Philly charters say Wolf’s budget proposals would devastate them

Education advocates are seeking much larger increases in state funding.

This article was originally published in The Notebook. In August 2020, The Notebook became Chalkbeat Philadelphia.

Gov. Wolf’s budget proposals for revamping how charters are reimbursed for special education would be “devastating” for their students, charter operators say, and would especially disadvantage those in Philadelphia, where half the state’s charters are located.

At the same time, traditional public school advocates who support Wolf’s proposed charter formula revisions nevertheless say that his overall revenue increases for education, while a positive step, fall far short of what is fair and what is needed.

Wolf, declining to ask for a tax increase that the Republican legislature has repeatedly shot down in past years, wants to increase the basic education funding formula by $100 million and special education aid by $25 million. In addition to changing the special education reimbursement formula for charters, Wolf also proposes to reduce payments to cyber charters to a flat $9,500 per student statewide. Now, districts pay cyber charters, which are authorized by the state, the same as they do brick-and-mortar charters.

These changes, if accepted, would save districts $280 million. Together with the increases the governor proposed in basic education funding and special ed funding, that would add up to $405 million in additional K-12 funds for school districts.

While supporting the proposed charter reforms, education advocates say they would also like to see a bigger boost in direct state education aid.

“Adopting the governor’s reforms and appropriations would mean that school districts across the state, especially those educating the most impoverished students, will still be forced to make cuts or increase property taxes or both,” said Donna Cooper of Public Citizens for Children and Youth.

Education Voters of PA, which also advocates for adequate and equitable education funding, called Wolf’s proposals welcome but insufficient.

“Gov. Wolf’s proposed investments of an additional $100 million in basic education and $25 million in special education funding through the state funding formulas are welcome,” said executive director Susan Spicka. “But alone, they are insufficient to take pressure off of local property taxes to fund education and to ensure that students have the resources in their classrooms that they need to succeed.”

Wolf also proposed an outlay of $1 billion to help repair school buildings across the Commonwealth, partly in response to Philadelphia’s escalating asbestos cleanup and testing crisis that has temporarily closed seven schools this year.

Closing a ‘loophole’

In the charter funding formula, Wolf is proposing to close what many education advocates call a “loophole” that has long been a subject of contention. The charter law and its funding formula have not been significantly revised since enacted in 1997.

While districts receive per-pupil special education allocations from the state in three “tiers” based on the severity and cost of the disability, charter schools get one set amount that is calculated for each district using the district’s actual expenditures. That amount, often three times what districts get for regular education students, is generally far more than the cost of providing services to students with mild disabilities such as speech impediments.

This creates what districts and advocates have called a “perverse incentive” for charters to enroll more special education students with less costly disabilities and pocket, in the case of for-profit management companies, or otherwise divert much of the special education subsidy.

If the change was adopted, Philadelphia would save $80 million to $90 million on its payments to charters, according to Chief Financial Officer Uri Monson. By his calculation, charter schools in the city currently receive that much more money than they need for – or spend on – serving their special education students.

Wolf’s proposal “is an attempt to rightsize the charter reimbursement formula to be based on expenditures and not on an artificial revenue formula,” Monson said.

Philadelphia, he said, spends anywhere from $12,000 to more than $100,000 per student to serve special education students, whose needs range from speech problems to severe mental and physical disabilities that require constant care and placement in private schools. So one reimbursement rate, he said, doesn’t make sense.

The overwhelming majority of special education students in all schools are in the least-expensive tier, he said. But in Philadelphia charters, that tier covers 94% of students in special education, and in the Philadelphia School District, that tier covers 80% of its special ed students. He said 4.5% of charter students in special education are in the second tier and just 1.5% – 163 students – are in the most expensive category.

On average, the District spends $18,000 to $21,000 each to serve its students with mild disabilities. But under the current formula, the charter reimbursement for special education students is $29,000.

“Assume charters spend the same amount [as the District] for those [least-expensive tier] students. … They are making $9,000 to $12,000 per child,” he said.

