Startling Report Costs Out the Impact of Charters on LA's Public Schools

Earlier this month it was announced that the Los Angeles school board would be receiving an embargoed report on the cost to the school district of charter schools.  The lead up in the press made the point that this was a teachers union-sponsored report and prepared readers for what would be its likely bias.  The article in the Los Angeles Times was headlined, “Union-Commissioned Report Says Charter Schools Are Bleeding Money from Traditional Ones,” and Howard Blume the reporter to whom the report had been leaked made sure readers noticed that, “The report… is certain to be viewed with skepticism by charter supporters….”

The report was released after its presentation to the Los Angeles Board of Education.  It is a long report, and I haven’t been able to read the whole thing, but I have read the accompanying policy brief, and I can tell you that if you read it, you will be underwhelmed by the presence of bias.  If the bias of charter school supporters is that charter schools should be unregulated to encourage innovation, the bias of the teachers union sponsors of this report is that traditional public schools shouldn’t be totally undermined and destroyed by experimentation with charters.  What surprises in this report—which was prepared by a consultant, MGT of America in collaboration with In the Public Interest—is its lack of hype and fanfare.  It is a plain old, thorough, costing-out study.  And as explained in the policy brief, the conclusions, while very basic, are deeply troubling.

Growth of charter schools in Los Angeles has been a huge experiment in the nation’s second largest school district: “Two hundred and twenty-one independent charter schools currently operate within LAUSD’s (Los Angeles Unified School District’s) boundaries. These schools currently enroll about 101,000 students.  Meanwhile, more than 540,000 students attend schools run by LAUSD, representing 84 percent of all students.  MGT of America’s recently released report, Fiscal Impact of Charter Schools on LAUSD, shows that the fiscal impact of charter schools on LAUSD is unsustainable if left unchecked, and will contribute to the eventual bankruptcy of LAUSD.  The unmitigated growth of charter schools will diminish the educational opportunities for the overwhelming majority of students through factors outside of their control.” The policy brief demonstrates that “charter expansion has cost the district more than $508 million in funding.”  That is half a billion dollars.

The first and biggest impact on the school district is that each student who leaves the district for a charter school takes $4,957 of the per-pupil funding allocated to the district by the state of California.  When children leave from a variety of schools, the district cannot simply downsize the costs of facilities and other fixed expenses. Of course schools can be closed, but the exodus to charters does not happen in an orderly manner that can be easily accommodated.  (This report does not explore the impact of school closures on neighborhoods and communities.)

Second, while to its credit (and unlike some other states), California has created rules and regulations to oversee charters, and while the state assigns such oversight to the host school district, nobody appears to have calculated the cost to the district of this new function. “The Charter Schools Act of 1992 established an unfunded mandate at the state level for each chartering authority to conduct ongoing oversight for all charter schools it has authorized.  To cover these costs, the act allows chartering authorities to assess a fee equal to one percent of a charter’s revenue… While all independent charters in LAUSD are paying these fees, they do not come close to covering the full costs of charter oversight cost incurred by LAUSD.  At first glance, many of the costs associated with charter oversight may seem relatively small.  However, taken together they are indicative of an unsustainable system that allows independent charter school oversight costs to steadily encroach onto the district’s general funds.” MGT estimates that LAUSD is spending $15.4 million each year on oversight costs above the one percent oversight fees.  The Charter Schools Division (CSD) has primary responsibility for overseeing charter schools.  “While LAUSD expects to collect $8.8 million in oversight fees, the total expenses for CSD alone are expected to top $11.7 million in 2015-2016,” leaving $3 million to be covered by the school district’s general fund.  The school district’s Office of Inspector General and Special Education Division are also assigned some responsibility for overseeing charter schools, and both agencies have recently requested budget increases for this very purpose.

