Paying Charter Schools Their Due: Is the Fox Guarding the Henhouse?

Some, if not most, Ohio school districts believe that public charter schools are draining funds from their coffers, but it may be the other way around. Through a little-known process called “flagging,” districts can tie up indefinitely money owed to charters schools for educating the children who choose to be educated there.

Many charter school leaders say they are involved in frequent fiscal skirmishes with their competing public districts that take place well below the public’s radar. And going up against well-funded (and highly staffed) opponents like the local school district’s bureaucracy, charter leaders say they often feel like they are marching off to battle Goliath with both arms tied behind their backs.

This report looks at the issue of student database “flagging,” a little-known process that essentially allows public school administrators to stand between charter schools and the state funding that rightly belongs to the students who choose to enroll in a charter. Interviews with dozens of charter school administrators statewide found numerous examples where “flagging” has impacted both operations and funding for their schools.

Depending on the size of the school, the time of the year when the flag is raised, and the aggressiveness with which the local school district “flags” what it deems to be questionable student records, a charter school caught under the flags may see tens of thousands of dollars delayed or withheld, despite having legitimately performed the work of educating students.

Some charter school leaders reported they are often sent by their local districts on the equivalent of a bureaucratic wild goose chase, forcing frantic records clerks to round up parents to provide documentation they provided when their child first enrolled in the charter school. All of this for no other reason than the local district’s decision to “flag” a student record it claims to be in error. Public school districts in Ohio have traditionally tended to be resistant to embracing the growing charter school movement, even challenging the legal right of charter schools to exist at all. The number of charter schools statewide has grown from 15 in the 1998-99 school years (2,245 students) to 292 charter schools (71,081 students) today.

Ohio is one of only three states that route charter school funding through the public school district’s funding formula and then subtracts the funds from the local district’s overall funding. This dynamic has prompted school district administrators, elected school board leaders, and special interest groups to portray charter schools as inappropriately dipping their hands into the district’s local tax base.

But the truth is less dramatic. When a student leaves a public school district to attend a charter school, the state money (and some federal funding as well) follows that child, and goes to the charter school, which bears the full cost of educating that child. The local portion of the funding for that child’s education remains with the local district, even though it no longer educates the student who left for a charter school. The end result here is that per-pupil spending in the local district actually increases when a student leaves his district school for a charter.

Public school districts in Ohio calculate enrollment in October and those figures (including the tally of charter school students) determine state aid paid to the districts for the entire year. But under state law, charter schools are required to report enrollment each month, and are paid monthly. Payments are based on entries the charter school makes over the Internet on the state’s student funding database (CSADM), but the money first flows through the schools’ local school district, which has the ability under state statutes (presumably to provide for a level of fiscal accountability) to review and “flag” student data entries that it finds questionable.

Here’s a snapshot of how it works:

     Charter schools have until the 15th of each month to enter and/or update student information to the database for payment that month.
   --    Between the 16th and 23rd of each month, school districts are allowed to review all of the information and “flag” any student data entries they deem incorrect.
   --    On the 24th of the month, the data is frozen and payments to charter schools for unresolved “flagged” students are not included in the monthly payment sent to the charter school.

The following reasons may be given for throwing a flag:

--    Student is not a resident of the district
--    Incorrect date of birth
--    Incorrect dates of residency in the district
--    Student’s percent of the day at a charter school is incorrect.
--    Incorrect address.
--    Student is too young or too old (younger than 5, older than 22)
--    Student has graduated or received a GED
--    Duplicate student, or student who has been reported by more than one charter school.
--    Incorrect dates of attendance at charter school (student was in the district’s school during that time period.)

It is the fox guarding the henhouse. Resolving the “flag” requires charters to ultimately appease the very districts that oppose their existence in the first place. The Ohio Department of Education (ODE), for example, recommends that charter schools and districts “work together to resolve any existing information flags.” Because these disputes are resolved at the district level, ODE officials say there is no way to tally just how many flags are raised by school districts in a given year. But many charter school leaders across the state actively wonder whether excessive flagging is part of the public school administrators’ playbook on fighting charter schools.

