Some Effects of Charter School Funding Plans on Smaller School Districts

Last Updated: July 27, 2012

This article appeared in the July 2012 Rural Policy Matters.

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What happens if a charter school draws so much per pupil funding that the regular school district can’t operate? That question has extra weight for small districts. And it is a question that more and more smaller districts are likely to face as many states alter their charter school laws to allow for rapid expansion of the publicly funded, semi-autonomous schools.

The idea behind charters is that they can be innovative and flexible because they are freed from many regulations that govern regular public schools. The exact nature of those freedoms varies among states depending on the provisions of the state charter law. In theory, successful innovations are eventually migrated to regular schools.

In all states, charters are prohibited from discriminating against any student applicant and are required to collect and publish the same academic and financial accountability information as regular schools. They must also serve students needing special education services or English language learners who wish to attend. However, state flexibility laws may allow charters to opt out of providing transportation or meals for students.

Generally, charter school laws allow charters more control over curriculum, scheduling, teacher hiring and placement, and other decisions than regular schools. In many states charters can require parental commitments of time and participation and they can set admissions parameters that have the effect of screening some students. In addition, in many states charters are released from some personnel laws.

Likewise, there is wide variation in how charters are authorized — local districts, authorizing organizations, state school boards are examples used in different states. Some states allow and some states prohibit for-profit companies from running charters.

Charter outcomes, like those in regular schools, are also highly varied at the school level. Research is mixed on overall academic performance, with some studies suggesting slightly better than average outcomes in charters and other studies suggesting slightly lower outcomes. 

About 40 states currently allow for charters in some form. That number is likely to increase in response to pressure from the U.S. Department of Education and a variety of charter advocacy organizations.

Disproportionate Impact: Charter funding and small districts

There is also wide variation in how each state finances charter schools. Some states provide start-up assistance. A variety of federal grants, many of which are administered through states, support initial start-up, organizational costs, facilities, or specific programs for charters. 

Despite some variations, charter schools generally get the state, and often the local, per pupil funding allocation for each student. This mechanism means that money follows the student who transfers from a regular school to a charter. As a result, charters can have a big impact on the budgets of smaller districts. For example, a charter with a few hundred, or even several thousand, students might not make a big difference in the ability of a large school district to offer programs for students. But that same charter could trigger the loss of a devastating proportion of a small district's budget.  

This situation has recently drawn attention in Pennsylvania where several smaller districts are threatened with insolvency.

The issue is coming up in other states as well.  

In South Carolina, the charter law says that a charter school’s application can be denied if the charter school would “negatively impact” the other students in a district. This challenge has not been used often, but as the state has encouraged expanded charter growth through legislation, small and rural districts are looking closely at this provision and the potential impact of charters on their ability to operate. 

Facilities Funding 

South Carolina is one of several states that gives charter schools access to unused or underused public school facilities. It also recently established a charter school facility loan program. As a result of these changes several districts are looking at the possibility of losing one or more of their buildings as well as a major share of their state funding to charter operators.  

Although a number of states give charters preferential access to available school district facilities, many states do not directly provide charters with funding for facilities. (Facilities funding is sometimes included, at least in part, in the state per pupil funding allocation; but many states exclude this portion for charter students.) 

Charter supporters in several states, including Texas, Arizona, North Carolina, and Florida, have filed lawsuits seeking funding for facilities. 

Charters, Funding, Segregation

Some common mechanisms for funding charter schools have the potential to undermine the ability of small school districts to offer programs required by the state. When charter schools are not required to offer the same programs or are given more latitude in how they offer them, perceptions of inequity arise.

In some districts such potential destabilization occurs in the context of long-standing antagonism to public education and public school students. 

For example, in parts of the South, private "segregation" academies have been the schools of choice for rmost white students in the 40 years since court-ordered desegregation. The rapid rise of charters, especially where they are loosely monitored, has opened the way for supporters of these private schools to seek authorization to create a public charter school. In such cases, the perception of many people is that the charter will not likely welcome all students equally and that it is competing against an under-resourced regular school district for public revenues. 

A study by the Civil Rights Project at UCLA found that, on the whole, charters are more racially isolated than traditional public schools and that, especially in the West and South, enrollment patterns suggest that charters are serving as "havens for white flight from public schools."

Researchers at the University of Colorado and Western Michigan University also concluded that charter schools were more segregated by race, wealth, disabling condition, and language than the public school district in which the charter was located.   

The charter movement raises many complex issues for American public education. Like so many other policies, most charter laws seem geared toward urban and suburban circumstances and have had unexpected or unintended consequences for rural and small town school districts. Per-pupil funding provisions and, in some cases, facilities access and finance mechanisms are examples of policies that can have very different outcomes in rural and urban districts.

Read more:

Colorado study on charter diversity:


News coverage of Pennsylvania charter funding controversy:


Read more from the July 2012
Rural Policy Matters.