Although the $29,000 reimbursement doesn’t completely cover the cost of the upper two tiers of disabilities – which average $40,000 and $70,000 per pupil, he said – the excess money for the 94% of charter special ed students in the least-expensive tier more than compensates for that difference, Monson explained.

Wolf’s proposal would send money to charters in three tiers, as is now done for traditional district schools, and “more closely aligns with what the district provides and what the actual costs are,” he said. “That should be the goal.”

He added: “There are [charter] schools that see this as a profit center.”

But Philadelphia Charters For Excellence (PCE), which represents about 40 Philadelphia charter schools, is crying foul. They say Wolf’s proposal takes badly needed money from charters and leaves them with less than what District schools are spending per pupil for their special needs students.

“This proposal from the governor is a heartbreaking attack,” said Amy Hollister, CEO of Northwood Academy Charter School and chair of PCE’s board. “Slashing funds for our most vulnerable students to appease the power brokers is never an effective, ethical or equitable plan. Bottom line, this funding cut would be devastating to tens of thousands of families across Philadelphia and the commonwealth.”

Scott Gordon, head of the Mastery Schools charter network, which is well-regarded for its special education services, said this analysis shows that Philadelphia charter schools would be especially disadvantaged. This is partly because Philadelphia’s special education costs are “dramatically higher than the state average” and the governor’s proposal doesn’t correct for that. Mastery operates more than 20 charters in Philadelphia, most of them converted District schools.

As it stands now, he said, charters would receive between one-half and two-thirds of what District schools get from the state for special education students.

Wolf’s formula “creates two classes of students in the city of students with disabilities and those who attend a charter school would become second-class citizens,” he said.

Monson disagrees with Gordon’s analysis regarding Philadelphia, saying it focuses on their revenues and doesn’t deal with what providing the services actually costs.

“If they were really concerned about funding special education, they would push for a system where they submit costs and we give them money based on that,” he said. That would be complicated to do fairly, he said, but it is preferable to the current system.

The PCE news release pointed out that statewide, public schools as a whole spend just under $5 billion annually on special education, but that only about 22% of this amount, slightly more than $1 billion, is reimbursed by the state.

On this point, the charter and traditional sectors agree – special education costs are rising faster than the state is increasing its aid. Advocates said Wolf’s $25 million proposed increase in special education funding statewide would barely make a dent in helping districts meet escalating costs in that area.

“None of us are spending enough,” Monson said. “There’s no question that there’s not enough money for District or charter schools in Philadelphia. We way underspend for the educational needs of all students, I don’t care what sector.”

Several advocacy organizations, representing six districts and some individual parents, are pressing a fair funding lawsuit against the state to overhaul its entire system for funding education, William Penn School District et al. v. Pennsylvania Department of Education et al. Arguments in Commonwealth Court are expected to begin later this year.

“At the end of the day, the legislature is underfunding public education, and we should be together asking it to allocate and appropriate more funding for basic education, for special education, to be able to meet the needs of students across the Commonwealth,” said Deborah Gordon Klehr, executive director of the Education Law Center, one of the organizations behind the lawsuit. “Charters and districts are in the same boat of not getting what they need from the state.”

Spicka, from Education Voters for PA, said that Wolf was doing his best “with a legislature that is unwilling to provide the funding that schools need. If they don’t want to raise taxes, they should at least reform the charter law to rightsize money charters get” to better align with their actual expenditures.

PA Schools Work, an umbrella coalition of organizations representing educators and communities, said that even if the charter reforms do not materialize, the governor and legislature should commit to at least a $405 million increase in state aid for school districts. They said that districts are facing at least $455 million in mandated cost increases, including payment into the state pension funds, charter school reimbursements, and fulfilling special education needs.

“Students and communities around Pennsylvania cannot afford budgetary maneuvers that may appear to boost funding but mean no material change in the condition of the Commonwealth’s public education system,” its statement said.