Even “legitimate” flags that can be easily fixed by gathering new documentation to support the legitimacy of a student’s enrollment at a charter school create problems if they are initiated by the school district on or about the 23rd of each month, since school administrators will only have a few hours to resolved the issue before the payment amount to the school becomes frozen on the 24th of each month. Essentially, mid-level district bureaucracy can force charter schools to bear the cost of educating a student in January, but not be completely paid by the local school district for January’s bills until the end of the fiscal year (in June) – even if the paperwork problem is easily solved in a day or two. This can create cash flow problems for schools, especially those serving only 200 or 300 students.
Dozens of charter school leaders interviewed for this paper reported having problems of varying degrees with the flagging issue, and nearly all refused to have their schools identified out of fears that it would make future payments through their districts even more difficult to secure.

One Toledo charter school leader said her school had twice been denied 6-weeks worth of funding for students the school was legitimately educating. In both cases, she said, the local district raised objections to student records just before the deadline for closing out monthly payments, making it impossible for the charter school to gather the supporting documentation in time for payment.

“We don’t even know that we have a problem, then all of a sudden they’ll put up a flag and say, ‘We need proof of residence,’” the charter leader said. “We’ve had kids who were in the (Toledo Public Schools) for their entire academic careers and suddenly the district wants to challenge where they live.”

Another charter school administrator reported that an administrator with the Toledo Public Schools often flags student entries, but doesn’t make clear what is wrong. (In one case, he allegedly claimed the word “Toledo” was spelled incorrectly on the database, but the school insisted they had it right. To make matters worse, she said, the TPS official wouldn’t return telephone calls or emails to discuss the flag he had thrown.)

A Dayton charter school administrator (who works with multiple school districts) estimated she spends approximately 20-hours per month, on average, working out “flags” on student records. “But when it rains, it pours,” she said, adding that the problem she saw was that no one seemed to understand exactly which records are required in order to qualify for payments. She has had to iron out flags over things like custody papers – in cases where the district’s records indicated a different parent had custody of a child than the records on file with the charter school.

In some cases “fatal flags” have been placed and funding has been denied for students that charters schools have educated. Charter operators with schools in Cleveland and Dayton reported an abundance of student record challenges late in the school year – like May and June, making it difficult for the school to resolve the issues before the end of the school year. This jeopardizes their funding over the summer months.

Another administrator in Akron said they have long believed that local districts were intentionally trying to mess with charter school finances through excessive flagging. “We feel the flagging was done maliciously by the public schools,” he said, noting that there was no way the districts would ever admit it publicly.

“The district gets to use our money for a while (before eventually reconciling the accounts and spreading back-payments over several months) and we go into debt,” a Toledo charter leader said. “Meanwhile, they accuse us of sucking the system dry.”

Existing funding disparities between charter schools and their competitive rivals, the local public school districts, are well documented. In Cleveland, for example, the average amount of public funding for charter schools in 2002-03 was $7,704 – compared with $10,732 for each student in the Cleveland Public Schools. If anything, this funding gap is severely understated because it doesn’t even take into consideration the hundreds of millions of dollars the Cleveland schools receive separately to cover facilities costs. Charter schools must pay for these same costs out of their per-pupil allocations.

Charter schools, which already receive significantly less taxpayer funding to educate their students than their district competitors, shouldn’t be forced to prove the existence of their students for school officials who want to see their demise, and who have actually joined in lawsuits seeking to declare their existence unconstitutional. This situation is akin to McDonald’s asking Burger King to sign off on payment every time a person ordered a Big Mac.

State policymakers should be able to come up with a funding stream for charter schools that both holds them accountable for providing accurate and timely student enrollment data and payment claims, while also providing charters with a funding path that makes it less contentious for them to receive legitimate per pupil payments. Local districts should not be serving as the middlemen in this important financial transaction.

Ohio Department of Education officials say they are pushing for changes in state laws that would eliminate districts as the middlemen for charter school funding. Their proposal calls for a separate funding system - one where charter schools do not have to work through their district to secure payment for students they educating. Charter school supporters in Ohio should not only push for this change in the legislature, they should support all measures that would bring fairness and parity to charter school funding.

It’s time to get the fox out of the henhouse.

About the Author

Joe Williams, author of the book Cheating Our Kids: How Politics and Greed Ruin Education, is a New York City-based education journalist and a non-resident senior fellow with the Washington-based think-tank Education Sector. Previously, Joe covered the New York City public schools for the New York Daily News.

Editor’s Note: The Gadfly welcomes any and all points of view on reform, choice and competition in education, even those that disagree with our view.

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