Charter School Funding Proposal Is Inefficient, Costly and Will Harm Public Education

Legislation introduced in the Kentucky House would create a duplicative, wasteful and unaccountable system for authorizing and funding charter schools that runs counter to the characteristics of an efficient system of schools as required by our constitution. House Bill (HB) 9 diverts state appropriations, federal funds and locally generated tax dollars away from already deeply underfunded public schools. And it dramatically and irresponsibly expands the list of unaccountable entities that can authorize charter schools, with these authorizers as the only entities to which the schools themselves are accountable.

Kentucky first passed legislation authorizing charter schools in 2017, but the funding mechanism was only for fiscal year 2017–18, and no charter schools were authorized before it expired. The legislation raised serious concerns about both the administrative and funding structures, but until this year’s even more concerning HB 9, a replacement funding mechanism had not been proposed.

HB 9 runs counter to Kentuckians’ fundamental constitutional right to an efficient system of public education

Section 183 of Kentucky’s Constitution provides that “The General Assembly shall, by appropriate legislation, provide for an efficient system of common schools throughout the state.” In 1989, the Kentucky Supreme Court issued its pivotal decision in Rose v. Council for Better Education, Inc., finding the “entire system” of common schools at that time to be unconstitutional and recognizing education as “a fundamental right in Kentucky.”

The primary focus of the court was on defining “efficiency.” After considering testimony of experts, prior opinions of the court and opinions issued by courts of neighboring states, the Rose court summarized the following minimal characteristics of an “‘efficient’ system of common schools”:

“1. The establishment, maintenance and funding of common schools in Kentucky is the sole responsibility of the General Assembly.

2. Common schools shall be free to all.

3. Common schools shall be available to all Kentucky children.

4. Common schools shall be substantially uniform throughout the state.

5. Common schools shall provide equal educational opportunities to all Kentucky children, regardless of place of residence or economic circumstances.

6. Common schools shall be monitored by the General Assembly to assure that they are operated with no waste, no duplication, no mismanagement, and with no political influence.

7. The premise for the existence of common schools is that all children in Kentucky have a constitutional right to an adequate education.

8. The General Assembly shall provide funding which is sufficient to provide each child in Kentucky an adequate education.

9. An adequate education is one which has as its goal the development of the seven capacities recited previously.”¹

There are several reasons why HB 9 does not meet these minimal characteristics to be part of an efficient system of schools. First, the requirement that the General Assembly monitor the common schools is violated because entities unaccountable to the General Assembly can authorize, oversee and operate charter schools. Second, charter schools outside of those approved by local school boards or the state-created boards would use state funding to operate as a separate, parallel system of schools that are not a part of, or integrated with, the statewide system of public schools. This violates both the requirement of substantial uniformity and the requirement that the system of common schools not be fundamentally duplicative and wasteful. Finally, the diversion of monies to charter schools will even further compromise the requirement that funding for public schools be sufficient, jeopardizing the right of Kentucky’s children to an adequate education.   

More unaccountable charter schools authorizers will create a parallel, inefficient system of education

Authorizers are the entities that are permitted by statute to approve and monitor charter schools. Under existing Kentucky law, charter schools can be authorized by public school boards within the boundaries of the school district, a collaborative of school boards working together within the boundaries of those districts, or unilaterally by the mayors of Lexington and Louisville within their jurisdictions. There are no entities with statewide authority to authorize charter schools. 

HB 9 will dramatically expand the list of authorizers in the state’s 24 largest school districts to include entities that are not accountable in any way to the state school board, the local school board or the General Assembly.² HB 9 designates as statewide authorizers the Kentucky Board of Education and a newly established Charter School Commission, and allows the governing body of any public university or private 4-year university that is accredited and nonsectarian to designate itself as a statewide authorizer — a group that collectively includes over 25 separate entities. These universities become authorizers through the simple adoption of a resolution by the governing board, with no other review process or application, no oversight by a state government entity or agency, and no process for revoking that authority when an institution fails to follow statutory requirements or operates inappropriately.

