Charter schools and district budget
In the past several weeks, as the Ohio legislature crafted the Buckeye State's biennial budget, each line item had its own constituency. Some of the most contentious debates were those centered on the state's system of funding public education.
One piece of pervasive misinformation is the supposed cost that charter schools exact on school districts. The rhetoric on this issue is completely overblown and deeply misleading.
At the margin, the state provides school districts with at least $5,169 in basic aid for each additional student enrolled. Districts also receive transportation aid as well as funding for a host of categorical items such as teacher training, gifted education, special education, etc.
While the state goes through the exacting process of setting its biennial budget, school districts set their own budgets for the next school year. Each district budget is based on estimates of revenue and expenditure, which in turn are partly based on enrollment estimates that are supposed to account for a variety of changes over the course of a year - families moving in and out, new construction, and enrollment at private and charter schools, as well as home schooling. The pressure to get these estimates correct is very high; once set, school budgets are difficult to change.
Take this example: Assume that a school district estimates it will begin the next year with 10,000 students and that the average cost per student is $9,000, which yields a $90 million budget.
What happens if 100 extra students enroll next year? At the margin, it is likely that each additional student will cost the district very little. A bit more paper, water, and floor wax might be used, but most costs are fixed. It's unlikely that the district will have to hire additional staff or purchase additional buses for these students. Most costs will simply be absorbed. And the district will realize revenues of at least $516,900 in additional basic aid ($5,169 per student x 100) in the first year. (Yes, it may need to hire another teacher or two the following year.)
The opposite happens when a district begins its school year with 100 fewer students than estimated. Here the marginal reduction in state aid per student is $5,169, leaving the actual revenue $516,900 less than predicted and planned around. Once again, the district cannot reduce expenditures much for that year, but in the next year the reduced need for expenditures such as books, paper, and other supplies resulting from fewer students will be captured in the new budget.
So, in the end, a two-year budget cycle can wash out the benefit or penalty of move-ins and move-outs - and even in the first year, these are hardly the enormous sums most districts contend they are. The only result of more or fewer students than estimated is actual revenue that is either more or less than estimated.
The key word here is estimated. A fundamental task of the school budget process, and one of the primary jobs of a district accounting office and local board, is estimating next year's student count. School districts in Ohio know - and have known for ages - that they face stiff competition from other education providers (charters for sure but also home schooling, virtual schooling, and private schooling). While they wail to the press about these pressures, district continue to make enrollment projections that pretend that charters don't exist, or aren't the popular alternative they are, and they continue to overestimate district enrollment. That's not the fault of charter schools. It's the fault of na??ve enrollment projections from people who ought to know better.
In Olentangy, a fast growing suburban district (adding 1000+ students per year), we employ a consulting firm to provide enrollment estimates, which are then reviewed and massaged by the board's development committee and district administration, taking into account such factors as the housing market and charter school demand. Due to a spike in housing starts this past school year (1,732 new homes instead of the predicted 1,640), the district enrolled 100 more students than predicted. These extra students provided additional state funding which the district recorded as a financial benefit in its state-mandated Five-Year Forecast.
Though Olentangy benefited this one year by a missed projection, neighboring districts have suffered due to overly-rosy enrollment projections. The Columbus Dispatch recently rapped the city district for what appears to be an under-estimation of the number of students expected to flee to charter schools. By under-estimating future charter enrollment, the city was able to balance its books based on "expected" state funding that will disappear into vapor once the school year begins and the count comes in lower than projected. Guess who will get the blame? Charter operators.
What to conclude from this? It's not charter school enrollments (or any other demographic factor) that causes revenue shortfalls, but school districts' inability to accurately gauge student enrollment and plan accordingly. If districts correctly estimate their student count (including but not limited to the effects of charter attendance) revenue and expenditures will be the same as budgeted. Charter students and move-outs affect districts in the same manner, but neither is a cause of a school district's financial woes. Flawed enrollment assumptions are the real problem.
James Fedako (email@example.com) is a member of the Olentangy, Ohio, school board and president of Decision Outlook, a consulting firm.