majority of the charter school operators that we surveyed reported that they received fiscal year 1996 federal start-up grant funds. Operators used these funds for a variety of purposes to establish their charter schools. Although no centralized repository of data exists for determining the extent to which charter schools have received federal funds nationwide, our study suggests that charter schools in the seven states we surveyed have not been systematically denied access to title I and IDEA funds. To date, the Congress has appropriated $155 million for start-up grants under this program. In fiscal year 1996, the Department of Education awarded grants to 19 states and the District of Columbia, ranging from about $191,000 to about $1.9 million, according to Education. In turn, each state made grant funds available to charter schools in their states. The seven states in our survey all received fiscal year 1996 program funds; the amounts they received ranged from $500,000 to almost $1.9 million. (See table 1.) Of the 41 charter schools responding to our survey, slightly more than half (or 23) received fiscal year 1996 start-up grants. States awarded grants to these schools ranging from $7,000 to $84,000; the average grant amount was about $36,000 and the median was $32,500. Funds received by individual charter schools varied by state. These differences reflect states’ flexibility in administering their grant programs and in allocating funds. funding. In Texas, for example, all charter schools received an equal amount of fiscal year 1996 grant funds ($26,785), even though enrollment at these schools varied greatly—from 90 students in one school to 180 students in another. The charter schools in our survey that received start-up grants used these funds most often to help pay for school equipment and curriculum materials, technology, and facilities renovation or leasing. Several charter schools used these funds for multiple purposes. (See table 2.) Operators of charter schools we surveyed that did not receive grant funds told us that their schools were either (1) ineligible for grants under their state guidelines, (2) unsuccessful in competing for a grant, or (3) did not apply for a grant. Schools ineligible for funds included schools that were no longer considered start-up operations or had previously received funds and did not qualify under state guidelines. Some charter school operators told us that although they applied for start-up grants, their applications were scored lower than other schools’ and, as a result, did not receive awards.