That multiple authorizers could take unilateral action in any of the 24 largest school districts in Kentucky to establish a charter school without approval or input from those districts, and with no way to reverse the decision, is very concerning. For example, three different private universities could establish charter schools in Warren County independently of each other and over the objection of the elected public school board. Those schools could be run and managed by out-of-state, for-profit companies or could contract with such companies to operate the schools. They could recruit and admit — and even limit service to — students from surrounding districts while taking funding from the district in which they are located.

In handing over the General Assembly’s “sole responsibility” for the system of common schools to unaccountable charter school authorizers, HB 9 would also violate the Rose court mandate that “the General Assembly must not only establish the system, but it must monitor it on a continuing basis so that it will always be maintained in a constitutional manner. The General Assembly must carefully supervise it, so that there is no waste, no duplication, no mismanagement, at any level.”

HB 9 diverts funds from already underfunded public schools

HB 9 requires that virtually all funds generated or received by a local board of education (other than those devoted to capital expenditures) be shared with any and all charter schools located within the school district. The allocation is based on enrollment of students in the charter school compared to overall district enrollment.

Under HB 9, charter schools cannot be authorized in smaller districts without school board approval, which would necessarily take into account the costs to the district of opening and operating charter schools, and is somewhat of a safeguard in these communities. But for the state’s 24 largest school districts, the expansion of authorizers jeopardizes funding in the public school system in a number of ways:

• The district does not have to be consulted about the funding impact.
• There is no limitation on the number of charter schools that can be authorized within any school district, and no limitation on the number of students within a district that can attend charter schools.
• A charter school can serve students from multiple districts, but the school district where the charter school is located will be forced to pay for those students.
• When students leave public schools to attend charter schools, public school districts will not be able to reduce costs proportionately to offset the loss of revenues that will be transferred to charter schools. School districts have fixed overhead costs that are unrelated to the number of students being served, including maintenance of buildings and infrastructure and the operation of transportation networks. Districts also have classroom-level expenses that cannot be reduced — this is especially true in larger districts with multiple schools where the loss of students will be spread among many schools, and student loss at an individual school will be insufficient to reduce staffing needs.
• SEEK, the formula under which school districts receive base per pupil funding plus additional funds to address specific student needs, is based on adjusted average daily attendance (AADA) and not enrollment. HB 9 requires funding transfers to charter schools based upon enrollment, which is a higher number than the AADA, so that districts will be required to send proportionally more money to charter schools than they actually receive under the formula.
• School districts receive funding from many other sources that are unrelated to, and therefore not tied to, the number of pupils enrolled in the district, and these funds are also required to be diverted to charter schools based on enrollment.
• Up to 3% of funds transferred to charter schools can be retained by authorizers (with possibly multiple authorizers in some districts), siphoning public funds intended for student education to administrative purposes in this duplicative system. In addition, if for-profit entities operate charter schools in Kentucky, there will be profit-taking from funds that were previously devoted solely to public education.

These occasions for the siphoning off of public resources pose another constitutional concern. HB 9 requires locally generated tax dollars from levies approved by publicly elected school board members to be distributed to charter schools and charter school authorizers — entities that are completely separate from the public schools and that are not accountable to the people that elected the school board. During testimony presented before the School Funding Task Force, the Kentucky Department of Education questioned whether revenues generated by local school boards through local levies can be diverted to other uses under Section 180 of the Kentucky Constitution, which states:

“Every act enacted by the General Assembly, and every ordinance and resolution passed by any county, city, town or municipal board or local legislative body, levying a tax, shall specify distinctly the purpose for which said tax is levied, and no tax levied and collected for one purpose shall ever be devoted to another purpose.”

Even as Kentucky is arguably failing in its constitutional duty to adequately and equitably fund its system of common schools, HB 9 would establish a parallel, duplicative, wasteful and unaccountable system that would be harmful to public education through the diversion of resources to completely uncoordinated charter schools.³ Entities with no involvement in the public school system and that are not accountable in any way to the public or the General Assembly should not be authorized to create charter schools or fund private schools with public resources. Public dollars should stay in public schools.