Third there is the matter of co-location: “Under Proposition 39, LAUSD is entitled to assess either a 3 percent fee on co-located charter schools that have been granted rent-free space within district schools; or they can charge a one percent fee and collect a minimal amount for the charter’s share of facility expenses.  MGT has found that LAUSD has opted to collect a one percent fee from the 56 co-located charter schools, which is the lower of the two amounts.  Assessing the higher fee allowed by state law would have generated an additional $2 million in revenue for LAUSD in the 2015-16 school year.”

Fourth, costs for federally mandated special education programs burden the school district and threaten its fiscal sustainability.  Two factors beyond the school district’s control set up an impossible funding challenge.

  1. “(T)he federal government has never fully funded the mandated educational requirements of IDEA, and in California the Local Control Funding Formula (LCFF) is applied in such a way as to require school districts to use general funds to ensure every student with special needs receives a comprehensive education.”
  2. “The State of California does not allocate funding based on the actual need or cost of instruction for SPED (Special Education) students.  For example, a student with severe mobility issues would require significant staff support throughout the school day, while a student with a mild speech impediment may require less frequent support.  Although the first student’s support services would cost significantly more than the second’s, current funding formulas do not distinguish between the different services each of these students will receive.”

The financial stress on LAUSD of mandated special education programs has grown as the number of students qualifying for special education has increased from 11.5 percent in 2004 to 13.5 percent in 2014-15.  In contrast, charter schools in Los Angeles average only 8.1 percent of students qualifying for special education, and the charters serve far fewer students with severe disabilities, students who are classified as “high-need.”  For example, 93 percent of children in LAUSD diagnosed with autism attend district schools, while only 7 percent are enrolled in charter schools.

And fifth, when children leave the school district to transfer (to another district, for example) the state of California reduces the average daily attendance reimbursement in what is called a “soft-landing,” by maintaining funding to the district school that has lost the student for one year after the student leaves.  The purpose is to give the school district time to adjust its costs. Transfers to charter schools, however, are handled differently: “(W)en students leave a district for an independent charter school, the state immediately reduces the district’s funding rather than allowing the district a year to adjust costs to match enrollment figures.”

The new report exposes a reality that is seldom named: charter schools were set up (in California back in 1992) as a great experiment by legislators who didn’t pay careful attention to their future impact on public school districts. Or, perhaps, the legislators listened to theorists who promoted charters and hoped market choice would entirely replace the public schools through just the kind of problems this report exposes. In his coverage of MGT’s new cost-study, Los Angeles Times reporter Howard Blume interviews one ideologue who virtually admits that the replacement of traditional public schools by charters has been his hope all along.  Eric Hanushek, the free-marketeer from the Hoover Institution, comments on the impact of the growth of charter schools on the viability of LAUSD: “Like all businesses, the district has to compete for its customers… The growth of charters is putting pressure on the district.  The district can’t do what it did in the past and come out ahead… They can try to compete for the students or sell off the buildings. But the point is: Charters look attractive to parents, which means that the district is not attractive.”

For a long time our society has tried to correct practices in the public schools that simply allowed parents to do what’s attractive according to their own biases and to promote their own children’s interests at the expense of the greater good—racial segregation—school funding (based on local property taxes) that favors wealthy suburbs—hiding away students with special needs in state institutions.  The new report from MGT and the Los Angeles teachers union challenges ideologues who would have our society revert to public policy that favors what merely looks attractive to parents.

Once again, it is important to confront Eric Hanushek’s free-market orthodoxy with the warning from political philosopher Benjamin Barber:  “Privatization is a kind of reverse social contract: it dissolves the bonds that tie us together into free communities and democratic republics.  It puts us back in the state of nature where we possess a natural right to get whatever we can on our own, but at the same time lose any real ability to secure that to which we have a right.  Private choices rest on individual power…. Public choices rest on civic rights and common responsibilities and presume equal rights for all.  Public liberty is what the power of common endeavor establishes, and hence presupposes that we have constituted ourselves as public citizens by opting into the social contract.  With privatization, we are seduced back into the state of nature by the lure of private liberty and particular interest; but what we experience in the end is an environment in which the strong dominate the weak….” (Consumed, pp. 143-144)


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