KY Policy Blog

Funding Concerns Persist in New Charter Bill

By Pam Thomas
February 22, 2017

House Bill 520 is a very different charter school proposal than the previously introduced HB 103. While some concerns we previously expressed about charter authorizing authority in HB 103 have been addressed in HB 520, funding concerns remain and new resource concerns have been introduced.

One significant change in HB 520 is that authorizers are limited to local school boards, with final approval by the commissioner of education. The change partially addresses the issue we noted in HB 103, that entities outside the public school realm could authorize charter schools, taking local money from public schools without input or consideration by the local school board.  There are some situations under HB 520 where this could still occur, particularly with virtual schools, and we remain concerned about the potential impact of charters on local school district funding, as discussed in more detail below.

Specific concerns are as follows:

Allocation of Local School Funds to Charter Schools – How Much Will Go?

The method of allocating resources to charter schools in HB 520 is concerning and unclear. The new charter bill requires money to be sent to charter schools from local districts on a “per pupil” basis, which is not the way traditional public schools are funded. School districts provide funds to traditional public schools within the district based on the needs and programs offered in each school rather than a system based strictly on the number of students attending the school. It isn’t clear just how much money a local district will have to transfer to a charter school under HB 520 because the bill provides that “gross state and local revenues” be divided by the number of pupils in the district, and that term is not defined.

We therefore don’t know whether amounts generated by the district for other purposes will be included in the amount that will be transferred to the charter school.  It appears the amount of local revenues flowing from local school districts to charter schools could be greater under HB 520 than they were under HB 103, which specifically described the components of funding that would be transferred on a per student basis.

The funding formula is particularly problematic in relation to virtual charter schools. Student enrollment for a virtual charter could include students from all over the state, which means multiple local districts would be required to send funds to a virtual charter school authorized by one district, with no input on the use of the funds. Further, the entity actually providing the virtual charter school services could be located out of state and would not be accountable to any school district other than the one that authorized the charter.

Reduction in Overall Resources Available to Public School Districts

Our previously expressed concerns remain about the negative impact on funding of existing public schools from the introduction of charter schools. When some students move to charters, traditional public schools cannot simply reduce their costs on a student-by-student basis because fixed overhead costs remain regardless of the number of students in the district. Operating two school systems within one district under separate governance arrangements can create extra costs or inefficient expenditures, and the potential negative consequences of charter schools on funding for Kentucky’s existing public schools would be particularly problematic given our state’s schools — especially the poorer school districts — are already experiencing such financial difficulties.

A related question is whether the funding diverted from traditional public schools to charter schools is adequate for the charter schools to be successful, and to meet the constitutional burden placed on the General Assembly with regard to public education.  By failing to provide resources to address the capital and infrastructure needs of charter schools in HB 520, the General Assembly is intentionally providing fewer resources to charter schools, which may make it more difficult for them to be successful — and lead to an even bigger shift of resources to charters later on.

Transportation Funding and Requirements

HB 520 specifically provides that transportation funding remains with the district in which the student lives, however the bill requires the local district where the charter school is located to provide transportation for charter school students that live within the district.  Since the transportation component of SEEK is woefully underfunded, this mandate imposes an additional burden on local school districts without providing additional resources to meet the mandate. This is especially true if the charter school operates on an alternative schedule — such  as having classes on weekends or in the summer — because the local district would be obligated to run buses just for charter school students in those circumstances, which would clearly be an added expense.  The legislation is silent regarding transportation of students who live outside the district where the charter school is located.

Benefit Appropriations for Charter School Employees

HB 520 requires that appropriations be made for charter school employees’ retirement, health and life insurance benefits to the same degree those contributions are made for public school employees, however the legislation does not provide details regarding how this is to be accomplished. This requirement creates an additional expenditure for the state with regard to new employees hired by charter schools and it is unclear whether these requirements would further reduce resources available for public schools in the commonwealth.

These questions and concerns about the funding of charter schools should be a primary component of discussions about whether charter schools should be authorized in Kentucky.


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